<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): November 24, 1997.
INTERMAGNETICS GENERAL CORPORATION
(Exact name of registrant as specified in its charter.)
Commission File Number 1-11344
New York 14-1537454
---------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 Old Niskayuna Road,
Latham, New York 12110
- ------------------------------------------ --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 782-1122
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On November 24, 1997, Intermagnetics General Corporation (the "Company")
completed its acquisition of Polycold Systems International, a California
corporation ("Polycold"), pursuant to an Agreement and Plan of Reorganization
and Merger, dated November 24, 1997 (the "Agreement"), by and among the
Company, Polycold Merger Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Merger Sub"), Polycold, and the 13 stockholders of
Polycold named therein (the "Stockholders"). Pursuant to the Agreement,
Polycold was acquired by the merger (the "Merger") of Polycold with and into
Merger Sub. Merger Sub is the surviving corporation in the Merger, and has been
named Polycold Systems International, Inc. In the Merger, all of the 284,887
shares of the outstanding common stock, no par value, of Polycold (the
"Polycold Shares") were exchanged for the Merger consideration, described below.
The Merger consideration was arrived at by arm's length negotiation and
consisted, on an aggregate basis, of a promissory note (the "Note") for $6.82
million, approximately 276,050 shares of the common stock, par value $.10 per
share, of the Company (the "Company Common Stock"), and approximately 70,000
shares of the Series A Preferred Stock, par value $.10 per share, of the
Company (the "Company Series A Preferred Stock"). The Note bears interest at
the compound rate of 5.75% per annum, and is payable, subject to certain
obligations of the Stockholders of Polycold as set forth in greater detail in
the Agreement, ninety (90) days after issuance. The total value of the Merger
consideration received by the Stockholders of Polycold was approximately $16.5
million. Each Stockholder of Polycold received for each Polycold Share held by
it (i) a portion of the Note equal to approximately $23.94, (ii) approximately
.97 shares of Company Common Stock, and (iii) approximately .25 shares of
Company Series A Preferred Stock.
All of the Stockholders of Polycold voted in favor of the Merger by a
Unanimous Written Consent of Stockholders In Lieu of A Special Meeting, dated
November 24, 1997, and are signatories to the Agreement.
The Company currently expects that the portion of the consideration
represented by the Note will, upon payment, be financed internally by the
Company or by Bank borrowings.
Prior to the Merger, Polycold was engaged in the manufacture of large
capacity, cryogenic systems. All plant, equipment and other physical property
acquired in the Merger will continue to be used primarily as they were prior
to the Merger. As contemplated by the Agreement, Ronald W. Sykes, an officer,
director and shareholder of Polycold, has entered into an Employment Agreement
with Intermagnetics, dated November 24, 1997, pursuant to which he has assumed
the position of Vice President and General Manager of Merger Sub.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
The financial statements required by this item will be filed by
amendment to this form 8-K on or prior to February 7, 1998.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item will filed
by amendment to this Form 8-K on or prior to February 7, 1998.
(c) Exhibits.
2
<PAGE>
The following Exhibits are filed herewith.
Exhibit No. Description
- ----------- ------------
2.1 Agreement and Plan of Reorganization and Merger
(the "Agreement"), dated November 24, 1997 by and
among Intermagnetics General Corporation, Polycold
Merger Sub, Inc., Polycold Systems International,
and the Stockholders of Polycold Systems
International named therein. (The Company hereby
undertakes to furnish supplementally a copy of any
omitted Schedule to the Commission upon request.)
3.1 Certificate of Amendment of the Certificate of
Incorporation of Intermagnetics General Corporation
Under Section 805 of the Business Corporation Law of
the State of New York.
10.1 Employment Agreement between Ronald W. Sykes and
Intermagnetics General Corporation dated
November 24, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
INTERMAGNETICS GENERAL CORPORATION
Date: December 8, 1997
By: /s/ Carl H. Rosner
-----------------------------------
Carl H. Rosner
Chairman and Chief Executive Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ------------ ----
2.1 Agreement and Plan of Reorganization and Merger, dated
November 24, 1997, by and among Intermagnetics General
Corporation, Polycold Merger Sub, Inc., Polycold Systems
International, and the Stockholders of Polycold Systems
International named therein.
3.1 Certificate of Amendment of the Certificate of Incorporation
of Intermagnetics General Corporation Under Section 805 of
the Business Corporation Law of the State of New York.
10.1 Employment Agreement between Ronald W. Sykes and
Intermagnetics General Corporation dated November 24, 1997.
4
<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Among
POLYCOLD SYSTEMS INTERNATIONAL.,
INTERMAGNETICS GENERAL CORPORATION
and
POLYCOLD MERGER SUB
Dated as of
November 24, 1997
5
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS
ARTICLE II - THE MERGER; CLOSING; EFFECTIVE TIME
2.1 THE MERGER
2.2 CLOSING
2.3 EFFECTIVE TIME
ARTICLE III - CERTIFICATE OF INCORPORATION AND BY-LAWS, AND OFFICERS AND
DIRECTORS OF THE SURVIVING CORPORATION
3.1 THE CERTIFICATE OF INCORPORATION
3.2 THE BY-LAWS
3.3 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
ARTICLE IV - CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 CONVERSION OR CANCELLATION OF SHARES
4.2 EXCHANGE OF CERTIFICATES; DIVIDENDS
4.3 DISSENTERS' RIGHTS
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
5.1 AUTHORITY; NO CONFLICT
5.2 TITLE TO SHARES
5.3 RELATIONSHIPS WITH RELATED PERSONS
5.4 BROKERS OR FINDERS
5.5 DISCLOSURE
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DESIGNATED
OFFICERS
6.1 ORGANIZATION AND GOOD STANDING
6.2 AUTHORITY; NO CONFLICT
6.3 CAPITALIZATION
6.4 FINANCIAL STATEMENTS
6.5 BOOKS AND RECORDS
6.6 TITLE TO PROPERTIES; ENCUMBRANCES
6.7 CONDITION AND SUFFICIENCY OF ASSETS
6.8 ACCOUNTS RECEIVABLE.
6.9 INVENTORY
6.10 NO UNDISCLOSED LIABILITIES
6.11 TAXES
6
<PAGE>
6.12 NO MATERIAL ADVERSE CHANGE
6.13 EMPLOYEE BENEFITS
6.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
6.15 LEGAL PROCEEDINGS; ORDERS
6.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
6.17 CONTRACTS; NO DEFAULTS
6.18 INSURANCE
6.19 ENVIRONMENTAL MATTERS
6.20 EMPLOYEES
6.21 LABOR RELATIONS; COMPLIANCE
6.22 INTELLECTUAL PROPERTY
6.23 CERTAIN PAYMENTS
6.24 DISCLOSURE
6.25 BROKERS OR FINDERS
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF PURCHASER
7.1 ORGANIZATION AND GOOD STANDING
7.2 AUTHORITY; NO CONFLICT
7.3 SEC FILINGS
7.4 CERTAIN PROCEEDINGS
7.5 BROKERS OR FINDERS
ARTICLE VIII - COVENANTS OF SELLERS PRIOR TO CLOSING DATE
8.1 ACCESS AND INVESTIGATION
8.2 OPERATION OF THE BUSINESS OF THE COMPANY
8.3 NEGATIVE COVENANT
8.4 REQUIRED APPROVALS
8.5 NOTIFICATION
8.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
8.7 MEETING OF THE COMPANY'S STOCKHOLDERS
8.8 BEST EFFORTS
ARTICLE IX - COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 APPROVALS OF GOVERNMENTAL BODIES
9.2 BEST EFFORTS
ARTICLE X - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION
10.1 ACCURACY OF REPRESENTATIONS
10.2 SELLERS' PERFORMANCE
10.3 CONSENTS
10.4 ADDITIONAL DOCUMENTS
10.5 NO PROCEEDINGS
10.6 EMPLOYMENT AGREEMENTS
10.7 STOCKHOLDER APPROVAL
10.9 GOVERNMENTAL AND REGULATORY CONSENTS
10.11 DISCHARGE OF CERTAIN OBLIGATIONS
10.12 NO PROHIBITION
7
<PAGE>
ARTICLE XI- CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
11.1 ACCURACY OF REPRESENTATIONS
11.2 PURCHASER'S PERFORMANCE
11.3 CONSENTS
11.4 ADDITIONAL DOCUMENTS
11.5 NO INJUNCTION
11.6 STOCKHOLDER APPROVAL
11.7 GOVERNMENTAL CONSENTS
ARTICLE XII - TERMINATION
12.1 TERMINATION EVENTS
12.2 EFFECT OF TERMINATION
ARTICLE XIII - INDEMNIFICATION; REMEDIES
13.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
13.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS.
13.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS--
ENVIRONMENTAL MATTERS
13.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
PURCHASER
13.5 TIME LIMITATIONS
13.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
13.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
ARTICLE XIV - GENERAL PROVISIONS
14.1 EXPENSES
14.2 PUBLIC ANNOUNCEMENTS
14.3 CONFIDENTIALITY
14.4 NOTICES
14.5 ARBITRATION
14.6 FURTHER ASSURANCES
14.7 WAIVER
14.8 ENTIRE AGREEMENT AND MODIFICATION
14.9 SCHEDULES
14.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
14.11 SEVERABILITY
14.12 SECTION HEADINGS, CONSTRUCTION
14.13 GOVERNING LAW
14.14 COUNTERPARTS
8
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of November 24, 1997, among POLYCOLD SYSTEMS INTERNATIONAL,, a
California corporation (the "Company"), Intermagnetics General Corporation., a
New York corporation ("Purchaser"), and Polycold Merger Sub, a Delaware
corporation, a wholly-owned subsidiary of Purchaser ("Merger Sub"), the
Company and Merger Sub sometimes being hereinafter collectively referred to as
the "Constituent Corporations" and the individual stockholders named herein
(the "Stockholders") and certain designated officers named herein.
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each
have determined that it is in the best interests of their respective
stockholders for Purchaser to acquire the Company upon the terms and subject
to the conditions set forth herein;
WHEREAS, each Stockholder has completed an Offeree Questionnaire,
copies of which are attached hereto as Schedule 0; and
WHEREAS, the Company, Purchaser, Merger Sub and the Stockholders
desire to make certain representations, warranties, covenants and agreements
in connection with this Agreement.
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Accounts Receivable"--all accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date.
"Aggregate Merger Consideration"--as defined in Section 4.1(a).
"Applicable Contract"--any Contract (a) under which the Company has
or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or any of
the assets owned or used by it is or may become bound.
"Balance Sheet"--as defined in Section 6.4.
"Basket Amount"--$150,000.
9
<PAGE>
"Best Efforts"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the
Person subject to that obligation to take actions that would result in a
materially adverse change in the benefits to such Person of this Agreement and
the Contemplated Transactions.
"Breach"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is
or was inconsistent with such representation, warranty, covenant, obligation,
or other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Cap Amount"--$4,000,000
"Cash Portion"--as defined in Section 4.1(a).
"California Certificate of Merger"--as defined in Section 2.3.
"CGCL" --California General Corporation Law.
"Commission"--the U.S. Securities and Exchange Commission.
"Competing Business"--as defined in Section 5.4.
"Closing Date"--the date and time as of which the Closing actually
takes place.
"Closing"--as defined in Section 2.2.
"Closing Documents"--shall mean one or more of the Promissory Note,
the Consulting Agreement, the Employment Agreement, the Retention Agreements,
the Deferred Compensation Agreement and the Lease Agreement.
"Company"--as defined in the Recitals of this Agreement.
"Company Certificate"--as defined in Section 4.1(a).
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Consulting Agreement"--as defined in Section 10.6.
"Contemplated Transactions"--all of the transactions contemplated by
this Agreement, including:
10
<PAGE>
(a) the Merger;
(b) the execution, delivery and performance of the
Employment Agreement, the Consulting Agreement, the
Retention Agreements and the Deferred Compensation
Agreement;
(c) the execution, delivery and performance of the
Promissory Note;
(d) the execution, delivery and performance of the
Lease Agreement; and
(e) the performance by Purchaser and Sellers of their
respective covenants and obligations under this
Agreement.
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Copyrights"-- all copyrights in both published works and unpublished
works.
"Damages"--as defined in Section 13.2.
"Deferred Compensation Agreement"--as defined in Section 10.6.
"Delaware Certificate of Merger"--as defined in Section 2.3.
"Designated Officers"--shall mean Dale J. Missimer, Ronald W. Sykes
and Jack V. Singer, Jr..
"DGCL" --Delaware General Corporation Law.
"Dissenting Stockholders"--Stockholders exercising appraisal rights
pursuant to the DGCL.
"Effective Time"--as defined in Section 2.3.
"Employment Agreement"--as defined in Section 10.6.
"Encumbrance"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right
of first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute
of ownership.
"Environment"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
11
<PAGE>
"Environmental, Health, and Safety Liabilities"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical substances
or products);
(b) fines, penalties, judgments, awards, settlements, legal
or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health
Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any investigation, cleanup, removal, containment,
or other remediation or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release
of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological
amenities;
12
<PAGE>
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean
up or prevention; or
(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or the Environment,
or permitting self-appointed representatives of the public interest
to recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate"--as defined in Section 6.13.
"Exchange Agent" --American Stock Transfer & Trust Company.
"Excluded Shares"--Shares held by Dissenting Stockholders immediately
prior to the Effective Time.
"Facilities"--any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet was
prepared.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
13
<PAGE>
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"Hazardous Activity"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and
any other act, business, operation, or thing that increases the danger, or
risk of danger, or poses an unreasonable risk of harm to persons or property
on or off the Facilities, or that may affect the value of the Facilities or
the Company.
"Hazardous Materials"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or
synthetic substitutes therefor and asbestos or asbestos-containing materials.
"Holdback Period"--a period of not less than ninety (90) days after
the Effective Time.
"Indemnified Person"--as defined in Section 13.2.
"Indemnity Claim"--as defined in Section 13.8.
"Intellectual Property Assets" --includes domestic and international
rights to Marks, Patents, Copyrights, Rights in Mask Works and Trade Secrets,
owned, used, or licensed by the Company as licensee or licensor.
"Interim Balance Sheet"--as defined in Section 6.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
14
<PAGE>
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time during the past five years served, as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time during such five years had, Knowledge of
such fact or other matter.
"Lease Agreement"-- shall have the meaning set forth in Schedule 10.11.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"Marks"-- the Company's name, all fictional business names, trading
names, registered and unregistered trademarks, service marks, and
applications.
"Merger"--as defined in Section 2.1.
"Merger Consideration"--as defined in Section 4.1(a).
"Occupational Safety and Health Law"--any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working
conditions.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; and
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of
Persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such
Person.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
15
<PAGE>
"Patents"-- all patents, patent applications, and inventions and
discoveries that may be patentable.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other
entity or Governmental Body.
"Plan"--as defined in Section 6.13.
"Polycold Shareholders Agency Trust"--that certain Trust created by
and for the benefit of the Shareholders of Polycold, and with Jack V. Singer,
Jr. and Ronald W. Sykes as co-trustees.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative,
or informal) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Promissory Note"--as defined in Section 4.2(d).
"Proprietary Rights Agreement"--as defined in Section 6.20.
"Purchaser"--as defined in the first paragraph of this Agreement.
"Purchaser Common Stock"--the Purchaser's common stock, par value
$0.10, per share.
"Purchaser Common Shares"--as defined in Section 4.1(a).
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one
or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
16
<PAGE>
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse (and former
spouses), (iii) any other natural person who is related to the individual or
the individual's spouse within the second degree, and (iv) any other natural
person who resides with such individual, and (b) "Material Interest" means
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Retention Agreements" -- shall have the meaning set forth in Section
10.6.
"Rights in Mask Works"--all rights in mask works.
"SEC Filings"--Purchaser's (i) Annual Report on Form 10-K for the
years ended May 25, 1997, May 26, 1996, and May 28, 1995, as filed with the
SEC; and (ii) all other reports, statements and registration statements
(including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K)
filed by the Purchaser with the SEC since May 25, 1997 (collectively, the "SEC
Filings")
"Securities Act"--the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"Security Funds"--as defined in Section 13.8.
"Sellers"--the Company and the Stockholders.
17
<PAGE>
"Series A Shares"--as defined in Section 4.1(a).
"Series A Stock"--the Purchaser's Series A preferred stock, par value
$0.10, per share.
"Shares"--the Company's common stock, par value $.01 per share.
"Share Price"-- the average of the closing prices of the Purchaser
Common Stock, as reported on the American Stock Exchange, for each of the ten
trading days immediately prior to the day of the Closing.
"Stock Portion"--as defined in Section 4.1(a).
"Subsidiary"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries.
"Surviving Corporation"--as defined in Section 2.1
"Tax"--any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, payroll tax, workers compensation
tax, unemployment tax, gift tax or estate tax), levy assessment, tariff, duty
(including any customs duty), deficiency, or other fee, and any related charge
or amount (including any fine, penalty, interest, or addition to tax),
imposed, assessed, or collected by or under the authority of any Governmental
Body or payable pursuant to any tax-sharing agreement or any other Contract
relating to the sharing or payment of any such tax, levy, assessment, tariff,
duty, deficiency, or fee.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"Threat of Release"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken,
or otherwise pursued in the future.
18
<PAGE>
"Trade Secrets"-- all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints.
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1 THE MERGER.
Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.3) the Company shall be merged with
and into Merger Sub and the separate corporate existence of the Company shall
thereupon cease (the "Merger"). Merger Sub shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"), shall have the name "Polycold Systems International, Inc." and
shall continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of Merger Sub with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the DGCL.
2.2 CLOSING.
The closing of the Merger (the "Closing") shall take place (i) at the
California office of McNeil, Silveira & Rice at 2:00 P.M. on the fifth
business day after which the last to be fulfilled or waived of the conditions
set forth in Articles X and XI hereof shall be fulfilled or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Purchaser may agree. Notwithstanding the
foregoing, it is the parties' intention to hold the Closing on the same day,
or as close thereto as reasonably practicable, as the day on which this
Agreement and Plan of Merger is fully executed.
2.3 EFFECTIVE TIME.
As soon as practicable following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article XII hereof,
the Company and the Purchaser will cause a Certificate of Merger (the
"Delaware Certificate of Merger") to be executed and filed with the Secretary
of State of Delaware as provided in Section 251 of the DGCL and a Certificate
of Merger to be executed and filed with the Secretary of State of California
as provided in Section 1108 of the CGCL (the "California Certificate of
Merger"). The Delaware Certificate of Merger and the California Certificate of
Merger are attached hereto as Schedule 2.3. The Merger shall become effective
on the date on which the last of the following actions shall have been
completed (i) the Delaware Certificate of Merger has been duly filed with the
Secretary of State of Delaware, and (ii) the California Certificate of Merger
has been duly filed with the Secretary of State of California, and such time
is hereinafter referred to as the "Effective Time."
19
<PAGE>
ARTICLE III
CERTIFICATE OF INCORPORATION AND
BY-LAWS , AND OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1 THE CERTIFICATE OF INCORPORATION.
The Certificate of Incorporation of Merger Sub (the "Certificate") in
effect at the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, until duly amended in accordance with the terms thereof
and the DGCL.
3.2 THE BY-LAWS.
The By-Laws of Merger Sub in effect at the Effective Time shall be
the By-Laws of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL. The By-Laws of Merger Sub are attached
hereto as Schedule 3.2.
3.3 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION. The
directors of Merger Sub and the officers of the Company at the Effective Time
shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Certificate and By-Laws.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1. CONVERSION OR CANCELLATION OF SHARES.
The manner of converting or canceling shares of the Company and
Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, the Shares of the Company issued
and outstanding immediately prior to the Effective Time , other than
Excluded Shares held by Dissenting Stockholders , shall, by virtue of
the Merger and without any action on the part of the holders thereof,
be converted into the right to receive, without interest, on an
aggregate basis (i) 250,000 shares (the "Purchaser Common Shares"),
as adjusted if necessary pursuant to Section 4.1.(e) below, of
Purchaser Common Stock, (ii) 70,000 shares (the "Series A Shares") of
Purchaser's Series A Stock (collectively, the Purchaser Common Shares
and the Series A Shares, the "Stock Portion") and (iii) $6,820,000
(the "Cash Portion") payable in cash (subject to Sections 4.2(d) and
13.8) (the Stock Portion and the Cash Portion are hereinafter
referred to as the "Aggregate Merger Consideration"). At the
Effective Time, each Share issued and outstanding immediately prior
to the Effective Time, other than the Excluded Shares, shall by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive a pro rata portion of
the Aggregate Merger Consideration (the "Merger Consideration"). All
such Shares, by virtue of the Merger and without any action on the
part of the holders thereof, shall no longer be outstanding and shall
be canceled and retired and shall cease to exist, and each holder of
a certificate representing any such Shares ("Company Certificates")
shall thereafter cease to have any rights with respect to such
Shares, except the right to receive the Merger Consideration for such
Shares upon the surrender of such certificate in accordance with
Section 4.2 or the right, if any, to receive payment from the
Surviving Corporation of the "fair value" of such Shares as
determined in accordance with CGCL.
20
<PAGE>
(b) Each Share issued and held in the Company's treasury at
the Effective Time, shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding,
shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(c) At the Effective Time, each share of Common Stock, par
value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of Merger Sub or the
holders of such shares, be and remain one share of Common Stock of
the Surviving Corporation.
(d) No fractional shares of either Purchaser Common Stock or
Series A Stock shall be issued in the Merger. In lieu thereof, the
Purchaser shall issue to any holder of Company Certificates otherwise
entitled to a fractional share, upon surrender of such certificates
as described in Section 4.2, a check for an amount of cash equal to
the fraction of a share of Purchaser Common Stock multiplied by the
Share Price or the fraction of a share of Series A Stock multiplied
by $100, as the case may be.
(e) If the Share Price is equal to $10 or less, then the
number of Purchaser Common Shares shall be increased in an amount
equal to (i) $2,500,000 divided by the Share Price, (ii) minus
250,000.
4.2 EXCHANGE OF CERTIFICATES; DIVIDENDS.
(a) At the Effective Time, Purchaser shall deposit with the Exchange
Agent, for the benefit of the holders of Shares, certificates representing the
Stock Portion of Purchaser Common Stock and Series A Stock. The Exchange Agent
shall make the deliveries provided for in Section 4.1 using such Purchaser
Common Stock and Series A Redeemable Shares. Promptly after the Effective
Time, the Exchange Agent shall mail to each Company shareholder of record as
of immediately prior to the Effective Time, a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Company Certificates shall pass, only upon proper delivery of the
Company Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Company Certificates for conversion and
exchange thereof. Upon surrender to the Exchange Agent of a Company
Certificate, in accordance with the instructions thereto, the holder of such
Company Certificate shall be entitled to receive in exchange therefor the
Merger Consideration (other than the Cash Portion), and such Company
Certificate shall forthwith be canceled. If Purchaser Common Stock or Series A
Stock is to be issued to a person other than the person in whose name the
Company Certificate is registered, it shall be a condition of exchange that
the Company Certificate so surrendered shall be properly endorsed with
signatures guaranteed, or otherwise in proper form satisfactory to Purchaser
for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the issuance or delivery to such
person or establish to the satisfaction of the Purchaser that such tax has
been paid or is not applicable. Until surrendered in accordance with this
Section 4.2, each Company Certificate shall represent solely the right to
receive the Merger Consideration in the form and manner provided herein.
21
<PAGE>
(b) No dividends or other distributions that are otherwise payable on
the Stock Portion shall be paid to persons entitled to receive such stock
until such persons surrender their Company Certificates. Upon such surrender,
there shall be paid to such person any dividends which shall have become
payable with respect to such Company Certificates (less the amount of taxes,
if any, which may have been imposed thereon) between the Effective Time and
the time of such surrender. Notwithstanding the above, neither the Exchange
Agent nor any party hereto shall be liable for any Purchaser Common Stock,
Series A Stock or dividend or distribution thereon delivered to any government
agency pursuant to any abandoned property, escheat or similar law.
(c) The shares of Purchaser Common Stock and Series A Stock
representing the Stock Portion shall be restricted securities and may not be
transferred by the holders thereof unless registered under the Securities Act
or are exempt from registration thereunder. The certificates representing such
shares shall bear a legend to the foregoing effect.
(d) As soon as practicable after the Effective Time, the Purchaser
shall issue a promissory note (the "Promissory Note"), substantially in the
form attached hereto as Schedule 4.2, payable to the Polycold Shareholders
Agency Trust, for the benefit of the Stockholders, in an amount equal to the
Cash Portion and aggregate cash payable in lieu of fractional shares, subject
to the terms and conditions set forth in Section 13.8 below.
4.3. DISSENTERS' RIGHTS.
If any Dissenting Stockholder shall be entitled to be paid the "fair
market value" of his or her Shares as provided in the CGCL, the Company shall
give Purchaser notice thereof and Purchaser shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. Neither the Company nor the Surviving Corporation shall, except with
the prior written consent of Purchaser, voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for payment. If any
Dissenting Stockholder shall fail to perfect, or shall have effectively
withdrawn or lost the right to dissent, the Shares held by such Dissenting
Stockholder shall thereupon be treated as though such Shares had been
converted into the Merger Consideration pursuant to Section 4.1.
22
<PAGE>
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME.
No transfers of Shares shall be made on the stock transfer books of
the Surviving Corporation at or after the Effective Time.
ARTICLE V
SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders hereby severally, but not jointly, represents and
warrants to Purchaser as follows:
5.1. AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms. To the extent such Stockholder is a party to one or
more of the Closing Documents, such Stockholder's Closing Document will
constitute the legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms. Such
Stockholder has the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and the Stockholder's Closing
Documents to the extent such Stockholder is a party thereto and to perform
such Stockholder's obligations under this Agreement and the Stockholder's
Closing Documents, to the extent such Stockholder is a party thereto.
(b) Except as set forth in Schedule 5.1 attached hereto, such
Stockholder is not and will not be required to give any notice to, or obtain
any consent from, any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Except as set forth in Schedule 5.1, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge, any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which such Stockholder may be
subject.
(d) Neither such Stockholder nor any Related Person of such
Stockholder has or may acquire any rights under, and neither such Stockholder
nor any Related Person of such Stockholder has or may become subject to any
obligation or liability under, any Contract that relates to the business of,
or any of the assets owned or used by, the Company.
(e) Such Stockholder is acquiring the Purchaser Common Stock and
Series A Stock for such Stockholder's own account and not with a view to
distribution within the meaning of Section 2(11) of the Securities Act. Such
Stockholder has completed an Offering Questionnaire with respect to such
Stockholder's qualifications as an investor in an offering exempt under
Section 4(2) and Regulation D under the Securities Act.
23
<PAGE>
5.2. TITLE TO SHARES.
Such Stockholder owns the number of Shares set forth opposite such
Stockholder's name in Schedule 5.2 free and clear of all Encumbrances.
5.3. RELATIONSHIPS WITH RELATED PERSONS
Except as set forth on Schedule 5.4, no Stockholder or any Related
Person of such Stockholder has, since January 1, 1995: (i) had any interest in
any property used in or pertaining to the Company's business, or (ii) owned of
record or beneficially an equity interest or other financial or profit
interest in a Person that has (a) had business dealings or a material
financial interest in any transaction with the Company other than business
dealings or transactions conducted in the Ordinary Course of Business with the
Company at substantially prevailing market prices or on substantially
prevailing market terms or (b) engaged in competition with the Company with
respect to any of the products or services of the Company (a "Competing
Business") in any markets presently served by the Company except for less than
one percent (1%) of the outstanding capital stock of any Competing Business
that is publicly traded on a recognized exchange or in the over-the-counter
market or (c) been a party to any Contract with or had any claim or right
against, the Company.
5.4. BROKERS OR FINDERS.
Such Stockholder has incurred no obligation or liability, contingent
or otherwise, which would require the Company to make any payment for
brokerage or finders fees or agents commissions or other similar payments in
connection with this Agreement.
5.5. DISCLOSURE.
(a) No representation or warranty of such Stockholder in this
Agreement and no statement by such Stockholder in the Schedules hereto omits
to state a material fact necessary to make the statements herein or therein,
in light of the circumstances in which they were made, not misleading.
(b) No notice given by such Stockholder pursuant to this Agreement
will contain any untrue statement or omit to state a material fact necessary
to make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
24
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND DESIGNATED OFFICERS
The Company and the Designated Officers severally, and not generally,
represent to the Purchaser as follows.
6.1 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to conduct its business as it is now being
conducted or as it is presently proposed to be conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification.
(b) The Company has delivered to Purchaser copies of the
Organizational Documents of the Company, as currently in effect.
6.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company, enforceable against the Company in accordance with
its terms. To the extent that the Company is a party to one or more of the
Closing Documents, then upon the execution and delivery of the Closing
Documents, the Closing Documents will constitute the legal, valid, and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms. The Company has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Closing Documents and to perform its obligations under this Agreement and the
Closing Documents.
(b) Except as set forth in Schedule 6.2 hereto, neither the execution
and delivery of this Agreement nor the consummation or performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Company, or
(B) any resolution adopted by the board of directors or the
Stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which
the Company, or any of the assets owned or used by the Company, may
be subject;
25
<PAGE>
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify,
any Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or
used by, the Company;
(iv) cause Purchaser or the Company to become subject to, or
to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental
Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used
by the Company.
Except as set forth in Schedule 6.2 hereto, no Seller is, or will be,
required to give any notice to or obtain any Consent from, any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
(c) The shares of Purchaser Common Stock are being offered to the
Stockholders pursuant to Section 4(2) under the Securities Act and Rule 506 of
Regulation D thereunder. Each of the Stockholders is acquiring the Purchaser
Common Stock for his own account and not with a view to distribution within
the meaning of Section 2(11) of the Securities Act. Each Stockholder has
completed an Offeree Questionnaire with respect to such Stockholder's
qualifications as an investor in an offering exempt under Section 4(2) and
Regulation D.
6.3 CAPITALIZATION.
The authorized equity securities of the Company consist of two
classes of Common Stock: 400,000 shares of Class A common voting stock, no par
value, of which 264,400 shares are issued and outstanding and, and 100,000
shares of Class B common nonvoting stock, no par value, of which 20,487 shares
are issued and outstanding. Together the Class A common voting stock, and the
Class B common nonvoting stock constitute the Shares. Stockholders are and
will be on the Closing Date the record and beneficial owners and holders of
the Shares, free and clear of all Encumbrances. Each Stockholder owns such
number of the Shares set forth beside his name on Schedule 6.3 hereto. All of
the outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company, other than this Agreement. None of the outstanding
equity securities or other securities of the Company was issued in violation
of the Securities Act or any other Legal Requirement. The Company does not
own, nor has it any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership
interest in any other business.
26
<PAGE>
6.4 FINANCIAL STATEMENTS.
The Company has delivered to Purchaser: (a) unaudited balance sheets
of the Company as at December 31 in each of the years 1995 and 1996, and the
related unaudited consolidated statement of income for each of the fiscal
years then ended, (b) an audited balance sheet of the Company as at September
30, 1997 (including the audited notes (the "Audited Notes") thereto, the
"Balance Sheet"), together with the report thereon of KPMG Peat Marwick, LLP,
independent auditors, and the related, unaudited statement of income for the
eight (8) months then ended, and (c) an unaudited balance sheet of the Company
as at October 31, 1997 (including any change in the information contained in
the Audited Notes as of October 31, 1997, the "Interim Balance Sheet") and the
related statement of income, for the month then ended. Except as otherwise
disclosed in Schedule 6.4, such financial statements and notes fairly present
the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates
of and for the periods referred to in such financial statements, all in
accordance with GAAP. Except as otherwise disclosed in Schedule 6.4, the
financial statements referred to in this Section 6.4 reflect the consistent
application of such accounting principles throughout the periods involved. No
financial statements of any Person other than the Company are required by GAAP
to be included in the financial statements of the Company. The financial
statements referred to in this Section 6.4 are set forth in Schedule 6.4
hereto.
6.5 BOOKS AND RECORDS.
The books of account, minute books, stock record books, and other
records of the Company, all of which have been made available to Purchaser,
are complete and correct 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, including the maintenance of an adequate
system of internal controls. The minute books of the Company contain accurate
and complete records 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, 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. At the Closing, all of those books
and records will be in the possession of the Company.
6.6 TITLE TO PROPERTIES; ENCUMBRANCES.
The Company does not own, nor has it owned, any real property. The
Company owns all property (whether tangible or intangible) that it purports to
own located in the facilities owned or operated by the Company or reflected as
owned in the books and records of the Company, including all of the properties
and assets reflected in the Balance Sheet and the Interim Balance Sheet
(except for personal property sold since the respective dates of the Balance
Sheet and the Interim Balance Sheet in the Ordinary Course of Business), and
all of the properties and assets purchased or otherwise acquired by the
Company since the respective dates of the Balance Sheet and the Interim
Balance Sheet (except for personal property acquired and sold since the
respective dates of the Balance Sheet and the Interim Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances of any nature except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, (c) liens for current taxes not
yet due.
27
<PAGE>
6.7 CONDITION AND SUFFICIENCY OF ASSETS.
The buildings, plants, structures, and equipment of the Company are
structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost. The building, plants, structures, and equipment of the Company are
sufficient for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing.
6.8 ACCOUNTS RECEIVABLE.
All Accounts Receivable represent or will represent valid obligations
arising from sales actually made or services actually performed in the
Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are, or will be as of the Closing Date, current and
collectible net of the respective reserves shown on the Balance Sheet or the
Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of
the Accounts Receivable reflected therein and will not represent a material
adverse change in the composition of such Accounts Receivable in terms of
aging). Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within ninety days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of set-off, other than returns in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Schedule 6.8
contains a complete and accurate list of all Accounts Receivable as of the
date of the Interim Balance Sheet, which list sets forth the aging of such
Accounts Receivable.
6.9 INVENTORY.
All inventory of the Company, including consigned inventory, whether
or not reflected in the Balance Sheet or the Interim Balance Sheet, consists
28
<PAGE>
of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below- standard quality, all
of which have been written off or written down to net realizable value on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date, as the case may be. All inventories not
written off have been priced at the lower of cost or net realizable value on a
first in, first out basis. The quantities of each item of inventory (whether
raw materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company. Schedule 6.9 sets
forth the location of all items of the Company's inventory, including
consigned inventory, as of September 30, 1997. The Company's procedures for
tracking and controlling consigned inventory are contained in Schedule 6.9,
and such procedures are adequate for such purpose and have been followed by
the Company consistent with past practice.
6.10 NO UNDISCLOSED LIABILITIES.
Except as set forth in Schedule 6.10 hereto, the Company has no
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or Interim
Balance Sheet and properly disclosed in the notes thereto and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
6.11 TAXES.
(a) The Company has filed or caused to be filed (on a timely basis
since January 1, 1992) all Tax Returns that are or were required to be filed
by it, pursuant to applicable Legal Requirements. The Company has delivered to
Purchaser copies of, and Schedule 6.11 hereto contains a complete and accurate
list of, all such Tax Returns filed since January 1, 1992. The Company has
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by the Company, except such Taxes, if any, as are listed
in Schedule 6.11 and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in
the Balance Sheet and Interim Balance Sheet.
(b) The United States federal Tax Returns of the Company have been
audited by the IRS or relevant tax authorities or are closed by the applicable
statute of limitations for all taxable years through December 31, 1995. The
state Tax Returns of the Company have been audited by the relevant state tax
authorities or are closed by the applicable statute of limitations for all
taxable years through December 31, 1994. Schedule 6.11 contains a complete and
accurate list of all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. All deficiencies
proposed as a result of such audits have been paid, reserved against, settled,
or, as described in Schedule 6.11 are being contested in good faith by
appropriate proceedings. Schedule 6.11 describes all adjustments to the United
States federal income Tax Returns filed by the Company for all taxable years
since January 1, 1992, and the resulting deficiencies proposed by the IRS.
Except as described in Schedule 6.11, no Seller has given or been requested to
give waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the
payment of Taxes of the Company or for which the Company may be liable.
29
<PAGE>
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. There
exists no proposed tax assessment against the Company except as disclosed in
the Balance Sheet or in Schedule 6.11. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property or
assets held, acquired, or to be acquired by the Company. All Taxes that the
Company is or was required by Legal Requirements to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person.
(d) All Tax Returns filed by the Company are true, correct, and
complete. There is no tax sharing agreement that will require any payment by
the Company after the date of this Agreement.
6.12 NO MATERIAL ADVERSE CHANGE.
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists
that may result in such a material adverse change.
6.13 EMPLOYEE BENEFITS.
Schedule 6.13 sets forth all of the Company's bonus, deferred or
incentive compensation, profit sharing, retirement, vacation, sick leave,
hospitalization, insurance, disability, stock options or severance plans,
programs, arrangements and policies and all "employee pension benefit plans"
(as defined in Section 3(d) of ERISA), and "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA)(collectively, the "Plans") sponsored or
contributed to by the Company or by any trade or business, whether or not
incorporated that together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA Affiliate"),
for the benefit of any employee or former employee of the Company or any ERISA
Affiliate. Each such Plan is in compliance in all material respects and has
been administered in all material respects, in accordance with the applicable
provisions of ERISA and the IRC and all other applicable Legal Requirements.
All contributions required to be made with respect to all Plans on or prior to
the Closing have been timely made. None of the Company, any ERISA Affiliate or
any Plan, trust or trustee or administrator thereof has (i) engaged in any
transaction prohibited by ERISA or the IRC or which would subject the Company
to a tax or civil penalty thereunder; or (ii) breached any fiduciary duty owed
by it with respect to the Plans described above; or (iii) failed to file or
distribute in a timely and proper manner all reports and information required
to be filed or distributed in accordance with ERISA which in the case of any
matter covered in clauses (i), (ii) or (iii), above would have a material
adverse effect on the business, operation, condition or prospects of the
Company. Neither the Company nor any ERISA Affiliate maintains any Plan
subject to Title IV of ERISA or Section 412 of the IRC. Neither the Company
nor any ERISA Affiliate is a participating or contributing employer in any
"multiemployer plan" (as defined in Section 3(37)(A) of ERISA) with respect to
employees of the Company nor has the Company incurred any withdrawal liability
30
<PAGE>
with respect to any such multiemployer plan or any liability in connection
with the termination or reorganization of any multiemployer plan. Neither the
Company nor any ERISA Affiliate maintains a voluntary employees beneficiary
association under Section 501(c)(9) of the IRC nor does either the Company or
any ERISA Affiliate have any obligation to provide post-retirement medical or
other benefits to employees, former employees or other survivors, dependents
or beneficiaries, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985 or any other applicable Legal Requirement. Each
Plan intended to be "qualified" within the meaning of Section 401(a) of the
IRC is so qualified and the trusts maintained thereunder are exempt from
taxation under Section 501(a) of the IRC. There are no pending, or to the
Knowledge of the Company, Threatened claims by, or on behalf of, any Plan, by
any employee or beneficiary covered under any such Plan, or otherwise
involving any such Plan, other than routine claims for benefits.
6.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Schedule 6.14:
(i) the Company is, and at all times since January 1, 1992
has been, in full compliance with each Legal Requirement that is or
was applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company
to comply with, any Legal Requirement, or (B) may give rise to any
obligation on the part of the Company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time since
January 1, 1992, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of, or failure
to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Schedule 6.14 contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or used by, the
Company. Each Governmental Authorization listed or required to be listed in
Schedule 6.14 is valid and in full force and effect. Except as set forth in
Schedule 6.14:
(i) the Company is, and at all times since January 1, 1992
has been, in full compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be
identified in Schedule 6.14;
31
<PAGE>
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization listed or
required to be listed in Schedule 6.14, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Schedule 6.14;
(iii) the Company has not received, at any time since
January 1, 1992, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of or failure
to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Schedule 6.14 have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Schedule 6.14 collectively
constitute all of the Governmental Authorizations necessary to permit the
Company to lawfully conduct and operate its business in the manner it
currently conducts and operates such business, to permit the Company to own
and use its assets in the manner in which it currently owns and uses such
assets and to permit any Person who purchases the Company's products to own or
use such products.
6.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Schedule 6.15, there is no pending
Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of
the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of the Company or any Designated Officer, (1) no
such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. The Company has delivered to Purchaser
copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Schedule 6.15. The Proceedings listed in Schedule 6.15
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of the Company.
(b) Except as set forth in Schedule 6.15:
32
<PAGE>
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Schedule 6.15:
(i) the Company is, and at all times since January 1, 1992
has been, in full compliance with all of the terms and requirements
of each Order to which it, or any of the assets owned or used by it,
is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the
Company, is subject; and
(iii) the Company has not received, at any time since
January 1, 1992, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or failure to
comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has
been subject.
6.16 ABSENCE OF CERTAIN CHANGES AND EVENTS.
Except as set forth in Schedule 6.16, since the date of the Interim
Balance Sheet, the Company has conducted its businesses only in the Ordinary
Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Company of any
shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of
capital stock.
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director,
officer, or (except in the Ordinary Course of Business) employee or
entry into any employment, severance, or similar Contract with any
director, officer, or employee;
33
<PAGE>
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
financial condition, or prospects of the Company;
(f) entry into, termination of, or receipt of notice of
termination of (i) any supply, license, distributorship, dealer,
sales representative, joint venture, credit, or similar agreement, or
(ii) any Contract or transaction involving a total remaining
commitment by or to the Company of at least $15,000;
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the
Company, including the sale, lease, or other disposition of any of
the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with
a value to the Company in excess of $10,000;
(i) material change in the accounting methods used by
the Company;
(j) material adverse change in the customer relationship
with AP&T (European distributor), Hakuto (Japanese distributor),
Megatech (United Kingdom distributor) or Exxus (a domestic sales
representative); or
(k) agreement, whether oral or written, by the Company to do
or cause any of the foregoing.
6.17 CONTRACTS; NO DEFAULTS.
(a) Schedule 6.17 contains a complete and accurate list, and the
Company has delivered to Purchaser true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods, materials or products of an amount or
value in excess of $15,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an
amount or value in excess of $15,000;
34
<PAGE>
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or
receipts in excess of $15,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or personal property
(except personal property leases and installment and conditional
sales agreements having a value per item or aggregate payments of
less than $1,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or
the non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or
limit the freedom of the Company to engage in any line of business or
to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential
damages;
(xii) each Applicable Contract for capital expenditures in
excess of $15,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Company;
(xiv) each Applicable Contract relating to the distribution
of the Company's goods or products; and
(xv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
35
<PAGE>
Schedule 6.17 sets forth reasonably complete details concerning such
Contracts, including the parties to the Contracts, the amount of the remaining
commitment of the Company under the Contracts, and the office of the Company
where details relating to the Contracts are located.
(b) Except as set forth in Schedule 6.17:
(i) no Seller (and no Related Person of any Seller) has or
may acquire any rights under, and no Seller has or may become subject
to any obligation or liability under, any Contract that relates to
the business of, or any of the assets owned or used by, the Company;
and
(ii) No officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to
limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of the Company, or (B)
assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Schedule 6.17, each Contract identified or
required to be identified in Schedule 6.17 is in full force and effect and is
valid and enforceable in accordance with its terms.
(d) Except as set forth in Schedule 6.17:
(i) the Company is, and at all times since January 1, 1992
has been, in full compliance with all applicable terms and
requirements of each Contract under which the Company has or had any
obligation or liability or by which the Company or any of the assets
owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or had any
rights is, and at all times since January 1, 1992 has been, in full
compliance with all applicable terms and requirements of such
Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give the Company or
other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) the Company has not given to or received from any other
Person, at any time since January 1, 1992, any notice or other
communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default
under, any Contract.
36
<PAGE>
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such
Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission
of any act alone or in concert with any other Person, or any consideration
having been paid or promised, that is or would be in violation of any Legal
Requirement.
6.18 INSURANCE.
(a) The Company has delivered to Purchaser:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any
director of the Company, is or has been covered at any time within
the five years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Schedule 6.18 describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company;
and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such
coverage is provided.
(c) Schedule 6.18 sets forth, by year, for the current policy year and
each of the four preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $2,500, which sets forth:
(A) the name of the claimant;
37
<PAGE>
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Schedule 6.18:
(i) All policies to which the Company is a party or that
provide coverage to the Company, or any director or officer of the
Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially
sound and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of the Company for all risks to
which the Company is normally exposed;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which any of
them is bound;
(E) will continue in full force and effect
following the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experience-based liability on the part of the Company.
(ii) The Company has not received (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to
which the Company is a party or that provides coverage to the Company
or director thereof.
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
38
<PAGE>
6.19 ENVIRONMENTAL MATTERS.
Except as set forth in Schedule 6.19:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or
liable under, any Environmental Law. The Company does not have any
basis to expect, nor has it or any other Person for whose conduct it
is or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest,
or (ii) the current or prior owner or operator of any Facilities, of
any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which the
Company has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by
the Company, or any other Person for whose conduct it is or may be
held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(b) There are no pending or, to the Knowledge of the Company
or the Designated Officers, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
or any other properties and assets (whether real, personal, or mixed)
in which the Company has or had an interest.
(c) The Company does not have any basis to expect, nor has
it or any other Person for whose conduct it is or may be held
responsible, received, any citation, directive, inquiry, notice,
Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law,
or of any alleged, actual, or potential obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company had an
interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by the Company, or any other Person for
whose conduct it is or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(d) Neither the Company, nor any other Person for whose
conduct it is or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with
respect to any other properties and assets (whether real, personal,
or mixed) in which the Company (or any predecessor), has or had an
interest, or at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
39
<PAGE>
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or, to the knowledge of the Company or
the Designated Officers, at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located
in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or
thereon. Neither the Company, nor any other Person for whose conduct
it is or may be held responsible, or to the Knowledge of the Company
or the Designated Officers, any other Person, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether
real, personal, or mixed) in which the Company has or had an interest
except in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of the
Company or the Designated Officers, Threat of Release, of any
Hazardous Materials at or from the Facilities or at any other
locations where any Hazardous Materials were generated, manufactured,
refined, transferred, produced, imported, used, or processed from or
by the Facilities, or from or by any other properties and assets
(whether real, personal, or mixed) in which the Company has or had an
interest, or to the Knowledge of the Company or the Designated
Officers, any geologically or hydrologically adjoining property,
whether by the Company or the Designated Officers, or any other
Person.
(g) The Company or the Designated Officers have delivered to
Purchaser true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed or initiated by the
Company or the Designated Officers pertaining to Hazardous Materials
or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by the Company, or any other Person for whose
conduct they are or may be held responsible, with Environmental Laws.
6.20 EMPLOYEES.
(a) Schedule 6.20 contains a complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status: name; job title; current
compensation paid or payable and any change in compensation since January 1,
1994; vacation accrued; and service credited for purposes of vesting and
eligibility to participate under any pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan,
other Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any director plan.
(b) No employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement")
that in any way adversely affects or will affect (i) the performance of his
duties as an employee or director of the Company, or (ii) the ability of the
Company to conduct its business, including any Proprietary Rights Agreement
with Sellers or the Company by any such employee or director. To the Company
or the Designated Officers' Knowledge, no director, officer, or other key
employee of the Company intends to terminate his employment with the Company.
40
<PAGE>
(c) Schedule 6.20 also contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
6.21 LABOR RELATIONS; COMPLIANCE.
The Company has not been, nor is it, a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending or existing, and there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting the Company relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor
or employment dispute against or affecting the Company or its premises, or (c)
any application for certification of a collective bargaining agent. No event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is not
liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
6.22 INTELLECTUAL PROPERTY.
(a) Agreements--Schedule 6.22 contains a complete and accurate list
and summary description, including any royalties paid or received by the
Company, of all Contracts, including all licenses, relating to the
Intellectual Property Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $500 under which the Company is the licensee. There are no
outstanding and, to the Company or the Designated Officers' Knowledge, no
Threatened disputes or disagreements with respect to any such agreement.
41
<PAGE>
(b) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary
for the operation of the Company's business as it is currently
conducted or as presently proposed to be conducted. The Company is
the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property Assets.
(ii) Except as set forth in Schedule 6.22, all former and
current employees of the Company have executed written Contracts with
the Company that assign to it all rights to any inventions,
improvements, discoveries, or information relating to the business of
the Company. No employee of the Company has entered into any Contract
that restricts or limits in any way the scope or type of work in
which the employee may be engaged or requires the employee to
transfer, assign, or disclose information concerning his work to
anyone other than the Company. Copies of the forms of Agreement
executed by employees of the Company relating to the Company's
Intellectual Property Assets are included in Schedule 6.22.
(c) Patents
(i) Schedule 6.22 contains a complete and accurate list and
summary description of all Patents in all jurisdictions, both
domestic and foreign. The Company is the owner of all right, title,
and interest in and to each of the Patents, free and clear of all
liens, security interests, charges, encumbrances, entities, and other
adverse claims.
(ii) All of the issued Patents are currently in compliance
with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use) in
the applicable jurisdictions, are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling due
within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding. To
the Company or the Designated Officers' Knowledge, there is no
potentially interfering patent or patent application of any third
party.
(iv) No Patent is infringed or, to the Company or the
Designated Officers' Knowledge, has been challenged or threatened in
any way. None of the products manufactured and sold, nor any process
or know-how used, by the Company infringes or is alleged to infringe
any patent or other proprietary right of any other Person.
(v) All products made, used, or sold under the Patents have
been marked with the proper patent notice.
42
<PAGE>
(d) Marks
(i) Schedule 6.22 contains a complete and accurate list and
summary description of all Marks in all jurisdictions, both domestic
and foreign. The Company is the owner of all right, title, and
interest in and to each of the Marks, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims in all jurisdictions, both domestic and foreign in
which it conducts business.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with
all formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications). All marks used in any foreign jurisdiction are
currently in compliance with all formal legal requirements applicable
thereto. All marks are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
(iii) No Mark has been or is now involved in any opposition,
invalidation, or cancellation and, to the Company or the Designated
Officers' Knowledge, no such action is Threatened with respect to any
of the Marks.
(iv) To the Company or the Designated Officers' Knowledge,
there is no potentially interfering trademark or trademark
application of any third party.
(v) No Mark is infringed or, to the Company or the
Designated Officers' Knowledge, has been challenged or threatened in
any way. None of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service mark of any
third party.
(vi) All products and materials containing a Mark bear the
proper federal registration notice where permitted by law.
(e) Copyrights
(i) Schedule 6.22 contains a complete and accurate list and
summary description of all Copyrights in all jurisdictions, both
domestic and foreign, necessary for the conduct of the Company's
business as it is now being conducted and as it is presently proposed
to be conducted. The Company is the owner of all right, title, and
interest in and to each of the Copyrights, free and clear of all
liens, security interests, charges, encumbrances, equities, and other
adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements in all
jurisdictions, both domestic and foreign. All of the Copyrights
referred to in clause (i) above are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due
within ninety days after the date of Closing.
43
<PAGE>
(iii) No Copyright is infringed or, to the Company or the
Designated Officers' Knowledge, has been challenged or threatened in
any way. None of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(f) Trade Secrets
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in
detail and content to identify and explain it and to allow its full
and proper use without reliance on the knowledge or memory of any
individual.
(ii) The Company has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of its Trade Secrets
in all jurisdictions, both domestic and foreign.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to
the Company or the Designated Officers' Knowledge, have not been
used, divulged, or appropriated either for the benefit of any Person
(other than the Company) or to the detriment of the Company. No Trade
Secret is subject to any adverse claim or has been challenged or
threatened in any way in any jurisdiction, be it domestic or foreign.
6.23 CERTAIN PAYMENTS.
Neither the Company nor any director, officer, agent, or employee of
the Company, or to the Company or the Designated Officers' Knowledge any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the Company or any
affiliate of the Company, or (iv) in violation of any Legal Requirement, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
6.24 DISCLOSURE.
(a) No representation or warranty of the Company or the Designated
Officers in this Agreement and no statement in Schedules hereto omits to state
a material fact necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not misleading.
44
<PAGE>
(b) No notice given pursuant to this Agreement will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to any Seller that has specific
application to the Company (other than general economic or industry
conditions) and that materially adversely affects the assets, business,
prospects, financial condition, or results of operations of the Company that
has not been set forth in this Agreement or Schedules hereto.
6.25 BROKERS OR FINDERS.
Except as disclosed in Schedule 6.25, the Company and its agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
7.1 ORGANIZATION AND GOOD STANDING.
Purchaser is a corporation duly organized, validly existing, and in
good standing under the laws of the State of New York. Purchaser has delivered
copies of its amended and restated Certificate of Incorporation to the Sellers
as currently in effect.
7.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms. Upon the execution and delivery by Purchaser of the Promissory Note,
the Employment Agreement, the Consulting Agreement, the Retention Agreements,
the Deferred Compensation Agreements and the Lease Agreement (collectively,
the "Purchaser's Closing Documents"), the Purchaser's Closing Documents will
constitute the legal, valid, and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms. Purchaser has the
absolute and unrestricted right, power, and authority to execute and deliver
this Agreement and the Purchaser's Closing Documents and to perform its
obligations under this Agreement and the Purchaser's Closing Documents.
(b) Except as set forth in Schedule 7.2, neither the execution and
delivery of this Agreement by Purchaser nor the consummation or performance of
any of the Contemplated Transactions by Purchaser will give any Person the
right to prevent, delay, or otherwise interfere with any of the Contemplated
Transactions pursuant to:
(i) any provision of Purchaser's Organizational Documents;
45
<PAGE>
(ii) any resolution adopted by the board of directors or the
stockholders of Purchaser;
(iii) any Legal Requirement or Order to which Purchaser may
be subject; or
(iv) any material Contract to which Purchaser is a party or
by which Purchaser may be bound.
Except as set forth in Schedule 7.2, Purchaser is not and will not be
required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
7.3 SEC FILINGS.
Purchaser has filed with the SEC all forms, reports and documents
required to be filed with the SEC since January 1, 1993 and has delivered to
the Sellers true and complete copies of the SEC Filings As of their respective
dates, the SEC Filings (including all exhibits and schedules thereto and
documents incorporated by reference therein), did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The financial
statements of the Purchaser and its subsidiaries included or incorporated by
reference in the SEC Filings (including the related notes and schedules) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated assets,
liabilities and financial position of the Purchaser and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments).
7.4 CERTAIN PROCEEDINGS.
There is no pending Proceeding that has been commenced against
Purchaser that challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Purchaser's Knowledge, no such Proceeding has been
Threatened.
7.5 BROKERS OR FINDERS.
Purchaser and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and
will indemnify and hold Sellers harmless from any such payment alleged to be
due by or through Purchaser as a result of the action of Purchaser or its
officers or agents.
46
<PAGE>
ARTICLE VIII
COVENANTS OF SELLERS PRIOR TO CLOSING DATE
8.1 ACCESS AND INVESTIGATION.
Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company and its Representatives to, (a) afford
Purchaser and its Representatives and prospective lenders and their
Representatives (collectively, "Purchaser's Advisors") full and free access to
the Company's personnel, properties (including subsurface testing), contracts,
books and records, and other documents and data, (b) furnish Purchaser and
Purchaser's Advisors with copies of all such contracts, books and records, and
other existing documents and data as Purchaser may reasonably request, and (c)
furnish Purchaser and Purchaser's Advisors with such additional financial,
operating, and other data and information as Purchaser may reasonably request.
8.2 OPERATION OF THE BUSINESS OF THE COMPANY.
Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Purchaser concerning operational matters
of a material nature; and
(d) otherwise report periodically to Purchaser concerning
the status of the business, operations, and finances of the Company.
8.3 NEGATIVE COVENANT.
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Sellers will not, and will
cause the Company not to, without the prior consent of Purchaser, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
6.16 is likely to occur.
47
<PAGE>
8.4 REQUIRED APPROVALS.
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Purchaser with respect
to all filings that Purchaser elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Purchaser in obtaining all consents identified in Schedule 6.2.
8.5 NOTIFICATION.
Between the date of this Agreement and the Closing Date, each Seller
will promptly notify Purchaser in writing if such Seller becomes aware of any
fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if such
Seller becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Schedules hereto if the Schedules were dated the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Purchaser a supplement to the Schedules specifying such change.
During the same period, each Seller will promptly notify Purchaser of the
occurrence of any Breach of any covenant of Sellers in this Article VIII or of
the occurrence of any event that may make the satisfaction of the conditions
in Article X impossible or unlikely.
8.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS.
Except as expressly provided in this Agreement, Sellers will cause
all indebtedness owed to the Company by any Seller or any Related Person of
any Seller to be paid in full prior to Closing.
8.7 MEETING OF THE COMPANY'S STOCKHOLDERS.
The Company will take all action necessary in accordance with
applicable law and its Certificates and By-Laws to convene a meeting of
holders of Shares as promptly as practicable to consider and vote upon the
approval of this Agreement and the Merger. Subject to fiduciary requirements
of applicable law, the Board of Directors of the Company shall recommend such
approval and the Company shall take all lawful action to solicit such
approval. At any such meeting of the Company all of the Shares then owned by
the Stockholders will be voted in favor of this Agreement. The Company's proxy
or information statement with respect to such meeting of shareholders (the
"Proxy Statement"), at the date thereof and at the date of such meeting, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state
a material fact was made by the Company in reliance upon and in conformity
with written information concerning the Purchaser furnished to the Company by
Purchaser specifically for use in the Proxy Statement. Purchaser understands
that for purposes of this Section 8.8 that while the Company's projections and
forward-looking information furnished by the Company to Purchaser were
prepared in good faith and represent the Company's best estimate as to the
subject matter thereof, the Company makes no representation or warranty as to
the truth, completeness or accuracy of any projections or forward-looking
information furnished by the Company to Purchaser.
48
<PAGE>
8.8 BEST EFFORTS.
Between the date of this Agreement and the Closing Date, Sellers will
use their Best Efforts to cause the conditions in Article X to be satisfied.
ARTICLE IX
COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 APPROVALS OF GOVERNMENTAL BODIES.
As promptly as practicable after the date of this Agreement,
Purchaser will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Purchaser will, and will cause each Related Person to, cooperate with
Sellers with respect to all filings that Sellers are required by Legal
Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Sellers in obtaining all consents identified in Schedule
6.2 hereto; provided that this Agreement will not require Purchaser to dispose
of or make any change in any portion of its business or to incur any other
burden to obtain a Governmental Authorization.
9.2 BEST EFFORTS.
Except as set forth in the proviso to Section 9.1, between the date
of this Agreement and the Closing Date, Purchaser will use its Best Efforts to
cause the conditions in Article XI to be satisfied.
9.3 TAX-FREE REORGANIZATION.
After the Closing, neither Purchaser nor Merger Sub will take any
action, including the conversion or redemption of Series A Preferred Shares,
that would cause the Merger to fail to be a reorganization under Section
368(a)(1)(A) and Section 368(a)(2)(D) of the IRC for federal and state income
tax purposes with respect to the Stockholders.
49
<PAGE>
ARTICLE X
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
Purchaser's obligations to consummate the Merger and to take the
other actions required to be taken by Purchaser at the Closing are subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Purchaser, in whole or in part):
10.1 ACCURACY OF REPRESENTATIONS.
All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects
as of the Closing Date as if made on the Closing Date.
10.2 SELLERS' PERFORMANCE.
All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
10.3 CONSENTS.
Each of the Consents identified in Schedule 6.2 and Schedule 7.2 must
have been obtained and must be in full force and effect.
10.4 ADDITIONAL DOCUMENTS.
Each of the following documents must have been delivered to
Purchaser:
(a) an opinion of McNeil, Silveira & Rice, dated the Closing Date, in
the form attached hereto as Schedule 10.4.
(b) such other documents as Purchaser may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 11.4(a), (ii) evidencing the accuracy of any of Sellers'
representations and warranties, (iii) evidencing the performance by the
Sellers of, or the compliance by the Sellers with, any covenant or obligation
required to be performed or complied with by such Sellers, (iv) evidencing the
satisfaction of any condition referred to in this Article X, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
10.5 NO PROCEEDINGS.
Since the date of this Agreement, there must not have been commenced
or Threatened against Purchaser, or against any Person affiliated with
Purchaser, any Proceeding (a) involving any challenge to, or seeking damages
or other relief in connection with, any of the Contemplated Transactions, or
(b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
50
<PAGE>
10.6 EMPLOYMENT ARRANGEMENTS.
Ronald W. Sykes shall have entered into an Employment Agreement in
the form attached hereto as Schedule 10.6A (the "Employment Agreement"), and
Dale J. Missimer shall have entered into a Consulting Agreement in the form
attached hereto as Schedule 10.6B (the "Consulting Agreement"), Paul Hall,
Robert Moyer and Kevin Flynn will have entered Retention Agreements
substantially in the form attached herein as Schedule 10.6C, (the "Retention
Agreements") and Jack V. Singer, Jr. shall have entered a Deferred
Compensation Agreement substantially in the form attached hereto as Schedule
10.6D (the "Deferred Compensation Agreement").
10.7 STOCKHOLDER APPROVAL.
This Agreement shall have been duly approved by the requisite vote of
holders of the Shares, in accordance with applicable law and the
Organizational Documents of the Company.
10.8 DISSENTERS.
No holder of the outstanding Shares shall have exercised dissenters'
rights.
10.9 GOVERNMENTAL AND REGULATORY CONSENTS.
All filings required to be made prior to the Effective Time by the
Company with, and all consents, approvals and authorizations required to be
obtained prior to the Effective Time by the Company from, governmental and
regulatory authorities in connection with the execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby by the Company, Purchaser and Merger Sub shall have been made or
obtained (as the case may be).
10.10 RESIGNATIONS.
Seller shall have received the resignations, effective as of the
Effective Time of Dale J. Missimer, Mary B. Missimer, Ronald W. Sykes, Jack V.
Singer, Jr. as directors of the Company.
10.11 CERTAIN OBLIGATIONS.
The Company shall have entered into a five year building lease
agreement (the "Lease Agreement"),substantially in the form attached hereto as
Schedule 10.11, for the premises located at 67 Mark Drive.
51
<PAGE>
10.12 NO PROHIBITION.
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
material violation of, or cause Purchaser or any Person affiliated with
Purchaser to suffer any material adverse consequence under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has
been published, introduced, or otherwise formally proposed by or before any
Governmental Body.
ARTICLE XI
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to consummate the Merger and to take the other
actions required to be taken by Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Sellers, in whole or in part):
11.1 ACCURACY OF REPRESENTATIONS.
All of Purchaser's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
11.2 PURCHASER'S PERFORMANCE.
All of the covenants and obligations that Purchaser is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
11.3 CONSENTS.
Each of the Consents identified in Schedule 7.2 must have been
obtained and must be in full force and effect.
11.4 ADDITIONAL DOCUMENTS.
Purchaser must have caused the following documents to be delivered to
Sellers:
(a) an opinion of Counsel to Purchaser dated the Closing
Date, in the form attached hereto as Schedule 11.4; and
(b) such other documents as Sellers may reasonably request
for the purpose of (i) enabling their counsel to provide the opinion
referred to in Section 10.4(a), (ii) evidencing the accuracy of any
52
<PAGE>
representation or warranty of Purchaser, (iii) evidencing the
performance by Purchaser of, or the compliance by Purchaser with, any
covenant or obligation required to be performed or complied with by
Purchaser, (ii) evidencing the satisfaction of any condition referred
to in this Article XI, or (v) otherwise facilitating the consummation
of any of the Contemplated Transactions.
11.5 NO INJUNCTION.
There must not be in effect any Legal Requirement or any injunction
or other Order that (a) prohibits the Contemplated Transactions, and (b) has
been adopted or issued, or has otherwise become effective, since the date of
this Agreement.
11.6 STOCKHOLDER APPROVAL.
This Agreement shall have been duly approved by the requisite vote of
the holders of the Shares, in accordance with applicable law and the
Certificate and By-Laws of the Company.
11.7 GOVERNMENTAL CONSENTS.
All filings required to be made prior to the Effective Time by
Purchaser and Merger Sub with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time by
Purchaser and Merger Sub from, governmental and regulatory authorities in
connection with the execution and delivery of this Agreement by Purchaser and
Merger Sub and the consummation of the transactions contemplated hereby by
Purchaser, Merger Sub and the Company shall have been made or obtained (as the
case may be).
ARTICLE XII
TERMINATION
12.1 TERMINATION EVENTS.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Purchaser or the Company if a material Breach
of any provision of this Agreement has been committed by the other
party and such Breach has not been waived;
(b) (i) by Purchaser if any of the conditions in Article X
has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of Purchaser to comply with its obligations under this
Agreement) and Purchaser has not waived such condition on or before
the Closing Date; or (ii) by Sellers, if any of the conditions in
Article XI has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers to comply with their obligations under
this Agreement) and Sellers have not waived such condition on or
before the Closing Date;
(c) by mutual consent of Purchaser and Sellers; or
53
<PAGE>
(d) by (i) the Purchaser if the Closing has not occurred
(other than through the failure of the Purchaser to comply fully with
its obligations under this Agreement) or (ii) the Company if the
Closing has not occurred (other than through the failure of the
Company to comply fully with its obligations under this Agreement),
on or before January 31, 1998, or such later date as the parties may
agree upon.
12.2 EFFECT OF TERMINATION.
Each party's right of termination under Section 12.1 is in addition
to any other rights it may have under this Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 12.1, all further obligations
of the parties under this Agreement will terminate, except that the
obligations in Articles XIII and XIV will survive; provided, however, that if
this Agreement is terminated by a party because of the Breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE XIII
INDEMNIFICATION; REMEDIES
13.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
All representations, warranties, covenants, and obligations in this
Agreement, the Schedules, the supplements to the Schedules and any certificate
or document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected
by any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
13.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS.
(a) Subject to the limitations, restrictions and conditions set forth
in this Agreement, each of the Stockholders and Designated Officers
(individually, an "Indemnifying Party", two or more, the Indemnifying
Parties")will severally, but not jointly, indemnify and hold harmless
Purchaser, the Company, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Purchaser Indemnified
Persons") for, and will pay to the Purchaser Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively "Damages"), arising, directly or indirectly,
from or in connection with: (i) any Breach of any representation or warranty
made by such Indemnifying Party in this Agreement; or (ii) any Breach by such
Indemnifying Party of any covenant or obligation of such Indemnifying Party in
this Agreement.
54
<PAGE>
(b) Subject to the limitations, restrictions and conditions set forth
in this Agreement, each of the Indemnifying Parties will severally but not
jointly indemnify and hold harmless each of the Purchaser Indemnified Persons
for, or pay to the Purchaser Indemnified Persons the amount of any Damages
arising, directly or indirectly, from or in connection with: (i) any Breach of
any representation or warranty made by the Company in this Agreement; or (ii)
any Breach by the Company of any covenant or obligation of the Company under
this Agreement.
The remedies provided in this Section 13.2 and any other remedies
provided at equity will be the exclusive remedies available to Purchaser and
the other Indemnified Persons.
13.3 DOLLAR LIMITATIONS ON INDEMNIFICATION CLAIMS.
(a) The Indemnifying Parties shall not be required to provide
indemnification under Section 13.2 unless the Damages of Purchaser or any of
the Purchaser Indemnified Persons for all claims for indemnification under
Section 13.2 shall exceed in the aggregate the Basket Amount.
(b) In no event shall (i) the aggregate liability of all of the
Indemnifying Parties with respect to all claims for indemnification by
Purchaser or any of the Purchaser Indemnified Persons hereunder exceed the Cap
Amount, (ii) the liability of any Indemnifying Party with respect to all
claims of indemnification exceed the share of Merger Consideration received by
such Indemnifying Party, or (iii) with respect to any claim for
indemnification against two or more Indemnifying Parties, the liability of
each such Indemnifying Party exceed the proportionate share of the Merger
Consideration received by such Indemnifying Party relative to the total Merger
Consideration received by all Indemnifying Parties against whom such claim was
made. For purposes of determining a Designated Officer's proportionate share
of the Merger Consideration, the share of the Merger Consideration received by
(A) The Dale J. Missimer and Mary Suzanne Missimer 1992 Trust, The Missimer
Family 1992 Trust, and the Dale J. Missimer and Mary Suzanne Missimer
Grandchildren's Education Trust shall be attributed to Dale J. Missimer, (B)
The Ronald W. Sykes and Lois A. Sykes Trust shall be attributed to Ronald W.
Sykes, and (C) The Jack V. Singer and Anna-Liise Singer 1993 Trust shall be
attributed to Jack V. Singer, Jr. Amounts payable by the Indemnifying Parties
pursuant to this Section may be made in cash or in shares of Purchaser Common
Stock valued at the average of the closing price of the Purchaser's Common
Stock on the American Stock Exchange (or, if the Purchaser's Common Stock is
not then listed on the American Stock Exchange, on such other exchange or
automated quotation system upon which the Common Stock is then listed or
quoted) for the ten trading days ending one week before the day on which such
shares are delivered (with stock powers duly authorized) to the Purchaser.
55
<PAGE>
This section shall not apply with respect to any Indemnifying Party
for any Breach of such Indemnifying Party's representations or warranties to
which such Indemnifying Party had knowledge at any time prior to the time such
representation or warranty was made or any intentional Breach by such
Indemnifying Party of any covenant or obligation.
13.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PURCHASER.
Purchaser will indemnify and hold harmless Sellers, and will pay to
Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by
Purchaser in this Agreement or in any certificate delivered by Purchaser
pursuant to this Agreement, (b) any Breach by Purchaser of any covenant or
obligation of Purchaser in this Agreement, or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with
Purchaser (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions. Purchaser will have no liability for
indemnification or otherwise with respect to the matters described in clause
(a), (b) or (c) of this Section 13.4 until the total of all Damages with
respect to such mattes exceeds the Basket Amount. In no event shall the
aggregate liability of Purchaser with respect to all claims for
indemnification by the Stockholders exceed the Cap. The liability of Purchaser
with respect to any claim by an individual Stockholder shall not exceed the
amount of the Cash Portion received by such Stockholder pursuant to this
Agreement. These limitations will not apply to any Breach of any of
Purchaser's or Merger Sub's representations or warranties of which Purchaser
had Knowledge at any time prior to the date on which such representation or
warranty is made or any intentional Breach by Purchaser of Merger Sub of any
covenant or obligation and Purchaser will be liable for all Damages with
respect to such Breaches.
The remedies provided in this Section 13.4 and any other remedies
provided at equity will be the exclusive remedies available to Sellers.
13.5 TIME LIMITATIONS.
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the
Closing Date, other than those in Sections 6.3, 6.11, 6.13, and 6.19, unless
on or before the fourth anniversary of the Closing Purchaser notifies Sellers
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Purchaser; a claim with respect to Sections 5.1, 5.2,
5.4 6.3, 6.11, 6.13, or 6.19, or a claim for indemnification or reimbursement
not based upon any representation or warranty or any covenant or obligation to
be performed and complied with prior to the Closing Date, may be made at any
time. If the Closing occurs, Purchaser will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the
Closing Date, unless on or before the fourth anniversary of the Closing
Sellers notify Purchaser of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by Sellers.
56
<PAGE>
13.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under
Section 13.2, 13.4, or (to the extent provided in the last sentence
of Section 13.3) Section 13.3 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to
be made against an indemnifying party under such Section, give notice
to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 13.6(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, unless the claim involves Taxes, be entitled
to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to
the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under this
Article XIII for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will
be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation
of Legal Requirements or any violation of the rights of any Person
and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (iii)
the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
If notice is given to an indemnifying party of the commencement of
any Proceeding and the indemnifying party does not, within ten days
after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination
made in such Proceeding or any compromise or settlement effected by
the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that
a Proceeding may adversely affect it or its affiliates other than as
a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
57
<PAGE>
(d) Sellers hereby consent to the non-exclusive jurisdiction
of any court in which a Proceeding is brought against any Indemnified
Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Sellers with
respect to such a claim anywhere in the world.
13.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS.
A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from whom
indemnification is sought.
13.8 HOLDBACK AS SECURITY AGAINST SELLERS' REPRESENTATIONS AND
WARRANTIES.
Subject to the limitations, restrictions and conditions set forth in
this Agreement, each Indemnifying Party's indemnification obligation under
this Article XIII shall be secured, severally and not jointly, for the
Holdback Period by the Cash Portion and any cash payable in lieu of fractional
shares (collectively, the "Security Funds") due to such Indemnifying Party
pursuant to Section 4.1. During the Holdback Period, Intermagnetics shall
provide notice pursuant to Section 14.4 (with copies to the affected
Indemnifying Party) of any claim (an "Indemnity Claim") for indemnification
under this Article XIII. The notice shall specify the Indemnifying Party or
Indemnifying Parties so affected and a reasonable estimate of the dollar
amount of such claim. Upon expiration of the Holdback Period, the Purchaser
shall promptly pay under the terms of the Promissory Note the balance of (A)
the Security Funds not effected by any such notice, and (B) any interest due
as provided in the Promissory Note. A notice of an Indemnity Claim with
respect to an Indemnifying Party, or several Indemnifying Parties, shall not
affect more than the lesser of (i) that Indemnifying Party's, or those
Indemnifying Parties' aggregate, pro rata share of the Security Funds, or (ii)
that Indemnifying Party's, or those Indemnifying Parties' aggregate, maximum
obligation under this Article XIII. Any Indemnity Claim shall be resolved as
provided in Section 14.5 with due consideration for the provisions of Section
13.6. Upon resolution of an Indemnity Claim by mutual agreement of the
parties, or a final order of a court of competent jurisdiction, the Purchaser
shall promptly pay, in accordance with Section 4.2(d) and terms of the
Promissory Note, any amounts affected by such Indemnity Claim pursuant to the
written instructions of the parties or such final court order. Notwithstanding
anything herein to the contrary, the failure of Purchaser to make any
Indemnity Claim during the Holdback Period shall not otherwise adversely
affect Purchaser's right to indemnification pursuant to this Article XIII.
58
<PAGE>
ARTICLE XIV
GENERAL PROVISIONS
14.1 EXPENSES.
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
14.2 PUBLIC ANNOUNCEMENTS.
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Purchaser determines. Unless consented to by
Purchaser in advance or required by Legal Requirements, prior to the Closing
Sellers shall, and shall cause the Company to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Sellers and Purchaser will consult with each other concerning the means by
which the Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the Contemplated Transactions,
and Purchaser will have the right to be present for any such communication.
14.3 CONFIDENTIALITY.
Between the date of this Agreement and the Closing Date, Purchaser
and Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Purchaser and the Company to
maintain in confidence, any written information stamped "confidential" when
originally furnished by another party or the Company in connection with this
Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no
fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing
or use of such information is required by or necessary or appropriate in
connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
14.4 NOTICES.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
59
<PAGE>
mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as
a party may designate by notice to the other parties):
Sellers: Polycold Systems International
67 Mark Drive
San Rafael, California 94903-2264
Attention: Ronald W. Sykes
Facsimile No.: (415)499-0927
with a copy to: McNeil, Silveira & Rice
55 Professional Center Parkway
Suite A
San Rafael, California 94903
Attention: Patrick J. McNeil, Esq.
Facsimile No. (415) 472-1298
Purchaser: Intermagnetics General Corporation
P.O. Box 461
Latham, New York 12110-0461
Attention: Christopher J. Lord, Esq.
Facsimile No.: (528) 783-2602
14.5 ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement
or the breach or validity thereof shall be settled by arbitration in San
Francisco, California by a panel of three arbitrators in accordance with the
rules of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator[s] may be entered in any court having jurisdiction
thereof, and the parties consent to the jurisdiction of the California courts
for this purpose.
14.6 FURTHER ASSURANCES.
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
14.7 WAIVER.
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such
60
<PAGE>
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
14.8 ENTIRE AGREEMENT AND MODIFICATION.
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter (including the Letter of Intent between
Purchaser and Sellers dated September 5, 1997, and any side letters sent in
conjunction therewith) and constitutes (along with the documents referred to
in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
14.9 SCHEDULES.
(a) The disclosures in the Schedules, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Schedules (other than an exception
expressly set forth as such in a Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
14.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties, which will not be unreasonably
withheld, except that Purchaser may assign any of its rights under this
Agreement to any Subsidiary of Purchaser. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to
the benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
61
<PAGE>
14.11 SEVERABILITY.
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
14.12 SECTION HEADINGS, CONSTRUCTION.
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
14.13 GOVERNING LAW.
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
14.14 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
INTERMAGNETICS POLYCOLD SYSTEMS
GENERAL CORPORATION INTERNATIONAL, INC.
By: /s/Carl H. Rosner By: /s/Dale J. Missimer
---------------------------- -------------------------------
Carl H. Rosner Dale J. Missimer
Chairman and Chief Executive Chairman and Chief Executive
Officer Officer
POLYCOLD
MERGER SUB, INC.
By: /s/Glenn H. Epstein
-------------------------------
Name: Glenn H. Epstein
Title: President
62
<PAGE>
STOCKHOLDERS
THE DALE J. MISSIMER AND MARY SUZANNE MISSIMER 1992 TRUST
/s/Dale J. Missimer
----------------------------
Dale J. Missimer, as trustee
/s/Mary B. Missimer
----------------------------
Mary B. Missimer, as trustee
THE MISSIMER FAMILY 1992 TRUST
/s/Duncan Bennett Missimer
-----------------------------------
Duncan Bennett Missimer, as trustee
THE DALE J. MISSIMER AND MARY SUZANNE MISSIMER GRANDCHILDREN'S EDUCATION TRUST
/s/Jack V. Singer, Jr.
-------------------------------
Jack V. Singer, Jr., as trustee
THE JACK V. SINGER AND ANNA-LIISE SINGER 1993 TRUST
/s/Jack V. Singer, Jr.
------------------------------
Jack V Singer, Jr., as trustee
THE RONALD W. SYKES AND LOIS A. SYKES TRUST
/s/Ronald W. Sykes
---------------------------
Ronald W. Sykes, as trustee
/s/Joan Brennan
---------------------------
Joan Brennan
/s/Searl G. Fields
---------------------------
Searl G. Fields
63
<PAGE>
/s/Kevin Flynn
---------------------------
Kevin Flynn
/s/David T. Fyfe, Jr.
---------------------------
David T. Fyfe, Jr.
/s/Paul H. Hall
---------------------------
Paul H. Hall
/s/Cindy L. Johnson
---------------------------
Cindy L. Johnson
/s/Robert Moyer
---------------------------
Robert Moyer
/s/Michael Wise
---------------------------
Michael Wise
DESIGNATED OFFICERS
/s/Dale J. Missimer
---------------------------
Dale J. Missimer
/s/Jack V. Singer, Jr.
---------------------------
Jack V. Singer, Jr.
/s/Ronald W. Sykes
---------------------------
Ronald W. Sykes
64
<PAGE>
Exhibit 3.1
Certificate of Amendment of
the Certificate of Incorporation of
Intermagnetics General Corporation
Under ss.805 of the Business Corporation Law
WE, THE UNDERSIGNED, Carl H. Rosner, Glenn Epstein and Catherine E.
Arduini, being respectively the Chairman and Chief Executive Officer, the
President and the Corporate Secretary of Intermagnetics General Corporation,
hereby certify that:
1. The name of the corporation is Intermagnetics General Corporation.
2. The name under which the corporation was formed is Magnetics International
Corporation.
3. The Certificate of Incorporation was filed by the Department of State on
the 1st day of April, 1971.
4. The corporation's Certificate of Incorporation is hereby amended by the
addition of the following Article THIRD-B stating the number, designation,
relative rights, preferences and limitations of the shares of a series of
preferred stock as fixed by the corporation's board of directors pursuant to
Article THIRD-A of the company's Certificate of Incorporation:
THIRD-B: Pursuant to Article THIRD-A, the board of directors has designated
70,000 shares of preferred stock as Series A Preferred Stock. The
designations, relative rights, preferences and limitations in respect of such
Series A Preferred Stock of the corporation shall be as follows:
(a) Voting Rights.
Except as otherwise expressly required pursuant to the Business Corporation
Law, the holders of shares of the Series A Preferred Stock shall not be
entitled to vote such shares in any elections or proceedings, and shall be
entitled to no notice of any such elections or proceedings.
(b) Dividends.
The holders of the Series A Preferred Stock shall not be entitled to any
preferential dividends. Notwithstanding the foregoing, holders of the Series A
Preferred Stock shall be entitled to share ratably with the holders of the
65
<PAGE>
corporation's common stock, $.10 par value per share (the "Common Stock"), out
of funds legally available therefor, any cash dividends when and if declared
and paid with respect to the Common Stock. In determining the ratable share of
the Series A Preferred Stock, each share of such Series A Preferred Stock
shall be deemed equal to the number of shares of Common Stock issuable if such
share of Series A Preferred Stock had been converted as of the record date for
such dividend into Common Stock in accordance with the terms hereof. With
respect to any stock dividends declared and distributed with respect to the
Common Stock, holders of the Series A Preferred Stock shall be entitled to
participate through an adjustment of the Series A Redemption Price and the
Series A Conversion Price, as such terms are defined below, as follows: the
Redemption Price or the Conversion Price, as the case may be, then in effect
upon the record date for such stock dividend shall be adjusted upward by a
percentage amount equal to the percentage amount of the stock dividend(s)
declared and payable up to the date of redemption or conversion, and for which
the adjustment is being calculated.
(c) Liquidation Preference.
Upon any liquidation, dissolution or winding up of the corporation, whether
voluntary or involuntary, or in the event of its insolvency, after the
payment, or provision for payment, of all debts and liabilities of the
corporation but subject to the liquidation rights and preferences of any class
or series of Preferred Stock other than the Series A Preferred Stock, any and
all remaining assets available for distribution shall be distributed ratably
to the holders of the Series A Preferred Stock and the holders of Common
Stock. In determining the ratable share of the Series A Preferred Stock, each
share of such Series A Preferred Stock shall be deemed equal to the number of
shares of Common Stock issuable if such share of Series A Preferred Stock had
been converted as of the record date for such distribution into Common Stock
in accordance with the terms hereof.
(d) Redemption.
The corporation shall have the right, upon approval of a majority of the board
of directors, to redeem the Series A Preferred Stock, in whole or in part, at
any time and from time to time after issuance. If less than all of the
outstanding shares of Series A Preferred Stock are to be redeemed, the shares
of Series A Preferred Stock to be redeemed shall be selected by the
corporation by such method as the corporation shall deem appropriate.
With respect to any redemption, the corporation shall provide to all holders
of the shares of Series A Preferred Stock to be redeemed, a written notice
(the "Notice of Redemption") of its intention to redeem such shares. Within
sixty days after receipt of the Notice of Redemption, the holders of the
shares of Series A Preferred Stock to be redeemed shall deliver such
certificates representing such shares of Series A Preferred Stock to the
corporation for redemption and cancellation against payment of the applicable
redemption price. If any of the shares of Series A Preferred Stock represented
by a certificate so delivered to the corporation have not been called for
redemption, the corporation shall issue to the holder of such certificate,
upon delivery of such certificate, a new certificate for such unredeemed
66
<PAGE>
shares of Series A Preferred Stock. In the event that any holder of shares of
Series A Preferred Stock called for redemption shall fail to deliver any
certificate or certificates representing such shares, such shares of Series A
Preferred Stock shall be deemed redeemed and canceled, and the corporation
shall set aside and reserve for payment upon delivery of such certificates the
redemption price payable therefor.
The redemption price payable with respect to each share of Series A Preferred
Stock that is the subject of a Notice of Redemption shall be $100 (the "Series
A Redemption Price"), as adjusted from time to time as provided above for any
stock dividends, plus all accrued and unpaid cash dividends, if any, as of the
date of such Notice of Redemption upon such share.
(e) Conversion.
The corporation shall have the right, upon approval of a majority of the board
of directors, to convert, in accordance with the terms hereof, any or all of
the outstanding shares of the Series A Preferred Stock into Common Stock at
any time and from time to time after the first anniversary of the date of
issuance. If less than all of the outstanding shares of Series A Preferred
Stock are to be converted, the shares of Series A Preferred Stock to be
converted shall be selected by the corporation by such method as the
corporation shall deem appropriate. If the corporation does not exercise its
right to redeem or convert all of the shares of Series A Preferred Stock on or
before November 30, 1999, then the outstanding shares of Series A Preferred
Stock at that time shall automatically convert, in accordance with the terms
hereof, into Common Stock effective as of December 1, 1999. If (i) the
corporation is involved in a consolidation or merger into, or with, any other
entity or entities other than a wholly owned subsidiary, and the corporation
is not the surviving corporation, or (ii) the corporation engages in a sale,
transfer or other disposition of all or substantially all of its assets, then
the Series A Preferred Stock shall automatically convert, in accordance with
the terms hereof, into Common Stock effective as of the day prior to the
effective day for such event.
With respect to any conversion, the corporation shall provide to all holders
of shares of Series A Preferred Stock which are to be converted a written
notice (the "Notice of Conversion") of its intention to convert into Common
Stock such shares of Series A Preferred Stock. Within sixty days after receipt
of the Notice of Conversion, the holders of the shares of Series A Preferred
Stock selected for conversion shall deliver all certificates representing such
shares of Series A Preferred Stock to the corporation for conversion and
cancellation. The corporation shall issue and deliver, or cause to be issued
and delivered, to such holder, in such denomination or denominations, and
registered in such name or names as specified in writing by such holder, a
certificate or certificates for the number of whole shares of Common Stock
issuable upon the conversion of the shares of Series A Preferred Stock
surrendered by such holder. Notwithstanding the foregoing, the corporation
shall not be required to pay any tax or duty which may be payable in respect
of any transfer involved in the issue and delivery of shares of Common Stock
in a name other than that of a holder of shares of Series A Preferred Stock to
be converted, and no such delivery shall be made unless and until the person
requesting such issue has paid to the corporation the amount of any such tax
or duty, or has established to the satisfaction of the corporation that such
tax or duty has been paid. If any of the shares of Series A Preferred Stock
represented by a certificate delivered to the corporation for conversion have
not been selected for conversion, the corporation shall deliver to the holder
of such certificate a new certificate for such unconverted shares of Series A
Preferred Stock. In the event that any holder of shares of Series A Preferred
Stock selected for conversion shall fail to deliver any certificate or
certificates representing such shares, the shares of Series A Preferred Stock
selected for conversion and represented thereby shall be deemed converted and
canceled and the corporation shall set aside and reserve for issuance upon
delivery of such certificates new certificates representing the applicable
number of shares of Common Stock.
67
<PAGE>
The applicable number of shares of Common Stock into which each share of
Series A Preferred Stock that is the subject of a Notice of Conversion shall
be converted shall be equal to the Series A Conversion Price, divided by the
average of the closing price of the corporation's Common Stock on the American
Stock Exchange (or, if the Common Stock is not then listed on the American
Stock Exchange, on such other exchange or automated quotation system upon
which the Common Stock is then listed or quoted) for the ten trading days
immediately following the fiftieth day after the date of the Notice of
Conversion (the "Market Price"). No fractional shares shall be issued upon
conversion of Series A Preferred Stock. In lieu of any such fractional shares,
the corporation shall pay in cash an amount equal to the fractional share
multiplied by the Market Price. At the time of conversion, the corporation
shall pay in cash an amount equal to the value of all dividends, if any,
accrued and unpaid on the shares of Series A Preferred Stock being converted,
as of the date of such Notice of Conversion.
The Series A Conversion Price shall be $100, as adjusted from time to time as
provided above for any stock dividends.
The corporation will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance on the conversion
of the Series A Preferred Stock as herein provided, such number of shares of
Common Stock as the board of directors reasonably and prudently determines,
from time to time, would likely be issuable upon the conversion of all
outstanding shares of Series A Preferred Stock. The corporation will take all
such action as may be necessary to assure that all such shares of Common Stock
may be so issued without violation of any applicable law or regulation, or of
any requirement of any national securities exchange upon which the Common
Stock may be listed.
(f) Effect of Conversion or Redemption.
Except as otherwise expressly provided herein, no share of Series A Preferred
Stock shall be entitled to any rights of conversion, redemption or dividends
accruing after the date of the Notice of Redemption or Notice of Conversion,
as the case may be, relating to such share, and as of such date all rights of
the holder of such share as such holder, other than the right to receive the
applicable redemption price or applicable number of shares of Common Stock,
will cease, and such share will not be deemed to be outstanding thereafter.
6. The manner in which the this Certificate of Amendment of the Restated
Certificate of Incorporation was authorized was by resolution adopted by a
majority vote of the Board of Directors of the corporation, as provided in
Article Three-A of the Restated Certificate of Incorporation of Intermagnetics
General Corporation.
68
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate on
this 24th day of November, 1997, and affirm under the penalty of perjury that
the statements contained herein are true.
/s/ Carl H. Rosner
-------------------------------------
Carl H. Rosner
Chairman and Chief Executive Officer
/s/Glenn H. Epstein
-------------------------------------
Glenn H. Epstein
President
/s/Catherine E. Arduini
-------------------------------------
Catherine E. Arduini
Corporate Secretary
69
<PAGE>
Exhibit 10.1
INTERMAGNETICS - SYKES
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of November 24, 1997 (the "Effective Date")
between Intermagnetics General Corporation, a New York corporation with its
principal office located at 450 Old Niskayuna Road, Latham, New York 12110
("Intermagnetics"), and Ronald W. Sykes, who resides at 7930 Mitchell Court,
Sebatopol, California 95472 ("Mr. Sykes").
WHEREAS, Mr. Sykes has been employed as President of Polycold Systems
International, Inc. ("Polycold") and has worked for Polycold on an at will
basis since 1991; and
WHEREAS, effective November 24, 1997, Polycold merged with a wholly
owned subsidiary of Intermagnetics; and
WHEREAS, Intermagnetics wishes to enter into an Agreement with Mr.
Sykes to (i) provide for continuation of Mr. Sykes' employment with Polycold
for a period of one year from the Effective Date, (ii) reinforce and encourage
the continued dedication of Mr. Sykes to Polycold, and (iii) provide for
certain additional benefits to Mr. Sykes;
NOW, THEREFORE, in consideration of the matters recited and the
respective covenants and promises of the parties contained in this Agreement,
the parties agree as follows:
1. Employment. From the Effective Date until December 31, 1998 (the
"Employment Term"), Intermagnetics shall employ Mr. Sykes as Vice President
and General Manager of Polycold. Mr. Sykes shall report directly to
Intermagnetics' President. Mr. Sykes shall perform the duties generally
associated with the job description set forth in Schedule "A" of this
Agreement, as updated from time to time. Notwithstanding the foregoing,
Intermagnetics, through its President, retains the discretion to vary the
title and duties of Mr. Sykes from time to time; provided that Mr. Sykes'
title and duties shall not be less than at an executive level during the
Employment Term. Mr. Sykes' employment with Intermagnetics shall cease at the
end of the Employment Term, unless Intermagnetics elects, and Mr. Sykes
agrees, to extend Mr. Sykes employment for an additional period not to exceed
one year (the "Extension Term").
2. Consulting Term: During the twelve month period following the end of the
Employment Term, or any applicable Extension Term, Mr. Sykes agrees to provide
up to three hundred (300) hours of consulting services as requested from time
to time by Intermagnetics (the "Consulting Term"). Mr. Sykes acknowledges and
agrees that during such Consulting Term, he shall be acting as an independent
contractor and not an employee of, agent for, partner of, or joint venturer
with Intermagnetics or any of its subsidiaries or affiliated companies. As an
independent contractor, Mr. Sykes will not be eligible for any benefit or
right under the Company's employee benefit or welfare plans, including,
without limitation, insurance, pension and 401(k) savings plan.
3. Performance. During the Employment Term and any applicable Extension Term,
Mr. Sykes shall devote his entire business time and effort rendering services
as Vice President and General Manager of Polycold, (or in such other capacity
as may be determined by the President of Intermagnetics consistent with the
provisions in Paragraph 1 above). Mr. Sykes shall perform his services
diligently to the best of his ability. Mr. Sykes agrees that in performing his
services, and in all aspects of his employment as an executive of
Intermagnetics, he will comply in all material respects with any directives,
policies, standards and regulations from time to time established by
Intermagnetics to the extent they do not conflict with this Agreement.
70
<PAGE>
4. Compensation, Benefits and Non-Compete Fee.
a. Salary. For the period of the Employment Term and any applicable
Extension Term, Mr. Sykes shall receive salary compensation in the
amount of $14,666.66 per month ("Salary").
b. Bonus. At the end of the Employment Term, Mr. Sykes shall be
entitled to a bonus in the amount of $176,000.00. The bonus shall be
payable as a lump sum within thirty (30) days of the expiration of
the Employment Term.
c. Benefits. During the Employment Term and any applicable Extension
Term, Mr. Sykes shall be entitled to receive group medical insurance
and other employee benefits, including, but not limited to, life
insurance, disability insurance, pension benefits and 401(k)
participation, subject to the same eligibility requirements afforded
other executive employees of Intermagnetics. Mr. Sykes acknowledges
that these employee benefit plans may be amended, enlarged,
diminished or eliminated on a non-discriminatory basis by
Intermagnetics from time to time at its discretion.
d. Reimbursement of Expenses. During the Employment Term and any
applicable Extension Term, Mr. Sykes shall be entitled to
reimbursement by Intermagnetics for all reasonable expenses incurred
by him in the performance of his duties as Vice President and General
Manager or executive in accordance with Company policy. During the
Consulting Term, Mr. Sykes shall be entitled to reimbursement for
reasonable authorized expenses incurred in the performance of his
consulting services.
e. Non-Compete Fee. Within sixty (60) days of the expiration of the
Employment Term, or, if the parties agree to an Extension Term, at
the expiration of such Extension Term, Intermagnetics shall pay to
Mr. Sykes a lump sum payment in the amount of $176,000.00
("Non-Compete Fee"); provided, however, that such Non-Compete Fee
shall be reduced by $0.50 for each $1.00 paid to Mr. Sykes in salary
during any applicable Extension Term. Such payment shall be in place
of any other termination payment program which may be in effect for
other Intermagnetics' employees at the expiration of the Employment
Term or any applicable Extension Term.
5. Vacations, Holidays, Personal and Sick Time. During the Employment Term and
any applicable Extension Term, Mr. Sykes shall be entitled to holiday,
personal and sick time, in accordance with Intermagnetics' policies for exempt
employees. Mr. Sykes shall also be entitled to three (3) weeks of vacation
time during the Employment Term and up to three (3) weeks of vacation on a
pro-rata basis for any applicable Extension Term.
71
<PAGE>
6. Confidential and Proprietary Information. As used in this Paragraph 6,
"secret" and "confidential" are used in the ordinary sense and do not refer to
official security classifications of any government. As used in this
Paragraph, "Intermagnetics" includes its subsidiaries and affiliated
companies, including Polycold. Mr. Sykes agrees:
a. to communicate to Intermagnetics promptly and fully, and assign to
Intermagnetics all inventions or significant technical or business
innovations developed or conceived solely by him or jointly with
others from the time of entering Intermagnetics' employ until any
termination of employment, (1) which are along the lines of the
business, work or investigations of Intermagnetics, or (2) which
result from or are suggested by any work which he may do for or on
behalf of Intermagnetics;
b. to execute all necessary papers and otherwise to assist
Intermagnetics and its nominees during and subsequent to his
employment in every proper way (entirely at its or their expense) to
obtain for its or their own benefit, patents, copyrights, or other
legal protection for such inventions or innovations, or for
publications pertaining to them, in any and all countries, said
inventions and innovations to be the exclusive property of
Intermagnetics or its nominees, whether or not patented or
copyrighted;
c. to make and maintain adequate and current written records of all
such inventions or innovations, in the form of notes, sketches,
drawings, or reports relating to Intermagnetics at all times;
d. upon any termination of employment, promptly to deliver to
Intermagnetics all drawings, blueprints, manuals, letters, notes,
notebooks, reports, models, and other materials (including all
copies) which are of a secret or confidential nature relating to the
business of Intermagnetics, which are in his possession or under his
control;
e. except as Intermagnetics may otherwise consent in writing, not to
publish or otherwise disclose (except as his job duties may require)
either during or subsequent to his employment, any information,
knowledge, or data of Intermagnetics or its customers which he may
receive or develop during the course of his employment relating to
inventions, discoveries, formulas, processes, machines, manufacturing
methods, compositions, computer programs, accounting methods,
information systems or business or financial plans or reports, or
other matters which are of a secret or confidential nature;
f. to notify Intermagnetics in writing before making any disclosure
or performing or causing to be performed any work for or on behalf of
Intermagnetics, which appears to conflict with (1) rights he claims
in any invention or idea (a) conceived by Mr. Sykes or others prior
to his employment or (b) otherwise outside the scope of this
Agreement, or (2) rights of others arising out of obligations
incurred by Mr. Sykes (a) prior to this Agreement or (b) otherwise
outside the scope of this Agreement. In the event Mr. Sykes fails to
give notice under the circumstances specified above, Intermagnetics
may assume that no such claim exists against Intermagnetics with
respect to the use of any such invention or idea for or on behalf of
Intermagnetics.
7. Agreement not to Compete. In consideration of his employment rights under
this Agreement and in recognition of the fact that he has access to
Intermagnetics' confidential information, Mr. Sykes agrees:
72
<PAGE>
a. During the term of this Agreement, that he will not participate
directly or indirectly, in any capacity, in any business or business
activity that is in competition with Intermagnetics or its
subsidiaries or affiliated companies.
b. For a period of three (3) years after the date of termination of
his employment, for any reason, unless acting with Intermagnetics'
express written consent, that he will not directly or indirectly own
or participate in, or be connected with, as an officer, director,
employee, partner, investor, consultant or advisor, any business that
engages, or proposes to engage in the development, manufacture or
sale of products similar to the products of Intermagnetics or of its
subsidiaries or affiliated companies; except that Intermagnetics
acknowledges and agrees that Mr. Sykes may continue to own shares in
Intermagnetics' stock and up to 2% of the shares of any other
publicly traded company so long as Mr. Sykes does not participate in
the management or control of such company.
73
<PAGE>
c. For a period of three (3) years after the date of termination of
his employment, for any reason, that he will not employ either
directly or on behalf of a third party, any person who is an employee
of Intermagnetics as of the date of the termination of Mr. Sykes'
employment.
8. Termination.
a. For Cause. Intermagnetics may terminate Mr. Sykes' employment
under this Agreement for "cause" which shall mean: (i) theft or other
dishonesty; (ii) conviction of a felony, or conviction of a
misdemeanor involving fraud; (iii) use of illegal substances; (iv)
neglect of duties or persistent refusal to adhere to Intermagnetics'
policies or directions; or (v) material breach of any term of this
Agreement. In the event Intermagnetics determines that termination of
Mr. Sykes is justified under (iv) or (v) above, Intermagnetics shall
give Mr. Sykes thirty (30) days notice to cure his neglect or rectify
his breach. If after thirty (30) days, Mr. Sykes has failed to cure
his neglect or rectify his breach, Intermagnetics may terminate his
employment. For all other causes of termination under this Paragraph
8(a), Intermagnetics may terminate Mr. Sykes immediately upon
discovery of the cause.
b. Disability. Intermagnetics may terminate this Agreement if Mr.
Sykes is unable, as a result of physical or mental disability, to
perform his duties as provided in this Agreement for a period in
excess of twelve (12) weeks, consecutively or non-consecutively,
during the Employment Term or any applicable Extension Term.
Termination under this provision shall be executed by written notice
from Intermagnetics to Mr. Sykes and shall be effective thirty (30)
days following the written notice. For purposes of determining
whether Mr. Sykes has a "physical or mental disability" under this
Paragraph 8(b), he shall be evaluated by a physician retained by
Intermagnetics at Intermagnetics' expense. Mr. Sykes shall make all
relevant medical records available to the physician retained by
Intermagnetics and shall otherwise cooperate in such evaluation.
c. Death. This Agreement shall terminate in the event of Mr. Sykes'
death during the Employment Term or any applicable Extension Term,
effective on the date of his death.
d. By Mr. Sykes. Mr. Sykes may terminate this Agreement at any time
upon one-hundred-eighty days prior written notice.
9. Forfeiture of Bonus and Non-Compete Fee. If this Agreement is terminated
for any of the reasons set forth in Paragraphs 8(a) or 8(d) above, Mr. Sykes
shall forfeit the amounts payable under Paragraphs 4(b) and 4(e), and any pro
rata portion of his Salary, as set forth in Paragraph 4(a), that is unearned
as of the date of termination.
10. Miscellaneous.
a. Governing Law. This Agreement is made under, and shall be
interpreted, construed, and enforced in accordance with, the laws of
the State of California.
b. Disputes. Any controversy or claim arising out of or relating to
this Agreement or Mr. Sykes employment shall be settled by
arbitration conducted in San Francisco, California, in accordance
with the then current rules of the American
74
<PAGE>
Arbitration Association. Judgment upon the award rendered shall be binding on
the parties and may be entered by either party in the court or forum, state or
federal, having jurisdiction.
c. Injunctive Remedy. Mr. Sykes acknowledges that the remedy at law for any
breach of the provisions of Paragraphs 6 and 7 will be inadequate and agrees
that, notwithstanding Paragraph 10(b) above, such provisions may be enforced
by an injunction or restraining order in any court, state or federal, having
jurisdiction, in addition to any other remedies that may be available to the
Company.
d. Damages. In no event shall either party be liable to the other party for
any special, incidental, indirect or consequential damages, from any cause
whatsoever, whether founded on contract, tort (including negligence), strict
liability or otherwise.
e. Surviving Terms. The restrictions contained in Paragraphs 6 and 7 shall
survive and remain enforceable following the termination of the Agreement for
any reason, including, but not limited to, termination by Intermagnetics with
or without cause.
f. Headings. The headings of the several sections are inserted for convenience
of reference only and are not intended to be a pert of, or to affect the
meaning or interpretation of, this Agreement.
g. Severability. If any provision or provisions of this Agreement are held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect or impair the validity or enforceability of the remaining provisions of
this Agreement, which shall remain in full force and effect.
h. Successors and Assigns. This Agreement shall benefit and bind the parties
and the successors and assigns of Intermagnetics. This Agreement shall not be
assignable by Mr. Sykes without the prior written consent of Intermagnetics.
i. Entire Agreement. This Agreement contains the entire agreement of the
parties relating to its subject matter, and supersedes all prior agreements,
negotiations and representations not specifically set forth in this Agreement.
j. Modifications. The parties further agree that no changes or modifications
of this Agreement shall be made without the express written consent of the
parties.
75
<PAGE>
IN WITNESS HEREOF, the parties have caused this Employment Agreement
to be executed as of the date first written above.
INTERMAGNETICS GENERAL CORPORATION
By: /s/Carl H. Rosner /s/Ronald W. Sykes
--------------------------- --------------------------
Name: Carl H. Rosner Ronald W. Sykes
Title: Chairman and Chief
Executive Officer
Date: November 24, 1997 Date: November 24, 1997
76
<PAGE>
CONFIDENTIAL DRAFT: December 3, 1997
SCHEDULE A
JOB DESCRIPTION
- -------------------------------------------------------------------------------
JOB TITLE: Vice President and General Manager - Polycold Systems
International, Inc.
Effective Date: _______ Revision No.: 0
--------------------------- -----------------------------
President Director of Administration
- -------------------------------------------------------------------------------
Fair Labor Standards Act Status: Exempt
Supervision Received: Minimum
1. DUTIES AND RESPONSIBILITIES:
A. Contacts:
Chairman of the Board and Chief Executive Officer of Intermagnetics
President and Chief Operating Officer of Intermagnetics
Chief Financial Officer of Intermagnetics
General Counsel
All levels within Polycold
Senior level customers and suppliers and other business relationships
Collaborators
Agencies
B. Supervision:
Directly supervises an Administrative Assistant and all function
managers for Polycold. Indirectly responsible for supervision of all
Polycold employees.
C. Work Direction:
As agreed with the President of Intermagnetics.
D. General Responsibilities:
77
<PAGE>
The Vice President and General Manager of Polycold is responsible to
the President of Intermagnetics for coordinating and directing the
activities of Polycold in accordance with the policies and objectives
established in collaboration with the President. Specific functions
include development of Polycold's Operating Policies and Procedures
for all Polycold's activities in accordance with Corporate Policies;
establishing controls to maintain adequate communication and
information flows; regularly evaluating the results of overall
business operations and; ensuring that all business unit activities
comply with government laws and regulations.
In collaboration with the President of Intermagnetics and with
corporate staff and other business units, hire all staff for
Polycold; develop, formulate and communicate strategies and
operational plans for Polycold; identify and evaluate new business
opportunities; develop and monitor internal operations; develop and
initiate external collaborations; initiate and monitor technology
development.
Prepare for approval all budgets for Polycold, and hold
responsibility for adherence to the same; report formally on a
monthly basis to the President of Intermagnetics.
Develop plans for full commercial exploitation of promising
opportunities with corporate and business unit staff, and other
organizations as appropriate.
Implement and monitor training of personnel.
2. QUALIFICATIONS:
A. Preferred:
A minimum of 12 years of management experience including prior
experience managing a profit and loss business unit.
B. Alternative:
A minimum of 15 years experience including experience as functional
manager of at least 2 of Polycold' primary functions: engineering,
manufacturing, marketing/sales, quality assurance or materials.
78
