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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended May 31, 1998
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or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ___________
Commission File Number 1-11344
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INTERMAGNETICS GENERAL CORPORATION
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(Exact name of registrant as specified in its charter.)
New York 14-1537454
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 Old Niskayuna Road,
Latham, New York 12110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 782-1122
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock - $.10 par value American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
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The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $82,420,000. Such aggregate market value was
computed by reference to the closing price of the Common Stock as reported on
the American Stock Exchange on August 14, 1998. It assumes that all directors
and officers of the registrant are affiliates. In making such calculation, the
registrant does not determine whether any director, officer or other holder of
Common Stock is an affiliate for any other purpose.
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The number of shares of the registrant's Common Stock outstanding, net of
Treasury shares, as of August 14, 1998 was 12,263,456.
DOCUMENTS INCORPORATED BY REFERENCE
The information required for Part III hereof is incorporated by reference from
the registrant's Proxy Statement for its 1998 Annual Meeting of Shareholders to
be filed within 120 days after the end of the registrant's fiscal year.
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TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS DESCRIPTION................................................ 1
MAGNETIC
PRODUCTS................................................... 1
REFRIGERATION
PRODUCTS................................................... 8
RESEARCH AND
DEVELOPMENT................................................ 12
INVESTMENTS................................................ 16
PERSONNEL.................................................. 17
EXECUTIVE OFFICERS OF THE
REGISTRANT................................................. 18
ITEM 2. PROPERTIES........................................................... 20
ITEM 3. LEGAL PROCEEDINGS.................................................... 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................. 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.............................................................. 21
ITEM 6. SELECTED FINANCIAL DATA.............................................. 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................ 23
RESULTS OF OPERATIONS...................................... 24
LIQUIDITY AND CAPITAL COMMITMENTS.......................... 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................... 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE............................................. 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................. 28
ITEM 11. EXECUTIVE COMPENSATION.............................................. 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.......................................................... 28
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................... 28
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..... 29
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS.......... 29
(b) REPORTS ON FORM 8-K.................................... 32
SIGNATURES................................................................... 33
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this report, and any other report filed by
Intermagnetics General Corporation (the "Company") from time to time, which are
not historical fact are "forward-looking statements" that involve various
important assumptions, risks, uncertainties and other factors which could cause
the Company's actual results for 1999 and beyond to differ materially from those
expressed in such forward-looking statements. These important factors include,
without limitation, the assumptions, risks, and uncertainties set forth in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, as well as other assumptions, risks, uncertainties and factors
disclosed elsewhere in this report and the Company's other securities filings.
PART I
ITEM 1. BUSINESS DESCRIPTION
The Company designs, develops, manufactures and sells products in two
significant segments: Magnetic Products and Refrigeration Products. Magnetic
Products consist primarily of low temperature superconducting ("LTS") magnets,
wires and cable, and radio frequency ("RF") coils. These products are developed
and sold through two corporate divisions -- the IGC Magnet Business Group
("IGC-MBG") and IGC Advanced Superconductors ("IGC-AS") -- and through IGC
Medical Advances Inc. ("IGC-MAI"), a wholly-owned subsidiary. The Magnetic
Products segment also includes low-cost, permanent magnet based MRI systems,
other permanent magnet products and high temperature superconducting ("HTS")
products developed and sold through IGC Technology Development ("IGC-TD"), a
division that includes IGC Field Effects. Three wholly-owned subsidiaries make
up the Company's Refrigeration Products segment. APD Cryogenics Inc. ("APD") and
IGC Polycold Systems Inc. ("IGC Polycold") design, develop, manufacture and sell
low and very low temperature refrigeration equipment. This segment also includes
refrigerants for mobile and stationary applications, which are designed,
developed and sold through the Company's wholly-owned subsidiary, InterCool
Energy Corporation ("ICE").
MAGNETIC PRODUCTS
About Superconductivity Generally
Superconductivity is the phenomenon in which certain materials lose all
resistance to the flow of electrical current when cooled below a critical
temperature. Consequently, devices made with superconductive materials require
special refrigeration equipment, known as cryogenic systems, to maintain the
materials at the very cold temperatures at which superconductivity occurs.
Superconductors offer advantages over conventional conductors, such as copper,
by carrying electricity with virtually no energy loss, and generating
comparatively more powerful magnetic fields.
There are two broad classes of superconductive materials. Low
temperature superconducting (LTS) materials are metals and alloys that become
superconductive when cooled to temperatures near absolute zero (4.2 Kelvin or
minus 452 F). Because of their superior ductile characteristics, LTS materials
are generally used in the form of flexible wire or tape ("Wire/Tape"). HTS
materials are composed of ceramic-like compounds that become superconductive
when cooled to temperatures close to that of liquid nitrogen (77 Kelvin or minus
321 F). Although HTS materials are not yet economically viable in existing
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superconducting applications, the Company is working to develop practical
materials suitable for various applications of HTS technology. See "Research and
Development - New Products" below.
The single largest existing commercial application for
superconductivity is the magnetic resonance imaging ("MRI") medical diagnostic
system ("MRI System"). MRI Systems are used in hospitals and clinics for
non-invasive, diagnostic imaging of organs within a patient's body. At the core
of an MRI System is a large, highly engineered magnet system. The magnet system
can be based upon a conventional resistive electro-magnet, a permanent magnet or
a more sophisticated superconductive magnet. Superconductive magnets offer far
more powerful, high-quality magnetic fields with virtually no power loss. Higher
magnetic field strengths correlate with improved "signal-to-noise" ratios which
can in turn lead to higher quality images in shorter acquisition times. The
annual commercial market for MRI Systems is estimated at approximately $2
billion worldwide. The MRI industry is increasingly dominated by a small number
of systems integrators worldwide who sell MRI Systems to end-users. The General
Electric Company ("GE"), Siemens Corporation, Philips Medical Systems Nederlands
B.V. ("Philips"), Hitachi Medical Corporation ("Hitachi"), Toshiba Corp., Picker
International Ltd., Elscint, Ltd. and Shimadzu Corporation are the major MRI
System integrators. The Company is a supplier of key components to several of
the MRI Systems integrators. See "Principal Products" below.
Other existing applications for superconductivity include nuclear
magnetic resonance ("NMR") spectroscopy (used in biological and chemical
research and testing of the composition and structure of non-ferrous materials)
and other scientific, defense and research applications. See "Principal Products
Other Superconductive Magnet Systems" below. Emerging areas for application of
LTS and/or HTS Wire/Tape include superconductive magnetic energy storage
("SMES") systems, fault current limiters, transformers and other electric power
equipment. See "Research and Development - New Product Development: SMES" below,
and "Research and Development - New Product Development: HTS" below.
Although these potential newer applications for superconductivity would
incorporate technology currently in use or in development by the Company, there
can be no assurances that commercially usable applications will emerge in the
future, or that the Company will be able to participate in them successfully.
About MRI Radio Frequency (RF) Coils Generally
An RF Coil is a necessary component of an MRI System. An RF coil is
placed inside the bore of the magnet of an MRI System, or more generally placed
onto a human patient. The RF coil acts as an antenna to receive, or transmit and
receive, radio frequency signals from the human body as it lies inside the
strong magnetic field of the MRI System. These radio frequency signals are
transferred electronically to the MRI System computer where they are
reconstructed into a clinically useful diagnostic image.
Specialized RF coils - those dedicated to imaging particular parts of
the human anatomy, such as the knee, neck, wrist, foot, etc. - increase the
number of diagnostic applications for which an MRI System can be used. The
increased number of applications increases the potential utilization rate of a
given MRI System, which typically helps to justify economically the acquisition
of that system. Specialized RF coils also enhance the diagnostic confidence
obtained from the images produced by an MRI System. That is, an RF coil designed
to image a specific part of the human body will yield a sharper, more detailed
image that is typically more clinically useful than a similar image produced
with a multi-purpose RF coil. Consequently, each MRI System could benefit from
multiple RF coils. The Company estimates that each MRI System could benefit from
an array of six to nine separate specialized RF coils.
An RF coil must work very closely with the MRI system in which it is
used. Consequently, RF coils are designed for a specific manufacturer's system
configuration and its related characteristics. Hence, RF coils may not easily be
moved between MRI Systems manufactured by different companies, from one field
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strength magnet to another, or even among different models manufactured by a
single company. The unique characteristics of each MRI System mean that RF Coils
must be engineered and manufactured to meet the needs of a particular model of
an MRI System. Consequently, the market opportunity for any particular RF coil
model usually is limited to the specific system for which it is designed and
built.
Principal Products
Within its Magnetic Products segment, the Company produces the
following:
o Superconductive MRI Magnet Systems. Through IGC-MBG, the Company
manufactures and sells superconductive MRI magnet systems to MRI Systems
integrators for use in stationary and mobile MRI Systems. During fiscal
years 1998, 1997 and 1996, MRI magnet systems accounted for 43%, 43% and
41%, respectively, of the Company's net sales. The Company's latest
generation of superconductive MRI magnet systems consists of three types of
systems with field strengths of 0.5, 1.0 and 1.5 Tesla.
The Company's magnets for MRI Systems are made with wire from its division,
IGC-AS, and fitted with cryogenic refrigerators supplied by its subsidiary,
APD. In fact, the Company is the only vertically integrated manufacturer of
superconductive MRI magnet systems, which the Company believes is an
important source of competitive strength.
o Superconductive Wire. Through IGC-AS, the Company manufactures and sells
the two principal LTS materials that are commercially available for the
construction of superconductive magnets: niobium-titanium ("Nb-Ti") wire,
and niobium-tin ("Nb3Sn") wire. In contrast to the relatively large market
for Nb-Ti wire, Nb3Sn multi-filamentary wire, which has been under
development for many years, is sold only in limited quantities. This is
because Nb-Ti is more cost effective for MRI magnet systems, which is the
leading market for superconductive wire. During fiscal years 1998, 1997 and
1996, sales of superconductive wire accounted for 12%, 12% and 22%,
respectively, of the Company's net sales.
o Other Superconductive Magnet Systems. Through IGC-MBG, the Company also
designs and builds superconductive magnet systems for various scientific
and defense applications. These special purpose superconductive magnet
systems are often one of a kind, custom built systems. For example, the
Company manufactured a portion of a 45 Tesla Hybrid Magnet for the National
High Magnetic Field Laboratory at Florida State University ("NHMFL"). The
Company also has designed and built a SMES System. See "Research and
Development - New Product Development: SMES" below. In addition, the
Company is working with NHMFL regarding the design and manufacture of a
technology-leading superconductive magnet for NMR for application at 900
MHz.
o RF Coils for MRI Systems. Since March, 1997, when the Company acquired
IGC-MAI, the Company manufactures and sells RF coils for use in MRI
Systems. The Company's current products include ten (10) anatomical
applications with over forty five (45) product groups available in magnetic
field strengths from 0.35T to 2.0T, for a total of more than 150 products.
Typical RF coils have a selling price between $5,000 and $30,000, although
some custom or high end coils may sell for substantially more. RF Coils
accounted for 11% of the Company's sales in fiscal year 1998. Because the
Company acquired IGC-MAI in March, 1997, RF coils accounted for
substantially less than 5% of sales in fiscal year 1997, and no sales in
fiscal year 1996.
o Permanent Magnet Products. Through IGC Field Effects, a part of IGC-TD, the
Company develops, manufactures and sells permanent magnet systems for use
in low field-strength MRI Systems. In connection with the Company's
strategic alliance with the UK-based firm of Surrey Medical Imaging Systems
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Limited ("SMIS") (see "Investments - Surrey Medical Imaging Systems"
below), IGC Field Effects has combined its MRI permanent magnet and system
components with SMIS' products to create a complete permanent magnet-based
MRI System. Under a distribution agreement entered into in fiscal year
1998, this product is marketed by Trex Medical Corporation, an
internationally recognized manufacturer and distributor of X-ray and other
diagnostic equipment. See "Research And Development - New Product
Development: Low-cost, Permanent Magnet-Based MRI Systems" below.
The potentially lower capital and operating costs of permanent magnet MRI
Systems may enable many smaller community hospitals and hospitals located
in developing countries to provide MRI diagnostic services to their
patients. The imaging quality of such systems is adequate for many
diagnostic purposes, but it may not, under current technology, be
comparable to images obtained with higher field-strength superconductive
systems. The Company's sales of such magnet systems to date have not been
significant and there can be no assurances this product will gain
wide-spread market acceptance.
Marketing
The Company markets its magnetic products and technology through its
own personnel, and, in addition, licenses the manufacture and marketing of
superconductive MRI magnet systems for certain customers to its European joint
venture. See "European Joint Venture" below. The Company also has a
wholly-owned European marketing and service subsidiary located in England, as
well as a foreign sales corporation located in Barbados. The Company markets its
RF coils through a direct sales force to domestic end-users, such as hospitals,
clinics and research facilities, and to MRI System integrators. The Company also
markets its RF coils internationally to end-users through a distributor network.
Export Sales. Products sold to foreign-based companies, such as
Philips, a Dutch company, Elscint, an Israeli Company or Hitachi, a Japanese
company, were accounted for as export sales even if some of the products sold
were installed in the US. On that basis, the Company's net export sales
(including the Refrigeration Products segment) for fiscal years 1998, 1997 and
1996 totaled $57.3, $53.1 and $46.5 million, respectively, most of which were to
European customers.
Principal Customers. A significant portion of the Company's sales are
through its Magnetic Products segment, and most of those sales consist of MRI
related products - superconductive MRI magnet systems, superconductive wire for
use in such systems or RF coils for use in such systems. During the past three
fiscal years, sales to customers accounting for more than 10% of the Company's
net sales in such years aggregated approximately 55% of net sales in fiscal
1998, 50% of net sales in fiscal 1997 and 62% of net sales in fiscal 1996. See
Notes J and K of Notes to Consolidated Financial Statements, included in
response to Item 8 hereto.
A substantial portion of the Company's sales to the MRI industry are to
four customers, two of which are significant. Philips is the current principal
customer for the Company's MRI products. Pursuant to an agreement (which was
extended through December, 2000, and subject to automatic extension for
successive one-year periods thereafter unless previously terminated in
accordance with the agreement), the Company sells to Philips certain
superconductive MRI magnet systems of various field strengths for incorporation
in Philips' proprietary MRI Systems. Sales to Philips (including sales by the
Refrigeration Products segment) amounted to approximately 45%, 50% and 44% of
the Company's net sales for fiscal 1998, 1997 and 1996, respectively.
The Company's second principal customer for MRI products is GE. The
Company sells superconductive wire to GE for use in GE's MRI magnets. Under the
Company's current arrangement with GE, GE places orders from time to time with
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the Company. This current arrangement supersedes a formal contract between GE
and the Company which expired in December, 1996. GE accounted for approximately
11%, 9% and 18% of the Company's net sales for fiscal 1998, 1997 and 1996,
respectively.
European Joint Venture
The Company and Alstom Energy, S.A. (formerly GEC Alsthom S.A.)
("Alstom"), a leading French industrial group in the areas of electrical and
electromechanical equipment, have participated since 1987 in a joint venture
named Alstom Intermagnetics (formerly GEC Alsthom Intermagnetics S.A) ("AISA").
AISA manufactures in France, under license from the Company, superconductive MRI
magnet systems. AISA is a party to the Company's supply agreement with Philips,
and supplies a portion of Philips' requirements for superconductive MRI magnet
systems.
Under the current agreement between the Company and Alstom, AISA
transferred its capability for the manufacture of superconductive wire to
Alstom, and the Company increased its ownership interest in AISA from 25% to
45%. Additionally, the license from the Company under which AISA manufactures
superconductive MRI magnet systems was extended to May, 2005. AISA pays a
royalty to the Company for licensed technology, and the Company shares in AISA's
profits in proportion to its ownership interest. The Company's investment in
AISA has been accounted for using the equity method of accounting.
Competition/Market
The Company derived more than 70% and 68% of its net sales in its
fiscal years 1998 and 1997, respectively, from the sale of products in its
Magnetic Products segment (see "Principal Products" above). US demand for MRI
Systems appears to have recovered from flat sales recorded in 1995 and 1996.
Non-US demand continues to grow. The Company believes that worldwide sales of
MRI Systems in 1999 should grow over such sales in 1998. The Company's growth in
this segment is dependent on its customers' ability to grow their respective
businesses, and on the Company's ability to attract new customers. There are no
assurances that the such growth will occur. In addition, the economic slowdown
in Asia may adversely impact the overall growth in sales of MRI Systems.
A significant factor affecting the Company is the fact that MRI Systems
compete indirectly with other diagnostic imaging methods such as conventional
and digital X-ray systems, nuclear medical systems, ultrasound, and X-ray CT
scanners. While most large MRI Systems suppliers perceive that there are
technical advantages to higher field-strength (0.5T or greater) imaging systems
based upon superconductive magnets, there are MRI Systems that use resistive
electromagnets and permanent magnets, which are limited in field strength either
by high power consumption or by basic material properties. Lower field strengths
generally translate into lower quality images, although rapid gains in computer
technology have offset some of this quality loss. The cost of certain cryogenic
liquids, such as helium, may cause markets in developing countries to prefer the
use of resistive or permanent magnets, despite image quality. Moreover, improved
MRI System components for low field strength magnet systems have improved image
quality. Indeed, several MRI Systems integrators, including the Company, through
IGC Field Effects, have introduced MRI Systems based upon such low field
resistive or permanent magnets. See "Research And Development - New Product
Development: Low-cost, Permanent Magnet-Based MRI Systems" below.
The Company's Magnetic Products are subject to substantial competition
within each of the markets for its principal products. Moreover, practical and
cost-effective conductors developed by the Company and others, as a result of
new discoveries in the field of HTS materials, could eventually reduce the
market for the Company's current LTS technology, although the Company (based
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upon the information currently available to it) does not believe this is likely
to happen in the near future. See "Research and Development - New Product
Development: HTS" below.
o Superconductive MRI Magnet Systems. Within the market for superconductive
MRI magnet systems, the Company's competitors fall into two categories: (1)
magnet manufacturers that make MRI magnet systems for sale to MRI Systems
integrators, and (2) MRI Systems integrators that manufacture
superconductive magnet systems for their own use.
The Company considers its principal competitor in the manufacture of
superconductive MRI magnet systems to be Oxford Magnet Technology Limited
("OMT"), a joint-venture between Siemens AG (51%) and Oxford Instruments
Group, plc (49%) ("Oxford"), a United Kingdom company that formerly owned
100% of OMT. While OMT has sold substantially more superconductive MRI
magnet systems, has greater production capacity, and greater financial
resources than the Company, the Company believes it can compete effectively
against OMT on both technological and cost bases. The Company's joint
venture, AISA, also sells superconductive MRI magnet systems and has one
principal customer, Philips, which it shares with the Company. See
"European Joint Venture" above.
MRI Systems integrators, such as GE, manufacture MRI magnet systems for use
in their own MRI Systems. Historically, such integrators have been
unavailable to the Company as customers for its superconductive MRI magnet
systems, notwithstanding the fact that they represent a substantial portion
of the potential market for superconductive MRI magnet systems. The Company
has instead treated these companies as customers or potential customers for
the Company's component products, such as superconductive wire or cryogenic
coolers.
Within the market for superconductive MRI magnet systems, the Company has
also seen increased competition from low-field "open" MRI magnet systems.
These systems are designed to reduce the feeling of claustrophobia in a
patient undergoing imaging, and may give medical personnel greater access
to the patient during imaging. While the Company does not currently
manufacture such an "open" MRI magnet system, such magnet systems have
represented one of the fastest growing segments of the market. The Company
does manufacture a product for another rapidly growing segment of the
market: compact high field systems.
o Superconductive Wires. The single largest market for superconductive wire
is MRI. In fact, most of the superconductive wire manufactured by the
Company is used to manufacture superconductive MRI system magnets (either
internally by IGC-MBG, or externally by other customers). The Company
believes that it, Oxford Superconducting Technology and, to a smaller
extent, Supercon, Inc. are the major suppliers of Nb-Ti in wire form for
the domestic market. The Company also believes that these three companies
are the major suppliers of Nb3Sn superconductive materials for the domestic
markets. There are several foreign manufacturers of Nb-Ti superconductive
materials in wire form; none of them has been a significant factor in the
domestic market. Because industry capacity for Nb-Ti wire is greater than
current demand, the Company has seen substantial pressure on prices. The
Company's prices for superconductive materials are currently competitive,
and the Company believes that product quality and the ability to meet
delivery schedules are factors important to its market position. There are
no assurances, however, that the Company can remain competitive without
future price reductions, or that the Company can find means to offset price
reductions with further cost reductions.
o Other Superconductive Magnet Systems. With respect to Other Superconductive
Magnet Systems, the Company has no single identifiable competitor.
Historically, the Company has competed against many different companies
domestically and internationally (including Oxford, which dominates the
worldwide market for NMR magnets) for the opportunity to design and build
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non-MRI superconductive magnet systems. The Company expects that
competition for such opportunities will vary on a case to case basis, but
that such competition will generally focus on price and technology. While
the Company believes that it can remain competitive within this area, there
can be no assurances that the Company will continue to be successful.
o RF Coils for MRI Systems. The Company currently believes that the market
for RF coils will grow faster than the market for MRI Systems because: (i)
the number of applications for MRI which use specialized RF coils is
increasing, requiring a higher number of RF coils to be purchased for each
new and existing MRI System; (ii) RF coil technology is being continuously
improved and with an average technology obsolescence rate of approximately
three years, existing coils need to be upgraded to later-generation
products; and (iii) an increasing number of existing MRI Systems are being
upgraded by OEM's, at a much lower cost than replacing an entire MRI
System. An added set of RF coils is typically needed in connection with
each system upgrade.
With respect to RF coils for MRI Systems, the Company's primary competitors
consist of independent manufacturers that make RF coils for sale to MRI
Systems integrators and end-users such as hospitals, clinics and research
facilities. The Company also experiences competition from MRI Systems
integrators that manufacture RF coils for sale with their MRI Systems. Most
MRI Systems integrators outsource RF coil development and manufacture to
companies such as IGC-MAI, though, to the best of the Company's knowledge,
Siemens and Philips have maintained the most extensive in-house coil
development activities of the major MRI Systems integrators. It is
generally felt by the MRI Systems integrators that RF coils can be
outsourced at a lower cost and faster time-to-market than possible with
in-house resources. If the MRI Systems integrators decide to pull all RF
coil development in-house, access to the market for the independent RF coil
manufacturers could be substantially limited. The Company believes this
risk is remote because such a fundamental shift in strategic approach would
substantially increase the cost of future hardware and software upgrades
for existing customers of MRI Systems integrators.
There are several independent RF coil manufacturers of various size that
make RF coils for sale to MRI Systems integrators and end users. The
Company believes that, of these companies, three compete with IGC-MAI
against its full product range. The other competitors offer limited product
lines and generally lack an organizational infrastructure and extensive
product development capabilities to compete across IGC-MAI's broad product
line at this time. Competition is generally based upon price and quality.
To remain competitive, the Company must continue to offer high quality,
technically advanced products while cutting costs. As competition
increases, however, price pressures grow and there are no assurances that
IGC-MAI can remain competitive in the marketplace.
o Permanent Magnet Products. IGC Field Effects has several competitors in the
development and manufacture of permanent magnets for MRI Systems. Sumitomo
Special Metals Co., Ltd. ("Sumitomo"), a Japanese company, produces much of
the neodymium boron iron (NdBFe) materials used in such systems. The
Company believes that Sumitomo's primary customer for its permanent magnet
products is Hitachi Medical, which dominates the market for permanent
magnet based MRI Systems. While the Company believes it offers a product
that is attractive both technically and economically, there are no
assurances it can compete against larger, more experienced companies like
Hitachi Medical.
The Company believes at the present time that patents are not a
significant competitive factor in the conduct of its business in this segment.
While the Company does not have any substantial patent protection in this
segment, it directly or indirectly either owns, or is a licensee under, a number
of patents relating to RF coils, superconductive materials, the manufacture of
superconductive materials, and the permanent magnet systems manufactured by IGC
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Field Effects. There are no assurances that changing technology and/or emerging
patents will not adversely impact the Companies current patent position or its
competitiveness.
Backlog
The Company no longer considers backlog to be material to an
understanding of the Magnetic Products segment. The Company has reached this
conclusion based on two main factors: (1) the manufacturing cycle for magnet
products has shortened significantly and the Company believes this trend will
continue and (2) backlog is not a factor in the Company's RF coil business
because of the short manufacturing lead times.
Raw Materials and Inventory
The Company's manufacturing process for superconducting and permanent
magnet systems generally requires production periods of up to twelve weeks. Most
materials and parts used in production are ordered for delivery based on
production needs. The Company's investment in inventories for production of MRI
magnet systems is based primarily on production schedules required to fill
existing and anticipated customer orders.
Nb-Ti raw material required for production of Nb-Ti superconductive
wire is available from several different sources. While the Company has not
experienced substantial difficulty in obtaining such materials, fluctuation in
demand caused by large projects such as the Large Hadron Collider being
constructed at CERN in Switzerland, could create temporary imbalances in supply
and demand and thus adversely impact the price of such raw material.
IGC Field Effects uses primarily permanent magnet (principally ferrite)
materials. There are several qualified domestic and international sources for
these ferrite materials. In light of the current low level of demand for its
permanent magnet products and efficient management of its needs, the Company
does not at this time believe that a decrease in the supply of permanent magnet
materials would have a substantial impact on its business.
IGC-MAI, believes that there are alternative suppliers at competitive
prices for each of the parts, materials and components that it purchases for the
manufacture of its RF coils. The Company does not currently expect any
difficulty in obtaining these parts, materials and components.
Warranty
The expense to the Company to date for performance of its warranty
obligations has not been significant.
REFRIGERATION PRODUCTS
Principal Products
Three wholly-owned subsidiaries comprise the Company's Refrigeration
Products segment. APD Cryogenics Inc. ("APD") and IGC Polycold Systems Inc.
("IGC Polycold") design, manufacture and sell cryogenic refrigeration equipment.
InterCool Energy Corporation ("ICE") designs, develops and sells refrigerants,
and is developing refrigeration equipment.
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APD's product line includes shield coolers (refrigerators) used in the
production of MRI magnet systems. APD also manufactures a specialized cryogenic
refrigeration system sold under the registered tradename CRYOTIGER, specialized
water pump systems sold under the registered tradename AquaTrap, cryopumps used
primarily in the manufacture of semiconductors, and laboratory cryogenic
research systems. Shield coolers make up the largest portion of APD's sales.
IGC Polycold manufactures and sells a line of low temperature
refrigeration systems in the -40 to -160 Celsius range. The Company acquired IGC
Polycold in November 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations: Liquidity and Capital
Commitments" included in response to Item 7 hereto. IGC Polycold's
refrigeration systems are used in several markets, including optical coating,
semiconductor manufacturing, magnetic media, decorative coating, plastic coating
and roll/web coating. The optical coating industry currently is the largest
market for IGC Polycold's products, accounting for approximately 20% of its
sales.
The Company's Refrigeration Products segment also includes proprietary
refrigerants. ICE pursues commercialization of its family of environmentally
acceptable refrigerants, sold under the registered tradename of FRIGC, and
related air conditioning and refrigeration equipment. The Company believes that
FRIGC has broad-based commercial potential to replace ozone-depleting
chlorofluorocarbons ("CFC's") currently being used as refrigerants and scheduled
to be phased out of use globally under the Montreal Protocol, an international
treaty signed by the US and ninety-three other nations.
ICE markets FRIGC FR-12 refrigerant for use as a replacement for R-12
(a CFC) for mobile air conditioning and stationary refrigerant applications. The
formula for FRIGC FR-12 is protected by U.S. Patent 5,425,890 and foreign
patents are pending for certain countries targeted by ICE as potentially viable
markets. The Environmental Protection Agency lists FRIGC FR-12 as an acceptable
substitute for R-12 in mobile air conditioning applications, and as a
replacement for R-12 in certain stationary applications. Use of FRIGC FR-12
refrigerant is subject to certain standard conditions (for example, the use of
special fittings and labels which are required for all refrigerants in mobile
applications) to prevent unintended mixing of different refrigerants and
facilitate recovery of refrigerants for recycling.
Marketing
The Company markets APD's MRI products through a direct sales force
based in APD's Allentown, Pennsylvania headquarters, APD's West Coast office in
Sunnyvale, California and a European office near Reading, England. APD markets
its laboratory systems, cryopump and other products worldwide through scientific
and vacuum equipment sales representatives and distributors. APD has a worldwide
partnership with Daikin Industries, Ltd. ("Daikin"), a Japanese company,
pursuant to which the parties sell common cryopumps under the "Marathon"
trademark in well-defined territories.
IGC Polycold does not employ a direct sales force. Rather, it markets
its line of low temperature refrigeration systems through a worldwide network of
sales representatives and two key distributors located in Japan and Germany. IGC
Polycold's headquarters are based in San Rafael, California.
Because ICE does not have extensive experience distributing and selling
refrigerants, it continues to pursue a strategy of securing distributors,
nationally and internationally, with significantly greater experience in
relevant markets. In the North American market, ICE appointed the Pennzoil
Products Company ("Pennzoil") in 1995 as its primary distributor for all mobile
applications and certain stationary applications. Since March, 1997, ICE has
aggressively sought to add additional distributors in the North American market
to accelerate commercialization of FRIGC FR-12 refrigerant. During calendar year
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1998, ICE successfully added a number of regional and national distribution
outlets for FRIGC FR-12, including United Refrigerants, Johnstone Supply, and
Dynatemp.
Internationally, ICE signed Sumitomo Corporation of America ("SCOA") in
1997 as the distributor for certain Asian-Pacific markets. The Agreement, which
currently is non-exclusive except for Australia, covers China, Japan, Malaysia,
Korea, Taiwan, Philippines, Indonesia, Singapore, Australia, New Zealand and
Thailand. SCOA, in turn, has added BOC Gases Australia, Ltd. ("BOC Australia"),
as a distributor in Australia. With substantial technical support from ICE, BOC
Australia has succeeded in making FRIGC FR-12 refrigerant the number one
alternative to R-12 in mobile applications during the 1997-1998 Australian
summer. BOC Australia is also beginning to explore stationary application for
FRIGC FR-12 refrigerant. ICE has also signed other international distributors,
and has made sales of FRIGC FR-12 in the Middle East. ICE is continually working
to identify qualified distributors for new and existing territories.
Competition/Market
IGC-MBG uses APD refrigerators for its superconductive MRI magnet
systems. In addition, APD sells these refrigerators to other manufacturers of
superconducting MRI magnet systems. APD licenses Daikin to produce shield
coolers and other cryogenic products for the Japanese market. Daikin has
captured a significant portion of that market for shield coolers.
The Company considers its principal competitor in the manufacture of
shield coolers to be Leybold AG ("Leybold"). Leybold is headquartered in
Germany, and has sold substantially more shield coolers than the Company.
Moreover, Leybold has greater production capacity and financial resources than
the Company, and has successfully locked up many of APD's potential customers in
multi-year supply agreements. In addition, Sumitomo Heavy Industries recently
began supplying shield coolers to a major MRI Systems integrator. The Company
nonetheless believes that it can compete with Leybold and Sumitomo on both
technological and cost bases. There are no assurances, however, that APD will
attract new customers for its shield coolers.
With respect to APD's laboratory cryogenic systems, the Company has no
single identifiable competitor. Historically, the Company has competed against
many different companies, domestically and internationally. The Company
generally competes in this area on the basis of price and product quality.
With respect to APD's cryopumps, the Company believes Helix Technology
Corporation ("Helix") (which markets its products under the names "CTI
Cryogenics" and "CTI") is the market leader in distributing cryopumps. The
Company believes that Helix controls 80% or more of the world market for
cryopumps. Notwithstanding Helix's market predominance, the Company believes
that it can retain its position in the market on technological and equipment
performance bases.
APD's CRYOTIGER line is based upon proprietary technology developed and
patented by APD. CRYOTIGER refrigeration systems presently compete against
certain closed-cycle machines, known as Stirling refrigerators, which the
Company believes are more costly and less reliable than its CRYOTIGER product.
Additionally, CRYOTIGER refrigerators, which are closed-cycle refrigeration
systems, compete principally against open-cycle coolers that rely on reservoirs
of liquid nitrogen which must be replenished periodically. Although the initial
purchase price for a CRYOTIGER refrigerator may exceed the price of a comparable
liquid nitrogen cooler, this higher initial cost will be offset by lower
operating and maintenance costs and greater ease of use. The Company feels that
there is a significant opportunity for this product in the marketplace, however,
there are no assurances it will achieve widespread commercial success.
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APD's AquaTrap Systems are based principally on the Company's
proprietary CRYOTIGER technology, and are protected by US patents. Foreign
patents are pending. The Company sees its single largest competitor as Helix.
Helix dominates the market for cryopumps, and it makes a water pump compatible
with its cryopump. Another significant competitor is Ebara Technologies, Inc.
which sells an integrated turbopump and water pump. Nonetheless, the Company
believes that the superior performance of its water pump, coupled with its
compact design and ease of installation and operation, will enable it to compete
effectively.
IGC Polycold's major competitors include Sanyo and Shin Meiwa in Japan
and Helix domestically. IGC Polycold also competes with the use of liquid
nitrogen as an alternative to IGC Polycold's low temperature refrigeration
systems. The Company generally competes in this area on the basis of price,
availability and product quality.
ICE's FRIGC FR-12 product is offered as an environmentally friendlier
alternative to ozone-depleting R-12. In its mobile application, FRIGC FR-12
refrigerant is a substitute for R-12 in automobile, truck and bus air
conditioning systems. Since 1994, most new mobile air conditioning systems have
been designed to use R-134a (an HCFC). Mobile air conditioning systems
manufactured before 1994 relied on R-12. ICE believes that its FRIGC FR-12
refrigerant is the most cost-effective alternative refrigerant for use in these
systems because its use does not require equipment changes. By contrast, the use
of R-134a refrigerant in such a system entails in most cases substantial
equipment changes to deliver effective and reliable cooling. Although the market
for pre-1994 automobile air conditioning systems is finite in nature, ICE
believes that through its sales in this market it will gain valuable experience
and name recognition that will facilitate future commercialization of other
FRIGC refrigerants.
ICE has recently begun exploiting the potential for FRIGC FR-12 as a
direct substitute for R-12 in stationary applications, exemplified by building
air conditioning systems, refrigeration systems, and food chillers. The
stationary market employs a wide variety of refrigerants. R-12 sales in the
stationary market accounted for approximately 12 million pounds of refrigerant
sold nationally in 1997. Since 1994, vendors and end-users have been looking for
alternative refrigerants that provide effective, cost efficient cooling. The
Company believes that end-users with R-12-based equipment who wish to end their
use of ozone-depleting R-12 face three choices: (1) make an expensive hardware
purchase of either new equipment (that uses other refrigerants) or major new
components that convert existing systems to R-134a refrigerant, (2) purchase an
R-22-based alternative blended refrigerant, such as R-401A offered by DuPont, or
(3) purchase FRIGC FR-12. The Company believes that FRIGC FR-12 refrigerant
provides a superior alternative to items (1) and (2) above. With respect to item
(1) above, FRIGC FR-12 requires little to no investment in hardware upgrades.
This is particularly true for medium temperature refrigeration applications such
as vending and ice machines. With respect to item (2) above, FRIGC FR-12
provides superior operating performance relative to R-22-based refrigerant
blends, primarily in the form of significant operating savings and potentially
less wear and tear on refrigeration equipment.
The Company believes that ICE's FRIGC refrigerants still face
significant challenges ahead, and there are no assurances they will win
wide-spread acceptance. For example, notwithstanding the phase-out of domestic
production of R-12 refrigerant at the end of 1996, there remain substantially
greater stocks of such refrigerant today than previously anticipated. Moreover,
to a smaller extent, the success of FRIGC FR-12 and other alternative
refrigerants in displacing R-12 has had the twin effect of reducing demand for
R-22 and returning recycled R-12 into national stockpiles. The relatively easy
access to R-12 has had an adverse impact on the near-term ability of ICE to
market FRIGC FR-12 refrigerant in both the mobile and stationary markets.
Moreover, there are other alternative refrigerants offered by
competitors as substitutes for R-12. In mobile applications, there are several
alternative refrigerants, including several that sell at lower prices. The
Company believes that FRIGC FR-12's superior technical performance and safety
record give it a strategic advantage. In fact, within the mobile market, the
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Company believes that its biggest competitive challenges come from the
continuing availability of R-12, and low cost (incomplete or "dirty") retrofit
kits to adapt R-12 systems to the use of R-134a.
In stationary applications, FRIGC FR-12 refrigerant faces competition
from alternative refrigerant blends based on R-22 such as R-409A and R-401A.
These two products are each marketed by companies with significantly greater
resources and access to better-established distribution systems than those
currently available to ICE. Nonetheless, the Company believes that the technical
and operating advantages of FRIGC FR-12 refrigerant are such that it can compete
effectively against these alternative refrigerants.
Backlog
Due to the relatively short production cycle for products in this
segment, the Company does not consider backlog to be material to an
understanding of the Refrigeration Products business.
Raw Materials and Inventory
For its cryogenics products, APD purchases certain major components
from single sources, but the Company believes alternate sources are available.
APD generally maintains a sufficient inventory of raw materials, assembled
parts, and partially and fully assembled major components to meet production
requirements.
IGC Polycold purchases certain major standard components for its
products from a single source. While alternative sources are available, an
unplanned loss or severe reduction in supply from this source could result in
added cost and temporary production delays to the Company. The Company generally
maintains a sufficient inventory of raw materials, assembled parts and partially
and fully assembled major components to meet production requirements.
With respect to its refrigerant products, ICE has an agreement with
Schenectady International, Inc. ("SII") for the purchase of FRIGC FR-12
refrigerant for the domestic market. SII's ability to supply commercial
quantities of FRIGC FR-12 refrigerant, however, will depend on the availability
of certain raw materials, which are manufactured by a small number of companies.
On March 7, 1997, SII announced that it had secured an agreement with
AlliedSignal, a major chemical production company, for the supply of FRIGC
FR-12 refrigerant. AlliedSignal is a world leader in the production and supply
of environmentally safer CFC substitutes for refrigeration, air conditioning,
foam insulation, sterilization and precision cleaning applications.
Warranty
The expense to the Company to date for the performance of its warranty
obligations has not been significant.
RESEARCH AND DEVELOPMENT
General Research and Development
The Company believes its research and development activities are
important to its continued success in new and existing markets. Externally
funded development programs have directly increased sales of design services and
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products and, at the same time, assisted in expanding the Company's technical
capabilities without burdening operating expenses. Under many of the Company's
government contracts, the Company must share any new technology resulting from
such contracts with the government, which would include the rights to transfer
such technology to other government contractors; however, the Company does not
currently expect such rights to have a material adverse effect on it.
Previously, a substantial portion of research and development
expenditures had been covered by external funding, principally from the US
government. In fiscal 1998, approximately 37% of total research and development
activities were paid by such external programs compared to approximately 47% and
56% in fiscal years 1997 and 1996, respectively. During fiscal years 1998, 1997
and 1996, product research and development expenses, including those of the
Refrigeration Products segment, were $13,072,000, $13,012,000 and $11,678,000,
respectively. The Company expects total research and development expenditures to
continue to increase somewhat in absolute dollar amounts, but the percentage of
these activities funded by external sources to decrease.
The Company believes that, apart from continued reductions in federal
spending on research and development, two other trends will limit external
funding from US government sources. First, and especially in the context of HTS
technology, government contracts are emphasizing cost-sharing, which requires
the awardee to contribute 20% to 50% of the total cost of the development
effort. This cost-sharing requirement may limit the Company's reliance on the
government as a significant source of research and development funds.
Second, the Company's continued growth has placed it outside the
definition of a "small business" for certain government-sponsored research and
development programs for small businesses, such as Small Business Innovation
Research ("SBIR") grants. "Small businesses" are defined, for this purpose, as
concerns which employ fewer than 500 employees.
The Company can experience, in any given year, significant increases or
decreases in external funding depending on its success in obtaining funded
contracts.
New Product Development: HTS
The Company believes that HTS materials in the form of Wire/Tape may,
in the future, have a substantial impact on commercial markets and applications
for superconductors. In particular, the Company believes HTS materials could be
suitable for larger scale, specialized electric power applications and high
field magnets in five to ten years, depending upon further advances. The
Company's activities in this area have been funded in part through
government-supported research and development programs, including joint research
agreements.
The Company's research and development activities are focused on: (1)
converting HTS materials into usable Wire/Tape with acceptable electrical
current densities and competitive pricing levels, and (2) creating devices and
equipment based upon such Wire/Tape. The Company has primarily focused on
bismuth-based HTS materials, but may broaden its technology base by developing
wires using yttrium-based materials, which show promise of even higher
superconducting performance than their bismuth-based counterparts.
Although the Company has done some basic research on identifying new
HTS materials, the Company does not believe it currently has the resources to
make a meaningful contribution in the highly competitive and costly endeavor of
identifying new HTS materials.
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The Company has continued to develop applications of HTS materials and
advanced devices in partnership with various utilities, manufacturers and
government laboratories, including a 1 MVA HTS transformer, a 15-kV HTS Fault
Current Limiter, HTS RF coils for low field MRI systems, and HTS current leads.
All of these products are in the development stage, and as yet remain
technologically and economically unproven. The Company has established a
dedicated facility for the manufacture and sale of bismuth-based HTS tape for
use in sufficient quantities to develop certain of these prototype devices.
The Company does not believe its current operations depend upon
successful market acceptance of HTS-based products or devices, nor are the
Company's continued operations necessarily dependent on its success in the HTS
marketplace even if HTS-based products or devices do become commercially viable.
However, if technical problems are solved and HTS materials become economically
feasible for commercial applications in fields in which the Company competes,
then the Company could be adversely affected unless it is able to develop
products or devices using HTS materials. Accordingly, while representing a
relatively high-risk, long-term investment of its resources, the Company
perceives HTS technology as an important future commercial opportunity of
significance. Consequently, the Company expects to continue to work and invest
research and development efforts in this area.
Because of the perceived high commercial potential of HTS materials,
HTS research is a highly competitive field, and currently involves many
commercial and academic institutions around the world that may have more
substantial economic and human resources to devote to HTS research and
development than the Company. In addition, due to the proliferation of patents
and patent applications, there can be no assurance that the Company will be able
to compete effectively in this area due to the potential patent position of
competitors.
New Product Development: SMES
The Company is seeking to participate in the potential commercial
opportunity for superconductive magnetic energy storage ("SMES") systems. A SMES
system acts as an electro-magnetic storage system that can protect critical
electrical power loads from interruptions, spikes and sags. End users currently
minimize power interruptions through use of Uninterruptible Power Supplies
("UPS"), which may use hundreds or even thousands of conventional lead acid
batteries per system, require costly maintenance, and present an environmental
hazard upon disposal. By contrast, a SMES system is more energy efficient, has a
life of more than 20 years, and is environmentally friendly. The Company has
developed an advanced micro-SMES unit under a contract it won in fiscal year
1996 to build a self-contained micro SMES system for the US Air Force. That
system was delivered and installed in fiscal year 1998.
While SMES may be commercially viable in the future, there can be no
assurances that the market will develop or that the Company will be able to
successfully build on its entrance into that market. At this time the cost of
SMES is significantly higher than for other energy storage systems.
Additionally, the Company faces other competitors interested in the SMES market,
some of which may have superior resources and patent positions.
New Product Development: Refrigerants and Refrigeration Equipment
ICE currently expects that, over the long run, it will introduce other
refrigerants from its FRIGC family of refrigerants for other carefully targeted
market opportunities. ICE believes that its refrigerant technology - which is an
outgrowth of its expertise in cryogenic technology - may give it a superior
insight into refrigerant design and more flexibility in designing refrigerating
hardware. Nonetheless, many other companies and research facilities currently
are working to identify environmentally acceptable alternatives to the existing
CFC- and HCFC-based refrigerants. Many of these companies are larger, better
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financed, better staffed and more experienced in the refrigerant business than
ICE. There can be no assurances that ICE's future refrigerants will win market
acceptance.
Moreover, ICE's success in developing FRIGC refrigerants and associated
technology will depend on its continued ability to obtain patents, maintain
trade secret protection and operate without infringing on the proprietary rights
of others. ICE expects to continue filing additional patent applications
relating to its new refrigerant technology in the near future. No assurance can
be given that any additional patents will issue with respect to patent
applications filed or to be filed by ICE. Furthermore, even if such patents
issue, there can be no assurance that any issued patents will protect against
competitive products or otherwise be commercially valuable.
ICE is also developing refrigeration equipment and has recently
obtained a patent for an advanced subcooler device. ICE is in the process of
Beta Site testing this device for the stationary market. This hardware could
dramatically increase the energy efficiency of existing and new stationary
refrigeration systems, such as low temperature display case systems (typically
found in supermarkets), refrigerated warehouses and ice rinks. ICE will be
competing in this market with other larger companies with potentially greater
resources, and there are no assurances that the Company can create a device with
sufficient technical and cost advantages to compete against such larger
companies.
New Product Development: Low-cost, Permanent Magnet-Based MRI Systems
The Company has been working through IGC Field Effects with SMIS (see
"Investments - Surrey Medical Imaging Systems Limited" below) to develop a
low-cost, permanent magnet-based MRI System. In May, 1996, the Company formally
entered a joint venture with SMIS through the formation of a limited liability
company, IMiG MRI Systems LLC ("IMiG LLC"). Under the joint venture agreement,
the Company initially owned a 50% share of IMiG. As a result of the application
of certain provisions of that agreement, however, the Company acquired a 90%
percent share of IMiG LLC and the balance was owned by SMIS. In fiscal year
1998, IMiG LLC was dissolved and its operations merged into IGC Field Effects.
IGC Field Effects will continue to market products developed jointly by
the Company and SMIS, including a permanent magnet-based MRI system for clinical
diagnostic use. In fiscal year 1997, IMiG LLC won FDA approval of this system
for sale as a medical diagnostic device in the US market. The Company believes
that FDA approval will also help it market this system in non-US markets. In
November, 1997, the Company entered into an exclusive, worldwide distribution
agreement with Trex Medical Corporation ("Trex") to market this system under the
Trex name. Trex is an internationally recognized manufacturer and distributor of
X-ray and other diagnostic equipment. While the Company believes that it has
developed a product which is especially attractive in certain niche markets by
virtue of its relatively low purchase, operating and maintenance costs, there
can be no assurance that it will be able to compete successfully in markets
which have until now been largely dominated by the major MRI systems integrators
referenced earlier. Sales of this new product to date have not been significant.
New Product Development: MR-Based Materials Inspection Systems
The Company has been working with SMIS (see "Investments - Surrey
Medical Imaging Systems Limited", below) to develop materials inspection systems
("Inspection System") using Magnetic Resonance ("MR") technology. The Inspection
System employs magnetic resonance to examine various product or material
parameters for quality assurance and/or process control purposes. The Company
sees the need for such a non-destructive inspection system stemming from the
unrelenting drive for improved productivity, higher product quality and greater
product yield in nearly all manufacturing industries worldwide. The Company
believes that Inspection Systems based on MR may be well suited for a variety of
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industries, including food and beverages, plastics and rubbers, petrochemicals,
ceramics, explosives and narcotics, fuel propellants and even timber. While
sales of this new class of products to date have not been significant, the
Company has developed and sold two systems which are installed on line at
manufacturing facilities to inspect food cartons.
Successful sales of Inspection Systems will depend on a variety of
factors. Most significantly, the Company must find a cost effective means of
tailoring each Inspection System to meet the highly specific needs of each
application. This tailoring process may include both the magnet (which in the
systems already sold, were developed and manufactured by the Company through IGC
Field Effects) but also the electronic hardware and software components
currently made by its partner SMIS. Additionally, given the relatively high cost
of the critical components of an Inspection System, the Company must find and
gain entree to markets in which the additional value-added provided by the
highly accurate Inspection System exceeds the substantial capital and operating
cost of such a System. There can be no assurances that the Company can
successfully meet these challenges.
INVESTMENTS
ULTRALIFE BATTERIES, INC.
The Company owns 975,753 shares of the common stock (approximately 9.3%
of the outstanding common stock) of Ultralife Batteries, Inc. ("Ultralife"),
acquired at a cost of $7,015,000. Headquartered in Newark, N.Y., Ultralife
focuses on markets which require increased energy density and extended shelf
life. Ultralife produces lithium batteries that are the same size and voltage as
standard batteries, but have double the operating life and a longer shelf life
(up to 10 years) than alkaline or zinc carbon batteries. These batteries
currently command a premium price in the market for long-life batteries. In
addition, Ultralife produces advanced rechargeable batteries that are being
commercialized for notebook computers, cellular telephones and other portable
electronic products.
The Company is represented on Ultralife's Board of Directors.
Ultralife's common stock is traded on the NASDAQ National Market System under
the symbol ULBI. The market value of the Company's total investment in
Ultralife, the sale of which is restricted under US securities laws, was
$11,221,000 and $10,123,000 at May 31, 1998 and May 25, 1997, respectively.
During fiscal year 1996, the Company sold, in a series of transactions, 85,000
shares of its Ultralife holdings on which it reported an aggregate gain of
$1,414,000. The Company sold no shares of its Ultralife holdings in its fiscal
years 1998 and 1997. The Company may in the future sell additional Ultralife
shares as market conditions warrant.
SURREY MEDICAL IMAGING SYSTEMS LIMITED
As of May 31, 1998, the Company owns 354,223 of the outstanding
ordinary shares (approximately 23%) of Surrey Medical Imaging Systems Limited
("SMIS"), acquired at a cost of $3,530,000. The Company adopted the equity
method of accounting for its investment during the first quarter of fiscal 1996.
The acquisition cost exceeded the underlying equity in net assets by $3,298,000,
which is being amortized over a period of 40 years. At May 31, 1998 and May 25,
1997, accumulated amortization was approximately $247,000 and $164,000,
respectively. As SMIS is privately held, the market value of this investment is
not readily determinable. As a result of amortization and recognition of a
portion of SMIS' losses, the carrying value of the investment has been reduced
to $2,854,000 at May 31, 1998.
The Company also owns 980,000 redeemable preference shares of SMIS
purchased at a cost of $1,511,000, and has provided additional loans to SMIS
which are convertible into capital stock of SMIS. For a discussion of these
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loans see Note C of the Notes of Consolidated Financial Statement included in
response to Item 8 hereto. During the year ended May 31, 1998, SMIS obtained a
line of credit financing in the amount of 2,500,000 British Pounds Sterling
("Pounds") ($4,177,000). The Company has guaranteed repayment of one half of the
outstanding balance up to 1,250,000 Pounds ($2,088,500) in the event of default
by SMIS. As of May 31, 1998, SMIS has drawn approximately 1,880,000 Pounds
(approximately $3,141,000) against the line.
Located in Guildford, England, SMIS focuses on developing and
marketing electronics and software for MRI and nuclear magnetic resonance
spectroscopy applications. It also supplies equipment using Ultrasonics for use
in the non-destructive testing of a variety of materials.
The Company and SMIS have worked together closely to develop complete
magnetic resonance system products combining SMIS' electronics and software with
the Company's permanent magnet systems. In this way, the Company and SMIS are
able to access certain niche markets in both the clinical and industrial sectors
which would be largely unavailable to each party separately. See "Research and
Development - New Product Development: Low-cost, Permanent Magnet-Based MRI
Systems" above.
KRYOTECH, INC.
On March 23, 1998, the Company acquired 1,172,840 shares (the "B
Shares") of the Series B Convertible Preferred Stock, $.01 par value per share
(the "Series B Stock"), of KryoTech, Inc., a privately-held, South Carolina
corporation ("KryoTech"), and a warrant (the "Warrant") to purchase an
additional 237,416 shares (the "Warrant Shares") of Series B Stock. The Company
paid $4,750,000 for the B Shares. The Warrant may be exercised, in whole or in
part, at any time on or before it expires on March 23, 2008. The Warrant may be
exercised at a price equal to $1.053 per Warrant Share. On an as-converted
basis, the Company's holdings represent 20.7% of the outstanding equity, on a
fully diluted basis, of KryoTech.
KryoTech was formed on March 15, 1996 for the purpose of developing,
marketing, manufacturing and selling thermal management products which are
designed specifically for the computer industry. More specifically, KryoTech has
successfully demonstrated that active cooling of computer chips can improve chip
performance.
As partial consideration for the Warrant, Intermagnetics granted to
KryoTech an exclusive, worldwide, fully paid up, irrevocable right (the "Right")
to represent and sell products for application to, and use in, computer chip
cooling, based upon APD's and IGC Polycold's refrigeration technology (including
mixed gas technology). Unless otherwise renewed or extended by agreement of the
parties, the Right has a term ending on the later of (1) the seventh anniversary
of March 28, 1998, or (2) the date on which Intermagnetics' equity ownership
interest in KryoTech falls below 15% on a fully diluted basis. KryoTech may not
sublicense, sell or transfer the Right. The scope of the Right expressly
excludes the cryo-cooling of other electronic devices, such as communications
equipment of any type.
PERSONNEL
On May 31, 1998, the Company employed 591 people.
Within the Magnetic Products segment, the production and maintenance
employees of the Company's IGC-AS Division, which is located in Waterbury,
Connecticut, are represented by the United Steelworkers of America ("United
Steelworkers"). In fiscal year 1998, the Company and the United Steelworkers
negotiated a five year collective bargaining agreement, effective June 1, 1998.
Within the Refrigeration Products segment, the production employees of the
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Company's subsidiary, APD, which is located in Allentown, Pennsylvania, are also
represented by a labor union, the International Association of Machinists and
Aerospace Workers ("IAMAW"). The Company and IAMAW negotiated a three year
collective bargaining agreement effective August 23, 1997.
There is great demand for trained scientific and technical personnel,
and the Company's growth and success will require it to attract and retain such
personnel. Many of the prospective employers of such personnel are larger and
have greater financial resources than the Company and may be in a better
position to compete with the Company for prospective employees.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are:
<TABLE>
<CAPTION>
Name Position Age
- ---- -------- ---
<S> <C> <C>
Carl H. Rosner Chairman of the Board of Directors, 69
and Chief Executive Officer
Glenn H. Epstein President and Chief Operating Officer 40
Michael C. Zeigler Senior Vice President - Finance 52
& Chief Financial Officer
Leo Blecher Vice President and General Manager - 52
IGC Magnet Business Group
Gary L. Hamilton Senior Vice President and General Manager - 48
InterCool Energy Corporation
Ian L. Pykett Vice President - IGC Technology 45
Development
Robert S. Sokolowski Vice President and General Manager - 45
IGC Advanced Superconductors
Richard J. Stevens Vice President and General Manager - 56
IGC Medical Advances Inc.
Ronald W. Sykes Vice President and General Manager - 66
IGC Polycold Systems Inc.
Bruce A. Zeitlin Corporate Vice President and General Manager - 55
APD Cryogenics Inc.
</TABLE>
A principal founder of the Company, Mr. Rosner has been Chairman of the
Board of Directors of the Company since the Company's formation in 1971 and
before that headed the Superconductive Products Operation of the General
Electric Company. Mr. Rosner also serves as the Company's Chief Executive
Officer.
18
<PAGE>
Mr. Epstein was named President and Chief Operating Officer on May 5,
1997. Prior to joining the Company, Mr. Epstein worked for Oxford Instruments
Group, plc in various capacities between 1986 and April, 1997. He most recently
held the position of President of the Nuclear Measurements Group, Inc., a
wholly-owned subsidiary of Oxford Instruments, plc. Mr. Epstein also worked for
the General Electric Company between 1981 and 1986.
Mr. Zeigler was appointed Senior Vice President - Finance and Chief
Financial Officer of the Company in September, 1993. He previously served as
Vice President-Finance and Chief Financial Officer of the Company from June,
1987 until his appointment as a Senior Vice President, and served as the
Company's Controller from June, 1985 through June, 1987.
Mr. Blecher was appointed Vice President and General Manager - IGC
Magnet Business Group in April, 1997. He previously held the title of Deputy
Manager of IGC-MBG. He originally joined the Company in 1988 as Manager of
Technology Projects. Prior to joining the Company, Mr. Blecher held various
positions of responsibility with Israel Aircraft Industry, most recently holding
the title of Manager Engineering and Project Manager, for the Space Technology
Division.
Mr. Hamilton was appointed Senior Vice President and General Manager -
InterCool Energy Corporation in February, 1995. Prior to that appointment, Mr.
Hamilton had served as Vice President and General Manager - APD Cryogenics Inc.,
since 1990. Before joining the Company, he was employed by Leybold Vacuum
Products, Inc. from 1982 to 1990, most recently as Vice President of Marketing.
Dr. Pykett was appointed Vice President of IGC Technology Development
in 1991. Prior to joining the Company, he had been President and Chief Executive
Officer of Advanced NMR Systems, Inc. (now Caprius, Inc.), a diagnostic imaging
company he co-founded in 1983.
Dr. Sokolowski was appointed Vice President and General Manager of the
Company's IGC Advanced Superconductors division in February, 1996. Dr.
Sokolowski served as the Company's Manager of High Temperature Superconductor
Operations, a part of IGC Technology Development, between November, 1992 and
February, 1996.
Mr. Stevens became Vice President and General Manager - IGC Medical
Advances Inc. upon its acquisition by the Company in March, 1997. An original
founder of Medical Advances, Inc., Mr. Stevens had been its President since
1985. Prior to that, Mr. Stevens was a marketing and advertising executive for
seventeen years with the General Electric Company. He spent twelve years of his
career at the General Electric Company in the Medical Systems Group and five
years in materials technologies businesses, and held the title of Manager of
Computed Tomography Marketing in the Medical Systems Group from 1981 to 1985.
Mr. Sykes became Vice President and General Manager - IGC Polycold
Systems Inc. upon its acquisition by the Company in November, 1997. Mr. Sykes
had been President of Polycold Systems International, Inc. since December, 1991.
Prior to that, he held executive level positions in the electronic scale
industry, holding the title of Senior Vice President at Weigh - Tronix, Inc.
from 1987 to 1991, and CEO of National Controls from 1984 to 1986. Mr. Sykes
also worked for several years in the optical coating industry.
Mr. Zeitlin has been employed by the Company in various capacities
since 1974. He was responsible for marketing superconductive materials between
1982 and 1996, and became Vice President Materials Technology in 1985. Mr.
Zeitlin also headed the Company's superconductive materials operations (now
IGC-AS) between 1987 and February, 1996 when Mr. Zeitlin was appointed Corporate
Vice President and General Manager - APD Cryogenics, Inc.
19
<PAGE>
ITEM 2. PROPERTIES.
The Company's corporate offices, IGC Magnet Business Group, IGC
Technology Development and InterCool Energy Corporation offices are located in
approximately 146,000 square feet of space located in Latham, New York (the
"Latham Facility"). The Company owns the Latham Facility, which is subject to a
$5.8 million mortgage bearing interest at the rate of 7.5%, and maturing in May,
2001.
The Company's HTS facility dedicated to the manufacture of
Bismuth-based HTS Wire/Tape is located in approximately 19,000 square feet of
leased space located in Cohoes, New York. The lease is a three (3) year lease
that expires on January 31, 2000, with two consecutive three year renewal terms.
IGC Advanced Superconductors' offices and production facilities are
located in Waterbury, Connecticut in premises of approximately 212,700 square
feet (of which 57,900 square feet are presently being used) pursuant to a thirty
year prepaid lease which expires in December, 2021. The facility's equipment
includes a drawbench with a pulling force of up to 150,000 pounds and a length
of approximately 400 feet. The Company believes that this drawbench is one of
the largest in the world.
IGC Field Effects currently operates out of premises totaling
approximately 21,900 square feet in Tyngsboro, Massachusetts. The facilities are
subject to a five year lease expiring in the fall of 2001.
APD Cryogenics, Inc. operates out of a building, which it owns, in
Allentown, Pennsylvania totaling approximately 56,550 square feet.
IGC Medical Advances Inc. leases approximately 20,800 square feet in a
building located in the Milwaukee County Research Park's Technology Innovation
Center. Approximately 9,000 square feet are used for office space with the
remaining space dedicated to lab, assembly, shipping and material storage. The
lease expires in September, 1998 and may be renewed for a successive one year
term. The Company currently believes that it will be able to renew this lease.
The Company believes that IGC-MAI has sufficient room to expand in this facility
to meet its currently projected needs through the balance of the lease term.
IGC Polycold Systems Inc. leases approximately 27,900 square feet of
manufacturing and office space in three buildings located in San Rafael,
California. The leases expire in 1999 (for one building) and 2002 (for two of
the buildings). The Company believes that IGC Polycold has sufficient room in
these facilities to meet its current projected needs through the balance of the
lease terms.
The Company believes its facilities are adequate and suitable for its
current and near-term needs.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor any of its subsidiaries is a party to any
material legal proceeding.
To the Company's knowledge, no director, officer, affiliate of the
Company, holder of 5% or more of the Company's Common Stock, or associate of any
of the foregoing, is a party adverse to, or has a material interest adverse to,
the Company or any of its subsidiaries in any proceedings.
20
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the American Stock Exchange
under the symbol IMG. The high and low sales prices of the Common Stock for each
quarterly period for the last two fiscal years, as reported on the American
Stock Exchange, are shown below.
Closing Prices(1)
-----------------
High Low
---- ---
Fiscal Year 1997
- ----------------
Quarter Ended August 25, 1996 $ 18 1/4 $ 12 13/16
Quarter Ended November 24, 1996 14 1/2 12 5/8
Quarter Ended February 23, 1997 13 5/16 10 15/16
Quarter Ended May 25, 1997 12 7 9/16
Fiscal Year 1998
- ----------------
Quarter Ended August 24, 1997 $ 13 7/16 $ 9 15/16
Quarter Ended November 23, 1997 11 7/8 8 7/16
Quarter Ended February 22, 1998 9 3/16 7 3/4
Quarter Ended May 31, 1998 11 1/2 9
------------------------
(1) The closing prices have been adjusted to reflect a two percent stock
dividend distributed on September 16, 1997 to stockholders of record on
August 26, 1997, rounded to the nearest $1/16, and a two percent stock
dividend to be distributed on September 17, 1998, to stockholders of
record on August 27, 1998.
There were 2,048 holders of record of Common Stock as of August 14,
1998. The Company has not paid cash dividends in the past ten years, and it does
not anticipate that it will pay cash dividends or adopt such a cash dividend
policy in the near future. The Board of Directors of the Company has declared a
policy of granting annual stock dividends where, and to the extent that, the
performance of the Company warrants such a declaration. Under the Company's bank
agreements, prior bank approval is required for cash dividends in excess of the
Company's net income for the year to which the dividend pertains.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial information has been taken
from the consolidated financial statements of the Company. The selected
statement of operations data and the selected balance sheet data set forth below
should be read in conjunction with, and is qualified in its entirety by,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and related Notes included
in response to Items 7 and 8 hereto. (Prior years have been reclassified to
conform with the current year presentation.)
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Amounts)
----------------------------------------------------------------------------------
For the Fiscal Year Ended May 31, 1998 May 25, 1997 May 26, 1996 May 28, 1995 May 29, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $95,894 $87,052 $88,467 $83,877 $51,238
Gross Margin 35,685 26,200 22,279 23,703 16,344
Income before income taxes 4,744 4,035 6,882 6,512 2,099
Net income 2,753 2,615 4,427 4,007 2,148
Per common share - diluted:
Income before
cumulative effect of
accounting change 0.21 0.20 0.35 0.33 0.11
Cumulative effect of
accounting change 0.07
Net income 0.21 0.20 0.35 0.33 0.18
----
At End of Fiscal Year 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Working capital $45, 493 $49,346 $53,642 $52,655 $49,339
Total assets 127,776 115,889 112,397 103,706 93,787
Long-term debt
(net of current maturities) 28,833 29,105 29,364 39,807 39,859
Accumulated deficit (1,081) (1,643) (1,727) (2,495) (2,595)
Shareholders' equity 83,801 73,087 67,296 53,305 46,935
</TABLE>
- ----------
(a) Income per common share - diluted has been computed during each period
based on the weighted average number of shares of Common Stock outstanding
plus dilutive potential common shares (where applicable).
(b) The Company did not pay a cash dividend on its Common Stock during any of
the periods indicated.
(c) Net income per common share-diluted has been restated to give effect to the
2% stock dividend declared July 21, 1998, the 2% stock dividend distributed
in September, 1997 and August, 1996, the five-for-four stock split effected
September 8, 1994, and the 3% stock dividend distributed in June, 1995.
(d) Net income for the fiscal year ended May 29, 1994 reflects a cumulative
effect of accounting change in the amount of $888,000 or $.07 per common
share-diluted.
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
The following tables set forth, for the periods indicated, the
percentages which certain items reflected in the financial data bear to net
sales of the Company and the percentage change of such items from period to
period. See the Consolidated Financial Statements, located elsewhere in this
report, for financial information to which the percentages set forth below
relate. (Prior years have been reclassified to conform with the current year
presentation.)
<TABLE>
<CAPTION>
Period to Period
Relationship to Net Sales Increase (Decrease)
-------------------------------------------- --------------------------
Fiscal Year Ended Fiscal Years
-------------------------------------------- --------------------------
May 31, May 25, May 26, 1997- 1996-
1998 1997 1996 1998 1997
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 10.2% (1.6%)
Cost of products sold 62.8 69.9 74.8 (1.1) (8.1)
------ ------ ------
Gross margin 37.2 30.1 25.2 36.2 17.6
Product research and
development 8.4 7.8 5.7 19.9 35.5
Marketing, general and
administrative 21.7 18.2 14.0 31.6 27.5
Amortization of
intangible assets 1.3 0.4 0.3 261.3 31.6
------ ------ ------
31.4 26.4 20.0 31.5 29.8
------ ------ ------
Operating income 5.8 3.7 5.2 69.6 (29.4)
Interest and other
income 2.5 3.4 4.7 (20.2) (28.4)
Realized gain on sale of
available for sale -- -- 1.6 ** **
securities
Interest and other
expense (2.2) (2.3) (2.9) 6.5 (21.0)
Equity in net loss of
unconsolidated affiliates (1.1) (0.2) (0.8) 454.4 (75.7)
------ ------ ------
Income before income
taxes 5.0 4.6 7.8 17.6 (41.4)
Provision for income
taxes 2.1 1.6 2.8 40.2 (42.2)
------ ------ ------
Net income 2.9% 3.0% 5.0% 5.3% (40.9%)
====== ====== ======
</TABLE>
- ----------
** Not applicable for purposes of this table.
23
<PAGE>
The statements contained in this annual report which are not historical
fact are "forward-looking statements" that involve various important
assumptions, risks, uncertainties and other factors which could cause the
Company's actual results for 1999 and beyond to differ materially from those
expressed in such forward-looking statements. These important factors include,
without limitation, the assumptions, risks, and uncertainties set forth herein,
as well as other assumptions, risks, uncertainties and factors disclosed
elsewhere in this report and in the Company's press releases, shareholders'
reports and filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS -- FISCAL 1998 and FISCAL 1997
Consolidated
Net sales increased 10.2% in fiscal 1998 compared to a decrease of 1.6%
in fiscal 1997. Sales for fiscal 1998 grew mainly due to the inclusion of full
year results from the acquisition of Medical Advances, Inc. ("MAI") and half
year results from the November, 1997 acquisition of Polycold Systems
International, Inc. ("Polycold"). In fiscal 1997, increases in sales of both
magnet systems and refrigeration products were offset by a substantial reduction
in sales of superconducting materials.
As a percentage of net sales, gross margins improved again in fiscal
1998 after a good recovery in fiscal 1997. The increase in both years was due to
continuing cost-reduction efforts and a more favorable product mix, primarily in
the Magnetic Products segment, despite continuing competitive pressure on
selling prices for magnets and superconducting materials. The recent
acquisitions, MAI and Polycold, had a favorable impact on gross margins, as did
improvements in fiscal 1998 for the superconducting magnets and wire businesses.
Looking forward, the Company expects greater sales and earnings in
fiscal 1999. This expectation is based on the following assumptions, among
others:
-the market for MRI systems continues to grow;
-the Company can successfully contend with continued competitive
pressure on selling prices in the MRI marketplace for magnets and
materials;
-anticipated sales of refrigerants occur; and,
-reductions in production costs in both business segments continue.
In addition, fiscal 1999 will include the operations of Polycold for the full
year. Polycold was acquired in November, 1997 as described in "Liquidity and
Capital Commitments".
Company-funded product research and development expenses increased
19.9% in fiscal 1998, almost all of which resulted from the recent acquisitions,
compared to a 35.5% increase in fiscal 1997. Company-funded product research and
development spending increased in all business segments. Because the Company is
no longer qualified as a small business and thus is not eligible for certain
government-funded research awards, external funding for research and development
expenses continues to decline, and has been replaced by internal funding.
Marketing, general and administrative expenses grew 31.6% in fiscal
1998 compared with growth of 27.5% in fiscal 1997. This was due primarily to the
recent acquisitions, increased marketing expenses for APD Cryogenics, and a
non-cash charge of $600,000 associated with the issuance of a warrant to
Sumitomo Corporation of America in connection with a distribution agreement. The
increase in fiscal 1997 was due to the creation of two separate organizations:
InterCool Energy Corporation ("ICE") in fiscal 1996, and, IMiG MRI, LLC
("IMiG"), a joint venture with Surrey Medical Imaging Systems Limited ("SMIS"),
in fiscal 1997. ICE's purpose is to develop and market FRIGC(R) refrigerants.
IMiG was formed to commercialize a new, low-cost permanent magnet-based magnetic
24
<PAGE>
resonance imaging system. In fiscal 1998, the Company discontinued IMiG and
named Trex Medical Corporation as the exclusive world-wide distributor for the
IMiG MRI system.
In fiscal 1998 the Company began to separately report the amortization
of intangible assets due to the significance of such expense resulting from the
acquisitions of MAI and Polycold. The excess of the purchase price over the fair
market value of net assets acquired for these acquisitions is being written off
over 15 years.
Interest income declined in fiscal 1998 because a substantial portion
of invested cash was used for acquisitions and investments in and advances to
affiliates. Equity in net loss of unconsolidated affiliates increased because
the affiliates had higher losses in the current fiscal year.
Interest expense was slightly higher in fiscal 1998 principally due to
the issuance of a short-term note as part of the Polycold acquisition and was
lower in fiscal 1997 due to the repayment of $2,167,000 of installment notes in
December, 1996.
The Company's effective income tax rate increased in fiscal 1998 to
42%, up from 35% in fiscal 1997, due mainly to the effect of non-deductible
amortization of intangible assets associated with the recent acquisitions.
Fiscal 1997 benefited from the utilization of certain tax credits. See Note G of
Notes to Consolidated Financial Statements, located elsewhere in this report,
for detailed information regarding income taxes.
In May, 1997, the Company entered into a distributorship agreement with
Sumitomo Corporation of America to market FR-12 refrigerant in the Asia-Pacific
market. In June, 1997, the Company entered into a Warrant Agreement with
Sumitomo under which Sumitomo could purchase up to 1,200,000 shares of Common
Stock. Sumitomo paid $120,000 for the rights to the warrants. The Company issued
an initial warrant (which expires on November 16, 1998) to purchase 500,000
shares at $12.50 per share. In connection with the initial Warrant, the Company
incurred a non-cash charge of $600,000 in fiscal 1998.
In July, 1998, the Company announced that it was extending the
near-term marketing emphasis of FRIGC(R) refrigerants to commercial stationary
applications because of the unsatisfactory penetration of the U.S. mobile market
and the larger-than-projected availability of Freon R-12. It also announced that
it had appointed three additional North American distributors and was
restructuring its international distribution plan to have several non-exclusive
international distributors.
Segment Discussion
Magnetic Products Segment. This segment consists of the design,
development, manufacture and sale of superconductive magnets and
materials, permanent magnets, RF coils, and other magnetic products.
Sales for the segment increased 13.4% in fiscal 1998 compared to a
decline of 9.2% in fiscal 1997, principally due to the inclusion of MAI
for the full year. Magnet system sales (including MAI) increased by
15.5% in fiscal 1998 compared with an increase of 6.8% in fiscal 1997.
Material sales increased approximately 4% in fiscal 1998 compared to a
decline of approximately 46% in fiscal 1997. The sales decline in this
segment in fiscal 1997 was principally due to substantially lower
superconducting material sales to a major customer who decided not to
renew a long-term supply agreement. Sales to this customer increased in
fiscal 1998. In fiscal 1998 gross profit margins increased for both
magnet products and superconducting materials due to continued cost
improvements, higher sales and improved product mix, including MAI's
impact on the full year. Gross margins in fiscal 1997 increased for
magnet products due to a more favorable product mix and improved
production costs, but declined substantially for materials due to lower
sales volume and continued yield losses in wire manufacturing.
25
<PAGE>
Refrigeration Products Segment. This segment, which consists of the
design, development, manufacture and sale of cryogenic refrigeration
equipment and refrigerants, had increased sales of approximately 3% in
fiscal 1998 and 20% in fiscal 1997. Fiscal 1998 includes Polycold sales
for six months, which slightly exceeded the reduction in sales of
FRIGC(R) refrigerants and APD Cryogenics' refrigeration equipment due
to reduced demand for both product lines. The increase in fiscal 1997
was primarily the result of sales of FR-12(TM) refrigerant and a
substantial increase in sales of laboratory and Cryotiger systems.
Gross margin, as a percentage of net sales, increased slightly in
fiscal 1998 and 9.3% in fiscal 1997. The fiscal 1997 increase was due
to cost reductions for refrigerants and cryogenic refrigeration
equipment.
See Note J of Notes to Consolidated Financial Statements, located
elsewhere in this report, for financial information by industry
segment.
Year 2000 Compliance
The Company has developed and is implementing an assessment and
remediation plan to identify and fix any potential problems that could occur
because of a computer's failure to properly deal with the Year 2000 and beyond.
This plan encompasses all of the Company's business entities, business partners
and all suppliers of materials and services. While, at present, the Company
believes that the cost of completing the plan will not be material, and that the
risks to the Company with respect to Year 2000 issues are not significant, the
Company cannot, at this time, fully assess the potential impact. If risks are
identified during the Company's Year 2000 review, the Company will take steps to
eliminate or reduce such risks.
The Company is in the process of installing a new computer software
system common to all its operating locations together with additional hardware
at a cost estimated to be between $1,500,000 and $2,000,000. The implementation
of this software is expected to be completed during the Company's current fiscal
year. Most of these costs will be capitalized.
LIQUIDITY AND CAPITAL COMMITMENTS
In fiscal 1998 the Company generated net cash of $6,422,000 from
operating activities, which, together with available cash, was used to purchase
property, plant and equipment, to make additional investments in SMIS and an
investment in KryoTech, Inc., to purchase Treasury Stock, repay debt and to
acquire Polycold.
On November 24, 1997, the Company acquired Polycold of San Rafael, CA.,
a manufacturer of low-temperature refrigeration systems including water vapor
cryopumps, cryocoolers, cold trap chillers and gas chillers, for an aggregate
consideration of approximately $16,500,000 consisting of a 90-day promissory
note for $6,821,000, 281,568 shares of the Company's Common Stock and 69,992
shares of Series A Preferred Stock, which is redeemable in cash or Common Stock
at the option of the Company. The $10,175,000 excess of purchase price over the
fair market value of net assets acquired is being amortized over 15 years. The
Preferred Stock is redeemable in cash by the Company at any time at $100 per
share. Also, the Company may convert some or all of the Preferred Stock into
Common Stock at any time after December 11, 1998, but before December 1, 1999.
If any of the Preferred Stock is not so converted by the Company, it shall
automatically convert into Common Stock as of December 1, 1999. The conversion
shall be effected by dividing the conversion price ($100 per share) by the
average of the closing prices of the Common Stock on the ten trading days
preceding the date of conversion. The promissory note was paid in March 1998
using working capital and $3,706,000 of cash acquired from Polycold.
During fiscal 1998, under the Company's stock buy-back program, the
Company repurchased a total of 465,500 shares of Common Stock for $4,066,000.
26
<PAGE>
During fiscal 1998, the Company increased its loans to SMIS by 900,000
British Pounds Sterling ("Pounds") ($1,479,000) at dates of advances and
repayments, net of repayments. These loans bear interest at the rate of 11% per
annum. Interest and principal are due and payable on December 31, 1998, but may
be prepaid by SMIS without penalty. Subsequent to December 31, 1998, if the
loans are not repaid, the Company has the right to tender the loans to SMIS in
exchange for 1% of the "enlarged equity" of SMIS for each 100,000 Pounds of
loans tendered. The "enlarged equity" equals the shares outstanding prior to the
tender, plus those issued as a result of the tender. The amount of loans
available for tender is equal to approximately 900,000 Pounds ($1,503,720) at
May 31, 1998.
During the year ended May 31, 1998, SMIS obtained line of credit
financing in the amount of 2,500,000 Pounds ($4,177,000). The Company has
guaranteed (by issuing a letter of credit) repayment of one half of the
outstanding balance, up to 1,250,000 Pounds ($2,088,500) in the event of default
by SMIS. Another of SMIS' shareholders guaranteed the balance. As of May 31,
1998, SMIS has drawn approximately 1,880,000 Pounds (approximately $3,141,000)
against the line.
In March 1998, the Company acquired 1,172,840 shares of the Series B
Convertible Preferred Stock, $.01 par value per share of KryoTech, Inc., a
privately-held corporation ("KryoTech"), and a warrant to purchase an additional
237,416 shares of the Series B Convertible Preferred Stock at $1.053 per share.
The warrant expires in March, 2008. On an "as converted" basis, the Series B
Convertible Preferred Shares equal approximately 21% of KryoTech.
KryoTech, located in Columbia, S.C., develops, manufactures and markets
value-added thermal management solutions for the computer industry. In
connection with this investment, the Company has granted KryoTech exclusive
worldwide rights to sell computer chip cooling equipment using the Company's
refrigeration technology.
See the Consolidated Statements of Cash Flows in the Consolidated
Financial Statements, located elsewhere in this report, for a detailed
description of the sources and uses of cash during fiscal 1998 as well as the
two preceding years.
The Company's capital resource commitments as of August 2, 1998
consisted principally of capital equipment commitments of approximately $970,000
and outstanding bank loans.
The Company has a three year, unsecured $25,000,000 line of credit with
two banks that bears interest at the London Interbank Offered Rate (LIBOR) plus
.50%, or prime less .50%, and will expire in November, 2000, of which $2,000,000
was in use on August 2, 1998.
The Company believes that it will have sufficient working capital to
meet its needs for the short term by using internally generated funds and
existing credit facilities. However, on a longer-term basis with substantial
increases in sales volume and/or unusually large expenditure requirements to
commercialize the FRIGC(R) family of refrigerants, the Company may be required
to obtain additional lines of credit for working capital purposes and possibly
make periodic public offerings or private placements in order to meet the
liquidity needs of such growth. While the Company does not believe it will be
restricted in financing such growth, there can be no assurances that such
sources of financing will be available to the Company in sufficient amounts or
on acceptable terms. Under such circumstances, the Company would expect to
manage its growth within the financing available.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Attached hereto and filed as part of this report are the financial
statements and supplementary data listed in the list of Financial Statements and
Schedules included in response to Item 14 of this report.
27
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning directors called for by Item 10 of Form 10-K
will be set forth under the heading "Election of Directors" in the Company's
definitive proxy statement relating to the 1998 Annual Meeting of Shareholders
(the "Proxy Statement"), and is hereby incorporated herein by reference.
The information concerning executive officers called for by Item 10 of
Form 10-K is set forth in "Item 1. Business" of this annual report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information with respect to compensation of certain executive
officers and all executive officers of the Company as a group to be contained
under the headings "Executive Compensation" and "Certain Transactions" in the
Proxy Statement is hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information with respect to ownership of the Company's Common Stock
by management and by certain other beneficial owners to be contained under the
heading "Security Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement is hereby incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information with respect to certain relationships and related
transactions to be contained under the heading "Certain Transactions" in the
Proxy Statement is hereby incorporated herein by reference.
28
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS.
Attached hereto and filed as part of this report are the financial statements,
schedules and the exhibits listed below.
1. Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of May 31, 1998 and May 25, 1997
Consolidated Statements of Income for the fiscal years ended May 31,
1998, May 25, 1997 and May 26, 1996
Consolidated Statements of Shareholders' Equity for the fiscal years
ended May 31, 1998, May 25, 1997 and May 26, 1996
Consolidated Statements of Cash Flows for the fiscal years ended May
31, 1998, May 25, 1997 and May 26, 1996
Notes to Consolidated Financial Statements
2. Schedule
II Valuation and Qualifying Accounts
All other schedules are not required or are inapplicable and,
therefore, have been omitted.
3. Exhibits
Articles of Incorporation and By-laws
* 3(i) Restated Certificate of Incorporation
3(ii) By-laws, as amended (3) (Exhibit 3.2)
Instruments defining the rights of security holders, including indentures
4.1 Form of Common Stock certificate (5) (Exhibit 4.1)
* 4.2 Intermagnetics General Corporation Indenture dated as of
September 15, 1993
* 4.3 Second Amended and Restated Loan and Agency Agreement dated as
of October 23, 1997 among Corestates Bank, N.A. and
Intermagnetics General Corporation, APD Cryogenics Inc.,
Magstream Corporation, Medical Advances, Inc. and InterCool
Energy Corporation
* 4.4 First Amendment dated as of May 18, 1998 to the Second Amended
and Restated Loan Agreement dated as of October 23, 1997 among
Corestates Bank, N.A. and Intermagnetics General Corporation,
APD Cryogenics Inc., Magstream Corporation, Medical Advances,
Inc. and InterCool Energy Corporation
29
<PAGE>
Material Contracts
10.1 Agreement Restating and Superseding Lease and Granting Rights
to Use Common Areas and Other Rights dated as of December 23,
1991 between Waterbury Industrial Commons Associates, IGC
Advanced Superconductors Inc. and Intermagnetics General
Corporation (5) (Exhibit 10.1)
+ 10.2 1990 Stock Option Plan (4) (Appendix A)
+ 10.3 1981 Stock Option Plan, as amended (2) (Exhibit 10.7)
+ 10.4 Supplemental Executive Benefit Agreement (1) (Exhibit 10.37)
10.5 Agreement dated June 2, 1992 between Philips Medical Systems
Nederlands B.V. and Intermagnetics General Corporation for
sales of magnet systems (7) (Exhibit 10.6)
10.6 Amendment No. 3 dated January 1, 1997 to the Agreement of June
2, 1992 between Philips Medical Systems Nederlands B.V. and
Intermagnetics General Corporation for sales of magnet systems
(8) (Exhibit 10.6)
+* 10.7 Employment Agreement dated April 20, 1998 between
Intermagnetics General Corporation and Carl H. Rosner
+* 10.8 Employment Agreement dated April 1, 1997 between
Intermagnetics General Corporation and Glenn H. Epstein
+ 10.9 Employment Agreement dated March 10, 1997 between
Intermagnetics General Corporation and Richard J. Stevens (9)
(Exhibit 10.1)
+ 10.10 Employment Agreement dated November 24, 1997 between
Intermagnetics General Corporation and Ronald W. Sykes (10)
(Exhibit 10.1)
10.11 Share Purchase Agreement, dated January 23, 1992, by and
between Ultralife Batteries, Inc. and Intermagnetics General
Corporation (6) (Exhibit 10.1)
Subsidiaries of the registrant
* 21 Subsidiaries of the Company
30
<PAGE>
Consents of experts and counsel
* 23 Consent of KPMG Peat Marwick LLP with respect to the
Registration Statements Numbers 2-80041, 2-94701, 33-2517,
33-12762, 33-12763, 33-38145, 33-44693, 33-50598, 33-55092,
33-72160, 333-10553 and 333-42163 on Form S-8.
- ----------------------------------------------------
(1) Exhibit incorporated herein by reference to the Registration
Statement on Form S-2 (Registration No. 2-99408) filed by the
Company on August 2, 1985.
(2) Exhibit incorporated herein by reference to the Annual Report
on Form 10-K filed by the Company for the fiscal year ended
May 31, 1987.
(3) Exhibit incorporated herein by reference to the Annual Report
on Form 10-K filed by the Company for the fiscal year ended
May 27, 1990.
(4) Exhibit incorporated herein by reference to the Proxy
Statement dated October 4, 1991 for the 1991 Annual Meeting
of Shareholders.
(5) Exhibit incorporated herein by reference to the Annual Report
on Form 10-K filed by the Company for the fiscal year ended
May 31, 1992, as amended by Amendment No. 1 on Form 8 dated
November 17, 1992.
(6) Exhibit incorporated herein by reference to the Quarterly
Report on Form 10-Q filed by the Company for the six months
ended November 29, 1992.
(7) Exhibit incorporated herein by reference to the Annual Report
on Form 10-K/A2 for the fiscal year ended May 29, 1994.
Portions of this Exhibit were omitted and filed separately
with the Secretary of the Securities and Exchange Commission
pursuant to an Application for Confidential Treatment under
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
(8) Exhibit incorporated herein by reference to the Annual Report
on Form 10-K/A filed by the Company for the fiscal year ended
May 25, 1997.
(9) Exhibit incorporated herein by reference to the Current Report
of Form 8-K filed by the Company on March 10, 1997.
(10) Exhibit incorporated herein by reference to the Current Report
of Form 8-K filed by the Company on November 24, 1997.
* Filed with the Annual Report on Form 10-K for the fiscal year ended May 31,
1998.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this annual report on Form 10-K.
31
<PAGE>
The Company agrees to provide the SEC upon request with copies of
certain long-term debt obligations which have been omitted pursuant to the
applicable rules.
The Company agrees to furnish supplementally a copy of omitted
Schedules and Exhibits, if any, with respect to Exhibits listed above upon
request.
(b) REPORTS ON FORM 8-K
None.
32
<PAGE>
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: August 27, 1998 By: /s/ Carl H. Rosner
------------------------------------
Carl H. Rosner
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Each person in so signing also makes, constitutes and appoints
Carl H. Rosner, Chairman and Chief Executive Officer, Michael C. Zeigler, Senior
Vice President - Finance and Chief Financial Officer, and each of them, his true
and lawful attorneys-in-fact, in his name, place and stead to execute and cause
to be filed with the Securities and Exchange Commission any or all amendments to
this report.
Name Capacity Date
- ---- -------- ----
/s/ Carl H. Rosner Chairman and August 27, 1998
--------------------------- Chief Executive Officer
Carl H. Rosner (principal executive
officer) and Director
/s/ Glenn H. Epstein President, Chief Operating August 27, 1998
--------------------------- Officer and Director
Glenn H. Epstein
/s/ Michael C. Zeigler Senior Vice President- August 27, 1998
--------------------------- Finance; Chief Financial
Michael C. Zeigler Officer (principal financial
and accounting officer)
/s/ Joseph C. Abeles Director August 27, 1998
---------------------------
Joseph C. Abeles
/s/ John M. Albertine Director August 27, 199
---------------------------
John M. Albertine
/s/ Edward E. David, Jr. Director August 27, 1998
---------------------------
Edward E. David, Jr.
/s/ James S. Hyde Director August 27, 1998
---------------------------
James S. Hyde
/s/ Thomas L. Kempner Director August 27, 1998
---------------------------
Thomas L. Kempner
/s/ Stuart A. Shikiar Director August 27, 1998
---------------------------
Stuart A. Shikiar
/s/ Sheldon Weinig Director August 27, 1998
---------------------------
Sheldon Weinig
33
<PAGE>
1. Financial Statements
34
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Intermagnetics General Corporation:
We have audited the consolidated financial statements of Intermagnetics General
Corporation and subsidiaries, as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Intermagnetics General Corporation and subsidiaries as of May 31, 1998 and May
25, 1997, and the results of their operations and their cash flows for each of
the years in the three-year period ended May 31, 1998, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Albany, New York
July 14, 1998
35
<PAGE>
CONSOLIDATED BALANCE SHEETS
INTERMAGNETICS GENERAL CORPORATION
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
May 31, May 25,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 2,993 $ 12,667
Trade accounts receivable, less allowance
(1998 - $350; 1997 - $302) 14,802 16,899
Costs and estimated earnings in excess of
billings on uncompleted contracts 4,660 3,543
Inventories:
Finished products 1,045 811
Work in process 18,313 14,196
Materials and supplies 13,491 11,410
-------- --------
32,849 26,417
Deferred income taxes 3,583 2,453
Prepaid expenses and other 1,423 819
-------- --------
TOTAL CURRENT ASSETS 60,310 62,798
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,479 1,479
Buildings and improvements 16,604 16,425
Machinery and equipment 39,421 36,181
Leasehold improvements 649 35
-------- --------
58,153 54,120
Less allowances for depreciation and amortization 32,445 28,616
-------- --------
25,708 25,504
Equipment in process of construction 2,231 3,048
-------- --------
27,939 28,552
INTANGIBLE AND OTHER ASSETS
Available for sale securities 3,450 3,112
Other investments 9,888 4,986
Investment in affiliate 2,854 3,946
Notes receivable from affiliate 2,476 972
Excess of cost over net assets acquired, less
accumulated amortization (1998 - $1,166; 1997 - $169) 18,966 9,538
Other assets 1,893 1,985
-------- --------
TOTAL ASSETS $127,776 $115,889
======== ========
</TABLE>
(Continued)
36
<PAGE>
<TABLE>
<CAPTION>
May 31, May 25,
1998 1997
---------------- ----------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 272 $ 259
Accounts payable 6,076 6,441
Salaries, wages and related items 3,647 2,660
Customer advances and deposits 298 811
Product warranty reserve 996 911
Accrued income taxes 2,411 1,453
Other liabilities and accrued expenses 1,117 917
--------- ---------
TOTAL CURRENT LIABILITIES 14,817 13,452
LONG-TERM DEBT, less current portion 28,833 29,105
DEFERRED INCOME TAXES 325 245
SHAREHOLDERS' EQUITY
Preferred Stock, par value $.10 per share:
Authorized - 2,000,000 shares
Issued and outstanding - 69,992 shares 6,999
Common Stock, par value $.10 per share:
Authorized - 40,000,000 shares
Issued and outstanding (including shares in treasury):
1998 - 13,334,280 shares
1997 - 12,892,084 shares 1,334 1,264
Additional paid-in capital 81,008 74,378
Accumulated deficit (1,081) (1,643)
Unrealized gain on available for sale securities, net 850 613
Foreign currency translation adjustments (354) (16)
--------- ---------
88,756 74,596
Less cost of Common Stock in treasury
(1998 - 562,175 shares; 1997 - 163,700 shares) (4,955) (1,509)
--------- ---------
TOTAL SHAREHOLDERS EQUITY 83,801 73,087
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 127,776 $ 115,889
========= =========
</TABLE>
See notes to consolidated financial statements.
37
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
INTERMAGNETICS GENERAL CORPORATION
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------
May 31, May 25, May 26,
1998 1997 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales $ 95,894 $ 87,052 $ 88,467
Cost of products sold 60,209 60,852 66,188
-------- -------- --------
Gross margin 35,685 26,200 22,279
Product research and development 8,128 6,779 5,003
Marketing, general and administrative 20,840 15,836 12,420
Amortization of intangible assets 1,203 333 154
-------- -------- --------
30,171 22,948 17,577
-------- -------- --------
Operating income 5,514 3,252 4,702
Interest and other income 2,364 2,961 4,138
Realized gain on sale of available for sale securities 1,414
Interest and other expense (2,125) (1,996) (2,624)
Equity in net loss of unconsolidated affiliates (1,009) (182) (748)
-------- -------- --------
Income before income taxes 4,744 4,035 6,882
Provision for income taxes 1,991 1,420 2,455
-------- -------- --------
NET INCOME $ 2,753 $ 2,615 $ 4,427
======== ======== ========
Earnings per Common Share:
Basic $ .22 $ .21 $ .37
======== ======== ========
Diluted $ .21 $ .20 $ .35
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
38
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
INTERMAGNETICS GENERAL CORPORATION
Fiscal Years Ended May 31, 1998, May 25, 1997, May 26, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Unrealized
Gain/(Loss) on Foreign
Additional Available Currency
Common Paid-in Accumulated For Sale Translation Treasury
Stock Capital Deficit Securities, net Adjustments Stock
------------ ------------ ----------- ---------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at May 28, 1995 $1,108 $55,166 $(2,495) $1,787 $(46) $(2,215)
Net income 4,427
Tax benefit from exercise of stock options 837
Sale of 217,778 shares of Common Stock,
including receipt of 17,072 shares of
Treasury Stock, upon exercise of stock
options 21 1,236 (275)
Sale of 7,875 shares of Common Stock
to IGC Savings Trust 1 140
Stock dividends and payment for
fractional shares 23 3,623 (3,659)
Unrealized gain on available for
sale securities, net 559
Unrealized loss on foreign currency
translation (50)
Purchase of 62,700 shares of Treasury Stock (985)
Conversion of $8,375,000 of 5.75% convertible
subordinated debentures 55 8,038
------------ ------------ ----------- ------------- ------------- ----------
Balances at May 26, 1996 1,208 69,040 (1,727) 2,346 (96) (3,475)
Net income 2,615
Tax benefit from exercise of stock options 412
Sale of 133,024 shares of Common Stock,
including receipt of 15,644 shares of
Treasury Stock, upon exercise of stock
options 13 669 (185)
Sale of 8,356 shares of Common Stock
to IGC Savings Trust 1 116
Stock dividends and payments for
fractional shares 23 2,495 (2,531)
Unrealized loss on available for
sale securities, net (1,733)
Unrealized gain on foreign currency
translation 80
Purchase of 291,100 shares of Treasury Stock (3,358)
Issuance of 678,517 shares of Common Stock,
including 474,895 Treasury Shares in
payment for acquisition 19 1,646 5,509
------------ ------------ ----------- ------------- ------------- ----------
Balances at May 25, 1997 1,264 74,378 (1,643) 613 (16) (1,509)
Net income 2,753
Tax benefit from exercise of stock options 177
Sale of 132,214 shares of Common Stock,
including receipt of 21,993 shares of
Treasury Stock, upon exercise of stock
options 13 739 (226)
Sale of 7,023 shares of Common Stock
to IGC Savings Trust 1 69
Stock dividends and payments for
fractional shares 25 2,157 (2,191)
Unrealized gain on available for
sale securities, net 237
Unrealized loss on foreign currency
translation (338)
Purchase of 465,800 shares of Treasury Stock (4,065)
Issuance of 312,650 shares of Common Stock
and 69,992 shares of Series A Preferred Stock
in payment for acquisitions 31 2,719
Issuance of 89,018 shares of Treasury Stock
for purchase of inventory 25 845
Issuance of warrant to acquire 500,000
shares of Common Stock 720
Other 24
------------ ------------ ----------- ------------- ------------- ----------
Balances at May 31, 1998 $1,334 $81,008 $(1,081) $ 850 $ (354) $(4,955)
============ ============ =========== ============= ============= ==========
</TABLE>
See notes to consolidated financial statements.
39
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
INTERMAGNETICS GENERAL CORPORATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
May 31, May 25, May 26,
1998 1997 1996
------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,753 $ 2,615 $ 4,427
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,424 3,964 3,165
Provision for deferred taxes (1,028) (589) (533)
Other non-cash activity (255)
Non-cash expense from warrants issued 600
Imputed interest on unsecured notes 137 210
Equity in net loss of unconsolidated affiliates 1,009 182 748
Gain on sale of available for sale securities (1,414)
Loss (gain) on sale and disposal of assets 60 (374)
Change in operating assets and liabilities, net of effects of acquisitions:
(Increase) decrease in accounts receivable and costs and estimated
earnings in excess of billings on uncompleted contracts 3,494 3,299 (1,270)
(Increase) decrease in inventories and prepaid expenses and other (5,579) (1,447) 1,482
Increase in accounts payable and accrued expenses 27 919 3,365
Change in foreign currency translation adjustments (338) 80 (50)
------------- -------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,422 8,531 10,130
INVESTING ACTIVITIES
Purchases of property, plant and equipment (3,146) (5,446) (4,079)
Proceeds from sale of assets 92 935
Proceeds from sale of available for sale securities 1,927
Acquisitions, net of cash acquired (3,115) (4,139)
Investment in and advances to unconsolidated affiliates (6,855) (972) (2,070)
Repayment of advances by unconsolidated affiliate 470
(Increase) decrease in other assets 66 83 (121)
------------- -------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (12,488) (9,539) (4,343)
FINANCING ACTIVITIES
Proceeds from sale of warrants 120
Purchase of Treasury Stock (4,065) (3,358) (985)
Proceeds from sales of Common Stock 596 614 1,123
Principal payments on note payable and long-term debt (259) (2,277) (238)
------------- -------------- --------------
NET CASH USED IN FINANCING ACTIVITIES (3,608) (5,021) (100)
------------- -------------- --------------
INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS (9,674) (6,029) 5,687
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD 12,667 18,696 13,009
------------- -------------- --------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 2,993 $12,667 $18,696
============= ============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Exchange of Common Stock in partial payment of exercise
price on options $ 226 $ 185 $ 275
============= ============== ==============
Issuance of Common Stock, Preferred Stock, and Treasury Stock
for acquisitions $ 9,749 $ 7,174
============= ==============
Issuance of Treasury Stock for purchase of inventory $ 870
=============
Tax benefit from exercise of stock options $ 177 $ 412 $ 837
============= ============== ==============
Stock dividends $ 2,191 $ 2,531 $ 3,659
============= ============== ==============
Conversion of debt to equity, net of deferred debt issue
cost reduction of $282 $ 8,093
==============
</TABLE>
See notes to consolidated financial statements.
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERMAGNETICS GENERAL CORPORATION
NOTE A - ACCOUNTING POLICIES
Description of Business:
Intermagnetics General Corporation (the "Company") operates in two industry
segments: Magnetic Products and Refrigeration Products. The Magnetic Products
segment consists primarily of the manufacture and sale of superconductive
materials, magnets, permanent magnets and radio frequency coils used mainly
in Magnetic Resonance Imaging ("MRI") for medical diagnostics. The majority of
the Company's sales in this segment are to US and European customers. The
Refrigeration Products segment consists of cryogenic refrigeration equipment
produced by two subsidiaries, APD Cryogenics Inc. and IGC Polycold Systems Inc.,
and refrigerants which are sold by another subsidiary, InterCool Energy
Corporation. Cryogenic refrigeration equipment is used in the vacuum deposition
industry, the semiconductor manufacturing process, MRI, and in a variety of
research applications. Refrigerants consist of a family of environmentally
friendly refrigerants designed to replace recently banned CFC refrigerants.
Sales of this segment are primarily to US and European customers. The Company
operates on a 52/53 week year ending the last Sunday during the month of May.
See Notes J and K for additional information regarding financial information by
segment and sales to principal customers.
Basis of Presentation:
The Company is presenting its consolidated statements of income in a multi-step
format and, accordingly, certain reclassifications of prior year amounts have
been made to conform to this presentation.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions have been eliminated
in consolidation. The Company's 45% investment in ALSTOM Intermagnetics, 23%
investment in Surrey Medical Imaging Systems Limited ("SMIS"), and 21%
investment in KryoTech, Inc. ("KryoTech") are accounted for using the equity
method of accounting.
41
<PAGE>
Cash Flows:
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Short-term investments ($68,000 at May 31, 1998 and $5,974,000 at May 25, 1997)
consist primarily of US Government and Agency obligations, commercial paper, and
other corporate obligations and are stated at market. The Company considers
these short-term investments to be cash equivalents for purposes of the
Consolidated Statements of Cash Flows.
Sales:
Sales are generally recognized as of the date of shipment or in accordance with
customer agreements.
Sales to the United States Government or its contractors under cost
reimbursement contracts are recorded as costs are incurred and include estimated
earned profits.
Sales of products involving long-term production periods and manufactured to
customer specifications are generally recognized by the percentage-of-completion
method, by multiplying the total contract price by the percentage that incurred
costs to date bear to estimated total job costs, except when material costs are
substantially incurred at the beginning of a contract, in which case material
costs are charged to the contract as they are placed into production. At the
time a loss on a contract is indicated, the Company accrues the entire amount of
the estimated ultimate loss.
The Company accrues for possible future claims arising under terms of various
warranties made in connection with the sale of products.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market
value.
Property, Plant and Equipment:
Land and improvements, buildings and improvements, machinery and equipment and
leasehold improvements are recorded at cost. Provisions for depreciation are
computed using straight-line and accelerated methods in a manner that is
intended to amortize the cost of such assets over their estimated useful lives.
42
<PAGE>
Leasehold improvements are amortized on a straight-line basis over the remaining
initial term of the lease. For financial reporting purposes, the Company
provides for depreciation of property, plant and equipment over the following
estimated useful lives:
Land improvements 25 years
Buildings and improvements 7 - 40 years
Machinery and equipment 3 - 15 years
Leasehold improvements 2 - 15 years
Investments:
Certain investments are categorized as available for sale securities in
accordance with Statement of Financial Accounting Standards ("SFAS") 115,
"Accounting for Certain Investments in Debt and Equity Securities". Available
for sale securities are reported at fair value, with unrealized gains and losses
included in shareholders' equity.
A decline in the market value of any available for sale security below cost that
is deemed other than temporary is charged to earnings, resulting in the
establishment of a new cost basis for the security.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities classified as available for sale are included in earnings
and are derived using the specific identification method for determining the
cost of securities sold.
Income Taxes:
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
43
<PAGE>
Foreign Currency Translation:
Foreign currency translation adjustments arise from conversion of the Company's
foreign subsidiary's financial statements to US currency for reporting purposes,
and are reflected in shareholders' equity in the accompanying consolidated
balance sheets. Realized foreign currency transaction gains and losses are
included in interest and other expense in the accompanying consolidated
statements of income.
Pension Plan:
The Company has a pension plan covering all eligible employees. Prior service
costs are amortized over a period of 30 years. It is the policy of the Company
to fund pension costs accrued on an annual basis.
Excess of Cost Over Net Assets Acquired:
Excess of cost over the fair value of net assets acquired in acquisitions is
being amortized on a straight-line basis over 15 years. The Company periodically
assesses recoverability, and impairments would be recognized in operating
results if a permanent diminution in value were to occur.
Impairment of Long-Lived Assets:
Long-lived assets, including intangible assets, used in the Company's operations
are reviewed for impairment when circumstances indicate that the carrying amount
of an asset may not be recoverable. The primary indicators of recoverability are
the associated current and forecasted undiscounted operating cash flows.
Stock-Based Compensation:
The intrinsic value method of accounting is used for stock-based compensation
plans. Under the intrinsic value method, compensation cost is measured as the
excess, if any, of the quoted market price of the stock at the grant date over
the amount an employee must pay to acquire the stock.
44
<PAGE>
Use of Estimates:
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, and the disclosure of
contingent assets and liabilities, to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Per Share Amounts:
During the year ended May 31, 1998, the Company adopted the provisions of SFAS
No. 128, "Earnings Per Share". SFAS No. 128 establishes standards for computing
and presenting "Earnings Per Share" ("EPS"). SFAS No. 128 supersedes Accounting
Principles Board Opinion No. 15, "Earnings Per Share" and related
interpretations. SFAS No. 128 requires dual presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital
structures and specifies additional disclosure requirements.
Basic EPS excludes dilution and is computed by dividing income available to
common shareholders by the weighted average number of Common Shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue Common Stock were exercised or converted
into Common Stock or resulted in the issuance of Common Stock that then shared
in the earnings of the entity (such as stock options). All prior-period EPS data
have been restated to conform to the provisions of SFAS No. 128.
New Accounting Pronouncements:
In June, 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
130, "Reporting Comprehensive Income". SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed in
equal prominence with the other financial statements.
SFAS 130 is effective for fiscal years beginning after December 15, 1997.
Comparative financial statements provided for earlier periods are required to be
reclassified to reflect the provisions of this Statement. The Company will
comply with the reporting requirements of SFAS 130 beginning with the quarter
ending August 30, 1998.
45
<PAGE>
In June, 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131 establishes standards for the way
public business enterprises are to report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. SFAS 131 focuses on a "management approach" concept as the basis
for identifying reportable segments. The management approach is based on the way
that management organizes the segments within the enterprise for making
operating decisions and assessing performance.
SFAS 131 is effective for fiscal years beginning after December 15, 1997. The
Company will comply with the reporting requirements of SFAS 131 for the fiscal
year ending May 30, 1999. Management anticipates that the effect of the adoption
of SFAS 131 will not significantly impact the current presentation of the
Company's segment disclosure as the current reportable segments are consistent
with the "management approach" methodology outlined in SFAS 131.
In February, 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS 132 revises employers'
disclosures about pension and other postretirement benefit plans, but does not
change the measurement or recognition of those plans. SFAS 132 is effective for
fiscal years beginning after December 15, 1997. The Company will comply with the
reporting requirements of SFAS 132 for the fiscal year ending May 30, 1999.
In March, 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that certain
costs related to the development or purchase of internal-use software be
capitalized and amortized over the estimated useful life of the software. SOP
98-1 also requires that costs related to the preliminary project stage and
post-implementation/operations stage of an internal-use computer software
development project be expensed as incurred. SOP 98-1 is effective for fiscal
years beginning after December 15, 1998. The Company will comply with the
reporting requirements of SOP 98-1 for the fiscal year ending May 28, 2000.
Management anticipates that the effect of adoption of SOP 98-1 will not have a
material effect on the Company's consolidated financial statements.
In March, 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up
Activities." SOP 98-5 requires the expensing of certain costs such as
pre-operating expenses and organizational costs associated with a company's
46
<PAGE>
start-up activities. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The effect of adoption is required to be accounted for as a
cumulative change in accounting principle. The Company will comply with the
reporting requirements of SOP 98-5 for the fiscal year ending May 30, 1999.
Management anticipates that the effect of adoption of SOP 98-5 will not have a
material effect on the Company's consolidated financial statements.
In June, 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Management is
currently evaluating the impact of SFAS 133 on the Company's consolidated
financial statements.
NOTE B - ACQUISITIONS
On November 24, 1997, the Company issued a note for, and on March 11, 1998, paid
$3,115,000 in cash, net of cash acquired, and issued 281,568 shares of Common
Stock, valued at $8.879 per share, and 69,992 shares of Series A Preferred
Stock, valued at $100 per share, for all of the outstanding shares of Polycold
Systems International, Inc. ("Polycold") Common Stock.
The acquisition has been accounted for using the purchase method of accounting,
and the results of operations of Polycold have been included in the consolidated
financial statements since November 24, 1997, the date of acquisition. The
excess of cost over the fair value of net assets acquired of approximately
$10,175,000 is being amortized on a straight-line basis over 15 years.
On March 11, 1997, the Company paid $4,139,000 in cash, net of cash acquired,
and issued 678,517 shares of Common Stock, valued at $10.573 per share,
including 474,895 shares of Treasury Stock, for all of the outstanding shares of
Medical Advances, Inc. ("MAI") Common Stock. The acquisition agreement provides
for the issuance of up to 101,777 additional shares as part of the purchase
price if the average of the Company's closing price on the American Stock
Exchange during the ninety calendar day period following the release of earnings
for fiscal 1997 is less than $11.053. During fiscal 1998 this contingency was
resolved and the Company issued 31,082 additional Common Shares.
47
<PAGE>
The acquisition has been accounted for using the purchase method of accounting,
and the results of operations of MAI have been included in the consolidated
financial statements since March 11, 1997, the date of acquisition. The excess
of cost over the fair value of net assets acquired of approximately $9,700,000
is being amortized on a straight-line basis over 15 years.
The following unaudited pro forma information presents a summary of consolidated
results of operations of the Company, Polycold and MAI as if the acquisitions
had occurred at the beginning of fiscal year 1997, with pro forma adjustments to
give effect to amortization of the excess of cost over the fair value of net
assets acquired and interest income on short-term investments, together with
related income tax effects.
(Dollars in Thousands, Except Per Share Amounts)
Fiscal Year Ended
----------------------------------------
May 31, 1998 May 25, 1997
------------ ------------
Total revenue $107,518 $110,722
Net income 2,900 3,687
Earnings per Common Share:
Basic .22 .28
Diluted .21 .26
Total amortization of excess of cost over the fair value of net assets acquired
for the fiscal years ended May 31, 1998, May 25, 1997, and May 26, 1996 amounted
to $997,000, $169,000, and $0, respectively.
NOTE C - INVESTMENTS AND NOTES RECEIVABLE
Available for Sale Securities:
As of May 31, 1998 and May 25, 1997, the Company owned 975,753 shares
(approximately 9%) of the common stock of Ultralife Batteries, Inc.
("Ultralife"), a manufacturer of lithium batteries, acquired at a cost of
$7,015,000. The market value of the Company's total investment in Ultralife, the
sale of which is restricted under US Securities laws, was $11,221,000 and
$10,123,000 at May 31, 1998 and May 25, 1997, respectively. The cost and market
value of "Available for Sale" securities, representing those shares saleable
under Securities laws, were as shown below:
May 31, 1998 May 25, 1997
------------ ------------
Cost $2,154,000 $2,154,000
Gross unrealized holding gain 1,296,000 958,000
--------- ----------
Market value $3,450,000 $3,112,000
========== ==========
48
<PAGE>
During fiscal 1996, the Company sold 85,000 shares, with proceeds from the sale
totaling $1,927,000, resulting in a pretax gain of $1,414,000. The cost of the
securities sold was based on specific identification of the securities held at
the time of sale. There were no such sales in fiscal 1998 and 1997.
The balance of the Ultralife investment is included at cost in other
investments.
Other Investments:
Investments in other securities at May 31, 1998 and May 25, 1997 consist of:
(Dollars in Thousands)
1998 1997
------- -------
Ultralife 4,861 4,861
KryoTech 4,710
Other 317 125
------- -------
$ 9,888 $ 4,986
======= =======
On March 23, 1998, the Company acquired 1,172,840 shares of the Series B
Convertible Preferred Stock, $.01 par value per share, of KryoTech, a
privately-held, South Carolina corporation, and a warrant to purchase an
additional 237,416 shares, at a cost of $4,750,000. The warrant may be
exercised, in whole or in part, at any time on or before March 23, 2008 at a
price equal to $1.053 per share. On an as-converted basis, the Company's
holdings represent approximately 20.7% of the outstanding voting securities, on
a fully diluted basis, of KryoTech.
KryoTech was formed on March 15, 1996 for the purpose of developing, marketing,
manufacturing and selling thermal management products, which are designed
specifically for the computer industry. The Preferred shares have the same
voting rights as Common Stock. Accordingly, the Company is accounting for its
investment in KryoTech using the equity method of accounting. The acquisition
cost exceeded the underlying equity in net assets by $3,645,000, which is being
amortized over a period of 15 years. At May 31, 1998, accumulated amortization
was $40,000. As KryoTech is privately held, the market value of this investment
is not readily determinable.
49
<PAGE>
Investment and Advances - SMIS:
As of May 31, 1998 and May 25, 1997 the Company owned 354,223 ordinary shares
(approximately 23%) of SMIS acquired at a cost of $3,530,000. SMIS is a European
company engaged in the manufacture and sale of electronics and software for
magnetic resonance imaging and nuclear magnetic resonance spectroscopy
applications. The Company is accounting for its investment in SMIS under the
equity method of accounting. The acquisition cost exceeded the underlying equity
in the net assets by $3,298,000, which is being amortized over a
period of 40 years. At May 31, 1998 and May 25, 1997, accumulated amortization
was $247,000 and $164,000, respectively. As SMIS is privately held, the market
value of this investment is not readily determinable.
In addition, the Company purchased 980,000 SMIS redeemable preference shares
during the year ended May 26, 1996 at a cost of $1,511,000. These shares are
non-voting unless SMIS is unable to attain certain specified financial targets
and are redeemable on the earlier of October 31, 1997 or the date of a public
offering; however, SMIS did not redeem them on their due date. The shares carry
a cumulative redemption premium of 15% per annum. The purchase of the preference
shares included the acquisition of an option to purchase 2.5% of SMIS' Common
Stock at a price of approximately $6 per share.
During the year ended May 25, 1997, the Company provided $972,000 of additional
funding in the form of convertible notes to SMIS. The notes were non-interest
bearing until February 27, 1998; thereafter, they bear interest at the rate of
15% per annum. They are immediately repayable, with accrued interest, in the
event of certain conditions as outlined in the note agreement and are redeemable
by SMIS at any time. The noteholders may require redemption at any time after
February 26, 1998. The noteholders have the right at any time prior to
redemption, to convert the notes plus accrued interest into capital stock of
SMIS.
During the year ended May 31, 1998, the Company provided 900,000 British Pounds
Sterling ("Pounds") (approximately $1,479,000) of additional loans to SMIS, net
of amounts repaid during the year. These loans bear interest at 11% per annum
and are due on December 31, 1998. Subsequent to December 31, 1998, if the loans
are not repaid, the Company has the right to tender the loans to SMIS in
exchange for 1% of the "enlarged equity" of SMIS for each 100,000 Pounds
(approximately $164,000) of loans tendered. The "enlarged equity" equals the
shares outstanding prior to the tender plus those issued as a result of the
tender. The amount of loans available for tender is equal to approximately
900,000 Pounds (approximately $1,504,000) at May 31, 1998.
50
<PAGE>
During the year ended May 31, 1998, SMIS obtained line of credit financing in
the amount of 2,500,000 Pounds (approximately $4,177,000). The Company has
guaranteed repayment of one half of the outstanding balance, up to 1,250,000
Pounds (approximately $2,088,500), in the event of default by SMIS. As of May
31, 1998, SMIS has drawn approximately 1,880,000 Pounds (approximately
$3,141,000) against the line.
Following is selected financial information with respect to SMIS, contained in
its internal financial statements as of April 30, 1998 and October 31, 1997
and for the six months and fiscal year then ended, respectively:
(Dollars in Thousands) April 30, October 31,
1998 1997
---------------- -------------
Current assets $5,265 $4,060
Non-current assets 446 576
Current liabilities 5,395 5,040
Non-current liabilities 3,025 2,746
Redeemable Preferred Stock 5,497 5,508
Fiscal Year
Six Months Ended Ended October
April 30, 1998 31, 1997
---------------- -------------
Net sales $1,995 $6,153
Gross margin 652 2,062
Loss from continuing operations 1,496 3,576
Net loss 1,496 3,576
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT
The Company has an unsecured line of credit of $25,000,000, which expires in
November 2000, none of which was in use on May 31, 1998. The Company may elect
51
<PAGE>
to apply interest rates to borrowings under the line which relate to either the
London Interbank Offered Rate (LIBOR) or prime, whichever is the most favorable.
Long-term debt consists of the following:
(Dollars in Thousands) May 31, May 25,
1998 1997
------- -------
Revenue bonds $ 1,650 $ 1,725
Mortgage payable 5,830 6,014
Convertible debentures 21,625 21,625
------- -------
29,105 29,364
Less current portion 272 259
------- -------
Long-term debt $28,833 $29,105
======= =======
Revenue bonds consist of a subsidiary's obligation under an agreement with an
Economic Development Authority with respect to revenue bonds issued in
connection with the acquisition of certain land, building and equipment acquired
at a total cost of $2,408,000. The bonds bear interest at a weekly adjustable
annual rate (convertible to fixed rate at the option of the Company) which
averaged 4.04% for the year ended May 31, 1998 (3.88% for the year ended May 25,
1997). The bonds mature serially in amounts ranging from $100,000 in December,
1998 to $200,000 in December, 2009. In the event of default or upon the
occurrence of certain conditions, the bonds are subject to mandatory redemption
at prices ranging from 100% to 103% of face value. As long as the interest rate
on the bonds is adjustable weekly, the bonds are redeemable at the option of the
Company at face value. The Company makes monthly advance payments to restricted
cash accounts in amounts sufficient to meet the interest and principal payments
on the bonds when due. The balances of these accounts, included in "Cash and
Short-Term Investments" on the accompanying Consolidated Balance Sheets, were
$51,000 at May 31, 1998 and $32,000 at May 25, 1997.
The mortgage payable bears interest at the rate of 7.5% and is payable in
monthly installments of $52,000, including principal and interest, through April
2001 with a final payment of $5,155,000 due in May 2001. The loan is secured by
land and buildings and certain equipment acquired at a cost of approximately
$10,800,000.
Convertible debentures at May 31, 1998 consist of $21,625,000 of 5.75%
convertible subordinated debentures due September, 2003, issued in a private
placement. The debentures are convertible into Common Stock at approximately
$14.272 per share. Interest on the debentures is payable semi-annually. The
debentures are redeemable, in whole or in part, at the option of the Company at
any time at prices ranging from 103.450% to 100.575%. The debentures also
52
<PAGE>
provide for redemption at the option of the holder upon a change in control of
the Company, as defined, and are subordinated to senior indebtedness, as
defined.
Aggregate maturities of long-term debt for the next five fiscal years are: 1999
- - $272,000; 2000 - $312,000; 2001 - $5,521,000; 2002 - $100,000; and 2003 -
$125,000.
Interest paid for the years ended May 31, 1998, May 25, 1997, and May 26, 1996
amounted to $1,910,000, $1,800,000, and $2,214,000, respectively.
NOTE E - SHAREHOLDERS' EQUITY
In July, 1998, the Company declared a 2% stock dividend to be distributed on all
outstanding shares, except Treasury Stock, on September 17, 1998. The
consolidated financial statements have been adjusted retroactively to reflect
this stock dividend in all numbers of shares, prices per share and earnings per
share.
The Company has established two stock option plans: the 1981 Stock Option Plan
and the 1990 Stock Option Plan. Shares and prices per share have been adjusted
to reflect the 2% stock dividends declared in July, 1998, July, 1997 and May,
1996, respectively. The total shares authorized for grant under the 1981 and
1990 plans are 1,492,996 and 2,634,207, respectively.
53
<PAGE>
Option activity under these plans was as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------------------------------------
May 31, 1998 May 25, 1997 May 26, 1996
------------------------------ ------------------------------- -------------------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
--------- ----- --------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year 1,687,977 $ 9.319 1,552,307 $ 8.656 1,553,157 $ 7.405
Granted 353,485 9.567 365,221 10.785 222,870 14.505
Exercised (132,214) 5.684 (133,024) 5.124 (217,778) 5.758
Forfeited (106,544) 11.953 (96,527) 9.993 (5,942) 7.161
---------- ---------- ------------
Outstanding,
end of year 1,802,704 9.477 1,687,977 9.319 1,552,307 8.656
========= ========= =========
Exercisable,
end of year 1,060,485 $ 8.648 870,331 $ 7.842 690,026 $ 6.684
========= ========== ==========
May 31, 1998
------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
---------------------------------------------------- ----------------------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Range of Option Exercise Number Exercise Contractual Number Exercise
Prices Outstanding Price Life Exercisable Price
---------------- ---------------- ------------------ ------------------- --------------
$3.265 to $6.553 552,972 $ 4.956 3.9 years 496,682 $ 4.823
$7.779 to $10.813 523,528 9.298 7.0 years 144,962 9.791
$11.253 to $13.127 493,754 11.727 4.4 years 297,002 11.571
$13.428 to $20.142 232,450 15.859 5.6 years 121,839 15.752
--------- ----------
1,802,704 $ 9.477 5.1 years 1,060,485 $ 8.648
========= =========
</TABLE>
The Company uses the intrinsic value based method of accounting for stock-based
compensation, under which compensation cost is measured as the excess, if any,
of the quoted market price of the stock at the grant date over the amount an
employee must pay to acquire the stock. Since the exercise price of stock
options granted under the 1981 and 1990 Stock Option Plans is not less than the
market price of the underlying stock on the date of grant, no compensation cost
has been recognized for such grants.
54
<PAGE>
The following pro forma net income and earnings per share information has been
determined as if the Company had accounted for stock-based compensation awarded
under the 1990 Stock Option Plan using the fair value-based method. Under the
fair value method, the estimated fair value of awards would be charged against
income ratably by installments over the vesting period. The pro forma effect on
net income for fiscal years 1998, 1997 and 1996 is not representative of the pro
forma effect on net income in future years because, as required by SFAS 123,
"Accounting for Stock Based Compensation", no consideration has been given to
awards granted prior to fiscal 1996.
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------- -- --------------------------- -- ---------------------------
May 31, 1998 May 25, 1997 May 26, 1996
-------------------------- --------------------------- ---------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net income $2,753 $1,816 $2,615 $1,886 $4,427 $4,311
Earnings per Common
Sshare:
Basic .22 .14 .21 .15 .37 .36
Diluted .21 .14 .20 .15 .35 .34
</TABLE>
The weighted average fair value of each option granted under the 1981 and 1990
Stock Option Plans during fiscal years 1998, 1997 and 1996 was $5.446, $6,550
and $10.333, respectively. The fair value of each option grant was estimated on
the date of grant using the Black-Scholes Model with the following weighted
average assumptions. The risk-free interest rates for fiscal years 1998, 1997
and 1996 were 5.9%, 6.3% and 6.6%, respectively. The expected volatility of the
market price of the Company's Common Stock for fiscal years 1998, 1997 and 1996
grants was 55.3%, 58.4% and 56.8%, respectively. The expected average term of
the granted options for fiscal years 1998, 1997 and 1996 was 5.9 years, 6.4
years and 6.2 years, respectively. There was no expected dividend yield for the
options granted for fiscal years 1998, 1997 and 1996.
Following are the shares of Common Stock reserved for issuance and the related
exercise prices for the outstanding stock options, convertible subordinated
debentures, Preferred Stock, and Warrants at May 31, 1998:
55
<PAGE>
<TABLE>
<CAPTION>
Number Exercise Price
of Shares Per Share .
--------- -----------
<S> <C> <C>
1981 Stock Option Plan 48,233 $3.265 to $4.605
1990 Stock Option Plan 1,754,471 $4.103 to $20.142
Convertible subordinated debentures 1,515,207 $14.272
Preferred Stock 800,000
Warrants 1,200,000
---------
Shares reserved for issuance 5,317,911
=========
</TABLE>
In June 1997, the Company, as part of a long-term strategic alliance, entered
into a Warrant Agreement with a distributor under which the distributor could
purchase up to 1,200,000 shares of Common Stock. The distributor paid $120,000
for the rights to the warrants and an initial warrant (which expires on November
16, 1998) to purchase 500,000 shares at $12.50 per share was issued. Future
warrants are conditioned on the distributor meeting specified performance levels
and would be issued at market prices at that time. In connection with the
initial warrant, the Company incurred a non-cash charge of $600,000 in fiscal
1998 which was included as marketing, general and administrative expense in the
accompanying consolidated statement of income.
During the year ended May 31, 1998, the Company issued 69,992 shares of Series A
Preferred Stock, valued at $100 per share, in connection with its acquisition of
Polycold. These shares are redeemable, at the option of the Company, at any
time, for cash of $100 per share, or after the first anniversary of their
issuance, for Common Stock valued at $100 per share. In the event the shares
have not been redeemed by November 30, 1999, or upon the occurrence of certain
change of control events, they will automatically convert to Common Stock. The
price of Common Stock used for redemption or conversion is based on the average
trading price for a specified ten-day period preceding the redemption or
conversion.
The Series A Preferred Stock issued by the Company is non-voting, and has no
dividend or liquidation preference, but is entitled to participate in any cash
dividend or liquidation distribution, on an "as converted" basis, with the
Company's Common Stock.
During the year ended May 31, 1998, the Company issued 89,018 shares of Treasury
Stock at fair market value in connection with the purchase of inventory from a
supplier. In addition, in connection with the grant of a stock option to
consultants, the Company recognized compensation cost of $24,000.
56
<PAGE>
NOTE F - RETIREMENT PLANS
The Company has a non-contributory, defined benefit plan covering all eligible
employees. Benefits under the plan are based on years of service and employees'
career average compensation. The Company's funding policy is to contribute
annually an amount sufficient to meet or exceed the minimum funding standard
contained in the Internal Revenue Code. Contributions are intended to provide
not only for benefits attributable to service to date, but also for those
expected to be earned in the future.
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheets at May 31, 1998 and May 25, 1997:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1998 1997
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of $7,096 and $4,949
as of May 31, 1998 and May 25, 1997,
respectively $ (7,325) $ (5,125)
======== ========
Projected benefit obligation for service rendered to date $ (9,399) $ (7,065)
Plan assets (consisting of common stock, US Government and
corporate debt obligations and money funds), at fair value 9,583 7,114
--------- ---------
Plan assets in excess of (less than) projected benefit obligation 184 49
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (1,454) (506)
Prior service cost not yet recognized in net periodic pension cost 649 73
Unrecognized net transition obligation 28 34
--------- ---------
Accrued pension cost included in salaries, wages and related items $ (593) $ (350)
========= =========
</TABLE>
The increase in unrecognized prior service cost at May 31, 1998 in the foregoing
table was due to an update of earnings used for benefit calculations. This
update sets the career average earnings for participants with service dates
prior to 1990 at their average earnings for the period from December 1, 1990
through November 30, 1995.
<TABLE>
<CAPTION>
Net pension cost includes the following components:
Fiscal Year Ended
------------------------------------------
May 31, May 25, May 26,
(Dollars in Thousands) 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 590 $ 495 $ 468
Interest cost on projected benefit obligation 571 453 410
Actual return on plan assets (2,370) (474) (398)
Net amortization and deferral 1,850 15 15
------- ------- -------
Net pension cost $ 641 $ 489 $ 495
======= ======= =======
</TABLE>
57
<PAGE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.0% in the fiscal year ended May
31, 1998, 7.5% in the fiscal year ended May 25, 1997, and 8.0% in the fiscal
year ended May 26, 1996. The rate of increase in future compensation levels used
in determining the aforementioned obligation was 4.5% in the fiscal years ended
May 31, 1998 and May 25, 1997, and 6.0% for May 26, 1996. The expected long-term
rate of return on plan assets in the fiscal years ended May 31, 1998, May 25,
1997 and May 26, 1996, was 8.0%.
The Company also maintains an employee savings plan, covering substantially all
employees, under Section 401(k) of the Internal Revenue Code. Under this plan,
the Company matches a portion of employees' contributions. Expenses under the
plan during the fiscal years ended May 31, 1998, May 25, 1997 and May 26, 1996
aggregated $350,000, $277,000 and $249,000, respectively.
The Company maintains supplemental retirement and disability plans for certain
of its executive officers. These plans utilize life insurance contracts for
funding purposes. Expenses under these plans were $67,000, $22,000 and $37,000
for the fiscal years ended May 31, 1998, May 25, 1997 and May 26, 1996,
respectively.
NOTE G - INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) Fiscal Year Ended
------------------------------------------------------------------------
May 31, 1998 May 25, 1997 May 26, 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Current
Federal $ 2,487 $ 1,513 $ 2,356
State 352 280 448
Foreign 180 216 184
------- ------- -------
Total current 3,019 2,009 2,988
Deferred
Federal (920) (527) (477)
State (108) (62) (56)
------- ------- -------
Total deferred (1,028) (589) (533)
------- ------- -------
Provision for income taxes $ 1,991 $ 1,420 $ 2,455
======= ======= =======
</TABLE>
58
<PAGE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
May 31, 1998 May 25, 1997
------------ ------------
Deferred tax assets:
<S> <C> <C>
Inventory reserves $2,264 $2,056
Non-deductible accruals 1,161 576
Product warranty reserve 431 388
Foreign subsidiaries 317 317
Equity in net loss of unconsolidated
affiliate 736 353
------ ------
Total gross deferred tax assets 4,909 3,690
Less valuation allowance (604) (834)
------ ------
Deferred tax assets 4,305 2,856
Deferred tax liabilities:
Unrealized gain on available for sale securities (446) (345)
Depreciation differences (446) (294)
Other, net (155) (9)
------ ------
Total gross deferred tax liabilities (1,047) (648)
------ ------
Net deferred tax assets $3,258 $2,208
====== ======
</TABLE>
The foregoing assets and liabilities are classified in the accompanying
consolidated balance sheets as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
May 31, 1998 May 25, 1997
------------ ------------
<S> <C> <C>
Net current deferred tax assets $3,583 $2,453
Net long-term deferred tax liabilities 325 245
------ ------
$3,258 $2,208
====== ======
</TABLE>
During fiscal 1998, in connection with the acquisition of Polycold, the Company
recorded $123,000 of deferred tax assets. During fiscal 1997, in connection with
the acquisition of MAI, the Company recorded $75,000 of deferred tax assets.
The Company reduced the valuation allowance based on recent levels of taxable
income and reasonable and prudent tax planning strategies. Changes made to the
valuation allowance during fiscal 1998 and 1997 were $230,000 and $0,
respectively.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
59
<PAGE>
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. The Company had Federal taxable income of approximately $7,000,000
in fiscal 1998, $3,700,000 in fiscal 1997, and $5,600,000 in fiscal 1996. Based
upon the level of historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced.
The reasons for the differences between the provision for income taxes and the
amount of income tax determined by applying the applicable statutory Federal tax
rate to income before income taxes are as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) Fiscal Year Ended
------------------------------------------------------------------
May 31, 1998 May 25, 1997 May 26, 1996
-------------------- ------------------- -------------------
<S> <C> <C> <C>
Pre-tax income at statutory tax rate (34%) $ 1,613 $ 1,372 $ 2,340
State taxes, net of Federal benefit 161 200 259
Benefit of Foreign Sales Corporation (288) (186) (172)
Non-deductible distribution expense 204
Amortization of intangibles 392 110 42
Non-deductible loss on IMiG LLC 36 151
Benefit of tax credits (257)
Change in valuation allowance (230)
Other, net 103 30 (14)
------- ------- -------
Provision for income taxes $ 1,991 $ 1,420 $ 2,455
======= ======= =======
</TABLE>
The Company paid income taxes, net of cash refunds received, of $1,815,000,
$1,347,000, and $1,153,000 during the years ended May 31, 1998, May 25, 1997,
and May 26, 1996, respectively.
60
<PAGE>
NOTE H - PER SHARE INFORMATION
The following table provides calculations of basic and diluted earnings per
share:
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------- --------------------------- ----- ------ --------
May 31, 1998 May 25, 1997 May 26, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Income available to
common stockholders $ 2,753 $ 2,615 $ 4,427
=========== =========== ===========
Weighted average shares 12,755,733 12,325,001 11,976,697
Dilutive potential Common
Shares:
Convertible Preferred Stock 325,925
Stock options 323,519 468,935 843,159
----------- ----------- -----------
Adjusted weighted average
shares 13,405,177 12,793,936 12,819,856
=========== =========== ===========
Earnings per Common Share:
Basic $ 0.22 $ 0.21 $ 0.37
=========== =========== ===========
Diluted $ 0.21 $ 0.20 $ 0.35
=========== =========== ===========
</TABLE>
Shares issuable upon conversion of warrants to purchase 500,000 Common Shares
and shares issuable upon conversion of convertible debentures are considered in
calculating "diluted" earnings per share, but have been excluded, as the effect
would be anti-dilutive.
The Company declared a 2% stock dividend on July 21, 1998 to be distributed to
shareholders on September 17, 1998. The Company distributed a 2% stock dividend
to shareholders on September 16, 1997 and August 22, 1996. All data with respect
to earnings per share, weighted average shares outstanding and common stock
equivalents have been adjusted to reflect these stock dividends.
NOTE I - COMMITMENTS
The Company leases certain manufacturing facilities and equipment under
operating lease agreements expiring at various dates through January, 2003.
Certain of the leases provide for renewal options. Total rent expense was
$400,000 for the year ended May 31, 1998, $331,000 for the year ended May 25,
1997, and $266,000 for the year ended May 26, 1996.
61
<PAGE>
Future minimum rental commitments, excluding renewal options, under the
noncancellable leases covering certain manufacturing facilities and equipment
through the term of the lease are as follows:
Fiscal Year
-----------
1999 $ 696,000
2000 596,000
2001 504,000
2002 265,000
2003 42,000
----------
Total $2,103,000
==========
In addition to operating lease agreements, the Company also has a five-year
maintenance agreement for $113,000 per year beginning January 1, 1999 for a
newly implemented computer system.
At May 31, 1998, the Company's capital equipment commitments were approximately
$950,000.
NOTE J - INFORMATION BY INDUSTRY SEGMENT
Net sales by business segment represent sales to unaffiliated customers. No
significant transfers between segments have occurred. Income (loss) from
operations represents net sales less operating expenses.
Identifiable assets are those used specifically in each segment's operations.
Income of foreign subsidiaries, primarily in the Refrigeration Products segment,
amounted to $398,000, $565,000 and $171,000 in fiscal 1998, 1997 and 1996,
respectively.
62
<PAGE>
The Company's segment information is as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) Fiscal Year Ended
--------------------------------------------------------------------------------------------------------
May 31, 1998 May 25, 1997 May 26, 1996
------------------------------- ------------------------------- --------------------------------
Magnetic Refrigeration Magnetic Refrigeration Magnetic Refrigeration
Products Products Total Products Products Total Products Products Total
-------- -------- ----- -------- --------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Magnet systems $45,460 $45,460 $46,694 $46,694 $45,562 $45,562
Superconductive wire 11,131 11,131 10,698 10,698 19,822 19,822
R F Coils 10,746 10,746 1,981 1,981
Refrigeration products $28,557 28,557 $27,679 27,679 $23,083 23,083
--------- -------- -------- -------- --------- --------- -------- -------- --------
Total 67,337 28,557 95,894 59,373 27,679 87,052 65,384 23,083 88,467
Income (loss) from
operations 5,917 (403) 5,514 1,145 2,107 3,252 5,200 (498) 4,702
Net income (loss) 3,037 (284) 2,753 1,074 1,541 2,615 3,998 429 4,427
Identifiable assets 83,479 44,297 127,776 94,819 21,070 115,889 94,139 18,258 112,397
Depreciation and
amortization expense 4,862 562 5,424 3,441 523 3,964 2,736 429 3,165
Additions to property,
plant and equipment,
exclusive of acquisitions 2,721 425 3,146 4,564 882 5,446 3,623 456 4,079
</TABLE>
63
<PAGE>
NOTE K - PRINCIPAL CUSTOMERS AND EXPORT SALES
Sales to significant customers, substantially all of which were sales by the
Magnetic Products segment, during the last three fiscal years are as follows:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------- ---------------------------- ----------------------------
% of % of % of
Sales Sales Sales Sales Sales Sales
<S> <C> <C> <C> <C> <C> <C>
Customer A $42,751 44.6% $43,548 50.0% $38,971 44.1%
Customer B 10,408 10.8% 7,378 8.5% 15,634 17.7%
------- ---- ------- ---- ------- ----
Total $53,159 55.4% $50,926 58.5% $54,605 61.8%
======= ==== ======= ==== ======= ====
</TABLE>
The Company's net export sales for the fiscal years ended May 31, 1998, May 25,
1997, and May 26, 1996 totaled $57,266,000, $53,137,000 and $46,543,000,
respectively, substantially all of which were to European customers.
NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS 107, "Disclosures About Fair
Value of Financial Instruments". Although the estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies, the estimates presented are not necessarily
indicative of the amounts that the Company could realize in current market
exchanges.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments, receivables, and accounts payable: The carrying
amounts reported in the Consolidated Balance Sheets approximate their fair
values.
Available for sale securities and other investments: The fair value of the
Ultralife investment is estimated from market prices (see Note C). The fair
values of the SMIS and KryoTech investments are not readily determinable as the
companies are privately held.
The carrying value of long-term debt, including current portion, was
approximately $29,100,000 and $29,400,000 at May 31, 1998 and May 25, 1997,
64
<PAGE>
respectively, while the estimated fair value was $27,900,000 and $28,200,000,
respectively, based upon interest rates available to the Company for issuance of
similar debt with similar terms and remaining maturities.
NOTE M - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for fiscal 1998 and 1997 are as follows:
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Earnings Per
--------------------
Net Gross Net Basic Diluted
Sales Margin Income Share Share
----- ------ ------ ----- -------
<S> <C> <C> <C> <C> <C>
1998 Quarter Ended
August 24, 1997 $21,020 $8,048 $ 461 $ .04 $ .04
November 23, 1997 22,215 7,770 592 .05 .05
February 22, 1998 25,235 9,058 815 .06 .06
May 31, 1998 27,424 10,809 885 .07 .06
1997 Quarter Ended
August 25, 1996 $21,370 $6,429 $1,053 $ .09 $ .08
November 24, 1996 23,260 7,092 827 .07 .06
February 23, 1997 17,325 4,595 24 .00 .00
May 25, 1997 25,097 8,084 711 .06 .05
</TABLE>
65
<PAGE>
2. Schedule
INTERMAGNETICS GENERAL CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
-------------------------------
Balance at Charged to Charged to
Beginning Costs and Other Accounts- Deductions- Balance at
DESCRIPTION of Period Expenses Describe Describe End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended May 31, 1998
Deducted from asset accounts:
Allowance for doubtful accounts $ 302 $ 60 $ 88(2) $ 130(3) $ 350
30(7)
Reserve for inventory obsolescence 6,653 1,266 (9)(6) 1,087(5) 6,843
20(7)
Included in liability accounts:
Product warranty reserve 911 929 70(7) 649(1) 1,261
Contract adjustment reserve (4) 274 184 458
Upgrade Reserve (4) 60 60 60(8) 60
Year Ended May 25, 1997
Deducted from asset accounts:
Allowance for doubtful accounts $ 169 $ 92 $ 2(6) $ 1(3) $ 302
40(7)
Reserve for inventory obsolescence 5,225 1,465 1(6) 58(5) 6,653
20(7)
Included in liability accounts:
Product warranty reserve 1,100 724 29(7) 942(1) 911
Contract adjustment reserve (4) 234 81 41(2) 274
Upgrade Reserve (4) 0 8 60(7) 8(8) 60
Year Ended May 26, 1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 145 $ 30 $(4)(6) $ 2(3) $ 169
Reserve for inventory obsolescence 4,404 1,208 387(5) 5,225
Included in liability accounts:
Product warranty reserve 822 1,159 881(1) 1,100
Contract adjustment reserve (4) 149 85 234
</TABLE>
(1) Cost of warranty performed.
(2) Adjustments from accruals.
(3) Write-off uncollectible accounts.
(4) Classified in the Balance Sheet with other liabilities and accrued
expenses.
(5) Write-off or sale of obsolete inventory.
(6) Foreign currency translation.
(7) Balance at date of acquisition of subsidiary.
(8) Cost of upgrade work performed.
66
<PAGE>
3. Exhibits
Exhibit Index
Page Exhibit
3 Restated Certificate of Incorporation
4.1 Intermagnetics General Corporation Indenture dated as
of September 15, 1993
4.2 Second Amended and Restated Loan and Agency Agreement
dated as of October 23, 1997 among Corestates Bank,
N.A. and Intermagnetics General Corporation, APD
Cryogenics Inc., Magstream Corporation, Medical
Advances, Inc. and InterCool Energy Corporation
4.3 First Amendment dated as of May 18, 1998 to the
Second Amended and Restated Loan Agreement dated as
of October 23, 1997 among Corestates Bank, N.A. and
Intermagnetics General Corporation, APD Cryogenics
Inc., Magstream Corporation, Medical Advances, Inc.
and InterCool Energy Corporation
10.1 Employment Agreement dated April 20, 1998 between
Intermagnetics General Corporation and Carl H. Rosner
10.2 Employment Agreement dated April 1, 1997 between
Intermagnetics General Corporation and Glenn H.
Epstein
21 Subsidiaries of Intermagnetics General Corporation
23 Consent of KPMG Peat Marwick LLP with respect to the
Registration Statements Numbers 2-80041, 2-94701,
33-2517, 33-12762, 33-12763, 33-38145, 33-44693,
33-50598, 33-55092, 33-72160, 333-10553 and 333-42163
on Form S-8
67
<PAGE>
Exhibit 3
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERMAGNETICS GENERAL CORPORATION
Under Section 807 of the Business Corporation Law
We, the undersigned, Carl H. Rosner, Glenn H. Epstein, and Catherine E.
Arduini, being, respectively, the Chairman and Chief Executive Officer, the
President, and the Secretary of INTERMAGNETICS GENERAL CORPORATION
("Corporation"), pursuant to section 807 of the Business Corporation Law of the
State of New York, do hereby restate, certify and set forth:
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 in the office of the
Secretary of State, Albany, New York, on April 1, 1971.
4. The Certificate of Incorporation, as amended heretofore, is hereby
further amended to increase the number of authorized shares of common stock,
$.10 par value per share, from 20 million to 40 million, and to delete the
requirement that the Corporation's headquarters be maintained within the City of
Albany. To effect the foregoing amendment Article THIRD shall be deleted and in
its stead substituted a new Article THIRD which shall read as follows:
"The Corporation shall have the authority to issue 40 million
shares of common stock, par value $.10 per share."
and Article FIFTH shall be deleted in its entirety, and in its stead substituted
a new Article FIFTH which shall read as follows:
"The office of the Corporation is to be located in the
County of Albany and State of New York."
5. The stated capital of the Corporation is not changed as a result of
this amendment.
6. The text of the certificate of incorporation is hereby restated and
amended to read as herein set forth in full:
FIRST: The name of the Corporation is INTERMAGNETICS GENERAL
CORPORATION.
SECOND: The purposes for which it is to be formed are:
To manufacture, buy, sell, import, export, trade, and deal in
wire and wire products, other electrical conductors and
apparatus including electro magnetic devices and equipment and
electric and electronic components and all phases of cryogenic
equipment technology.
To manufacture, buy, sell, install, erect and generally deal
in and deal with conductors, insulators, insulating materials,
wires, coils, conduits, cables, fixtures, motors, instruments,
generators, meters, switches and all other equipment,
appurtenances, goods, and devices capable of being employed in
connection with the generation, control, storage,
distribution, transmission, and use of electricity; and to
manufacture, buy, sell, and deal in all materials
<PAGE>
used for or in connection with the manufacture of the articles
aforesaid, or which may be advantageously dealt in by the
Corporation in connection therewith.
To manufacture, make, buy, sell, exchange, install, repair,
service, supply, exploit, develop, protect, and generally
trade and deal in (as principal or agent) products, processes
and techniques of all kinds pertaining or related to or
connected with superconductivity, magnetics, electronics,
cryogenic and related industries, including without
limitation, equipment, parts and components for industrial and
military electronics, transistors, electrical components, and
all other conductors and superconductors of every kind and
description.
To acquire, by purchase, lease or otherwise, equip, maintain
and operate a general machine shop. To manufacture tools,
machinery, mechanical equipment, furnaces, cryogenic
equipment, motors and all things made wholly or partly from
metals. To do repairing, welding, brazing, soldering,
polishing, molding, canting, patternmaking, blacksmithing,
lacquering, enameling, metal stamping and cutting, electrical
work of all kinds. To engage in all kinds of mechanical and
manufacturing business.
To sell, manage, improve, assign, transfer, convey, lease,
sub-lease, pledge or otherwise alienate or dispose of, and to
mortgage or otherwise encumber the land, buildings, real
property, chattels, real and other property of this
Corporation, real and personal, and wheresoever situate, and
any and all legal and equitable rights therein. To acquire any
and all property necessary to effectuate the purposes of the
Corporation.
To borrow money, with or without pledge of or mortgage on all
or any of its property, real or personal, as security and to
loan and advance money upon mortgages on personal and real
property, or on either of them.
To do, or engage in, any other lawful act or activity for
which a corporation may be lawfully organized under the laws
of the State of New York, provided that the Corporation shall
not do, or engage in, any act or activity which requires the
consent or approval of any state official, department, board,
agency or other body, without such consent or approval first
being obtained.
To have, in furtherance of its corporate purposes, all the
powers conferred upon corporations formed under the Business
Corporation Law, subject to any limitations provided by the
laws of the State of New York or in the Certificate of
Incorporation.
THIRD: The Corporation shall have the authority to issue 40 million
shares of common stock, par value $.10 per share.
THIRD-A: The Corporation shall have the authority to issue 2 million
shares of preferred stock, par value $.10 per share.
The board of directors of the Corporation shall have the full authority
permitted by law, subject to any limitations and procedures of the
Business Corporation Law, to establish and designate one or more series
of the preferred stock and to fix for each series the number of shares
of the series, the designation thereof and full, limited, multiple,
fractional or no voting rights, and such other relative rights,
preferences and limitations of the shares of each such series as may be
desired.
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:
<PAGE>
(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
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
<PAGE>
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 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
<PAGE>
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.
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.
FOURTH: Board of Directors
(a) Number of Directors. The board of directors of the
Corporation shall consist of such number of directors as shall
be fixed from time to time by resolution of the board adopted
by a vote of a majority of the entire board. No change in the
size of the board shall shorten or otherwise affect the term
of any incumbent director.
(b) Classification of Directors. The board of directors shall
be divided into two classes, which shall be as nearly equal in
number as possible. Directors of each class shall serve for a
term of two years and until their successors shall have been
elected and qualified. Except as otherwise provided by law, if
the number of directors is changed, any increase or decrease
shall be apportioned among the classes as to maintain the
number of directors in
<PAGE>
each class as nearly equal as possible. The two initial
classes of directors shall be comprised as follows:
Class I shall be comprised of directors who shall
serve until the annual meeting of shareholders in
1989 and until their successors shall have been
elected and qualified.
Class II shall be comprised of directors who shall
serve until the annual meeting of shareholders in
1990 and until their successors shall have been
elected and qualified.
(c) Removal of Directors. Subject to the rights of the holders
of any class or series of preferred stock then outstanding,
any director or directors of the Corporation may be removed
from office only for cause and only by vote of the
shareholders.
(d) Election of Directors. In all elections of directors of
this Corporation, each shareholder shall be entitled to as
many votes as shall equal the number of votes which (except
for these provisions) he would be entitled to cast for the
election of directors with respect to his shares multiplied by
the number of directors to be elected, and he may cast all of
such votes for a single director or may distribute them among
the number to be voted for, or any two or more of them, as he
may see fit.
(e) By-laws. By-laws may be adopted, amended or repealed by
the board of directors to the full extent permitted by law.
(f) Definition. As used in this Article FOURTH, "entire board"
means the total number of directors that the Corporation would
have if there were no vacancies.
(g) Preferred Stock Provisions. Notwithstanding the foregoing
provisions of this Article FOURTH, whenever the holders of any
one or more classes or series of preferred stock issued by the
Corporation shall have the right, voting separately by class
or series, to elect directors at any annual or special meeting
of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be
governed by the terms of this certificate of incorporation
applicable thereto, and the directors so elected shall not be
divided into classes pursuant to this Article FOURTH unless
expressly provided by such terms.
FIFTH: The office of the Corporation is to be located in the County of
Albany and State of New York.
SIXTH: Qualifications of Directors
(a) Nominating Procedure. A person shall not be appointed or
elected a director of the Corporation unless the name of such
person, together with such consents and information concerning
present and prior occupations, transactions with the
Corporation or its subsidiaries and other matters as may at
the time be required by or pursuant to the by-laws, shall have
been filed with the Secretary of the Corporation no later than
a time fixed by or pursuant to the by-laws immediately
preceding the annual or special meeting at which such person
intends to be a candidate for director.
(b) Shareholdings. It shall not be necessary that a director
be a shareholder.
<PAGE>
SEVENTH: The Secretary of State is designated as agent of the
Corporation upon whom process against it may be served. The post office
address to which the Secretary of State shall mail a copy of any
process against the Corporation served upon it is P.O. Box 461, Latham,
New York 12110.
EIGHTH: Shareholder Approval of Certain Corporation Action
(a) Corporate Action Recommended by Management. Whenever any
corporate action, other than the election of directors, is to
be taken by vote of the shareholders on recommendation of the
affirmative vote of three-quarters or more of the entire
board, the proposed corporate action, including a Fundamental
Transaction, shall be authorized upon receiving the minimum
vote required for the authorization of such action by law,
after taking into account the express terms of any class or
series of shares of the Corporation with respect to such vote.
(b) Other Corporate Action. Except as provided in paragraph
(a) of this Article EIGHTH, whenever any corporate action,
other than the election of directors, is to be taken by vote
of the shareholders, the proposed corporate action, including
a Fundamental Transaction, shall be authorized only upon
receiving at least 66 2/3 of the votes entitled to be cast by
the holders of all then outstanding shares of Voting Stock
entitled to vote on such proposed corporate action, voting
together as a single class, and, in addition, the affirmative
vote of the number or proportion of shares of any class or
series of shares of the Corporation, if any, as shall at the
time be required by law or the express terms of any such class
or series of shares of the Corporation.
(c) Definitions. The following terms, as used in this Article
EIGHTH, shall have the meanings indicated:
(1) "Entire board" means the total number of directors that the
Corporation would have if there were no vacancies.
(2) "Fundamental Transaction: shall mean:
(i) any of the following, if such action is to be effected by
vote of the shareholders: amendment of this certificate of
incorporation; adoption, amendment or repeal of the by-laws;
or removal of one or more directors; or
(ii) any of the following, if any such transaction requires
the approval of the shareholders under the certificate of
incorporation of the Corporation as then in effect or the New
York Business Corporation Law as then in effect with respect
to the Corporation; the sale, lease, exchange or other
disposition of all or substantially all of the assets of the
Corporation; or a share exchange or merger, consolidation,
division, reorganization, recapitalization, dissolution,
liquidation or winding up of the Corporation.
(3) "Voting Stock" means all shares issued from time to time under
Articles THIRD and THIRD-A of this certificate of incorporation and
which by their terms may be voted generally in the election of
directors of the Corporation.
NINTH: No shareholder of this Corporation shall have a preemptive right
because of his shareholdings to have first offered to him any part of
any of the presently authorized shares of this Corporation hereafter
issued, optioned, or sold, or any part of any debenture, bonds, notes,
commercial paper, or securities of this Corporation convertible into
shares hereafter issued, optioned, or sold by the Corporation. This
provision shall operate to defeat rights in all shares bonds, notes or
securities of the Corporation which may be convertible into shares, and
also to defeat preemptive rights in any and all shares and classes of
shares and securities convertible into shares
<PAGE>
which this Corporation may be hereafter authorized to issue by any
amended certificate duly filed. Thus, any and all of the shares of this
Corporation presently authorized, and any and all debentures, bonds,
notes, commercial paper, or securities of this Corporation convertible
into shares and any and all of the shares of this Corporation which may
hereafter be authorized, may at any time be issued, optioned, and
contracted for sale, and/or sold and disposed of by direction of the
Board of Directors of this Corporation to such persons, and upon such
terms and conditions as may to the Board of Directors seem proper and
advisable, including offering the said shares of securities, or any
part thereof, to existing holders.
TENTH: The Corporation shall, to the fullest extent permitted by the
general laws of the State of New York now or hereafter in force,
indemnify any and all past, present and future directors and officers
of the Corporation and each designated representative from and against
any and all liabilities, including any and all judgments, fines,
penalties, punitive damages, excise taxes assessed with respect to an
employee benefit plan, amounts paid in settlement, costs and expenses
(including attorneys' fees) of any nature whatsoever, incurred at any
time in connection with any pending, threatened or completed action,
suit or proceeding (whether commenced by or in the right of the
Corporation, by a class of its security holders or otherwise) by reason
of the fact that such person is or was serving as a director, officer
or designated representative of the Corporation. Notwithstanding the
preceding sentence, the Corporation shall not indemnify any director,
officer or designated representative for any liability incurred in
connection with any action, suit or proceeding initiated by such person
unless the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the
directors in office. The rights granted by any provision of these
articles to a director, officer or designated representative shall not
be deemed exclusive of any other rights to which such person may be
entitled under any statute, by-law, agreement, resolution of
shareholders or directors or otherwise, shall continue as to a person
who has ceased to be a director, officer or designated representative
and shall inure to the benefit of the heirs, executors, administrators
and personal representatives of such person. The board of directors of
the Corporation may at any time adopt resolutions or by-laws, or
authorize the Corporation to enter into agreements, providing for
indemnification of any director, officer or designated representative
in accordance with this article, or in addition to the indemnification
provided herein. For purposes of this article, a "designated
representative" shall mean any person designated as an indemnified
representative by the board of directors of the Corporation (which may
include, but need not be limited to, any person serving at the request
of the Corporation as a director, officer, fiduciary or trustee of
another corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise). Each person who shall act
as a director, officer or designated representative of the Corporation
shall be deemed to be doing so in reliance upon the rights of
indemnification provided by this Article. All rights to indemnification
under this Article shall be deemed a contract between the Corporation
and each such director, officer or designated representative, pursuant
to which the Corporation and each such person intend to be legally
bound. Any repeal, amendment or modification hereof shall be
prospective only and shall not affect any rights or obligations then
existing.
ELEVENTH: (a) A director of the Corporation shall not be personally
liable to the Corporation or its shareholders for damages (including,
without limitation, any judgment, amount paid in settlement, fine,
penalty, punitive damages, excise tax assessed with respect to any
employee benefit plan, or expense of any nature (including, without
limitation, attorneys' fees and disbursements) for any breach of duty
in such capacity, except to the extent a judgment or other final
adjudication adverse to the director establishes that the director is
liable for:
(i) acts or omissions in bad faith or involving intentional
misconduct or a knowing violation of law;
<PAGE>
(ii) financial profit or other advantage personally gained by
such director to which such director was not legally entitled;
or
(iii) acts in violation of Section 719 of the New York
Business Corporation Law.
(b) An officer of this Corporation shall not be personally
liable to the Corporation or its shareholders for damages (including,
without limitation, any judgment, amount paid in settlement, fine,
penalty, punitive damages, excise tax assessed with respect to an
employee benefit plan, or expense of any nature (including, without
limitation, attorneys' fees and disbursements) for any breach of duty
in such capacity, except to the extent a judgment or other final
adjudication adverse to the officer establishes that the officer is
liable for:
(i) acts or omissions in bad faith or involving intentional
misconduct or a knowing violation of law; or
(ii) financial profit or other advantage personally gained by
such officer to which such officer was not legally entitled.
(c) Each person who serves as a director or officer of this Corporation
while this Article is in effect shall be deemed to be doing so in
reliance on the provisions of this Article, and neither the amendment
or repeal of this Article, nor the adoption of any provision of this
certificate of incorporation inconsistent with this Article, shall
apply to or have any effect on the liability or alleged liability of
any director or officer of this Corporation for or with respect to any
acts or omissions of such director of officer occurring prior to such
amendment, repeal or adoption of an inconsistent provision. The
provisions of this Article are cumulative and shall be in addition to
and independent of any and all other limitations on or eliminations of
the liabilities of directors or officers of this Corporation, as such,
whether such limitations or eliminations arise under or are created by
any statute, rule of law, by-law, agreement, vote of shareholders or
disinterested directors or otherwise.
7. The foregoing amendment of the increase in the authorized shares of
the Corporation and restatement of the Certificate of Incorporation was
authorized and approved by unanimous vote of the entire Board of
Directors of the Corporation on September 11, 1997, followed by a vote
of a majority of the Corporation's Shareholders on November 11, 1997.
The foregoing amendment of the location of the Corporation's
headquarters was authorized and approved by unanimous vote of the
entire Board of Directors of the Corporation on May 18, 1998.
IN WITNESS WHEREOF, we have each signed this Restated Certificate of
Incorporation this _____ day of June 1998, and we jointly and severally affirm
the statements contained herein as true under penalty of perjury.
/S/ Carl H. Rosner /S/ Glenn H. Epstein /S/ Catherine E. Arduini
- ---------------------- -------------------------- -----------------------
Carl H. Rosner Glenn H. Epstein Catherine E. Arduini
As: Chairman and Chief As: President As: Secretary
Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
INTERMAGNETICS GENERAL CORPORATION
TO
American Stock Transfer & Trust Company
Trustee
-------
--------------------
Indenture
Dated as of September 15, 1993
--------------------
$34,500,000
5.75% Convertible Subordinated Debentures Due 2003
- --------------------------------------------------------------------------------
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939
Trust Indenture Indenture
Acts Section Section
- --------------- ----------
Section 310(a)(1) .................................... 609
(a)(2) .................................... 609
(a)(3) .................................... Not
Applicable
(a)(4) .................................... Not
Applicable
(b) .................................... 608
610
Section 311(a) .................................... 613
(b) .................................... 613
Section 312(a) .................................... 701
702(a)
(b) .................................... 702(b)
(c) .................................... 702(c)
Section 313(a) .................................... 703(a)
(b) .................................... 703(a)
(c) .................................... 703(a)
(d) .................................... 703(b)
Section 314(a) .................................... 704
(b) .................................... Not
Applicable
(c)(1) .................................... 102
(c)(2) .................................... 102
(c)(3) .................................... Not
Applicable
(d) .................................... Not
Applicable
(e) .................................... 102
Section 315(a) .................................... 601
(b) .................................... 602
(c) .................................... 601
(d) .................................... 601
(e) .................................... 514
<PAGE>
TABLE OF CONTENTS
Page
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Parties ................................................................ 1
Recitals of the Company ................................................ 1
ARTICLE ONE
Definitions and other Provisions of
General Application
SECTION 101. Definitions:
Act .................................................................. 2
Affiliate; control ................................................... 2
Authenticating Agent ................................................. 2
Board of Directors ................................................... 2
Board Resolution ..................................................... 2
Business Day ......................................................... 2
Change of Control .................................................... 2
Closing Price ........................................................ 3
Commission ........................................................... 3
Common Stock ......................................................... 3
Company .............................................................. 3
Company Notice ....................................................... 3
Company Request; Company Order ....................................... 3
Conversion Rate ...................................................... 4
Corporate Trust Office ............................................... 4
Corporation .......................................................... 4
Defaulted Interest ................................................... 4
Depositary ........................................................... 4
Event of Default ..................................................... 4
Exchange Act ......................................................... 4
Expiration Time ...................................................... 4
Global Security ...................................................... 4
Holder ............................................................... 4
Indenture ............................................................ 4
Initial Purchaser .................................................... 4
Institutional Accredited Investor .................................... 5
Interest Payment Date ................................................ 5
Maturity ............................................................. 5
NASDAQ/NMS ........................................................... 5
Non-U.S. Person ...................................................... 5
Officers' Certificate ................................................ 5
Opinion of Counsel ................................................... 5
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
Page
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Outstanding .......................................................... 5
Paying Agent ......................................................... 6
Person ............................................................... 6
Predecessor Security ................................................. 6
Private Placement Legend ............................................. 6
Proceeding ........................................................... 7
Purchased Shares ..................................................... 7
QIB .................................................................. 7
Redemption Date ...................................................... 7
Redemption Price ..................................................... 7
Registered Individual Securities ..................................... 7
Regular Record Date .................................................. 7
Regulation S ......................................................... 7
Repurchase Date ...................................................... 7
Repurchase Price ..................................................... 7
Responsible Officer .................................................. 7
Rule 144 ............................................................. 7
Rule 144A ............................................................ 7
Securities ........................................................... 7
Securities Act ....................................................... 7
Securities Payment ................................................... 8
Security Register; Security Registrar ................................ 8
Senior Indebtedness .................................................. 8
Special Record Date .................................................. 8
Stated Maturity ...................................................... 8
Subsidiary ........................................................... 8
Trading Day .......................................................... 8
Trustee .............................................................. 9
Trust Indenture Act .................................................. 9
U.S. Person .......................................................... 9
United States ........................................................ 9
Vice President ....................................................... 9
SECTION 102. Compliance Certificates and Opinions ..................... 9
SECTION 103. Form of Documents Delivered to Trustee ................... 10
SECTION 104. Acts of Holders; Record Dates ............................ 11
SECTION 105. Notices, Etc., to Trustee and Company .................... 12
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
Page
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SECTION 106. Notice to Holders; Waiver ............................... 13
SECTION 107. The Application of Trust Indenture Act .................. 13
SECTION 108. Effect of Headings and Table of Contents ................ 13
SECTION 109. Successors and Assigns .................................. 14
SECTION 110. Separability Clause ..................................... 14
SECTION 1ll. Benefits of Indenture ................................... 14
SECTION 112. Governing Law ........................................... 14
SECTION 113. Legal Holidays .......................................... 14
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally ......................................... 15
SECTION 202. Form of Face of Security ................................ 16
SECTION 203. Form of Reverse of Security ............................. 19
SECTION 204. Form of Legend for Global Securities .................... 25
SECTION 205. Form of Trustee's Certificate of Authentication ......... 26
ARTICLE THREE
The Securities
SECTION 301. Title and Terms ......................................... 26
SECTION 302. Denominations ........................................... 27
SECTION 303. Execution, Authentication, Delivery and Dating .......... 27
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of the Indenture.
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<PAGE>
Page
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SECTION 304. Temporary Securities ..................................... 28
SECTION 305. Registration, Registration of Transfer and Exchange ...... 29
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities ......... 35
SECTION 307. Payment of Interest; Interest Rights Preserved ........... 36
SECTION 308. Persons Deemed Owners .................................... 38
SECTION 309. Cancellation ............................................. 38
SECTION 310. Computation of Interest .................................. 38
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture .................. 38
SECTION 402. Application of Trust Money ............................... 40
ARTICLE FIVE
Remedies
SECTION 501. Events of Default ....................................... 40
SECTION 502. Acceleration of Maturity; Rescission and Annulment ...... 42
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee .............................................. 43
SECTION 504. Trustee May File Proofs of Claim ........................ 44
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-iv-
<PAGE>
Page
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SECTION 505. Trustee May Enforce Claims Without Possession
of Securities ........................................... 45
SECTION 506. Application of Money Collected .......................... 45
SECTION 507. Limitation on Suits ..................................... 46
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert ..................... 46
SECTION 509. Restoration of Rights and Remedies ...................... 47
SECTION 510. Rights and Remedies Cumulative .......................... 47
SECTION 511. Delay or Omission Not Waiver ............................ 47
SECTION 512. Control by Holders ...................................... 48
SECTION 513. Waiver of Past Defaults ................................. 48
SECTION 514. Undertaking for Costs ................................... 48
SECTION 515. Waiver of Stay or Extension Laws ........................ 49
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities ..................... 49
SECTION 602. Notice of Defaults ...................................... 50
SECTION 603. Certain Rights of Trustee ............................... 50
SECTION 604. Not Responsible for Recitals or Issuance
of Securities ........................................... 51
SECTION 605. May Hold Securities .................................... 52
SECTION 606. Money Held in Trust ..................................... 52
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of the Indenture.
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<PAGE>
Page
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SECTION 607. Compensation and Reimbursement ........................... 52
SECTION 608. Disqualification; Conflicting Interests .................. 53
SECTION 609. Corporate Trustee Required; Eligibility .................. 53
SECTION 610. Resignation and Removal; Appointment of Successor ........ 53
SECTION 611. Acceptance of Appointment by Successor ................... 55
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business .............................................. 55
SECTION 613. Preferential Collection of Claims Against Company ........ 56
SECTION 614. Appointment of Authenticating Agent ...................... 56
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders ............................................... 58
SECTION 702. Preservation of Information; Communications
to Holders ............................................... 58
SECTION 703. Reports by Trustee ....................................... 59
SECTION 704. Reports by Company ....................................... 59
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., only on
Certain Terms ............................................ 60
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
Page
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SECTION 802. Successor Substituted .................................... 61
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders ....... 61
SECTION 902. Supplemental Indentures with Consent of Holders .......... 62
SECTION 903. Execution of Supplemental Indentures ..................... 63
SECTION 904. Effect of Supplemental Indentures ........................ 64
SECTION 905. Conformity with Trust Indenture Act ...................... 64
SECTION 906. Reference in Securities to Supplemental Indentures ....... 64
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest ............... 65
SECTION 1002. Maintenance of Office or Agency .......................... 65
SECTION 1003. Money for Security Payments to Be Held in Trust .......... 66
SECTION 1004. Statement by Officers as to Default ...................... 67
SECTION 1005. Existence ................................................ 67
SECTION 1006. Maintenance of Properties ................................ 68
SECTION 1007. Payment of Taxes and Other Claims ........................ 68
SECTION 1008. Delivery of Certain Information .......................... 68
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
Page
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ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption ...................................... 69
SECTION 1102. Applicability of Article ................................. 69
SECTION 1103. Election to Redeem; Notice to Trustee .................... 69
SECTION 1104. Selection by Trustee of Securities to Be Redeemed ........ 69
SECTION 1105. Notice of Redemption ..................................... 70
SECTION 1106. Deposit of Redemption Price .............................. 71
SECTION 1107. Securities Payable on Redemption Date .................... 71
SECTION 1108. Securities Redeemed in Part .............................. 72
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior Indebtedness ............ 72
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc. .......... 73
SECTION 1203. Prior Payment to Senior Indebtedness Upon Acceleration
of Securities; No Payment when Senior Indebtedness
in Default ............................................... 74
SECTION 1204. Payment Permitted If No Default .......................... 75
SECTION 1205. Subrogation to Rights of Holders of Senior
Indebtedness ............................................. 76
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
Page
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SECTION 1206. Provisions Solely to Define Relative Rights .............. 76
SECTION 1207. Trustee to Effectuate Subordination ...................... 77
SECTION 1208. No Waiver of Subordination Provisions .................... 77
SECTION 1209. Notice to Trustee ........................................ 78
SECTION 1210. Reliance on Judicial Order or Certificate of
Liquidating Agent ........................................ 79
SECTION 1211. Trustee Not Fiduciary for Holders of Senior
Indebtedness ............................................. 79
SECTION 1212. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights ......................... 79
SECTION 1213. Article Applicable to Paying Agents ...................... 80
SECTION 1214. Certain Conversions Deemed Payment ....................... 80
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Privilege and Conversion Rate ................. 81
SECTION 1302. Exercise of Conversion Privilege ......................... 81
SECTION 1303. Fractions of Shares ...................................... 84
SECTION 1304. Adjustment of Conversion Rate ........................... 84
SECTION 1305. Notice of Adjustments of Conversion Rate ................. 89
SECTION 1306. Notice of Certain Corporate Action ....................... 90
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE>
Page
----
SECTION 1307. Company to Reserve Common Stock .......................... 91
SECTION 1308. Taxes on Conversions ..................................... 91
SECTION 1309. Covenant as to Common Stock .............................. 91
SECTION 1310. Cancellation of Converted Securities ..................... 92
SECTION 1311. Provisions in Case of Consolidation, Merger
or Sale of Assets ........................................ 92
SECTION 1312. Trustee's Disclaimer ..................................... 93
ARTICLE FOURTEEN
Repurchase of Securities at the Option of the
Holder Upon a Change in Control
SECTION 1401. Right to Require Repurchase .............................. 93
SECTION 1402. Notices; Method of Exercising Repurchase Right, Etc. ..... 94
SECTION 1403. Certain Definitions ...................................... 95
TESTIMONIUM ............................................................ 97
SIGNATURES AND SEALS ................................................... 98
ACKNOWLEDGMENTS ........................................................ 99
- -------------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-x-
<PAGE>
INDENTURE, dated as of September 15, 1993, between Intermagnetics
General Corporation, a corporation duly organized and existing under the laws of
the State of New York (herein called the "Company"), having its principal office
at Charles Industrial Park, New Karner Road, Guilderland, New York 12084, and
American Stock Transfer & Trust Company, a trust company duly organized and
existing under the laws of the State of New York as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 5.75%
Convertible Subordinated Debentures Due 2003 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act as in effect on the date hereof, either directly or
<PAGE>
by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
securities.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York are authorized or obligated by law or executive
order to close.
"Change of Control" has the meaning specified in Section 1403(c).
-2-
<PAGE>
"Closing Price" has the meaning specified in Section 1304(8).
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Section 1311, shares issuable on conversion of Securities shall
include only shares of the class designated as Common Stock of the Company at
the date of this instrument or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Notice" has the meaning specified in Section 1402.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Chief
Financial Officer, Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
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"Conversion Rate" has the meaning specified in Section 1301.
"Corporate Trust Office" means the principal office of the Trustee in
the Borough of Manhattan, The City of New York at which at any particular time
its corporate trust business shall be administered.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities issued in whole or
in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 305.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 as it may be
amended from time to time, and any successor act thereto, and the rules and
regulations of the Commission promulgated thereunder.
"Expiration Time" has the meaning specified in Section 1304(6).
"Global Security" means a Security that evidences all or part of the
Securities issued to the Depositary in accordance with Section 303 and bearing
the legend prescribed in Section 204.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchaser" means Lazard Freres & Co.
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"Institutional Accredited Investor" means an institutional investor
that is an "accredited investor" as defined in Rule 501(a)(1),(2),(3) or (7) of
Regulation D under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Securities.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"NASDAQ/NMS" has the meaning specified in Section 1304(6).
"Non-U.S. Person" means a person other than a U.S. Person.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board or a Vice Chairman of the Board or the President or a Vice President,
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to
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this Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
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"Private Placement Legend" has the meaning specified in Section 202.
"Proceeding" has the meaning specified in Section 1202.
"Purchased Shares" has the meaning specified in Section 1304(6).
"QIB" means "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Individual Securities" means certificated Securities not
including Global Securities.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 1 or September 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Repurchase Date" has the meaning specified in Section 1401.
"Repurchase Price" has the meaning specified in Section 1401.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" has the meaning set forth in the first recital of this
Indenture and more particularly means the Global Securities and Registered
Individual Securities.
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"Securities Act" means the Securities Act of 1933 as it may be amended
from time to time, and any successor act thereto, and the rules and regulations
of the Commission promulgated thereunder.
"Securities Payment" has the meaning specified in Section 1202.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest on (i) indebtedness of the Company for money borrowed evidenced by
bonds, notes, debentures or similar obligations, including any guaranty by the
Company of any indebtedness for money borrowed of any other person, whether
outstanding on the date of the Indenture or thereafter created, assumed or
incurred; (ii) indebtedness incurred, assumed or guaranteed by the Company in
connection with the acquisition by it or a subsidiary of any other business,
properties or other assets; and (iii) any refundings, renewals or extensions of
any indebtedness described in clauses (i) and (ii), unless in the instrument
creating or evidencing the indebtedness it is provided that such indebtedness is
not superior in right of payment to the Securities.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
instalment of interest thereon, means the date specified in such Security as the
fixed date on which the principal of such Security or such instalment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
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"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that
in the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"U.S. Person" has the meaning given it by Regulation S.
"United States" means the United States of America (including the
States thereof and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an officers' Certificate, if to be given by an officer of the
Company, or an Opinion of Counsel, if to be given by counsel, stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions
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contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condi-
tion has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including
the Depositary that is a Holder of a Global Security, may make, give or take, by
a proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders, and the
Depositary that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interest in any such Global Security.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization,
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direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to
or with the Trustee at its Corporate Trust Office, Attention: Herbert
Lemmer, Corporate Trust Department, 40 Wall Street, New York, New York
10005, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed
to it at the address of its principal office specified in the first
paragraph of this instrument, to the
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attention of the Secretary, or at any other address previously furnished
in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. The Application of Trust Indenture Act.
This Indenture shall be construed as though the Trust Indenture Act
applied hereto for purposes, where applicable, of interpreting, constructing and
defining the rights and obligations hereunder. If any provision set forth herein
limits, qualifies or conflicts with any provision of the Trust Indenture Act
used for the purposes described in the preceding sentence, the provision set
forth herein shall control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Repurchase Date or Stated Maturity of any Security or the last date on which a
Holder has the right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) or conversion of the
securities need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date or Repurchase Date, or at the Stated Maturity, or on such
last day for conversion, provided that no interest shall accrue with respect to
the amount so payable for the period from and after such Interest Payment Date,
Redemption Date, Repurchase Date or Stated Maturity, as the case may be.
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ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture (including forms of notices of conversion and
exercise of repurchase right), and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or Depositary
therefor or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner, all as determined by the officers executing
such securities, as evidenced by their execution of such Securities.
In certain cases described elsewhere herein, the legends set forth in
Section 202 may be omitted from Securities issued hereunder.
Securities offered and sold to Institutional Accredited Investors or in
reliance on Regulation S shall be issued in the form of Registered Individual
Securities in definitive, fully registered form without interest coupons,
substantially in the form of security set forth in Sections 202 and 203, with
such applicable legends as are provided for in Section 202, except as otherwise
permitted herein.
Securities offered and sold in reliance on Rule 144A shall be issued in
the form of one or more Registered Individual Securities or in the form of a
single Global Security in definitive, fully registered form without interest
coupons, substantially in the form of Security set forth in Sections 202 and
203, with such applicable legends as are provided for in Section 202 and Section
204, except as otherwise permitted herein. Such Global Security shall be
registered in the name of a nominee of the Depositary and deposited with the
Trustee, at its New York office, as
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custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary, in
connection with a corresponding decrease or increase in the aggregate principal
amount of Registered Individual Securities, as hereinafter provided.
SECTION 202. Form of Face of Security.
(Insert the following legend (the "Private Placement Legend") -- THE
DEBENTURE EVIDENCED HEREBY HAS NOT BEEN REGISTERED AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THE DEBENTURE EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER
THE DEBENTURE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF
SUCH DEBENTURE EXCEPT IN A TRANSACTION NOT REQUIRING REGISTRATION UNDER THE
SECURITIES ACT (A) TO INTERMAGNETICS GENERAL CORPORATION OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO AMERICAN STOCK TRANSFER & TRUST COMPANY, NEW YORK, NEW YORK AS TRUSTEE OR
TRANSFER AGENT, AS THE CASE MAY BE, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
DEBENTURE EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
DEBENTURE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR
TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE DEBENTURE EVIDENCED
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HEREBY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH DEBENTURE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE AMERICAN STOCK
TRANSFER & TRUST COMPANY, AS TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U. S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.]
INTERMAGNETICS GENERAL CORPORATION
5.75% Convertible Subordinated Debentures Due 2003
No. _________ $_________
Intermagnetics General Corporation, a corporation duly organized and
existing under the laws of New York (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ____________, or registered assigns,
the principal sum of ___________ Dollars on September 15, 2003, and to pay
interest thereon from September 20, 1993 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
on March 15 and September 15 in each year, commencing March 15, 1994, at the
rate of 5.75% per annum, until the principal hereof is paid or made available
for payment. The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice
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whereof shall be given to Holders of Securities not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, and at any other
office or agency maintained by the Company for such purpose, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
INTERMAGNETICS GENERAL CORPORATION
By____________________________
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[Seal]
Attest:
______________________________
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 5.75% Convertible Subordinated Debentures Due 2003
(herein called the "Securities"), limited in aggregate principal amount to
$34,500,000, issued and to be issued under an Indenture, dated as of September
15, 1993 (herein called the "Indenture"), between the Company and American Stock
Transfer & Trust Company, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Indebtedness and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time on or before
the close of business on September 15, 2003, or in case this Security or a
portion hereof is called for redemption or is subject to repurchase upon
exercise of the Holder's right under the Indenture to cause the Company to
repurchase this Security following the occurrence of a Change in Control, then
in respect of this Security or such portion hereof until and including, but
(unless the Company defaults in making the payment due upon redemption or
repurchase, as the case may be) not after, the close of business on the Business
Day preceding the Redemption Date or the second Trading Day preceding the
Repurchase Date, respectively, to convert this Security (or any portion of the
principal amount hereof which is $1,000 or an integral multiple thereof), at the
principal amount hereof (or of such portion), into fully paid and non-assessable
shares (calculated as to each conversion to the nearest 1/100 of a share) of
Common Stock of the Company at the rate of 51.282 shares of Common Stock for
each $1,000 principal amount of Securities (or at the current adjusted
conversion rate if an adjustment has been
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made as provided in the Indenture) by surrender of this Security, duly endorsed
or assigned to the Company or in blank, to the Company at its office or agency
in the Borough of Manhattan, The City of New York, accompanied by written notice
to the Company that the Holder hereof elects to convert this Security, or if
less than the entire principal amount hereof is to be converted, the portion
hereof to be converted, and, in case such surrender shall be made during the
period from the close of business on any Regular Record Date next preceding the
corresponding Interest Payment Date to the opening of business on such Interest
Payment Date (unless this Security or the portion hereof being converted has
been called for redemption on a Redemption Date within such period), also
accompanied by payment in New York Clearing House or other funds acceptable to
the Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of this Security then being converted. If this
Security is converted after having been called for redemption, interest accrued
and unpaid hereon to the date of conversion shall be payable on such date.
Subject to the aforesaid and, in the case of a conversion after the Regular
Record Date next preceding any Interest Payment Date and on or before such
Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security) of record at such Regular Record Date to receive an
instalment of interest (with certain exceptions provided in the Indenture), no
payment or adjustment is to be made on conversion for interest accrued hereon or
for dividends on the Common Stock issued on conversion. No fractions of shares
or scrip representing fractions of shares will be issued on conversion, but
instead of any fractional interest the Company shall pay a cash adjustment as
provided in the Indenture. The conversion rate is subject to adjustment as
provided in the Indenture. In addition, the Indenture provides that in case of
certain consolidations or mergers to which the Company is a party or the
transfer of substantially all of the assets of the Company, the Indenture shall
be amended, without the consent of any Holders of Securities, so that this
Security, if then outstanding, will be convertible thereafter, during the period
this Security shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger or transfer by a holder of the number of shares of Common Stock into
which this Security might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares).
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The Securities are subject to redemption upon not less than 30 days' or
more than 60 days' notice by mail, at any time on or after September 15, 1996,
as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount). If
redeemed during the 12-month period beginning September 15 of the years
indicated:
Redemption Redemption
Year Price Year Price
- ---- ---------- ---- ----------
1996 ..... 104.025% 2000 .... 101.725%
1997 ..... 103.450% 2001 .... 101.150%
1998 ..... 102.875% 2002 .... 100.575%
1999 ..... 102.300%
and at maturity at 100% of the principal amount. Such amounts will be paid
together with accrued interest to the Redemption Date, but interest installments
whose Stated Maturity is on or prior to such Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of record
at the close of business on the relevant Record Dates referred to on the face
hereof, all as provided in the Indenture.
The Indenture provides that if a Change in Control (as defined therein)
occurs, each Holder of Securities shall have the right, in accordance with the
provisions of the Indenture, to require the Company to repurchase all of such
Holder's Securities, or any portion thereof that is an integral multiple of
$1,000, for cash at a price equal to 100% of the principal amount of such
Securities to be repurchased together with accrued interest to the Repurchase
Date.
The Securities do not have the benefit of any sinking fund.
In the event of redemption, conversion or repurchase of this Security
in part only, a new Security or Securities for the portion hereof not redeemed,
converted or repurchased will be issued in the name of the Holder hereof upon
the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions,
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(b) authorizes and directs the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal
of all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefore or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
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The Securities are issuable only in registered form without coupons.
Securities subject to the transfer restrictions provided in the Indenture are
issuable only in denominations of $50,000 and integral multiples of $1,000 in
excess thereof, except that such Securities may be issued in lesser
denominations in connection with a partial conversion, redemption or repurchase
(but not in connection with any proposed transfer of Securities thereafter).
Securities not subject to such transfer restrictions are issuable in
denominations of $1,000 plus integral multiples thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof, for
all purposes, whether or not payment of or on this Security is overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES
OTHER THAN THE GLOBAL CERTIFICATE)
In connection with any transfer of this Security occurring prior to
[insert date that is three years following the-date of initial issuance of the
Securities], the undersigned confirms that without utilizing any general
solicitation or general advertising that:
(Check One)
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[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
[ ] (b) this Security is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or the Security Registrar
shall not be obligated to register this Security in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein shall have been satisfied.
Date:______________________ ____________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or
any change whatever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A under
the Securities Act and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A
under the Securities Act or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A under the securities Act.
Dated:______________________ ____________________________________
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NOTICE: To be executed by an executive officer
(IN ALL CERTIFICATES OTHER THAN THE GLOBAL
CERTIFICATE INSERT CONVERSION NOTICE AND NOTICE OF
REPURCHASE IN CUSTOMARY FORM]
SECTION 204. form of Legend for Global Securities.
Any Global Security authenticated and delivered hereunder shall bear a
legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART
FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN
PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
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SECTION 205. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the within-mentioned
Indenture.
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Trustee
By_______________________________
Authorized Signature
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $34,500,000, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306,
906, 1108, 1302 or 1402.
The Securities shall be known and designated as the "5.75% Convertible
Subordinated Debentures due 2003" of the Company. Their Stated Maturity shall be
September 15, 2003, and they shall bear interest at the rate of 5.75% per annum,
from September 20, 1993 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
semi-annually on March 15 and September 15, commencing March 15, 1994, until the
principal thereof is paid or made available for payment.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York, maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
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The Depositary for the Global securities, beneficial interests in which
may be originally purchased by QIBs, is the Depository Trust Company.
The Securities shall be redeemable by the Company as provided in
Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
The Securities shall be convertible as provided in Article Thirteen.
The Securities shall be subject to repurchase by the Company at the
option of the Holders thereof as provided in Article Fourteen.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons. Securities that are required, in accordance with Section 305, to bear
the Private Placement Legend shall be issuable only in denominations of $50,000
and integral multiples of $1,000 in excess thereof. Notwithstanding the
foregoing, a new Security may be issued in a denomination less than $50,000 in
the case of any Security which is redeemed in part only under Section 1108,
converted in part only under Section 1302 or repurchased in part only under
Section 1402(e) (but not in the case of a proposed transfer under Section 305(b)
thereafter). Securities that not required, in accordance with Section 305, to
bear the Private Placement Legend are issuable in denominations of $1,000 and
integral multiples thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
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notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
The Company shall execute and the Trustee shall authenticate and
deliver one or more Global Securities that (i) shall represent an aggregate
amount equal to the aggregate principal amount of the Outstanding Securities
originally purchased by QIBs, (ii) shall be registered in the name of the
Depositary or the nominee of the Depositary, (iii) shall be delivered by the
Trustee to the Depositary or pursuant to the Depositary's instruction and (iv)
shall bear a legend substantially to the effect specified in Section 204 hereof
(or in the form required by the Depositary).
The Depositary must, at all times while it serves as such Depositary,
be a clearing agency registered under the Exchange Act and any other applicable
statute or regulation.
Any securities initially offered and sold to Institutional Accredited
Investors or in reliance on Regulation S shall be issued in the form of
Registered Individual Securities.
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SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
(a) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers and exchanges of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
securities and transfers and exchanges of Securities as herein provided.
(b) Subject to the transfers on restrictions specified below in this
Section 305, upon surrender for registration of transfer or exchange of any
Security at an office or agency of the Company designated pursuant to Section
1002 for such purpose, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new
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Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
If the proposed transferor of Securities is a member of, or participant
in, the Depositary (an "Agent Member") holding a beneficial interest in the
Global Security, and the Securities transferred or exchanged are to be taken in
the form Registered Individual Securities, then subject to the restrictions on
transfers specified below in this Section 305, and upon receipt of the
instructions in accordance with the Depositary's and the Security Registrar's
procedures, the Security Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the Global Security in an amount
equal to the principal amount of the beneficial interest in the Global Security
to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Registered Individual Securities of like
tenor and amount.
If the proposed transferee of Securities is an Agent Member that
proposes to hold such Securities by way of a beneficial interest in the Global
Security, and the Securities to be transferred consist of Registered Individual
Securities, then subject to the restrictions on transfers specified below in
this Section 305, and upon receipt by the Security Registrar of instructions
given in accordance with the Depositary's and the Security Registrar's
procedures, the Security Registrar shall reflect on its books and records the
date and an increase in the principal amount of the Global Security in an amount
equal to the principal amount of the Registered Individual Securities to be
transferred, and the Trustee shall cancel the Registered Individual Securities
so transferred.
All securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
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(c) Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of securities, other than
exchanges pursuant to Section 304, 906, 1108, 1302 or 1402 not involving any
transfer.
(e) The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 1104 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
(f) Notwithstanding any other provision of this Section, unless and
until it is exchanged in whole or in part for Registered Individual Securities
represented thereby, a Global Security representing all or a portion of the
Securities may not be transferred except as a whole by the Depositary to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
If at any time the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary or if at any time the Depositary shall no
longer be eligible under Section 303, the Company shall appoint a successor
Depositary. If a successor Depositary is not appointed by the Company within 90
days after the Company receives such notice or becomes aware of such
ineligibility, the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of Registered Individual
Securities, will authenticate and deliver, Registered Individual Securities in
an aggregate principal amount equal to the principal amount of the Global
Security or Securities representing the Securities in exchange for such Global
Security or Securities.
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The Company may at any time and in its sole discretion determine that
individual Securities issued in the form of one or more Global Securities shall
no longer be represented by such Global Security or Securities. In such event,
or if an Event of Default has occurred and is continuing, the Company will
execute, and the Trustee, upon receipt of a Company Order for the authentication
and delivery of Registered Individual Securities, will authenticate and deliver,
Registered Individual Securities in an aggregate principal amount equal to the
principal amount of the Global Security or Securities representing the
Securities in exchange for such Global Security or Securities.
The Depositary may surrender a Global Security in exchange in whole or
part for Registered Individual Securities on such terms as are acceptable to the
Company and such Depositary. Thereupon, the Company shall execute, and the
Trustee shall authenticate and deliver,
(i) to each Person specified by such Depositary a new Registered
Individual Security of any authorized denomination as requested by such
Person in aggregate principal amount equal to and in exchange for such
Person's beneficial interest in the Global Security; and
(ii) to such Depositary a new Global Security in a denomination equal
to the difference, if any, between the principal amount of the surrendered
Global Security and the aggregate principal amount of the Registered
Individual Securities delivered to Holders thereof.
Upon the exchange of a Global Security for Registered Individual
Securities, such Global Security shall be canceled by the Trustee. Individual
Securities issued in exchange for a Global Security pursuant to this Section
shall be registered in such names and in such authorized denominations as the
Depositary for such Global Security, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee.
The Trustee and the Company shall not have any liability for the
accuracy of the instructions received from the Depositary. The Trustee shall
deliver such securities to the Persons in whose names such Securities are so
registered.
(g) Agent Members shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the Depositary, or the
Paying Agent as its
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custodian, or under the Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Neither the Company nor the Trustee shall have any responsibility or
obligation to any participant in the Depositary, any Person claiming a
beneficial ownership interest in the Securities under or through the Depositary
or any such participant, or any other Person which is not shown on the Security
Register as being a Holder, with respect to (1) the Securities; (2) the accuracy
of any records maintained by the Depositary or any such participant; (3) the
payment by the Depositary or any such participant of any amount in respect of
the principal of or premium or interest on the Securities; (4) any notice which
is permitted or required to be given to Holders of Securities under this
Indenture; (5) the selection by the Depositary or any such participant of any
Person to receive payment in the event of a partial redemption of the Securi-
ties; or (6) any consent given or other action taken by the Depositary as Holder
of Securities.
(h) Subject to the following subsection (i) of this Section 305, every
Security issued upon transfer or exchange or replacement thereof shall bear the
Private Placement Legend and shall be subject to the restrictions on transfer
provided therein.
(i) The restrictions described in the Private Placement Legend upon the
transferability of any Security shall cease and terminate:
(x) when such Security has been sold pursuant to an effective
registration statement under the Securities Act,
(y) when the Company has delivered to the Trustee a Company
Order that states that a period of at least three years has elapsed since
the Securities were acquired by the Initial Purchaser and that the
Security may be issued without the Private Placement Legend, or
(z) when such Security has otherwise been transferred in
compliance with Rule 144 under the Securities Act (or any successor
provision thereto).
Any Security as to which such restrictions on transfer shall have
terminated may, upon surrender of such Security for exchange to the Security
Registrar in accordance with the provisions of this section 305, be
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exchanged for a new Security, of like tenor and aggregate principal amount,
which shall not bear the Private Placement Legend. In the event that such
restrictions on transfer have terminated by reason of a transfer in compliance
with Rule 144 or any successor provision, in accordance with subsection (i)(z)
of this Section 305, such Security shall be accompanied by an opinion of counsel
(such counsel having experience in practice under the Securities Act and
otherwise reasonably acceptable to the Company), addressed to the Company and in
form acceptable to the Company, to the effect that the transfer of such Security
has been made in compliance with Rule 144 or such successor provision. The
Trustee shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the aforementioned opinion of counsel or
registration statement. As used in subsections (i) and (j) of this Section 305,
the term "transfer" encompasses any sale, pledge, transfer, hypothecation or
other disposition of any Security.
(j) So long as the restrictions on transfer of securities specified in
this Section 305 remain in effect, the Security Registrar shall register any
proposed transfer of a Security to a QIB pursuant to Rule 144A, only if such
transfer is being made by a proposed transferor who has checked the box provided
for on the form of Security stating, or has otherwise advised the Company and
the Security Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Security stating, or has otherwise
advised the Company and the Security Registrar in writing, that it is purchasing
the Rule 144A Security for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is a
QIB within the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(k) So long as the restrictions on transfer of Securities specified in
this Section 305 remain in effect, the Security Registrar shall register any
proposed transfer of a Registered Individual Security to a Non-U.S. Person only
upon receipt from the proposed transferor of a certificate substantially in the
form of Exhibit A hereto.
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(1) So long as the restrictions on transfer of Securities specified in
this Section 305 remain in effect, the Security Registrar shall register any
proposed transfer of a Registered Individual security to an Institutional
Accredited Investor (that is not a QIB) only upon receipt from the proposed
transferee of a certificate substantially in the form of Exhibit B hereto.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not
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less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as
may be required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this Clause, such manner
of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular Record
Date and on or prior to the next succeeding Interest Payment Date (other than
any Security whose Maturity is prior to such Interest Payment Date), interest
whose Stated Maturity is on such Interest Payment Date shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise
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expressly provided in the immediately preceding sentence, and except in the case
of any Security which is converted after having been called for redemption,
interest whose Stated Maturity is after the date of conversion of such Security
shall not be payable.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer, exchange or conversion shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee and shall be promptly cancelled by it.
The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in this
Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
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ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
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and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held
by it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon Company Request.
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ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of
30 days; or
(2) default in the payment of the principal of (or premium, if any, on)
any Security at its Maturity; or
(3) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 10% in principal amount of the Outstanding Securi-
ties a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(4) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or order
adjudging the
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Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
(5) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in principal amount
of the outstanding
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Securities may declare the principal of all the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal shall become
immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the principal
of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is
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hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and
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premium, if any) and interest on the Securities in respect of which or
for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (and premium, if any)
and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture,
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except in the manner herein provided and for the equal and ratable benefit of
all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to convert such Security in accordance with Article Thirteen and to
institute suit for the enforcement of any such payment and right to convert, and
such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest
on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this
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Indenture; but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or in any suit for the
enforcement of the right to convert any security in accordance with Article
Thirteen.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of
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its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder
known to the Trustee as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified in
Section 501(3), no such notice to Holders shall be given until at least 30 days
after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically
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prescribed) may, in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
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SECTION 604. Not Responsible for Recitals
or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the
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reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $10,000,000 and its Corporate Trust
Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal;
Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this
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Article shall become effective until the acceptance of appointment
by the successor Trustee in accordance with the applicable requirements of
Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
a majority in principal amount of the Outstanding Securities, delivered to
the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee, or (ii) subject to Section 514, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If,
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within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act
of the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of
such appointment, become the successor Trustee and supersede the successor
Trustee appointed by the Company. If no successor Trustee shall have
been so appointed by the Company or the Holders and accepted appointment
in the manner hereinafter provided, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection
of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer, partial
conversion, partial redemption or partial repurchase or pursuant to Section 306,
and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
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having a combined capital and surplus of not less than $10,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee or the Company may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may, upon receipt of a Company Request,
appoint a successor Authenticating Agent and shall mail written notice of such
appointment by first-class mail, postage prepaid, to all Holders as their names
and addresses appear in the Security Register. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with
all the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this section, and the
Trustee shall be
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entitled to be reimbursed for such payments, subject the provisions of section
607.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities referred to in the within-mentioned
Indenture.
AMERICAN STOCK TRANSFER & TRUST COMPANY,
As Trustee
By______________________________________,
As Authenticating Agent
By______________________________________
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content
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as of a date not more than 15 days prior to the time such list is
furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as security Registrar.
SECTION 702. Preservation of Information;
Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in
the most recent list furnished to the Trustee as provided in Section 701
and the names and addresses of Holders received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list furnished
to it as provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be as provided
by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by
reason of any disclosure of information as to names and addresses of
Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as would be required
pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Securities are listed, with the Commission, if applicable,
and with the Company. The Company will notify the Trustee if and when the
Securities are listed on any stock exchange.
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SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, if
applicable, and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as would be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant to such Act;
provided that any such information, documents or reports required to be filed
with the commission pursuant to Section 13 or 15(d) of the Exchange Act shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc.,
Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a corporation,
partnership or trust, shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of (and premium, if
any) and interest on all the Securities and the performance or observance
of every
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covenant of this Indenture on the part of the Company to be
performed or observed and shall have provided for conversion rights in
accordance with Section 1311;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a
Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
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ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Companys obligations in respect of the Securities;
or
(4) to make provision with respect to the conversion rights of Holders
pursuant to the requirements of Section 1311; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided that such action pursuant to
this Clause (5) shall not adversely affect the interests of the Holders
in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of a majority in principal amount of
the Outstanding Securities , by Act of said Holders delivered to the Company and
the Trustee, the
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Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin or
currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption or repurchase, on or after the Redemption Date or Repurchase
Date, as the case may be), or adversely affect the right to convert any
Security provided in Article Thirteen (except as permitted by Section
901(4)), or adversely affect the right to cause the Company to repurchase
any Security pursuant to Article Fourteen, or modify the provisions of
this Indenture with respect to the subordination or redemption of the
Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Security affected thereby.
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It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities
to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and
the Company, to any such supplemental indenture may be prepared and executed by
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the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange, where Securities may be surrendered for conversion and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York for such purposes. The company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
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SECTION 1003. Money for Security
Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 1003,
that such Paying Agent will
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the securities) in the making of any payment of
principal, premium, if any, or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent;
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and, upon such payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, shall at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the
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preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its business or the
business of any subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. Delivery of Certain Information.
At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the request of a Holder or the holder of shares of Common
Stock issued upon conversion thereof, the Company will promptly furnish or cause
to be furnished Rule 144A Information (as defined below) to such Holder or such
holder of shares of Common Stock issued upon conversion of Securities, or to a
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prospective purchaser of any such security designated by any such Holder or
holder, as the case may be, to the extent required to permit compliance by such
Holder or holder with Rule 144A under the Securities Act in connection with the
resale of any such security. "Rule 144A Information" shall be such information
as is specified pursuant to Rule 144A(d)(4) under the Securities Act.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, upon not less than 30 days' or more than 60
days' notice by mail, at any time on or after September 15, 1996, at the
Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company of less than all the Securities, the Company
shall, at least 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities to be
redeemed.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date
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by the Trustee, from the Outstanding Securities not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $1,000
or any integral multiple thereof) of the principal amount of Securities of a
denomination larger than $1,000.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed shall be treated
by the Trustee as outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
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(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(5) the conversion rate, the date on which the right to convert the
Securities to be redeemed will terminate and the place or places where
such Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date other than any Securities called for
redemption on that date which have been converted prior to the date of such
deposit.
If any Security called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust for
the redemption of such Security shall (subject to any right of the Holder of
such Security or any Predecessor Security to receive interest as provided in the
last paragraph of Section 307) be paid to the Company upon Company Request or,
if then held by the Company, shall be discharged from such trust.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption
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Price therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company or
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal amount of the Security so surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior
Indentedness.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the indebtedness
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represented by the Securities and the payment of the principal of (and premium,
if any) and interest on each and all of the Securities (including any
repurchases or payments pursuant to Article Fourteen) are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness.
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Indebtedness
shall be entitled to receive payment in full of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision shall be made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Indebtedness, before the Holders of the Securities are
entitled to receive any payment or distribution of any kind or character,
whether in cash, property or securities (including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities), on account of principal of (or premium, if any) or interest on the
Securities or on account of any purchase (including any repurchase pursuant to
Article Fourteen) or other acquisition of Securities by the Company or any
Subsidiary of the Company (all such payments, distributions, purchases and
acquisitions herein referred to, individually and collectively, as a "Securities
Payment"), and to that end the holders of all Senior Indebtedness shall be
entitled to receive, for application to the payment thereof, any Securities
Payment which may be payable or deliverable in respect of the Securities in any
such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
Securities Payment before all Senior Indebtedness is paid in full or payment
thereof
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provided for in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Indebtedness, and if such fact shall, at or prior to
the time of such Securities Payment, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such Securities Payment
shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other Person making
payment or distribution of assets of the Company for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment which
stock or securities are subordinated in right of payment to all then outstanding
Senior Indebtedness to substantially the same extent as the Securities are so
subordinated as provided in this Article. The consolidation of the Company with,
or the merger of the Company into, another Person or the liquidation or
dissolution or the Company following the conveyance or transfer of all or
substantially all of its properties and assets as an entirety to another Person
upon the terms and conditions set forth in Article Eight shall not be deemed a
Proceeding for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer such properties and assets as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1203. Prior Payment to senior Indebtedness Upon
Acceleration of Securities; No Payment When
Senior Indebtedness in Default.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior
Indebtedness outstanding at the time such Securities so become due and payable
shall be entitled to receive payment in full of all amounts due or to
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become due on or in respect of all Senior Indebtedness, or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of such Senior Indebtedness, before the Holders of
the Securities are entitled to receive any Securities Payment.
In the event and during the continuation of any default in the payment
of principal of (or premium, if any) or interest on any Senior Indebtedness
beyond any applicable grace period with respect thereto, or in the event that
any event of default with respect to any Senior Indebtedness shall have occurred
and be continuing permitting the holders of such Senior Indebtedness (or a
trustee on behalf of the holders thereof) to declare such Senior Indebtedness
due and payable prior to the date on which it would otherwise have become due
and payable, unless and until such event of default shall have been cured or
waived or shall have ceased to exist and such acceleration shall have been
rescinded or annulled, or in the event any judicial proceeding shall be pending
with respect to any such default in payment or event of default, then no
Securities Payment shall be made.
In the event that, notwithstanding the foregoing, the Company shall
make any Securities Payment to the Trustee or any Holder prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such Securities Payment, have been made known to the Trustee or, as the
case may be, such Holder, then and in such event such Securities Payment shall
be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Securities
Payment with respect to which Section 1202 would be applicable.
SECTION 1204. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 1202 or under the
conditions described in Section 1203, from making Securities Payments, or (b)
the application by the Trustee of any money deposited with it hereunder to
Securities Payments or the retention of such Securities Payment by the Holders,
if, at the time of such application by the Trustee, it did not have knowledge
that such Securities Payment would have been prohibited by the provisions of
this Article.
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SECTION 1205. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all amounts due or to become due on
or in respect of Senior Indebtedness, or the provision for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Indebtedness, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of Senior
Indebtedness pursuant to the provisions of this Article to the rights of the
holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be paid
in full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Indebtedness.
SECTION 1206. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
Holders of the Securities the principal of (and premium, if any) and interest
on, and to make any repurchases required by Article Fourteen of, the Securities
as and when the same shall become due and payable in accordance with their
terms; or (b) affect the relative rights against the Company of the Holders of
the Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies
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otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article of the holders of Senior Indebtedness
to receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 1207. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1208. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
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SECTION 1209. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
the notice provided for in this Section at least two Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on, or amounts payable upon repurchase of, any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
Subject to the provisions of Section 601, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Indebtedness (or a trustee therefor) to
establish that such notice has been given by a holder of Senior Indebtedness (or
a trustee therefor). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
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SECTION 1210. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
SECTION 1211. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
SECTION 1212. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
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SECTION 1213. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1212 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1214. Certain Conversions Deemed Payment.
For the purposes of this Article only, (1) the issuance and delivery of
junior securities upon conversion of securities in accordance with Article
Thirteen shall not be deemed to constitute a payment of distribution on account
of the principal of or premium or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of the
principal of such Security. For the purposes of this Section, the term "junior
securities" means (a) shares of any stock of any class of the Company and (b)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or delivery
of such securities to the same extent as, or to a greater extent than, the
Securities are so subordinated as provided in this Article. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall impair, as among the company, its creditors other than holders of
Senior Indebtedness and the holders of the Securities, the right, which is
absolute and unconditional, of the Holder of any Security to convert such
Security in accordance with Article Thirteen.
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ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Privilege and Conversion Rate.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security or any portion of the principal
amount thereof which is $1,000 or an integral multiple of $1,000 may be
converted at the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company at the conversion rate,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right shall expire at the close of business on September 15, 2003. In
case a Security or portion thereof is called for redemption at the election of
the Company or delivered for repurchase pursuant to Article Fourteen, such
conversion right in respect of the Security or portion so called shall expire at
the close of business on the Business Day prior to the Redemption Date or the
second Trading Day preceding the Repurchase Date, as the case may be, unless the
Company defaults in making the payment due upon redemption or repurchase.
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion rate") shall be initially 51.282
shares of Common Stock for each $1,000 principal amount of Securities. The
conversion rate shall be adjusted in certain instances as provided in this
Article.
SECTION 1302. Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed or
assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to Section 1002, accompanied by (a) written
notice to the Company at such office or agency that the Holder elects to convert
such security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted and (b) if any portion of such
Security not to be converted are to be issued in the name of a Person other than
the Holder thereof, and the restrictions on transfer of such Security set forth
in the Private Placement Legend remain in effect, a certification of the Holder
as to compliance with such restrictions (as
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set forth in Section 305). Securities surrendered for conversion during the
period from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
shall (except in the case of Securities or portions thereof which have been
called for redemption on a Redemption Date within such period) be accompanied by
payment in New York Clearing House funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment Date
on the principal amount of Securities being surrendered for conversion. Subject
to the provisions of Section 307 relating to the payment of Defaulted Interest
by the Company, the interest payment with respect to a Security called for
redemption on a Redemption Date during the period from the close of business on
any Regular Record Date next preceding any Interest Payment Date to the opening
of business on such Interest Payment Date shall be payable on such Interest
Payment Date to the Holder of such Security at the close of business on such
Regular Record Date notwithstanding the conversion of such Security after such
Regular Record Date and prior to such Interest Payment Date, and the Holder
converting such Security need not include a payment of such interest payment
amount upon surrender of such Security for conversion. Except as provided in the
second preceding sentence and subject to the final paragraph of Section 307, no
payment or adjustment shall be made upon any conversion on account of any
interest accrued on the Securities surrendered for conversion or on account of
any dividends on the Common Stock issued upon conversion.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 1303.
If the restrictions on transfer of a Security set forth in the Private
Placement Legend remain in effect, all shares of Common Stock delivered upon
conversion thereof shall bear a restrictive legend substantially in the
following form:
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THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED AND WILL NOT
BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THE DEBENTURE UPON THE CONVERSION OF WHICH
THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT IN A TRANSACTION NOT
REQURING REGISTRATION UNDER THE SECURITIES ACT (A) TO INTERMAGNETICS GENERAL
CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER,
FURNISHED TO AMERICAN STOCK TRANSFER & TRUST COMPANY, AS TRANSFER AGENT FOR THE
COMMON STOCK EVIDENCED HEREBY, A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRANSFER AGENT), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE); (2) PRIOR TO SUCH TRANSFER, IT WILL FURNISH TO THE AMERICAN STOCK
TRANSFER & TRUST COMPANY, AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (3) IT WILL DELIVER TO
EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
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SECTION 1303. Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the daily closing price per share of Common Stock
(consistent with Section 1304(8) below) at the close of business on the day of
conversion.
SECTION 1304. Adjustment of Conversion Rate.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock, the
conversion rate in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be increased by dividing such conversion
rate by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such increase to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this paragraph (1), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
shares issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock (not being available on an equivalent basis to
Holders of the Securities upon conversion) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the current
market price per share (determined as provided in paragraph (8) of this Section)
of the Common Stock on the date fixed for the determination of
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stockholders entitled to receive such rights, options or warrants, the
conversion rate in effect at the opening of business on the day following the
date fixed for such determination shall be increased by dividing such conversion
rate by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the aggregate of
the offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such increase to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph (2),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not issue any rights or warrants in respect of shares of
Common Stock held in the options of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the conversion rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the conversion rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2) of this Section, any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in paragraph (1) of this
Section), the conversion rate shall be adjusted so that the same shall equal the
rate determined by dividing the conversion rate in effect immediately prior to
the close of business on the date fixed for the determination of stockholders
entitled to
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receive such distribution by a fraction of which the numerator shall be the
current market price per share (determined as provided in paragraph (8) of this
Section) of the Common Stock on the date fixed for such determination less the
then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution filed with
the Trustee) of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution.
(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 1313 applies or as part of a
distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, combined together with (I) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to this paragraph (5) has been made and (II) the
aggregate of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common Stock
concluded within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to paragraph (6) of
this Section has been made, exceeds 15% of the product of the current market
price per share of the Common Stock on the date for the determination of holders
of shares of Common Stock entitled to receive such distribution times the number
of shares of Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date for determination, the
conversion rate shall be increased so that the same shall equal the rate
determined by dividing the conversion rate in effect immediately prior to the
close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the current market price per share (determined as provided in
paragraph (8) of this Section) of the Common Stock on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined amount over such 15% and (y) the number of shares of Common Stock
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outstanding on such date for determination and (ii) the denominator of which
shall be equal to the current market price per share (determined as provided in
paragraph (8) of this Section) of the Common Stock on such date for
determination.
(6) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock shall expire and such tender offer (as
amended upon the expiration thereof) shall require the payment to stockholders
(based on the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) that
combined together with (I) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of such
tender offer, of consideration payable in respect of any other tender offer, by
the Company or any Subsidiary for all or any portion of the Common Stock
expiring within the 12 months preceding the expiration of such tender offer and
in respect of which no adjustment pursuant to this paragraph (6) has been made
and (II) the aggregate amount of any distributions to all holders of the
Company's Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to paragraph (5) of this Section has been made, exceeds 15% of the product of
the current market price per share of the Common Stock (determined as provided
in paragraph (8) of this Section) as of the last time (the "Expiration Time")
tenders could have been made pursuant to such tender offer (as it may be
amended) times the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the conversion rate shall be adjusted so that the same shall
equal the price determined by dividing the conversion rate immediately prior to
close of business on the date of the Expiration Time by a fraction (i) the
numerator of which shall be equal to (A) the product of (I) the current market
price per share of the Common Stock (determined as provided in paragraph (8) of
this Section) on the date of the Expiration Time and (II) the number of shares
of Common Stock outstanding (including any tendered shares) on the Expiration
Time less (B) the amount of cash plus the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms
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of the tender offer) of Purchased Shares, and (ii) the denominator of which
shall be equal to the product of (A) the current market price per share of the
Common Stock (determined as provided in paragraph (8) of this Section) as of the
Expiration Time and (B) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted up to any such maximum, being referred to as the "Purchased
Shares").
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 1311 applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination" within
the meaning of paragraph (4) of this Section), and (b) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(8) For the purpose of any computation under paragraphs (2), (4), (5)
and (6) of this Section, the current market price per share of Common Stock on
any day shall be deemed to be the average of the daily Closing Prices for the 5
consecutive Trading Days selected by the Company commencing not more than 20
Trading Days before, and ending not later than, the earlier of the day in
question and the day before the "ex" date with respect to the issuance or
distribution requiring such computation. The "Closing Price" for each day shall
be the reported last sale price regular way or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the American Stock Exchange or, if the
Common Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers Automated
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Quotations National Market System ("NASDAQ/NMS") or, if the Common Stock is not
listed or admitted to trading on any national securities exchange or quoted on
such National Market System, the average of the closing bid and asked prices in
the over-the-counter market as furnished by any American Stock Exchange member
firm selected from time to time by the Company for that purpose. For purposes of
this paragraph, the term "'ex' date", when used with respect to any issuance or
distribution, shall mean the first date on which the Common Stock trades regular
way on such exchange or in such market without the right to receive such
issuance or distribution.
(9) No adjustment in the conversion rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(9)) would require an increase or decrease of at least 1% in such rate;
provided, however, that any adjustments which by reason of this paragraph (9)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this paragraph (9) shall be
made to the nearest cent.
(10) The Company may make such increases in the conversion rate, in
addition to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this
Section, as it considers to be advisable in order to avoid or diminish any
income tax to any holders of shares of Common Stock resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes.
SECTION 1305. Notice of Adjustments of Conversion Rate.
Whenever the conversion rate is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion rate in
accordance with Section 1304 and shall prepare a certificate signed by the
Treasurer of the Company setting forth the adjusted conversion rate and
showing in reasonable detail the facts upon which such adjustment is
based, and such certificate shall forthwith be filed at each office or
agency maintained for the purpose of conversion of securities pursuant to
Section 1002; and
(b) a notice stating that the conversion rate has been adjusted and
setting forth the adjusted conversion
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rate shall forthwith be required, and as soon as practicable after
it is required, such notice shall be mailed by the Company to all Holders
at their last addresses as they shall appear in the Security Register.
SECTION 1306. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than in cash out of its earned
surplus; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation, merger or share exchange to which
the Company is a party and for which approval of any stockholders of the
Company is required, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 1002, and shall
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register, at least 20 days (or 10 days in any case specified in
clause (a) or (b) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or warrants, or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable
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upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up. Neither the failure to give
such notice nor any defect therein shall affect the legality or validity of the
proceedings described in clauses (a) through (d) of this Section 1306. If at the
time the Trustee shall not be the conversion agent, a copy of such notice shall
also forthwith be filed by the Company with the Trustee.
SECTION 1307. Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all outstanding Securities.
SECTION 1308. Taxes on Conversions.
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Securities
pursuant hereto. The Company shall not, however, be required to pay any tax
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 the Holder of
the Security or Securities to be converted, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
SECTION 1309. Covenant as to Common-Stock.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issue be newly issued (and not
treasury shares) and be duly authorized, validly issued, fully paid and
nonassessable and, except as provided in Section 1308, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
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SECTION 1310. Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee to be cancelled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309.
SECTION 1311. Provisions in Case of Consolidation, Merger
or Sale of Assets.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any sale or transfer of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Trustee a supplemental indenture providing that the Holder of each Security
then outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 1301, to convert such
Security only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which such Security might
have been converted immediately prior to such consolidation, merger, sale or
transfer, assuming such holder of Common Stock of the Company is not a Person
with which the Company consolidated or into which the Company merged or which
merged into the Company or to which such sale or transfer was made, as the case
may be ("constituent Person"), or an Affiliate of a constituent Person, and
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer is
not the same for each share of Common Stock of the Company held immediately
prior to such consolidation, merger, sale or transfer by others than a
constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this Section the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such supplemental indenture
shall
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provide for adjustments which, for events subsequent to the effective date of
such supplemental indenture, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Article. The above provisions of this
Section shall similarly apply to successive consolidations, mergers, sales or
transfers.
SECTION 1312. Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment under this
Article should be made, how it should be made or what it should be. The Trustee
makes no representation as to the validity or value of any securities or assets
issued upon conversion of Securities. The Trustee shall not be responsible for
the Company's failure to comply with this Article. Each Conversion Agent other
than the Company shall have the same protection under this Section as the
Trustee.
ARTICLE FOURTEEN
Repurchase of Securities at the Option of the
Holder Upon a Change in Control
SECTION 1401. Right to Require Repurchase.
In the event that a Change in Control (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, to require
the Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Securities, or any portion of the principal
amount thereof that is an integral multiple of $1,000, on the date (the
"Repurchase Date") that is 45 days after the date of the Company Notice (as
defined in Section 1402) for cash at a purchase price equal to 100% of the
principal amount of the Securities to be repurchased (the "Repurchase Price"),
together in each case with accrued interest to the Repurchase Date. Such right
to require the repurchase of the Securities shall not continue after a discharge
of the Company from its obligations with respect to the Securities in accordance
with Article Four, unless a Change in Control shall have occurred prior to such
discharge.
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SECTION 1402. Notices; Method of Exercising
Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for redemption all
of the Outstanding Securities, on or before the 30th day after the occurrence of
a Change in control, the Company or, at the request of the Company, the Trustee,
shall mail to all Holders a notice (the "Company Notice") of the occurrence of
the Change in Control and of the repurchase right set forth herein arising as a
result thereof. The Company shall also deliver a copy of such notice of a
repurchase right to the Trustee and cause a copy of such notice of a repurchase
right, or a summary of the information contained therein, to be published in a
newspaper of general circulation in The City of New York.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must follow to
exercise a repurchase right, and
(5) the conversion rate then in effect, the date on which the right
to convert the principal amount of the Securities to be repurchased will
terminate and the place or places where such Securities may be surrendered
for conversion.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions are inconsistent with applicable
law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Securities to be
repurchased, a statement that an election to exercise the repurchase right is
being made thereby, and (ii) the Securities with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the
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Company. Such written notice shall be irrevocable, except that the right of the
Holder to convert the Securities with respect to which the repurchase right is
being exercised shall continue until the close of business on the second Trading
Day preceding the Repurchase Date.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the Repurchase
Price in cash to the Holder on the Repurchase Date, together with accrued and
unpaid interest to the Repurchase Date payable with respect to the Securities as
to which the purchase right has been exercised; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash to the Holders of such Securities, or one or more predecessor
Securities, registered as such at the close of business on the relevant Regular
Record Date according to the terms and provisions of Article Three.
(d) If any Security surrendered for repurchase shall not be so paid on
the Repurchase Date, the principal shall, until paid, bear interest to the
extent permitted by applicable law from the Repurchase Date at the rate borne by
the Security and each Security shall remain convertible into Common Stock until
the principal of such Security shall have been paid or duly provided for.
(e) Any security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, containing identical terms and conditions,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
SECTION 1403. Certain Definitions.
For purposes of this Article Fourteen,
(a) the term "beneficial owner" shall be determined in accordance with
Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the Securities and Exchange Commission pursuant to the
Exchange Act, as amended;
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(b) the term "Person", for purposes of the definition of Change in
Control, shall include any syndicate or group which would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act, as amended, as in effect on
the date of the original execution of this Indenture;
(c) a "Change in Control" shall be deemed to have occurred at such time
as:
(i) any Person (other than the Company, any Subsidiary of the
Company or any employee benefit plan of the Company) is or
becomes the beneficial owner, directly or indirectly, through
a purchase, merger or other acquisition transaction or series
of transactions, of shares of capital stock of the Company
entitling such Person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company
entitled to vote generally in the elections of directors (any
shares of voting stock of which such person or group is the
beneficial owner that are not then outstanding being deemed
outstanding for purposes of calculating such percentage); or
(ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person
into the Company, or any sale or transfer of all or
substantially all of the assets of the Company to another
Person (other than a merger (x) which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock or (y) which is effected
solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock into solely
shares of Common Stock);
provided, however, that a Change in Control with respect to the Securities shall
not be deemed to have occurred if with respect to clause (ii) above, all the
consideration (excluding cash payments for fractional shares) to be paid for the
Common Stock in the transaction or transactions
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constituting the Change in Control consists of shares of common stock traded on
a national securities exchange or quoted on the NASDAQ/NMS and as a result of
such transaction or transactions the Securities become convertible solely into
such common stock.
________________________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
INTERMAGNETICS GENERAL CORPORATION
By /s/ Carl H. Rosner
----------------------
Name: Carl H. Rosner
Title: President
[Seal]
Attest:
/s/ Alfred L. Goldberger
- -----------------------------
Name: Alfred L. Goldberger
Secretary
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By
--------------------------------------
Name:
Title:
[Seal]
Attest:
- -----------------------------
Name:
Title:
-98-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
INTERMAGNETICS GENERAL CORPORATION
By
--------------------------------------
Name:
Title:
[Seal]
Attest:
- -----------------------------
Name:
Secretary
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By /s/ Herbert J. Lemmer
----------------------------
Name: Herbert J. Lemmer
Title: VICE PRESIDENT
[Seal]
Attest:
/s/ Susan Silber
- ----------------------------
Name: Susan Silber
Title: ASSISTANT SECRETARY
-99-
<PAGE>
State of New York )
ss.:
County of Albany )
On the 20th day of September 1993, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
President of Intermagnetics General Corporation, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
/s/ Myron E. Leach
------------------------------------
MYRON E. LEACH
Notary Public, State of New York
Presiding in Albany County
Commission Expires
)
ss.:
)
On the _________ day of ________ 1993, before me personally came
____________, to me known, who, being by me duly sworn, did depose and say
that __________________________ is ________________ of __________________,
one of the corporations described in and which executed the foregoing
instrument; that she knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation, and that she signed her name
thereto by like authority.
-100-
<PAGE>
)
ss.:
)
On the ________ day of ________, 1993, before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he is _____________________________________ of Intermagnetics General
Corporation, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
________________________________
STATE OF NEW YORK )
ss.:
COUNTY OF KINGS )
On the 15th day of September, 1993, before me personally came Herbert J.
Lemmer to me known, who, being by me duly sworn, did depose and say that he is
a Vice President of American Stock Transfer & Trust Company, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
/s/ James E. Hogan
------------------------------------
JAMES E. HOGAN
Notary Public, State of New York
No. 30-4518684
Qualified in Nassau County
Commission Expires April 30, 1994
<PAGE>
EXHIBIT A
Form of Certificate to be Delivered
in connection with Transfers
pursuant to Regulation S
_______________, ______
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Corporate Trust Office
Re: Intermagnetics General Corporation
(the "Company") 5.75% Convertible
Subordinated Debentures
Due 2003 (the "Securities")
----------------------------------
Dear Sirs:
In connection with our proposed sale of $ ______ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to an in accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly we represent that:
(1) the offer of the securities was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been prearranged
with a buyer in the United States
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) of Regulation S, as
applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933; and
(5) the Securities to be transferred are not in denominations smaller
than $50,000.
In addition, if the sale is made during a restricted period and the provision of
Rule 903(c)(2) or (3) or Rule 904(l) of Regulation S are applicable thereto, we
confirm that such sale has been made in accordance with the applicable
A-1
<PAGE>
provisions of Rule 903(c)(2) or (3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative legal proceedings or official inquiry with respect
to the matters covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _______________________
Authorized Signature
A-2
<PAGE>
EXHIBIT B
Form of Certificate to be Delivered
in connection with Transfers to
Non-QIB Accredited Investors
_______________, ______
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Corporate Trust Office
Re: Intermagnetics General Corporation
(the "Company") 5.75% Convertible
Subordinated Debentures
Due 2003 (the "Securities")
----------------------------------
Dear Sirs:
In connection with our proposed purchase of $______ aggregate principal
amount of the Securities, we confirm that:
1. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
dated as of September 15, 1993 relating to the Securities (the
"Indenture") and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Securities except in compliance with,
such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
2. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not
be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Securities, we
will do so only (A) to the Company or any subsidiary thereof, (B) inside
the United States in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) inside the
United States to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes to you a signed letter
substantially in the form of this letter, (D) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act or (E)
pursuant to the exemption from registration provided by Rule 144
B-1
<PAGE>
under the Securities Act, and we further agree to provide to any person
purchasing any of the Securities from us a notice advising such purchaser
that resales of the Securities are restricted as stated herein.
3. We understand that, on any proposed resale of any Securities, we
will be required to furnish to you and the Company such certifications,
legal opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional investor and an "accredited investor"
(as defined in Rule 501(a) of Regulation D under the Securities Act) (an
"Accredited Investor") and understand that we may not hold any Securities
in denominations smaller than $50,000, and have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment. We understand that we may not
transfer any Securities to any Accredited Investor who is not a QIB unless
the aggregate principal amount transferred exceeds $250,000, except that
we may transfer a smaller principal amount if such principal amount
constitutes all of the Securities owned by us.
5. (A) We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an Accredited
Investor) as to each of which we exercise sole investment discretion; if
we are purchasing for the accounts of other Accredited Investors, (1) we
reasonably believe that each such Accredited Investor can bear the
economic risk of its investment in the Securities and (2) we have all
necessary authority to make the foregoing representations on behalf of,
and to act for, each such Accredited Investor, or (B) we are a "bank",
within the meaning of Section 3(a)(2) of the Securities Act, or a "savings
and loan association" or other institution described in Section 3(a)(5)(A)
of the Securities Act that is acquiring the Securities as fiduciary for
the account of one or more institutions for which we exercise sole
investment discretion.
6. We are not acquiring the Securities with a view to distribution
thereof or with any present intention of offering or selling any of the
Securities,
B-2
<PAGE>
except pursuant to an effective registration statement under the
Securities Act or (a) inside the United States in accordance with Rule
144A under the Securities Act or (b) outside the United States in
accordance with Regulation S under the Securities Act.
We acknowledge that you, the Issuer, and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete. We hereby irrevocably agree that this
letter or a copy hereof may be produced to any interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
We hereby certify that all necessary action has been taken to authorize
the purchase of the Securities and the execution of this letter.
Very truly yours,
[Name of Transferee]
By:_______________________
Authorized Signature
B-3
<PAGE>
Exhibit 4.2
SECOND AMENDED AND RESTATED LOAN
AND AGENCY AGREEMENT
among
INTERMAGNETICS GENERAL CORPORATION
APD CRYOGENICS INC.
MAGSTREAM CORPORATION
MEDICAL ADVANCES, INC.
INTERCOOL ENERGY CORPORATION
and
CORESTATES BANK, N.A. AND THE OTHER BANKS PARTY HERETO
with
CORESTATES BANK, N.A.
as Agent
October 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. CERTAIN DEFINITIONS..................................................................................1
1.1 Definitions...................................................................................1
1.2 Accounting Terms..............................................................................8
II. THE CREDIT 9
2.1 Revolving Credit Loans........................................................................9
2.2 The Revolving Credit Notes....................................................................10
2.3 Funding Procedures............................................................................10
2.4 Interest......................................................................................12
2.5 Fees..........................................................................................14
2.6 Reduction or Termination of Aggregate Revolving Loan Commitment...............................14
2.7 Voluntary Prepayments.........................................................................14
2.8 Payments......................................................................................15
2.9 Changes in Circumstances; Yield Protection....................................................16
2.10 Illegality....................................................................................18
2.11 Joint and Several Liability...................................................................18
2.12 Optional Cash Management Facility.............................................................18
III. REPRESENTATIONS AND WARRANTIES 19
3.1 Good Standing of the Borrowers; Authorization.................................................19
3.2 Compliance with Laws and Other Agreements.....................................................19
3.3 No Conflict; Governmental Approvals...........................................................19
3.4 Financial and Other Information Regarding Borrowers...........................................19
3.5 Taxes.........................................................................................20
3.6 Liens and Guaranties..........................................................................20
3.7 Material Adverse Changes......................................................................20
3.8 Compliance with Federal Reserve Board Regulations.............................................20
3.9 ERISA.........................................................................................21
3.10 Pending Litigation............................................................................21
3.11 Valid, Binding and Enforceable................................................................21
3.12 No Untrue Statements..........................................................................21
IV. CONDITIONS PRECEDENT 21
4.1 Conditions Precedent to All Loans.............................................................21
4.2 Conditions Precedent to First Loan............................................................22
V. AFFIRMATIVE COVENANTS 23
5.1 Use of Proceeds...............................................................................23
5.2 Accounting Records, Reports and Financial Statements..........................................23
5.3 Ordinary Course of Business; Records..........................................................24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
5.4 Information for the Banks.....................................................................24
5.5 Insurance.....................................................................................24
5.6 Maintenance...................................................................................25
5.7 Taxes.........................................................................................25
5.8 Leases........................................................................................25
5.9 Corporate Existence; Certain Rights; Laws.....................................................25
5.10 Notice of Litigation..........................................................................25
5.11 Indebtedness..................................................................................25
5.12 Notice of Events of Default...................................................................26
5.13 ERISA.........................................................................................26
5.14 Deposit Accounts..............................................................................26
5.15 Management....................................................................................26
5.16 Financial Covenants...........................................................................26
VI. NEGATIVE COVENANTS 26
6.1 Fundamental Corporate Changes.................................................................27
6.2 Indebtedness..................................................................................27
6.3 Liens.........................................................................................27
6.4 Guaranties....................................................................................28
6.5 Sales and Lease-Backs.........................................................................28
6.6 Loans; Investments............................................................................28
6.7 Change in Business............................................................................28
6.8 Sale or Discount of Receivables...............................................................28
6.9 ERISA.........................................................................................28
6.10 Restricted Payments...........................................................................29
VII. DEFAULT 29
7.1 Borrowers' Failure to Pay.....................................................................29
7.2 Breach of Covenants or Conditions.............................................................29
7.3 Defaults in Other Agreements..................................................................29
7.4 Agreements Invalid............................................................................29
7.5 False Warranties; Breach of Representations...................................................30
7.6 Judgments.....................................................................................30
7.7 Bankruptcy or Insolvency of a Borrower........................................................30
VIII. REMEDIES 31
8.1 Further Advances; Acceleration; Setoff........................................................31
8.2 Further Remedies..............................................................................32
IX. AGENT 32
9.1 Appointment and Authorization.................................................................32
9.2 Duties and Obligations........................................................................32
9.3 The Agent as a Bank...........................................................................33
9.4 Independent Credit Decisions..................................................................33
9.5 Indemnification...............................................................................33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.6 Successor Agent...............................................................................34
9.7 Allocations Made By Agent.....................................................................34
9.8 Benefits of Article IX........................................................................34
9.9 Mutual Disclosure.............................................................................35
9.10 Reports and Notices..........................................................................35
X. MISCELLANEOUS 35
10.1 Waiver........................................................................................35
10.2 Amendments....................................................................................35
10.3 Governing Law.................................................................................35
10.4 Participations and Assignments................................................................36
10.5 Captions......................................................................................37
10.6 Notices.......................................................................................37
10.7 Sharing of Collections, Proceeds and Set-Offs; Application of Payments........................38
10.8 Expenses of the Agent; Indemnification of the Agent and the Banks.............................39
10.9 Survival of Warranties and Certain Agreements.................................................40
10.10 Severability..................................................................................40
10.11 Banks' Obligations Several; Independent Nature of Banks' Rights...............................40
10.12 No Fiduciary Relationship.....................................................................40
10.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS................................................41
10.14 WAIVER OF JURY TRIAL..........................................................................41
10.15 Counterparts; Effectiveness...................................................................41
10.16 Use of Defined Terms..........................................................................42
</TABLE>
<PAGE>
LIST OF EXHIBITS:
Exhibit A Form of Borrowing Notice
Exhibit B Form of Covenant Compliance Certificate
Exhibit C Form of Competitive Bid Note
LIST OF SCHEDULES:
Schedule A Applicable Margin for LIBO Rate Loans
Schedule 3.4(c) Borrowers' Investments
Schedule 5.16 Financial Covenants
Schedule 6.2 Existing Indebtedness
<PAGE>
SECOND AMENDED AND RESTATED LOAN AND AGENCY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND AGENCY AGREEMENT, dated as of
October 23, 1997 (this "Agreement"), is entered into by and among INTERMAGNETICS
GENERAL CORPORATION, a New York corporation ("IGC"), APD CRYOGENICS INC., a
Pennsylvania corporation ("APD"), MAGSTREAM CORPORATION, a New York corporation
("MC"), MEDICAL ADVANCES, INC., a Wisconsin corporation ("MA"), and INTERCOOL
ENERGY CORPORATION, a Delaware corporation ("IEC") (each, a "Borrower" and
collectively, the "Borrowers"), the banking institutions signatories hereto and
such other institutions that hereafter become a "Bank" pursuant to Section 10.4
hereof (each, a "Bank" and collectively, the "Banks") and CORESTATES BANK, N.A.,
a national banking association ("CoreStates"), as agent for the Banks under this
Agreement (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Agent and IGC, APD and MC (collectively, the "Existing
Borrowers") are parties to a certain Amended and Restated Loan Agreement dated
as of December 23, 1991, as amended on February 26, 1992, June 14, 1994, and
August 1, 1994 (as amended, the "Existing Loan Agreement"), pursuant to which
the Agent has made available to the Existing Borrowers certain credit
facilities.
WHEREAS, the parties hereto desire to amend and restate the Existing
Loan Agreement in its entirety to, among other things: add MA and IEC (the "New
Borrowers") as additional co-borrowers; add the Banks other than the Agent as
additional co-lenders; and set forth the terms on which the Agent shall act as
agent for the Banks; and
WHEREAS, the Banks and the Borrowers desire the Agent, and the Agent
has agreed, to act as the agent for the Banks as provided herein.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree to amend and restate the Existing
Loan Agreement in its entirety as follows:
I. CERTAIN DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have these meanings:
"Additional Amount" shall have the meaning set forth in Section 2.1.
"Adjusted Base Rate" shall mean the Base Rate less one-half of one
percent (0.5%).
<PAGE>
"Affiliate" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with any Borrower or
any Subsidiary; (2) which directly or indirectly beneficially owns or holds ten
percent (10%) or more of any class of voting stock of any Borrower or any
Subsidiary; or (3) ten percent (10%) or more of the voting stock of which is,
directly or indirectly, beneficially owned or held by any Borrower or any
Subsidiary. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" shall mean this Second Amended and Restated Loan and Agency
Agreement, as amended, supplemented, or modified from time to time, and all
exhibits and schedules attached hereto.
"Aggregate Revolving Loan Commitment" shall have the meaning set forth
in Section 2.1.
"Applicable Margin" shall mean the margin applicable to LIBO Rate
Loans, determined in accordance with Schedule A hereto.
"Base Rate" shall mean, for any day, the prime commercial lending rate
of CoreStates, as announced from time to time at its head office, calculated on
the basis of the actual number of days elapsed in a year of 360 days.
"Base Rate Loans" shall mean Revolving Credit Loans accruing interest
based on the Adjusted Base Rate.
"Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks in Philadelphia are authorized or required
to close under the laws of the Commonwealth of Pennsylvania and, if the
applicable day relates to a LIBO Rate Loan, or notice with respect to a LIBO
Rate Loan, a day on which dealings in Dollar deposits are also carried on in the
London interbank market and banks are open for business in London ("London
Business Day").
"Capitalized Lease" shall mean all lease obligations of any Person for
any property (whether real, personal or mixed) which have been or should be
capitalized on the books of the lessee in accordance with Generally Accepted
Accounting Principles.
"Closing Date" shall mean the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and all rules and regulations with respect thereto in effect from
time to time.
"Commitment Percentage" shall mean with respect to each Bank, the
percentage set forth opposite its name on the signature page hereof.
<PAGE>
"Competitive Bid Loan" shall mean a Loan made by a Bank to the
Borrowers pursuant to Section 2.4(c) hereof.
"Competitive Bid Notes" shall mean notes issued by the Borrowers to
evidence Loans made pursuant to Section 2.4(c) hereof.
"Covenant Compliance Certificate" shall mean a certificate, completed
by the Chief Financial Officer of IGC on behalf of the Borrowers and submitted
to the Agent, in the form of Exhibit B hereto.
"Current Assets" shall mean, at any time, all assets which, in
accordance with GAAP, should be classified as current assets of any Borrower.
"Default Rate" on any Loan shall mean the lower of (i) 2% per annum
above the Base Rate; or (ii) the highest interest rate permitted by applicable
law.
"Dollars" shall mean the lawful currency of the United States of
America.
"EBITDA" shall mean, for any period, the sum (without duplication) of
(i) Net Income, (ii) provision for taxes based on income, (iii) Interest
Expenses, and (iv) to the extent Net Income has been reduced thereby,
amortization expense, depreciation expense and other expenses not ultimately
settled in cash, all as determined for the Borrowers on a consolidated basis in
accordance with GAAP.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the
same controlled group of corporations as any Borrower within the meaning of
Section 414(b) of the Code, or any trade or business which is under common
control with any Borrower within the meaning of Section 414(c) of the Code.
"Event of Default" shall have the meaning set forth in Section 7.1.
"Environmental Laws" shall mean the Federal Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.ss. 9601, et seq., the
Federal Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901, et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 1801, et seq., all
other federal, state and local environmental or health laws applicable to any
Borrower or its business, operations or assets now or hereafter enacted, and all
rules, regulations, orders and publications adopted or promulgated pursuant
thereto from time to time.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal
<PAGE>
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that if the day for which
such rate is to be determined is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day.
"Guaranty" shall mean any guaranty or other agreement to be a surety or
other contingent liability (other than any endorsement for collection or deposit
in the ordinary course of business), direct or indirect, with respect to any
obligation of another Person.
"Generally Accepted Accounting Principles" or "GAAP" shall mean
generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.
"Governmental Authority" shall mean the federal, state, county or
municipal government, or any department, agency, bureau or other similar type
body obtaining authority therefrom or created pursuant to any laws, including,
without limitation, Environmental Laws.
"Indebtedness" shall mean any obligation for borrowed money, including,
without limitation: (i) any obligation owed for all or any part of the purchase
price of property or other assets or for the cost of property or other assets
constructed or improvements thereto, other than accounts payable included in
current liabilities and incurred in respect of property purchased in the
ordinary course of business; and (ii) any Capitalized Lease obligation.
"Interest Expenses" shall mean, for any period, the gross interest
expense for the Borrowers on a consolidated basis for such period, as determined
in accordance with GAAP.
"Interest Period" shall mean, with respect to any LIBO Rate Loan, each
period commencing on the date any such Loan is made or, with respect to a Loan
being renewed, the last day of the next preceding Interest Period with respect
to a Loan, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day of the calendar month) in the
first, second, third or sixth calendar month thereafter as selected under the
procedures specified in Section 2.3, if the Banks are then offering LIBO Rate
Loans for such period; provided that each LIBO Rate Loan Interest Period which
would otherwise end on a day which is not a Business Day (or, for purposes of
Loans to be repaid on a London Business Day, such day is not a London Business
Day) shall end on the next succeeding Business Day (or London Business Day, as
appropriate) unless such next succeeding Business Day (or London Business Day,
as appropriate) falls in the next succeeding calendar month, in which case the
Interest Period shall end on the next preceding Business Day (or London Business
Day, as appropriate).
"LIBO Rate" shall mean, for the applicable Interest Period, (i) the
rate, rounded upwards to the next one-sixteenth of one percent, determined by
the Agent two London Business Days prior to the date of the corresponding LIBO
Rate Loan, at which the Agent is offered deposits in dollars at approximately
11:00 A.M. London time by leading banks in the interbank eurodollar or
eurocurrency market for delivery on the date of such Loan in an amount and for a
period
<PAGE>
comparable to the amount and Interest Period of such Loan and in like
funds, divided by (ii) a number equal to one (1.0) minus the LIBO Rate Reserve
Percentage. The LIBO Rate shall be adjusted automatically with respect to any
LIBO Rate Loan outstanding on the effective date of any change in the LIBO Rate
Reserve Percentage, as of such effective date. LIBO Rate shall be calculated on
the basis of the number of days elapsed in a year of 360 days.
"LIBO Rate Reserve Percentage" shall mean, for any LIBO Rate Loan for
any Interest Period therefor, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by the Agent against "Eurocurrency
liabilities" (as such term is used in Regulation D) but without benefit of
credit proration, exemptions, or offsets that might otherwise be available to
the Agent from time to time under Regulation D. Without limiting the effect of
the foregoing, the LIBO Rate Reserve Percentage shall reflect any other reserves
required to be maintained by the Agent against (1) any category of liabilities
which includes deposits by reference to which the rate for LIBO Rate Loans is to
be determined; or (2) any category of extension of credit or other assets which
include LIBO Rate Loans.
"LIBO Rate Loans" shall mean Revolving Credit Loans accruing interest
based on the LIBO Rate.
"Lien" shall mean any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any kind
securing satisfaction of an obligation, including any agreement to give any of
the foregoing, any conditional sales or other title retention agreement, any
lease in the nature thereof, and the filing of or the agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction or
similar evidence of any encumbrance, whether within or outside the United
States.
"Loan" or "Loans" shall mean a Revolving Credit Loan or Revolving
Credit Loans and a Competitive Bid Loan or Competitive Bid Loans.
"Loan Documents" shall mean this Agreement, the Notes, and each other
agreement, document and instrument executed in connection herewith.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
ERISA Section 4001(a)(3), which covers employees of any Borrower or any ERISA
Affiliate.
"Net Income" shall mean, for any period, the consolidated net income
(after the deduction of federal and state income taxes) of the Borrowers,
determined in accordance with GAAP, excluding:
(a) the proceeds of any insurance policy;
(b) any gain or loss arising from:
(1) the sale or other disposition of any assets,
other than in the ordinary course of
business (other than Current Assets);
<PAGE>
(2) any write-up of assets; or
(3) the acquisition of outstanding securities
representing Indebtedness of any
Borrower;
(c) any earnings, prior to the date of acquisition,
of any Person acquired in any manner;
(d) any earnings of a successor to or transferee of the
assets of any Borrower prior to
becoming such successor or transferee;
(e) any deferred credit (or amortization of a deferred
credit) arising from the acquisition of any Person;
and
(f) any other item constituting an extraordinary gain or
loss under GAAP.
"Notes" shall mean the Revolving Credit Notes and Competitive Bid
Notes.
"Obligations" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
the Banks or the Agent by or from the Borrowers or any Subsidiary arising out of
this Agreement or any other Loan Document, including, without limitation, all
obligations to repay principal of and interest on all the Revolving Credit
Loans, and to pay interest, fees, costs, charges, expenses, professional fees,
and all sums chargeable to the Borrowers or any Subsidiary or for which any
Borrower or any Subsidiary is liable as indemnitor under the Loan Documents,
whether or not evidenced by any note or other instrument.
"Operating Lease" shall mean an operating lease as defined by Generally
Accepted Accounting Principles, excluding all leases the expenses for which may
be charged to a customer of any Borrower pursuant to the written terms of the
contract with such customer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" shall mean, at any time, any Plan (including a
Multiemployer Plan), the funding requirements of which (under ERISA Section 302
or Code Section 412) are, or at any time within the six years immediately
preceding the time in question were, in whole or in part, the responsibility of
any Borrower or any ERISA Affiliate.
"Permitted Acquisitions" shall mean acquisitions by the Borrowers, or
any of them, of the assets and/or capital stock of other businesses and/or
Persons, for which cash consideration (net of any cash acquired directly by the
Borrowers or retained by the entity that is acquired by the Borrowers as part of
the acquisition transaction) is paid in an amount not to exceed $10,000,000 in
the aggregate between the Closing Date and the Revolver Termination Date.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity, or other entity of
whatever nature.
"Plan" shall mean an employee benefit plan as defined in Section 3(3)
of ERISA, other than a Multiemployer Plan, whether formal or informal and
whether legally binding or not.
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"Potential Default" shall mean an event, condition or circumstance that
with the giving of notice or lapse of time or both would become an Event of
Default.
"Regulation" shall mean any statute, law, ordinance, regulation, order
or rule of any United States or foreign, federal, state, local or other
government or governmental body, including, without limitation, those covering
or related to banking, financial transactions, securities, public utilities,
environmental control, energy, safety, health, transportation, bribery, record
keeping, zoning, anti-discrimination, antitrust, wages and hours, employee
benefits, and price and wage control matters.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as it may be amended from time to time.
"Regulatory Change" shall mean any change after the date of this
Agreement in any Regulation (including Regulation D) or the adoption or making
after such date of any interpretations, directives or requests of or under any
Regulation (whether or not having the force of law) by any court or governmental
or monetary authority charged with the interpretation or administration thereof
applying to a class of banks including any one of the Banks but excluding any
foreign office of any Bank.
"Reportable Event" shall mean, with respect to a Pension Plan: (a) Any
of the events set forth in ERISA Sections 4043(b) (other than a reportable event
as to which the provision of 30 days' notice to the PBGC is waived under
applicable regulations) or 4063(a) or the regulations thereunder, (b) an event
requiring any Borrower or any ERISA Affiliate to provide security to a Pension
Plan under Code Section 401(a)(29) and (c) any failure by any Borrower or any
ERISA Affiliate to make payments required by Code Section 412(m).
"Required Banks" at any time shall mean Banks whose Revolving Loan
Commitments equal or exceed 51% of the total of such Revolving Loan Commitments
if no Loans are outstanding or, if Loans are outstanding, Banks whose
outstanding Loans equal or exceed 51% of the Loans; provided, however, that with
respect to Sections 5.1, 5.11, 5.14, 5.16, 6.1, 6.2, 6.3, 6.4, 6.6, 6.7, 6.8,
6.10 and 8.1 of this Agreement, the term "Required Banks" shall mean Banks whose
Revolving Loan Commitments equal 100% of the total of such Revolving Loan
Commitments if no Loans are outstanding or, if Loans are outstanding, Banks
whose outstanding Loans equal 100% of the Loans.
"Revolver Termination Date" shall have the meaning set forth in Section
2.1.
"Revolving Loan Commitment" shall have the meaning set forth in Section
2.1.
"Revolving Credit Loan" or "Loan" shall have the meaning set forth in
Section 2.1.
"Revolving Credit Note" shall have the meaning set forth in Section
2.2.
<PAGE>
"Senior Funded Debt" shall mean (i) Indebtedness, excluding
Subordinated Indebtedness; (ii) Capitalized Lease obligations; (iii) all
Guaranties, direct or indirect, except (A) those that guarantee obligations that
would already be included in this definition and (B) guarantees of obligations
arising under Operating Leases; (iv) contingent obligations in connection with
issued and outstanding standby letters of credit, except those obligations that
would already be included in this definition; and (v) obligations in connection
with bankers' acceptances.
"Subordinated Indebtedness" shall mean, at any time, all Indebtedness
of the Borrowers subordinated to the Obligations on terms reasonably
satisfactory to the Banks, including the outstanding portion of the $30,000,000
of 5.75% convertible subordinated debentures due September 19, 2003.
"Subsidiary" shall mean a corporation or other entity, the shares of
stock or other equity interests of which having ordinary voting power (other
than stock or other equity interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries or both, by any Borrower.
"Taxes" shall have the meaning set forth in Section 2.9.
"Termination Event" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination under ERISA Section 4041(c), (c) the institution of
proceedings to terminate a Pension Plan under ERISA Section 4042 or (d) the
appointment of a trustee to administer any Pension Plan under ERISA Section
4042.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with Generally Accepted Accounting
Principles consistent with those applied in the preparation of the Financial
Statements referred to in Section 3.4, and all financial data submitted pursuant
to this Agreement shall be prepared in accordance with such principles.
II. THE CREDIT
2.1 Revolving Credit Loans.
<PAGE>
(a) Subject to the terms and conditions hereof and in reliance upon
the representations, warranties and covenants contained herein, each Bank
agrees, severally and not jointly with the other Banks, to make revolving credit
loans (collectively called the "Revolving Credit Loans" and each individually a
"Revolving Credit Loan") to the Borrowers from time to time during the period
commencing on the Closing Date and ending three (3) years following the Closing
Date, or on any earlier date as provided in Section 2.7(b) or Section 8.1 hereof
(the "Revolver Termination Date"), in principal amounts not to exceed at any
time outstanding in the aggregate the amount set forth opposite the name of each
such Bank on the signature page hereof (each such amount being hereinafter
called such Bank's "Revolving Loan Commitment" and collectively, the Banks'
"Aggregate Revolving Loan Commitment"). All Loans shall be made by the Banks
simultaneously and pro rata in accordance with the Revolving Loan Commitments.
The failure of any one or more of the Banks to make Revolving Credit Loans in
accordance with its or their obligations shall not relieve the other Banks of
their several obligations under this Section 2.1(a), but in no event shall the
aggregate amount at any one time outstanding which any Bank shall be required to
lend under this Section 2.1(a) exceed the amount of such Bank's Revolving Loan
Commitment at that time.
(b) The Borrowers may request Revolving Credit Loans to bear
interest at either the Adjusted Base Rate or LIBO Rate options described in
Section 2.4. The Revolving Credit Loans outstanding at any one time may involve
any combination of such interest rate options in such amounts as the Borrowers
may determine, subject to the terms and conditions hereof, including the
requirement concerning minimum Loan requests and the requirements that (i) no
request may be made which would require more than one interest rate option or
more than one Interest Period to apply to a single Revolving Credit Loan, and
(ii) in the case of LIBO Rate Loans, no LIBO Rate Loan may have an Interest
Period extending beyond the Revolver Termination Date.
(c) Notwithstanding the foregoing, the Borrowers shall not be
entitled to a Revolving Credit Loan if, after giving effect to such Revolving
Credit Loan, the unpaid principal amount of the Revolving Credit Loans to the
Borrowers exceeds the Aggregate Revolving Loan Commitment.
(d) Except for Revolving Credit Loans which exhaust the full
remaining amount of the Aggregate Revolving Loan Commitment and conversions
which result in the conversion of all Revolving Credit Loans subject to a
particular interest rate option, each of which may be in lesser amounts, each
Loan when made and each conversion of Loans of one type into Loans of another
type hereunder shall be in an amount at least equal to $500,000 or, if greater,
then in such minimum amount plus $100,000 multiples.
(e) Within the limits of the Aggregate Revolving Loan Commitment,
the Borrowers may borrow, prepay (in accordance with Section 2.8) and reborrow
Revolving Credit Loans. All Revolving Credit Loans shall, in any event, be
repaid by the Borrowers on the Revolver Termination Date.
<PAGE>
(f) If any principal of a LIBO Rate Loan shall be voluntarily
repaid (whether upon prepayment, reduction of the Aggregate Revolving Loan
Commitment after acceleration or for any other reason) or converted to a Base
Rate Loan pursuant to Section 2.11 prior to the last day of the Interest Period
applicable to such LIBO Rate Loan or if the Borrowers fail for any reason to
borrow a LIBO Rate Loan after giving irrevocable notice pursuant to Section 2.3,
the Borrowers shall pay to each Bank, in addition to the principal and interest
then to be paid, such additional amounts as may be necessary to compensate each
Bank for all appropriate direct and indirect costs and losses (including losses
resulting from redeployment of prepaid or unborrowed funds at rates lower than
the cost of such funds to such Bank, and including lost profits incurred or
sustained by such Bank) as a result of such repayment or failure to borrow (the
"Additional Amount"). The Additional Amount (which each Bank shall take
reasonable measures to minimize) shall be specified in a written notice or
certificate delivered to the Borrowers by the Agent in the form provided by each
Bank sustaining such costs or losses. Such notice or certificate shall contain a
calculation in reasonable detail of the Additional Amount to be compensated and
shall be conclusive as to the facts and the amounts stated therein, absent
manifest error.
2.2 The Revolving Credit Notes. The Revolving Credit Loans made by each
Bank shall all be evidenced by a single promissory note of the Borrowers (each
such promissory note as it may be amended, extended, modified or renewed a
"Revolving Credit Note") in principal face amount equal to such Bank's Revolving
Loan Commitment, payable to the order of such Bank and otherwise in form and
substance satisfactory to the Banks. The Revolving Credit Notes shall be dated
the Closing Date, shall bear interest at the rate per annum and be payable as to
principal and interest in accordance with the terms hereof. The Revolving Credit
Notes shall mature upon the Revolver Termination Date, and upon maturity each
outstanding Revolving Credit Loan evidenced thereby shall be due and payable.
The Agent shall maintain records of all Loans evidenced by the Revolving Credit
Notes and of all payments thereon, which records shall be conclusive absent
manifest error.
2.3 Funding Procedures.
(a) Each request for a Revolving Credit Loan or the conversion or
renewal of an interest rate with respect to a Loan shall be made not later than
11:00 a.m. on a Business Day by delivery to the Agent of a written request
signed by IGC on behalf of the Borrowers or, in the alternative, a telephone
request followed promptly by written confirmation of the request, specifying the
date and amount of the Loan to be made, converted or renewed, selecting the
interest rate option applicable thereto, and in the case of LIBO Rate Loans,
specifying the Interest Period applicable to such Loan. The form of request
attached hereto as Exhibit A ("Borrowing Notice") shall be used to request the
making, conversion or renewal of Revolving Credit Loans unless otherwise agreed.
Each request shall be received not less than one (1) Business Day prior to the
date of the proposed borrowing, conversion or renewal in the case of Base Rate
Loans, and three (3) London Business Days prior to the date of the proposed
borrowing, conversion or renewal in the case of LIBO Rate Loans. No request
shall be effective until actually received in writing by the Agent.
<PAGE>
(b) Upon receipt of a request for a Loan or the conversion of a
Loan, and if the conditions precedent provided herein shall be satisfied at the
time of such request, the Agent promptly shall notify each Bank of such request
and of such Bank's ratable share of such Loan. Upon receipt by the Agent, the
request for a Loan or the conversion of a Loan shall not be revocable by the
Borrowers.
(c) Not later than 11:00 A.M. on the date of each Loan, each Bank
shall make available (except as provided in clause (d) below) its ratable share
of such Loan, in immediately available funds, to the Agent at the address set
forth in Section 10.6 hereof or at such account in London as the Agent shall
specify to the Borrowers and the Banks. Unless the Agent knows that any
applicable condition specified herein has not been satisfied, the Agent will
make the funds so received from the Banks immediately available to the Borrowers
on the date of each Loan by a credit to the account of the Borrowers at the
Agent's aforesaid address.
(d) Unless the Agent shall have been notified by any Bank at least
one (1) Business Day prior to the date of the making, conversion or renewal of
any LIBO Rate Loan, or by 3:00 P.M. on the date a Base Rate Loan is requested,
that such Bank does not intend to make available to the Agent such Bank's
portion of the total amount of the Loan to be made, converted or renewed on such
date, the Agent may assume that such Bank has made such amount available to the
Agent on the date of the Loan and the Agent may, in reliance upon such
assumption, make available to the Borrowers a corresponding amount. If and to
the extent such Bank shall not have made such funds available to the Agent, such
Bank agrees to repay the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrowers until the date such amount is repaid to the Agent, at
the Federal Funds Rate plus 50 basis points for three (3) Business Days, and
thereafter at the Base Rate. If such Bank shall repay to the Agent such
corresponding amount, such amounts so repaid shall constitute such Bank's Loan
for purposes of this Agreement. If such Bank does not repay such corresponding
amount forthwith upon the Agent's demand therefor, the Agent shall promptly
notify the Borrowers, and the Borrowers shall immediately pay such corresponding
amount to the Agent, without any prepayment penalty or premium, but with
interest on the amount repaid, for each day from the date such amount is made
available to the Borrowers until the date such amount is repaid to the Agent, at
the rate of interest applicable at the time to such Loan. Nothing herein shall
be deemed to relieve any Bank of its obligation to fulfill its Revolving Loan
Commitment hereunder or to prejudice any rights which the Borrowers may have
against any Bank as a result of any default by such Bank hereunder.
(e) If the Banks make a Loan on a day on which all or any part of
an outstanding Loan from the Banks is to be repaid, each Bank shall apply the
proceeds of its new Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by such Bank to the Agent as provided in clause
(c).
<PAGE>
2.4 Interest.
(a) Base Rate. Each Base Rate Loan shall bear interest on the
principal amount thereof from the date made until such Loan is paid in full or
converted, at a rate per annum equal to the Adjusted Base Rate determined from
time to time.
(b) LIBO Rate. Each LIBO Rate Loan shall bear interest on the
principal amount thereof from the date made until such Loan is paid in full,
renewed, or converted, at a rate per annum equal to the applicable LIBO Rate
plus the Applicable Margin determined from time to time.
(1) After receipt of a request for a LIBO Rate Loan, the Agent
shall proceed to determine the LIBO Rate to be applicable thereto. The Agent
shall give prompt notice by telephone or facsimile to the Borrowers and to each
Bank of the LIBO Rate thus determined in respect of each LIBO Rate Loan or any
change therein.
(2) In the event the Borrowers fail to, or are not permitted
to, select an Interest Period for any LIBO Rate Loan within the time period and
otherwise as provided herein, such Loan shall be automatically converted into a
Base Rate Loan on the last day of the Interest Period for such Loan.
(c) Competitive Bid Rate. For working capital advances, the
Borrowers may request the Agent to solicit competitive bids from the Banks for a
rate of interest (the "Competitive Bid Rate") quoted by the Banks, the amount
and duration of which Competitive Bid Rate shall be offered to the Borrowers in
each Bank's sole discretion; provided, however, that the Banks reserve the right
to limit the number of such requests for Competitive Bid Rate bids in any given
period. In the event that the Borrowers desire the Agent to solicit competitive
bids with respect to the Competitive Bid Rate, IGC, on behalf of the Borrowers,
shall notify the Agent of such request in writing in the manner set forth in
Section 10.6 hereof, with authorized signatures and with the executed original
sent to the Agent under separate cover (each, a "Request for Competitive Bids"),
the contents of which shall be irrevocable and binding on the Borrowers. The
Agent, upon receipt thereof, shall forward copies of such Request for
Competitive Bids to each Bank by telecopier on the day of such receipt in the
event that the Agent receives such Request for Competitive Bids not later than
11:00 a.m. that day and otherwise not later than 11:00 a.m. of the next Business
Day. Each Request for Competitive Bids shall specify (i) the requested borrowing
date (the "Borrowing Date"), (ii) the amount of the Loan desired, (iii) the use
of the Loan proceeds, and (iv) if applicable, the Interest Period applicable to
the desired advance. Each Bank shall have the right, but not the obligation, to
submit a bid to make such desired advance to the Borrowers; provided that such
bid, if any, shall be delivered in writing by telecopier to the Agent not later
than 11:00 a.m. on the Business Day next following the Bank's receipt of a copy
of the Request for Competitive Bids from the Agent (the "Bid Deadline"); and
provided further that such bid, if any, shall specify the principal amount which
such Bank is willing to make available to the Borrowers and the interest rate at
which such Bank is willing to make such advance available. The Agent agrees that
in the event it elects to submit a bid pursuant to such Request for Competitive
Bids, the Agent must submit its bid, if any, not later than thirty (30) minutes
prior to the Bid Deadline. The Agent shall furnish copies of the bids, if any,
which it receives on or before the Bid Deadline to IGC, by telecopier,
<PAGE>
on the day of Agent's receipt thereof in the event that the Agent receives such
bids not later than 11:00 a.m. that day and otherwise not later than the next
Business Day. IGC shall determine the aggregate amount of any of the bids, if
any, submitted by the Banks which IGC desires to accept. To the extent that IGC
desires to accept some or all of the bids so submitted, IGC shall accept the
bids in order of the lowest to highest interest rates ("Bid Rates"), and IGC
must notify the Agent by telephone, confirmed in writing delivered to the Agent
by telecopier not later than 11:00 a.m. on the Business Day next following the
date on which IGC receives copies of the bids, if any, from the Agent (the
"Acceptance Deadline"). In the event that IGC fails to so notify the Agent prior
to the Acceptance Deadline of the amount of any of the bids, if any, submitted
by the Banks which IGC desires to accept, IGC shall automatically be deemed to
have rejected all such bids. If, pursuant to a particular Request for
Competitive Bids, two or more Banks bid at the same Bid Rate and the aggregate
amount of bids accepted by IGC is less than the aggregate amount of such bids,
then the amount to be borrowed at such Bid Rate shall be allocated among such
Banks according to their respective Commitment Percentages. Any amounts advanced
by any Bank pursuant to a Request for Competitive Bids as set forth in this
Section shall be deemed to be a Loan hereunder; provided, however, that any
advance made by a Bank pursuant to a Request for Competitive Bids shall not
reduce that Bank's obligation to advance its pro rata share of any remaining
undrawn availability under the Revolving Loan Commitment of such Bank.
Notwithstanding anything herein to the contrary, each Loan pursuant to a Request
for Competitive Bids shall be in an amount equal to or in excess of $500,000 and
shall be evidenced by a promissory note in the form attached hereto as Exhibit
C, with such changes thereto as may be required by the Bank making such Loan in
order to reflect the terms of such Loan.
(d) Renewals and Conversions of Loans. The Borrowers shall have the
right to convert Base Rate Loans into LIBO Rate Loans, and vice versa, and to
renew LIBO Rate Loans from time to time, provided that: (i) IGC, on behalf of
the Borrowers, shall give the Agent notice of each permitted conversion or
renewal as provided in Section 2.3 hereof; (ii) LIBO Rate Loans may be converted
or renewed only as of the last day of the applicable Interest Period for such
Loans; and (iii) no Interest Period may be renewed if on the proposed date of
conversion an Event of Default, or Potential Default exists or would thereby
occur. The Agent shall use its best efforts to notify the Borrowers of the
effectiveness of each such conversion or renewal, and the new interest rate to
which the converted or renewed Loan is subject, as soon as practicable after the
conversion; provided, however, that any failure to give such notice shall not
affect the Borrowers' obligations or the Banks' rights and remedies hereunder in
any way whatsoever.
(e) Continuing Liability of Borrowers. The liability of the
Borrowers under this Section 2.4 shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the payments to the Banks is rescinded or must otherwise
be restored or returned upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of any Borrower or any other person, or upon or as
a result of the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to any Borrower or other Person or any
substantial part of its property, or otherwise, all as though such payment had
not been made.
<PAGE>
2.5 Fees.
(a) The Borrowers shall pay to the Agent for the ratable benefit of
the Banks, and as compensation for the Banks' Revolving Loan Commitments, a fee
(the "Commitment Fee") computed at the rate per annum equal to 12.5 basis points
(0.125%) on the average daily amount of the unused portion of the Aggregate
Revolving Loan Commitment accrued from and after the date hereof. The Commitment
Fee shall be payable in arrears on the first day of each January, April, July
and October, commencing October 1, 1997 (for the three month period or portion
thereof ended on the preceding day), and on the Revolver Termination Date.
Payment shall be made to the Agent on behalf of the Banks and the Agent shall
promptly forward to each Bank the portion of the Commitment Fee amount due such
Bank. The Commitment Fee shall be calculated on the basis of a 360 day year.
(b) The Borrowers shall pay to the Agent for its own account, the
fees and expenses agreed to between the Borrowers and the Agent in the letter
agreement between the Agent and IGC, dated , 1997 (the "Side Letter").
2.6 Reduction or Termination of Aggregate Revolving Loan Commitment.
(a) Voluntary. The Borrowers may at any time, on not less than
three (3) Business Days' written notice, terminate or permanently reduce the
Aggregate Revolving Loan Commitment pro rata among the Banks, provided that any
reduction shall be in the amount of $1,000,000 or a multiple thereof and that no
such reduction shall cause the principal amount of Loans outstanding to exceed
the Aggregate Revolving Credit Commitment as reduced.
(b) Termination. In the event the Aggregate Revolving Loan
Commitment is terminated pursuant to the terms of this Agreement, the Revolver
Termination Date shall accelerate and the Borrowers shall, simultaneously with
such termination, repay the Base Rate Loans and LIBO Rate Loans in accordance
with Section 2.8.
2.7 Voluntary Prepayments.
(a) Base Rate Loans. On one (1) Business Day's notice to the Banks,
the Borrowers may, at their option, prepay the Base Rate Loans in whole at any
time or in part from time to time, provided that each partial prepayment shall
be in the principal amount of $500,000 or, if greater, then in $100,000
multiples.
(b) LIBO Rate Loans. The Borrowers may, at their option, prepay any
LIBO Rate Loan, provided that if the Borrowers shall prepay a LIBO Rate Loan
prior to the last day of the applicable Interest Period, or shall fail to borrow
any LIBO Rate Loan on the date such Loan is to be made, the Borrowers shall pay
to each Bank, in addition to the principal and interest then to be paid in the
case of a prepayment, on such date of prepayment, the Additional Amount incurred
or sustained by such Bank as a result of such prepayment or failure to borrow as
provided in Section 2.1(f)).
<PAGE>
2.8 Payments.
(a) LIBO Rate Loans. Accrued interest on LIBO Rate Loans with
Interest Periods of one, two or three months shall be due and payable on the
last day of such Interest Period. Accrued interest on LIBO Rate Loans with
Interest Periods of six months shall be due and payable at the end of the third
month and on the last day of such Interest Period.
(b) Base Rate Loans. Accrued interest on all Base Rate Loans shall
be due and payable on the first Business Day of each month and upon the Revolver
Termination Date.
(c) Form of Payments; Application of Payments; Payment
Administration, Etc. Provided that no Event of Default or Potential Default then
exists, all payments and prepayments shall be applied to the Loans in such order
and to such extent as shall be specified by the Borrowers, by written notice to
the Agent at the time of such payment or prepayment. Except as otherwise
provided herein, all payments of principal, interest, fees, or other amounts
payable by the Borrowers hereunder shall be remitted to the Agent on behalf of
the Banks at the address set forth opposite its name on the signature page
hereof or at such office or account as the Agent shall specify to the Borrowers
and the Banks, in immediately available funds not later than 2:00 p.m. on the
day when due. The Agent will promptly distribute to each Bank by wire transfer
in immediately available funds each Bank's pro rata share of such payment based
upon such Bank's Commitment Percentage. Whenever any payment is stated as due on
a day which is not a Business Day, the maturity of such payment shall, except as
otherwise provided in the definition of "Interest Period" in Section 1.1, be
extended to the next succeeding Business Day and interest and commitment fees
shall continue to accrue during such extension. Each Borrower authorizes the
Agent to deduct from any account of any Borrower maintained at the Agent or over
which the Agent has control any amount payable under this Agreement, the Notes
or any other Loan Document which is not paid in a timely manner. The Agent's
failure to deliver any bill, statement or invoice with respect to amounts due
under this Section or under any Loan Document shall not affect the Borrowers'
obligations to pay any installment of principal, interest or any other amount
under this Agreement when due and payable.
(d) Net Payments. All payments made to the Banks and the Agent by
the Borrowers hereunder, under any Note or under any other Loan Document will be
made without set off, counterclaim or other defense. All such payments will be
made free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature, now or hereafter imposed, by any jurisdiction or any political
subdivision or taxing authority thereof or therein (but excluding, except as
provided below, any Bank Taxes (as defined herein)), and all interest, penalties
or similar liabilities with respect thereto (collectively, together with any
amounts payable pursuant to the next sentence, "Taxes"). The Borrowers shall
also reimburse each Bank, upon the written request of such Bank, for Taxes
imposed on or measured by the gross or net income of such Bank pursuant to the
laws of the United States of America (or any State or political subdivision
thereof), or the jurisdiction (or any political subdivision or taxing authority
thereof) in which the principal office or applicable lending office of such Bank
is located (collectively, "Bank Taxes") as such Bank shall determine are payable
by such Bank due to the amount of Taxes paid to or on behalf of such Bank
pursuant to this or the preceding sentence. If any Taxes are so levied or
imposed, each Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be
<PAGE>
necessary so that every payment of all amounts due hereunder, under any Note or
under any other Loan Document, after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein or in such
Note. Each Borrower will furnish to the Agent upon request certified copies of
tax receipts evidencing such payment by such Borrower. The Borrowers will, on a
joint and several basis, indemnify and hold harmless the Agent and each Bank,
and reimburse the Agent or such Bank upon its written request, for the amount of
any Taxes so levied or imposed and paid or withheld by such Bank.
2.9 Changes in Circumstances; Yield Protection.
(a) If any Regulatory Change or compliance by the Banks with any
request made after the date of this Agreement by the Board of Governors of the
Federal Reserve System or by any Federal Reserve Bank or other central bank or
fiscal, monetary or similar authority (in each case whether or not having the
force of law) shall:
(i) impose, modify or make applicable any reserve, special
deposit, Federal Deposit Insurance Corporation premium or similar
requirement or imposition against assets held by, or deposits in or
for the account of, or loans made by, or any other acquisition of
funds for loans or advances by, the Banks;
(ii) impose on the Banks any other condition regarding the
Notes;
(iii) subject the Banks to, or cause the withdrawal or
termination of any previously granted exemption with respect to,
any tax (including any withholding tax but not including any income
tax not currently causing the Banks to be subject to withholding)
or any other levy, impost, duty, charge, fee or deduction on or
from any payments due from the Borrowers; or
(iv) change the basis of taxation of payments from the
Borrowers to the Banks (other than by reason of a change in the
method of taxation of a Bank's net income);
and the result of any of the foregoing events is to increase the cost to a Bank
of making or maintaining any Loan or to reduce the amount of principal, interest
or fees to be received by the Bank hereunder in respect of any Loan, the Agent
will immediately so notify the Borrowers. If a Bank determines in good faith
that the effects of the change resulting in such increased cost or reduced
amount cannot reasonably be avoided or the cost thereof mitigated, then upon
notice by the Agent to the Borrowers, the Borrowers shall pay to such Bank on
each interest payment date of the Loan, such additional amount as shall be
necessary to compensate the Bank for such increased cost or reduced amount.
<PAGE>
(b) If any Bank shall reasonably determine that any Regulation
regarding capital adequacy or the adoption of any Regulation regarding capital
adequacy, which Regulation is applicable to banks (or their holding companies)
generally and not such Bank (or its holding company) specifically, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank (or its
holding company) with any such request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has the effect of reducing the rate of return on such Bank's
capital as a consequence of its obligations hereunder to a level below that
which such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies with respect to capital
adequacy) by an amount reasonably deemed by such Bank to be material, the
Borrowers shall promptly pay to the Agent for the account of such Bank, upon the
demand of such Bank, such additional amount or amounts as will compensate such
Bank for such reduction.
(c) If the Agent shall reasonably determine (which determination
will be made after consultation with any Bank requesting same and shall be, in
the absence of fraud or manifest error, conclusive and binding upon all parties
hereto) that by reason of abnormal circumstances affecting the interbank
eurodollar or applicable eurocurrency market, adequate and reasonable means do
not exist for ascertaining the LIBO Rate to be applicable to the requested LIBO
Rate Loan or that eurodollar or eurocurrency funds in amounts sufficient to fund
all the LIBO Rate Loans are not obtainable on reasonable terms, the Agent shall
give notice of such inability or determination by telephone to the Borrowers and
to each Bank at least two (2) Business Days prior to the date of the proposed
Loan and thereupon the obligations of the Banks to make, convert other Loans to,
or renew such LIBO Rate Loan shall be excused, subject, however, to the right of
the Borrowers at any time thereafter to submit another request.
(d) Determination by a Bank for purposes of this Section 2.9 of the
effect of any Regulatory Change or other change or circumstance referred to
above on its costs of making or maintaining Loans or on amounts receivable by it
in respect of the Loans and of the additional amounts required to compensate
such Bank in respect of any additional costs, shall be made in good faith and
shall be evidenced by a certificate, signed by an officer of such Bank and
delivered to the Borrowers, as to the fact and amount of the increased cost
incurred by or the reduced amount accruing to the Bank owing to such event or
events. Such certificate shall be prepared in reasonable detail and shall be
conclusive as to the facts and amounts stated therein, absent manifest error.
(e) The affected Bank will notify the Borrowers of any event
occurring after the date of this Agreement that will entitle the Bank to
compensation pursuant to this Section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation. Said
notice shall be in writing, shall specify the applicable Section or Sections of
this Agreement to which it relates and shall set forth the amount of amounts
then payable pursuant to this Section. The Borrowers shall pay such Bank the
amount shown as due on such notice within 10 days after their receipt of the
same.
<PAGE>
2.10 Illegality. Notwithstanding any other provision in this Agreement,
if the adoption of any applicable Regulation, or any change therein, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by the Banks with any request or directive
(whether or not having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for the Banks to (1)
maintain their Revolving Loan Commitments, then upon notice to the Borrowers by
the Agent, the Revolving Loan Commitments shall terminate; or (2) maintain or
fund their LIBO Rate Loans, then upon notice to the Borrowers of such event, the
Borrowers' outstanding LIBO Rate Loans shall be converted into Base Rate Loans.
2.11 Joint and Several Liability. Each Borrower, on a joint and several
basis, unconditionally and irrevocably guarantees to each Bank the due, prompt
and complete payment by each other Borrower of its payment of principal of and
interest on each Revolving Credit Loan, when and as the same shall become due
and payable, and any and all other amounts with respect to which any other
Borrower is obligated under any Loan Document. The obligation of each Borrower
under this Section 2.11 is a guaranty of payment and not of collectability and
is no way conditioned or contingent upon any attempt to collect from or enforce
compliance by any other Borrower or upon any other event, contingency or
circumstance whatsoever. The obligation of each Borrower under this Section
shall be primary, absolute and unconditional, shall not be subject to any
counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension,
deferment, reduction, or defense based upon any claim any Borrower or any other
Person may have against any other Borrower or any other Person, and shall remain
in full force and effect without regard to, and shall not be released,
discharged or in any way affected by, any circumstance or condition whatsoever
(whether or not any Borrower shall have any knowledge or notice thereof). No
Borrower shall be subrogated to the rights of the Banks in respect of any
payment or other obligation with respect to which an amount has been payable by
such Borrower under this Section 2.11 and no Borrower shall seek to exercise any
rights of subrogation, reimbursement or indemnity arising from payments made by
it pursuant to the provisions of this Section 2.11.
2.12 Optional Cash Management Facility. Should the Borrowers, or any of
them, become continuing borrowers with CoreStates or any other Bank and wish to
utilize the cash management services of CoreStates or such other Bank, the Banks
may agree to allow $500,000 of the Revolving Loan Commitment of CoreStates or
such other Bank to be dedicated to fund, on a daily basis, the cash management
requirements of such Borrower(s), without allocating such borrowings among the
Banks on a pro rata basis.
III. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to execute and deliver this Agreement and to
make the Loans available to the Borrowers, the Borrowers, jointly and severally,
represent and warrant to the Banks that:
<PAGE>
3.1 Good Standing of the Borrowers; Authorization. Each of the Borrowers is
duly incorporated, validly existing and in good standing in its jurisdiction of
incorporation. Each Borrower is duly qualified as a foreign corporation and
authorized to do Business in all other jurisdictions wherein the nature of its
business or property makes such qualification necessary except where the failure
to so qualify would not have a material adverse effect on the financial
condition of such Borrower, and has the corporate power to own its properties
and to carry on its business as now conducted. The execution, delivery and
performance of this Agreement and the Loan Documents have been duly authorized
by all necessary corporate proceedings on the part of each of the Borrowers.
3.2 Compliance with Laws and Other Agreements. Each Borrower is in
compliance in all material respects with all Regulations applicable to such
Borrower and has not received, and has no knowledge of, any order or notice of
any governmental investigation or of any violation or claim of violation of any
Regulation that might have a materially adverse effect on any Borrower.
3.3 No Conflict; Governmental Approvals. The execution, delivery, and
performance of this Agreement and each of the Loan Documents will not (i)
conflict with, violate, constitute a default under, or result in a breach of any
provision of any applicable law, rule, regulation, judgment, decree, order,
instrument or other agreement, or (ii) conflict with or result in a breach of
any provision of the certificate or articles of incorporation or by-laws of any
Borrower. No authorization, permit, consent or approval of or other action by,
and no filing, registration or declaration with, any governmental authority or
regulatory body is required to be obtained or made by any Borrower for the due
execution and performance of this Agreement or any of the Loan Documents, except
such as have been duly obtained or made prior to the Closing Date and are in
full force and effect as of the Closing Date (copies of which have been
delivered to the Banks on or before the Closing Date).
3.4 Financial and Other Information Regarding Borrowers.
(a) The Borrowers have delivered to the Banks true, correct and
complete copies of the consolidated balance sheets of IGC and its consolidated
Subsidiaries as of May 23, 1997, and related statements of income for the period
then ended, together with notes thereto and the unqualified opinion thereon,
dated July 11, 1997, of KPMG Peat Marwick LLP. The Borrowers shall, upon request
by the Agent, supply the Banks with true and correct copies of consolidating
balance sheets of IGC and its consolidated subsidiaries for the aforementioned
periods. Those financial statements and the notes thereto (together, the
"Financial Statements") present fairly the financial position of IGC and its
consolidated Subsidiaries as at such dates and the results of their operations
for the periods then ended in conformity with GAAP.
(b) As of the date of this Agreement, no Borrower has any Indebtedness
other than as shown in the Financial Statements.
<PAGE>
(c) Except as set forth on Schedule 3.4(c), as of the date of this
Agreement, no Borrower has any "investment" (as such term is defined under
GAAP), whether by stock purchase, capital contribution, loan, advance, purchase
of property or otherwise, in any Person.
3.5 Taxes. No Borrower is delinquent in the payment of any material income,
property or other tax, except for any delinquency in the payment of a tax which
is contested in good faith by a Borrower and for which appropriate reserves have
been established in accordance with GAAP.
3.6 Liens and Guaranties.
(a) All properties and assets of each Borrower are owned by that
Borrower free and clear of all Liens except (i) those for taxes or other
government charges either not yet delinquent or the nonpayment of which is
permitted by Section 3.5 of this Agreement; (ii) those not arising in connection
with Indebtedness that do not materially impair the use or value of the
properties or assets of that Borrower in the conduct of its businesses; (iii)
Liens whose release and termination is evidenced by the Borrowers' delivery to
the Banks of appropriate documents on the Closing Date; and (iv) Liens permitted
under the Loan Documents.
(b) Except as permitted hereby, no Borrower is obligated under any
Guaranty.
3.7 Material Adverse Changes. Since May 23, 1997, there has not been any
material adverse change in the business, operations, properties or financial
position of any of the Borrowers. No Borrower knows of any fact (other than
matters of a general economic or political nature) which materially adversely
affects, or, so far as that Borrower can now reasonably foresee, will materially
adversely affect, the business, operations, properties or financial position of
any Borrower or the performance by any Borrower of its obligations under this
Agreement and the other Loan Documents.
3.8 Compliance with Federal Reserve Board Regulations. No part of the
proceeds of the Loans will be used, directly or indirectly, for the purpose of
purchasing or carrying any "margin security" within the meaning of Regulations G
or U of the Board of Governors of the Federal Reserve System (12 C.F.R. 207,
221), or for the purpose of purchasing or carrying or trading in any securities
under such circumstances as to involve any Borrower in a violation of Regulation
X of the said Board (12 C.F.R. 224). The assets of the Borrowers do not include
any margin securities, and no Borrower has any present intention of acquiring
any margin security.
3.9 ERISA. The provisions of each Plan maintained by any Borrower complies
in all material respects with all applicable requirements of ERISA and of the
Code, and with all applicable rulings and regulations issued under the
provisions of ERISA and the Code setting forth those requirements. No Reportable
Event has occurred with respect to any Plan; no Plan to which Section 4021 of
ERISA applies has been terminated; no Plan has incurred any liability to PBGC as
provided in Section 4062, 4063 and 4064 of ERISA; no Plan has been involved in
any prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code; and no Termination Event has occurred.
<PAGE>
3.10 Pending Litigation. There are no actions, suits, proceedings or
investigations pending, or, to the knowledge of any of the Borrowers, threatened
against or affecting any Borrower, before any court, arbitrator or
administrative or governmental body which, in the aggregate, might adversely
affect any action taken or to be taken by any Borrower under this Agreement and
the other Loan Documents or which, in the aggregate, might materially adversely
affect the business, operations, properties or financial position of any
Borrower, or the ability of any Borrower to perform its obligations under this
Loan Agreement and the other Loan Documents.
3.11 Valid, Binding and Enforceable. This Agreement and the Loan Documents
have been duly and validly executed and delivered by the parties thereto (other
than the Banks) and constitute the valid and legally binding obligations of such
parties enforceable in accordance with their respective terms, except as
enforcement of this Agreement, and the Loan Documents may be limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights and except as enforcement is
subject to general equitable principles.
3.12 No Untrue Statements. Neither this Agreement, the Loan Documents nor
any other document, certificate or statement furnished or to be furnished by the
Borrowers or by any other party to the Banks in connection herewith contains, or
at the time of delivery will contain, any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
IV. CONDITIONS PRECEDENT
4.1 Conditions Precedent to All Loans. The obligation of each Bank to make
any Loan is conditioned upon the following:
(a) Documents. The Borrowers shall have delivered and the Agent shall
have received a Borrowing Notice and all such other documents as may be
reasonably requested by the Banks; provided, that if the Banks should request
any such additional documents, the Borrowers shall have thirty (30) days
following such request in which to deliver such additional documents to the
Agent.
(b) Covenants; Representations. Each Borrower shall be in compliance
with all covenants, agreements and conditions in each Loan Document and each
representation and warranty contained in each Loan Document shall be true with
the same effect as if such representation or warranty had been made on the date
such Loan is made or issued.
(c) Defaults. Immediately prior to and after giving effect to such
transaction, no Event of Default or Potential Default shall exist.
4.2 Conditions Precedent to First Loan. The obligation of each Bank to make
the first Loan hereunder is conditioned upon the following:
<PAGE>
(a) Articles, Bylaws. The Agent shall have received copies of the
Articles or Certificates of Incorporation and Bylaws of each of the Borrowers,
certified by the Corporate Secretary or Assistant Corporate Secretary of each
such entity; together with a Certificate of Good Standing for each Borrower from
any jurisdiction where the nature of its business or the ownership of its
properties requires such qualification except where the failure to be so
qualified would not have a material adverse effect on the business, operations,
assets or condition (financial or otherwise) of the Borrowers and their
Subsidiaries taken as a whole.
(b) Evidence of Authorization. The Agent shall have received copies,
certified by the Corporate Secretary or Assistant Corporate Secretary of each
Borrower or other appropriate official in the case of a Person who is not a
Borrower, of all corporate or other action taken by each Person other than a
Bank who is a party to any Loan Document to authorize its execution and delivery
and performance of the Loan Documents and to authorize the Revolving Credit
Loans, together with such other related papers as the Banks shall reasonably
require.
(c) Incumbency. The Agent shall have received a certificate signed by
the Corporate Secretary or Assistant Corporate Secretary of each corporate
signatory to the Loan Documents other than a Bank, together with the true
signature of the officer or officers authorized to execute and deliver the Loan
Documents and certificates thereunder, upon which the Banks shall be entitled to
rely conclusively until the Agent shall have received a further certificate of
the appropriate secretary or assistant secretary amending the prior certificate
and submitting the signature of the officer or officers named in the new
certificate as being authorized to execute and deliver Loan Documents and
certificates thereunder;
(d) Notes. Each Bank shall have received an executed Note payable to the
order of such Bank.
(e) Documents. The Agent shall have received all certificates,
instruments and other documents then required to be delivered pursuant to any
Loan Documents, in each instance in form and substance reasonably satisfactory
to the Agent and the Banks.
(f) Consents. The Borrowers shall have provided to the Agent evidence
satisfactory to the Agent that all governmental, shareholder and third party
consents and approvals necessary in connection with the transactions
contemplated hereby have been obtained and remain in effect.
(g) Other Agreements. The Borrowers shall have executed and delivered
each other Loan Document required hereunder.
(h) Borrowing Notice. The Borrowers shall have delivered and the Agent
shall have received a Borrowing Notice, which shall, at a minimum, set forth the
information regarding the conversion of the Existing Indebtedness into a Base
Rate Loan or a LIBO Rate Loan.
<PAGE>
(i) Fees. The Borrowers shall have paid all fees required as of the
Closing Date by Section 2.5 (a) and (b) hereof.
(j) Legal Opinion. The Agent shall have received a favorable written
opinion of general counsel to the Borrowers, which shall be addressed to the
Banks and be dated the date of the first Loan, in form and substance
satisfactory to the Banks.
V. AFFIRMATIVE COVENANTS
The Borrowers, jointly and severally, hereby covenant and agree that, from
and after the date hereof and so long as the Revolving Loan Commitments are in
effect or any Obligations remain unpaid or outstanding, unless the Required
Banks have otherwise consented in writing, the Borrowers shall do the following:
5.1 Use of Proceeds. Use the proceeds of the Loans only for working capital
and Permitted Acquisitions.
5.2 Accounting Records, Reports and Financial Statements. Furnish to the
Agent:
(a) Within one hundred and five (105) days after the end of each fiscal
year, IGC's Form 10-K filed with the Securities and Exchange Commission for that
year, including consolidated financial statements of IGC and the other
Borrowers. Such financial statements shall present fairly the consolidated
financial position of IGC and the other Borrowers as of the close of such year
and the results of its operations and changes in its financial position during
such year, in accordance with GAAP, and shall be audited and accompanied by the
unqualified opinion of an independent public accountant acceptable to the Banks.
With each Form 10-K delivered to the Banks, the Borrowers shall, upon request by
the Agent, supply, as supplemental information, unaudited consolidating
financial statements of the Borrowers used in the preparation of such Form 10-K;
(b) Within sixty (60) days after the end of each fiscal quarter, IGC's
Form 10-Q filed with the Securities and Exchange Commission for that quarter,
including unaudited consolidated financial statements of IGC and the other
Borrowers. Such financial statements shall present fairly the financial position
of the Borrowers as of the end of such quarter and the results of their
operations and changes in their financial position during each quarter in
accordance with GAAP. With each Form 10-Q delivered to the Banks, IGC, on behalf
of all Borrowers, shall, upon request by the Agent, supply, as supplemental
information, consolidating financial statements of the Borrowers used in the
preparation of such Form 10-Q;
(c) With reasonable promptness, and when reasonably requested by the
Banks unless any Borrower's compliance with such request would conflict with any
law, regulation or contractual obligation applicable to such Borrower, copies of
all financial reports, statements and returns which each Borrower shall file
with any federal or state department, commission, board, bureau, agency or
instrumentality and any report,
<PAGE>
statement or return delivered by any Borrower to any supplier or other creditor
which is material to that Borrower's operations or financial condition;
(d) Within sixty (60) days after the end of each fiscal quarter, a
complete and fully-executed Covenant Compliance Certificate; and
(e) All such other documents and information as may be reasonably
requested by the Banks, within thirty (30) days following any such request by
the Banks.
5.3 Ordinary Course of Business; Records. Conduct its business only in the
ordinary course and keep accurate and complete books and records of its assets,
liabilities and operations consistent with sound business practices and in
accordance with GAAP.
5.4 Information for the Banks. Make available during normal business hours
for inspection by the Banks or their designated representatives any of its books
and records when reasonably requested by the Banks to do so, and furnish the
Banks any information reasonably requested regarding their operations, business
affairs and financial condition within a reasonable time after the Banks give
notice of their request therefor. In particular, and without limiting the
foregoing, each Borrower shall permit, during normal business hours,
representatives of the Banks' Audit Departments to make such periodic
inspections of its books, records and assets as such representatives deem
necessary and proper. The first two sentences of this Section 5.4
notwithstanding, no Borrower shall be required to disclose any information which
such Borrower is required by law, regulation or contractual obligation to
maintain confidential, and the Banks shall use their best efforts to coordinate
the timing of any inspections made pursuant to this Section in order to minimize
any resultant disruption of the Borrowers' businesses.
5.5 Insurance. Carry and maintain, in full force and effect at all times with
financially sound and reputable insurers: (i) all workers' compensation or
similar insurance as may be required under the laws of any jurisdiction
applicable to such Borrower; (ii) public liability insurance against claims for
personal injury, death or property damage suffered upon, in or about any
premises occupied by them or occurring as a result of the ownership, maintenance
or operation by them of any automobile, truck or other vehicle or as a result of
the use of products manufactured, constructed or sold by them, or services
rendered by them; (iii) business interruption insurance covering risk of loss as
a result of the cessation for all or any part of one year of any substantial
part of the business conducted by them; (iv) insurance against such other risks
as are usually insured against by business entities of established reputation
engaged in the same or similar businesses and similarly situated. The insurance
specified in clauses (ii), (iii), and (iv) shall be maintained in such amounts
(and with co-insurance and deductibles) as such insurance is usually carried by
business entities of established reputation engaged in the same or similar
business and similarly situated.
5.6 Maintenance. Maintain their equipment, real property and other properties
in good condition and repair (normal wear and tear excepted) and pay and
discharge the cost of repairs thereto or maintenance thereof other than idle
equipment no longer used or useful, in connection with the Borrowers'
operations.
<PAGE>
5.7 Taxes. Pay all taxes, assessments, charges and levies imposed upon them
or on any of their property, or which they are required to withhold and pay
over, and provide evidence of payment thereto to the Banks if the Banks so
request, except where contested in good faith by lawful and appropriate
proceedings and where adequate reserves therefor have been set aside on their
books; provided, however, that each Borrower shall pay all such taxes,
assessments, charges and levies forthwith whenever foreclosure on any lien which
attaches or security therefor appears imminent.
5.8 Leases. Pay all rent or other sums required by every lease to which any
Borrower is a party as the same become due and payable; perform all their
obligations as tenant or lessee thereunder except where contested in good faith
by lawful and appropriate proceedings and where adequate reserves therefor have
been set aside; and keep all such leases at all times in full force and effect
during the terms thereof.
5.9 Corporate Existence; Certain Rights; Laws. Do all things necessary to
preserve and keep in full force and effect the corporate existence, licenses,
rights, patents, trademarks, trade names and franchises of each Borrower (except
that any Borrower may merge into or consolidate with another Borrower as long as
the Agent receives written notice prior thereto) and comply with all present and
future laws, ordinances, rules and regulations applicable to them in the
operation of their businesses; provided, however, that a Borrower may terminate
any patent, trademark or license and other rights conferred by jurisdictions
outside the United States as long as such Borrower's business judgment requires
such termination.
5.10 Notice of Litigation. Give immediate notice to the Agent of the
institution of any litigation or any administrative proceeding involving any
Borrower which might materially and adversely affect the operation, financial
condition, property or business of any Borrower individually, or the Borrowers
as a whole.
5.11 Indebtedness. Jointly and severally, pay or cause to be paid when due
(or within applicable grace periods) all Indebtedness of the Borrowers.
5.12 Notice of Events of Default. Give immediate notice to the Agent if any
Borrower becomes aware of the occurrence of any Event of Default or Potential
Default, or of the failure of any Borrower to observe or perform any of the
conditions or covenants to be observed or performed by it under this Agreement.
5.13 ERISA. Maintain each Plan in compliance with all applicable requirements
of ERISA and of the Code and with all applicable rulings and regulations issued
under the provisions of ERISA and of the Code. As promptly as practicable (but
in any event not later than ten days) after any Borrower receives from the PBGC
a notice of intent to terminate any Plan or to appoint a trustee to administer
any Plan, after a Borrower has notified the PBGC that any Reportable Event has
occurred, or after a Borrower has filed a notice of intent to terminate with the
PBGC with respect to any Plan, a certificate of the chief executive officer of
that Borrower shall be furnished to the Agent setting forth the details with
respect to the events resulting in such
<PAGE>
reportable event, as the case may be, and the action which such Borrower
proposes to take with respect thereto, together with a copy of the notice of
intent to terminate or to appoint a trustee from the PBGC, of the notice of such
reportable event or of a Borrower's notice of intent to terminate, as the case
may be.
5.14 Deposit Accounts. Use the Banks as their primary depository institutions
to the extent reasonably feasible unless otherwise agreed in writing by the
Banks; and notify the Agent, in writing and on a continuing basis, of all
deposit accounts and certificates of deposit (including the numbers thereof)
maintained with or purchased from other banks and other financial institutions.
5.15 Management. Furnish to the Agent within thirty (30) days of any election
or appointment of officers or directors, written notice of any change in the
persons who from time to time become officers and directors of each Borrower.
5.16 Financial Covenants. Observe the financial covenants set forth on
Schedule 5.16 hereto; provided, however, that the financial covenants set forth
in Schedule 5.16 shall supersede any financial covenants set forth in any other
agreement between CoreStates and any of the Borrowers.
VI. NEGATIVE COVENANTS
The Borrowers, jointly and severally, hereby covenant and agree that, from
and after the date hereof, and so long as the Revolving Loan Commitments are in
effect or any Obligations remain unpaid or outstanding, they will not do any one
or more of the following without first obtaining the written consent of the
Required Banks:
6.1 Fundamental Corporate Changes.
(a) Change any Borrower's name, enter into any merger, consolidation,
reorganization or recapitalization, or dissolve, provided that any Borrower may
merge into or consolidate with another Borrower;
(b) Sell, transfer, lease or otherwise dispose of all or (except in the
ordinary course of business) any material part of any Borrower's assets or any
significant product line or process of any Borrower; or
(c) Have any Subsidiary; provided, however, that IGC may have the other
Borrowers as its Subsidiaries and any Borrower may have a Subsidiary as long as
such Subsidiary becomes a party to this Agreement, and subject to its terms.
6.2 Indebtedness. Incur, create, assume or have any Indebtedness except (i)
existing Indebtedness reflected in the Financial Statements, (ii) existing
Indebtedness set forth on Schedule 6.2 attached hereto, (iii) Subordinated
Indebtedness issued by IGC in an aggregate amount not to exceed $30,000,000,
(iv) Indebtedness incurred pursuant to this Agreement,
<PAGE>
(v) additional Indebtedness incurred to finance Permitted Acquisitions, and (vi)
purchase money Indebtedness for the acquisition of non-current assets following
the date of this Agreement; provided, however, that the aggregate of any
Indebtedness incurred from time to time pursuant to Section 6.5 of this
Agreement and clauses (v) and (vi) of this Section shall not exceed $12,000,000.
6.3 Liens. Create or allow any Lien to be on or otherwise affect any
Borrower's property or assets except:
(a) Liens in favor of the Banks;
(b) Liens for taxes, assessments and other governmental charges incurred
in the ordinary course of business which are not yet due and payable or which
are being properly contested in good faith by lawful and appropriate
proceedings;
(c) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation or to participate in any fund in
connection with workman's compensation, unemployment insurance or other social
security obligations;
(d) Good faith pledges or deposits made in the ordinary course of
business to secure performance of tenders, contracts (other than for the
repayment of Indebtedness) or leases or to secure statutory or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business;
(e) Liens of mechanics, materialmen, warehousemen, carriers or other
similar liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable or are being contested in good faith by
appropriate and lawful proceedings;
(f) Liens securing Indebtedness permitted under Subsections 6.2(i),
(ii), (iv) and (vi) of this Agreement;
(g) Liens, if any, otherwise expressly permitted by this Agreement.
6.4 Guaranties. Except for a guaranty of Indebtedness of another Borrower or
other guaranties of indebtedness not to exceed $1,000,000 in the aggregate,
directly or indirectly make any Guaranty.
6.5 Sales and Lease-Backs. Sell, transfer or otherwise dispose of any
property, real or personal, now owned or hereafter acquired, with the intention
of directly or indirectly taking back a lease on such property which
cumulatively in the aggregate has a fair market value in excess of $2,000,000.
6.6 Loans; Investments. Purchase, invest in, or make any loan in the nature
of an investment in the stocks, bonds, notes or other securities or evidence of
Indebtedness of any
<PAGE>
Person (other than another Borrower) or make any loan or advance to or for the
benefit of any Person (other than to another Borrower) and except for short term
(less than one year) loans and advances to employees in the ordinary course of
business, except for (i) short-term obligations of the Treasury of the United
States of America; (ii) certificates of deposit issued by banks with
shareholders' equity of at least $100,000,000; (iii) repurchase agreements not
exceeding 29 days in duration by banks with shareholders' equity of at least
$100,000,000; (iv) notes and other instruments generally known as "commercial
paper" which arise out of current transactions, which have maturities at the
time of issuance thereof not exceeding nine months and which have, at the time
of such purchase, investment or other acquisition, either of the two highest
credit ratings of Standard & Poor's Corporation or Moody's Investors Service,
Inc.; (v) other investments in an aggregate amount not to exceed $5,000,000
during the period commencing on the Closing Date and ending on the Revolver
Termination Date; and (vi) Permitted Acquisitions.
6.7 Change in Business. Discontinue any substantial part, or change the
nature of, the business of IGC and its Subsidiaries taken as a whole or enter
into any new business unrelated to the present business conducted by IGC and its
Subsidiaries, taken as a whole.
6.8 Sale or Discount of Receivables. Sell any notes receivable or account
receivable, with or without recourse.
6.9 ERISA.
(a) Terminate any Plan maintained by any Borrower to which Section 4021
of ERISA applies;
(b) Allow the value of the benefits guaranteed under Title IV of ERISA
to exceed the value of assets allocable to such benefits; or
(c) Incur a withdrawal liability within the meaning of Section 4201 of
ERISA.
6.10 Restricted Payments. Declare or pay any dividend (except stock
dividends), or make any distributions of cash or property, to holders of any
shares of its capital stock, or, directly or indirectly, redeem or otherwise
acquire any such shares of any Borrower; provided, however, that: (i) payments
of one Borrower to another Borrower shall be permitted (as long as the recipient
Borrower holds shares of the payee Borrower's stock); (ii) IGC may pay cash
dividends in any fiscal year in an amount not exceeding its Net Income for the
preceding fiscal year; and (iii) IGC may make payments pursuant to its existing
stock buy-back program.
VII. DEFAULT
The Borrowers shall be in default if any one or more of the following
events (each an "Event of Default") occurs and is continuing, whatever the
reason therefor:
7.1 Borrowers' Failure to Pay. The Borrowers jointly or severally fail to
pay any amount of principal, interest, fees or other sums as and when due under
this Agreement or any of the Loan Documents, whether upon stated maturity,
acceleration, or otherwise and have not
<PAGE>
remedied and fully cured such failure to pay within ten (10) Business Days after
the date such payment is so due.
7.2 Breach of Covenants or Conditions. The Borrowers, individually or
collectively, fail to perform or observe any term, covenant, agreement or
condition in this Agreement or any of the other Loan Documents or are in
violation of or non-compliance with any provision of this Agreement or any of
the Loan Documents, and have not remedied and fully cured such non-performance,
non-observance, violation of or non-compliance within thirty (30) days after the
Agent has given written notice thereof to the Borrowers; provided, however, that
during such thirty (30) day period the Banks' obligations to make further Loans
to the Borrowers shall be suspended.
7.3 Defaults in Other Agreements. The Borrowers, individually or
collectively, fail to perform or observe any material term, covenant, agreement
or condition contained in any other agreement applicable to the Borrowers
(except for financial covenants contained in any other agreement between
CoreStates and any of the Borrowers that are superseded by the financial
covenants set forth on Schedule 5.16) or by which they are individually or
collectively bound involving a material liability of any Borrower which shall
not be remedied within the period of time (if any) within which such other
agreement permits such default to be remedied, unless such default is waived by
the other party thereto or excused as a matter of law.
7.4 Agreements Invalid. The validity, binding nature of, or enforceability
of any material term or provision of any of the Loan Documents is disputed by,
on behalf of, or in the right or name of any Borrower or any material term or
provision of any such Loan Document is found or declared to be invalid,
avoidable, or non-enforceable by any court of competent jurisdiction.
7.5 False Warranties; Breach of Representations. Any warranty or
representation made by the Borrowers, individually or collectively, in this
Agreement or any other Loan Document or in any certificate or other writing
delivered under or pursuant to this Agreement or any other Loan Document, or in
connection with any provision of this Agreement or related to the transactions
contemplated hereby shall prove to have been false or incorrect or breached in
any material aspect on the date as of which made.
7.6 Judgments. A final judgment or judgments is entered, or an order or
orders of any judicial authority or governmental entity is issued against the
Borrowers, individually or collectively, (such judgment(s) and order(s)
hereinafter collectively referred to as "Judgment") (i) for payment of money,
which Judgment, in the aggregate, exceeds Two Hundred Thousand Dollars
($200,000.00) outstanding at any one time; or (ii) for injunctive or declaratory
relief which would have a material adverse effect on the ability of any Borrower
individually or the Borrowers as a whole to conduct their business, and such
Judgment is not discharged or execution thereon or enforcement thereof stayed
pending appeal, within thirty (30) days after entry or issuance thereof, or, in
the event of such a stay, such Judgment is not discharged within thirty (30)
days after such stay expires.
<PAGE>
7.7 Bankruptcy or Insolvency of a Borrower.
(a) A Borrower becomes insolvent, or generally fails to pay, or is
generally unable to pay, or admits in writing its inability to pay, its debts as
they become due or applies for, consents to, or acquiesces in , the appointment
of a trustee, receiver or other custodian for it or a substantial part of its
property, or makes a general assignment for the benefit of creditors.
(b) A Borrower commences any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any state or federal bankruptcy
or insolvency law, or any dissolution or liquidation proceeding.
(c) Any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any state or federal bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is involuntarily commenced against or in
respect of a Borrower, which is not dismissed within forty-five (45) days, or an
order for relief is entered in any such proceeding.
(d) A trustee, receiver, or other custodian is appointed for a Borrower
or a substantial part of its property.
VIII. REMEDIES
8.1 Further Advances; Acceleration; Setoff.
(a) Upon the occurrence of any one or more Events of Default, the
Agent shall, upon the written request of the Required Banks, terminate the
Revolving Loan Commitments and refuse to make any further advances or Loans to
the Borrowers.
(b) Automatically upon the occurrence of any Event of Default
described in Section 7.6 of this Agreement, and in the sole discretion of the
Required Banks upon the occurrence of any other Event of Default, the unpaid
principal balance of all Loans, all interest and fees accrued and unpaid
thereon, and all other amounts and Obligations payable by the Borrowers under
this Agreement and the other Loan Documents shall immediately become due and
payable in full, all without protest, presentment, demand, or further notice of
any kind to the Borrowers, all of which are expressly waived by the Borrowers.
(c) If any one or more Events of Default shall have occurred, the
Banks, any affiliate of any Bank and any other participant in the Loans shall
have the right, in addition to all other rights and remedies available to them,
without notice to the Borrowers, to apply toward and set-off against and apply
to the then unpaid balance of the Notes and the other Obligations any items or
funds held by any Bank or any such affiliate or participant, any and all
deposits (whether general or special, time or demand, matured or unmatured,
fixed or contingent, liquidated or unliquidated) now or hereafter maintained by
any Borrower for its own account with any Bank or any such affiliate or
participant, and any other indebtedness at any time held or owing by any Bank or
any such affiliate or participant, to or for the credit or the account of such
Borrowers. For such purpose, the Banks and any such affiliate or participant
shall have, and each Borrower
<PAGE>
hereby grant to the Banks and any such affiliate or participant, a first lien on
all such deposits. The Banks and any such affiliate or participant are hereby
authorized to charge any such account or indebtedness for any amounts due to the
Banks and any such affiliate or participant. Such right of set-off shall exist
whether or not the Banks shall have made any demand under this Agreement, the
Notes or any other Loan Document and whether or not the Notes and the other
Obligations are matured or unmatured. Each Borrower hereby confirms the Banks'
and any such affiliate's or participant's lien on such accounts and right of
set-off, and nothing in this Agreement shall be deemed any waiver or prohibition
of such lien and right of set-off.
(d) Any date on which the Loans and such other obligations are
declared due and payable pursuant to this Section shall be the Revolver
Termination Date for purposes of this Agreement. Prior to the Revolver
Termination Date, so long as an Event of Default shall have occurred and be
continuing, and at all times after the Revolver Termination Date the Loans shall
bear interest at the Default Rate.
8.2 Further Remedies. Upon the occurrence of any one or more Events of
Default, the Agent and the Banks may proceed to protect and enforce their rights
under this Agreement and the other Loan Documents by exercising such remedies as
are available to the Agent and the Banks in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific
performance of any provision contained in this Agreement or any of the other
Loan Documents or in aid of the exercise of any power granted in this Agreement
or any of the other Loan Documents.
<PAGE>
IX. AGENT
9.1 Appointment and Authorization. Each Bank hereby irrevocably appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the Loan Documents as are specifically delegated
to the Agent by the terms hereof or thereof, together with such other powers as
are reasonably incidental thereto. The relationship between the Agent and each
Bank has no fiduciary aspects, and the Agent's duties (as Agent) hereunder are
acknowledged to be only ministerial and not involving the exercise of discretion
on its part. Nothing in this Agreement or any Loan Document shall be construed
to impose on the Agent any duties or responsibilities other than those for which
express provision is made herein or therein. In performing its duties and
functions hereunder, the Agent does not assume and shall not be deemed to have
assumed, and hereby expressly disclaims, any obligation with or for the
Borrowers. As to matters not expressly provided for in this Agreement or any
Loan Document, the Agent shall not be required to exercise any discretion or to
take any action or communicate any notice, but shall be fully protected in so
acting or refraining from acting upon the instructions of the Required Banks and
their respective successors and assigns; provided, however, that in no event
shall the Agent be required to take any action which exposes it to personal
liability or which is contrary to this Agreement, any Loan Document or
applicable law, and the Agent shall be fully justified in failing or refusing to
take any action hereunder unless it shall first be specifically indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or omitting to take any such action.
If an indemnity furnished to the Agent for any purpose shall, in the reasonable
opinion of the Agent, be insufficient or become impaired, the Agent may call for
additional indemnity from the Banks and not commence or cease to do the acts for
which such indemnity is requested until such additional indemnity is furnished.
9.2 Duties and Obligations. In performing its functions and duties hereunder
on behalf of the Banks, the Agent shall exercise the same care and skill as it
would exercise in dealing with loans for its own account. Neither the Agent nor
any of its directors, officers, employees or other agents shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or any Loan Document except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Agent (a) may consult with legal counsel and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith and in accordance with the advice of such experts; (b)
makes no representation or warranty to any Bank as to, and shall not be
responsible to any Bank for, any recital, statement, representation or warranty
made in or in connection with this Agreement, any Loan Document or in any
written or oral statement (including a financial or other such statement),
instrument or other document delivered in connection herewith or therewith or
furnished to any Bank by or on behalf of any Borrower; (c) shall have no duty to
ascertain or inquire into any Borrower's performance or observance of any of the
covenants or conditions contained herein or to inspect any of the property
(including the books and records) of any Borrower or inquire into the use of the
proceeds of the Revolving Credit Loans or (unless the officers of the Agent
active in their capacity as officers of the Agent on the Borrowers' account have
actual knowledge thereof or have been notified in writing thereof) to inquire
into the existence or possible existence of any Event of Default or Potential
Default; (d) shall not be responsible to any Bank for the due execution,
legality, validity,
<PAGE>
enforceability, effectiveness, genuineness, sufficiency, collectability or value
of this Agreement or any other Loan Document or any instrument or document
executed or issued pursuant hereto or in connection herewith, except to the
extent that such may be dependent on the due authorization and execution by the
Agent itself; (e) except as expressly provided herein in respect of information
and data furnished to the Agent for distribution to the Banks, shall have no
duty or responsibility, either initially or on a continuing basis, to provide to
any Bank any credit or other information with respect to any Borrower, whether
coming into its possession before the making of the Loans or at any time or
times thereafter; and (f) shall incur no liability under or in respect of this
Agreement or any other Loan Document for, and shall be entitled to rely and act
upon, any notice, consent, certificate or other instrument or writing (which may
be by facsimile (telecopier), telegram, cable, or other electronic means)
believed by it to be genuine and correct and to have been signed or sent by the
proper party or parties.
9.3 The Agent as a Bank. With respect to its Revolving Loan Commitment and
the Loans made and to be made by it, the Agent shall have the same rights and
powers under this Agreement and all other Loan Documents as the other Banks and
may exercise the same as if it were not the Agent. The terms "Bank" and "Banks"
as used herein shall, unless otherwise expressly indicated, include the Agent in
its individual capacity. The Agent and any successor Agent which is a commercial
bank, and their respective affiliates, may accept deposits from, lend money to,
act as trustee under indentures of and generally engage in any kind of business
with, the Borrowers and their affiliates from time to time, all as if such
entity were not the Agent hereunder and without any duty to account therefor to
any Bank.
9.4 Independent Credit Decisions. Each Bank acknowledges to the Agent that
it has, independently and without reliance upon the Agent or any other Bank, and
based upon such documents and information as it has deemed appropriate, made its
own independent credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently or through other advisers and
representatives but without reliance upon the Agent or any other Bank, and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or refraining from taking
any action under this Agreement or any Loan Document.
9.5 Indemnification. The Banks agree to indemnify the Agent (to the extent
not reimbursed by the Borrowers), ratably in proportion to each Bank's
Commitment Percentage, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in such capacity in any way relating to or
arising out of this Agreement or any Loan Document or any action taken or
omitted to be taken by the Agent in such capacity hereunder or under any Loan
Document; provided that none of the Banks shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, each Bank agrees to reimburse the Agent, promptly on demand, for such
Bank's ratable share (based upon the aforesaid apportionment) of any
out-of-pocket expenses (including counsel fees and disbursements) incurred by
the Agent in connection with the preparation, execution,
<PAGE>
administration or enforcement of, or the preservation of any rights under, this
Agreement and the Loan Documents to the extent that the Agent is not reimbursed
for such expenses by the Borrowers.
9.6 Successor Agent. The Agent may resign at any time by giving written
notice of such resignation to the Banks and the Borrowers, such resignation to
be effective only upon the appointment of a successor Agent as hereinafter
provided. Additionally, the Agent may be removed by the Required Banks if: (i)
the aggregate Commitment Percentages of the Agent and its affiliates do not
equal at least fifteen percent (15%); or (ii) a conservator, receiver or trustee
in bankruptcy is appointed for the Agent and such appointment is not vacated
within ninety (90) days of such appointment. Upon any such resignation or
removal of the Agent, the Banks shall jointly appoint a successor Agent upon
written notice to the Borrowers and the retiring or removed Agent. If no
successor Agent shall have been jointly appointed by such Banks and shall have
accepted such appointment within thirty (30) days after a retiring Agent shall
have given notice of resignation, the retiring Agent may, upon notice to the
Borrowers and the Banks, appoint a successor Agent. Upon its acceptance of any
appointment as Agent hereunder, the successor Agent shall succeed to and become
vested with all the rights, powers, privileges and duties of the previous Agent,
and the previous Agent shall be discharged from its duties and obligations as
Agent under this Agreement and the Loan Documents. After any Agent's resignation
or removal hereunder, the provisions hereof shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent under this
Agreement and the Loan Documents.
9.7 Allocations Made By Agent. As between the Agent and the Banks, unless a
Bank objecting to a determination or allocation made by the Agent pursuant to
this Agreement delivers to the Agent written notice of such objection within one
hundred twenty (120) days after the date any distribution was made by the Agent,
such determination or allocation shall be conclusive on such one hundred
twentieth day and only those items expressly objected to in such notice shall be
deemed disputed by such Bank. The Agent shall not have any duty to inquire as to
the application by the Banks of any amounts distributed to them.
9.8 Benefits of Article IX. The parties hereto agree that the provisions of
this Article IX are intended solely for the benefit of the Agent, and the Banks
and the Borrowers shall not be entitled to rely on any provisions or assert any
such provisions of this Article in any claim or as a defense against the Agent
or the Banks.
9.9 Mutual Disclosure. The Banks and the Agent each agree to disclose to the
others immediately upon receipt any information that is not required to be
delivered pursuant to Section 9.10 of this Agreement and (i) that concerns the
financial condition of the Borrowers and is material to the conduct of the
Borrowers' business operations as going concerns, or (ii) relates to the ability
of the Borrowers to perform their respective obligations under the Loan
Documents. In addition, if any Bank receives any notice, document, financial
statement or report from the Borrowers which such Bank is aware has not been
delivered to the other Banks and the Agent, such Bank shall promptly forward to
the other Banks and the Agent a copy of such notice, document, financial
statement or report.
<PAGE>
9.10 Reports and Notices. The Borrowers hereby agree that whenever herein or
in any other Loan Document any report, notice, statement or other information is
to be given to any Bank or the Agent, such report, notice, statement or other
information shall be given to all Banks contemporaneously and within the period
of time required for giving such report, notice, statement or information.
X. MISCELLANEOUS
10.1 Waiver. No failure or delay on the part of the Agent or any Bank or any
holder of any Note in exercising any right, power or remedy under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under any
Loan Document. The remedies provided under the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
10.2 Amendments. No amendment, modification, termination or waiver of any
Loan Document or any provision thereof nor any consent to any departure by any
Borrower therefrom shall be effective unless the same shall have been approved
in writing by all of the Banks, be in writing and be signed by the Agent and the
applicable Borrower or Borrowers, and then any such waiver or consent shall be
effective only in the instance and for the specific purpose for which given. No
notice to or demand on the Borrowers shall entitle the Borrowers to any other or
further notice or demand in similar or other circumstances. Notwithstanding any
other provision contained in any Loan Document, no amendment, modification,
termination or waiver shall affect the payment of principal (including without
limitation the date when due), reduce any interest rate margin or any fee
provided herein, increase any Revolving Loan Commitment, extend the Revolver
Termination Date, modify the definition of "Required Banks" or any voting rights
of the Banks without the written consent of all the Banks. The rights and
responsibilities of the Agent hereunder cannot be changed without the Agent's
prior written consent.
10.3 Governing Law. The Loan Documents and all rights and obligations of the
parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania or federal principles of conflict of laws.
10.4 Participations and Assignments. Each Borrower hereby acknowledges and
agrees that a Bank may at any time:
(a) grant participations in all or any portion of its Revolving Loan
Commitment, any Note, or of its right, title and interest therein or in or to
this Agreement (collectively, "Participations") to any other lending office or
to any other bank, lending institution or other entity which has the requisite
sophistication to evaluate the merits and risks of investments in Participations
("Participants") (but only with the consent of the Borrowers, which consent
shall not be unreasonably withheld); provided, however, that: (i) all amounts
payable by the Borrowers hereunder shall be determined as if such Bank had not
granted such
<PAGE>
Participation; (ii) any agreement pursuant to which any Bank may grant a
Participation: (x) shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrowers hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provisions of this Agreement; (y) such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement without the consent of the Participant if such modification,
amendment or waiver would reduce the principal of or rate of interest on the
Loan or postpone the date fixed for any payment of principal of or interest on
the Loan; and (z) shall not relieve such Bank from its obligations, which shall
remain absolute, to make Loans hereunder; and (iii) notwithstanding the
foregoing, if any Event of Default with respect to Sections 5.16 or 7.1 of this
Agreement has occurred within the six (6) months immediately preceding the date
of the proposed participation (whether or not such Event of Default is ongoing
or has been cured), the consent of the Borrowers and the Agent shall not be
necessary to such participation; and
(b) assign any of its Loans and its Revolving Credit Commitment (but
only with the consent of the Borrowers and the Agent, which consent shall not be
unreasonably withheld), provided that: (i) each such assignment shall be in an
amount of at least $5,000,000 (unless, after giving effect to such assignment
and all other such assignments by such assigning Bank occurring simultaneously
or substantially simultaneously therewith, such assigning Bank shall hold no
Revolving Credit Commitment or Loan hereunder); (ii) each such assignment by a
Bank of its Loans or Revolving Credit Commitment shall be made in such manner so
that the same portion of its Loans, Note and Revolving Credit Commitment is
assigned to the respective assignee; and (iii) notwithstanding the foregoing, if
any Event of Default with respect to Sections 5.16 or 7.1 of this Agreement has
occurred within the six (6) months immediately preceding the date of the
proposed assignment (whether or not such Event of Default is ongoing or has been
cured), the consent of the Borrowers and the Agent shall not be necessary to
such assignment. Upon execution and delivery by the assignee to the Borrowers
and the Agent of an instrument in writing pursuant to which such assignee agrees
to become a "Bank" hereunder (if not already a Bank) having the Revolving Credit
Commitment(s) and Loans specified in such instrument, and upon consent thereto
by the Borrowers and the Agent, to the extent required above, the assignee shall
have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of the Borrowers and the Agent), the obligations,
rights and benefits of a Bank hereunder holding the Revolving Credit
Commitment(s) and Loans (or portions thereof) assigned to it (in addition to the
Revolving Credit Commitment(s) and Loans, if any, theretofore held by such
assignee) and the assigning Bank shall, to the extent of such assignment, be
released from the Commitment(s) (or portion(s) thereof) so assigned. Upon each
such assignment the assigning Bank shall pay the Agent an assignment fee of
$3,000.
10.5 Captions. Captions in the Loan Documents are included for convenience of
reference only and shall not constitute a part of any Loan Document for any
other purpose.
10.6 Notices. All notices, requests, demands, directions, declarations and
other communications between the Banks and the Borrowers provided for in any
Loan Document shall, except as otherwise expressly provided, be mailed by
registered or certified mail, return receipt
<PAGE>
requested, or telegraphed, or
telefaxed, or delivered in hand to the applicable party at the following
addresses:
If to the Borrowers:
Intermagnetics General Corporation
450 Old Niskayuna Road
Latham, NY 12110
Attention: Michael Zeigler, Senior Vice President - Finance
Telephone: (518) 782-1122
Telecopy: (518) 782-1105
with a copy to:
Intermagnetics General Corporation
450 Old Niskayuna Road
Latham, NY 12110
Attention: Christopher J. Lord, Esquire, Corporate Counsel
Telephone: (518) 782-1122
Telecopy: (518) 782-1105
If to the Agent or the Banks:
CoreStates Bank, N.A.
645 Hamilton Mall
Allentown, PA 18101
Attention: Kaj Karch, Vice President
Telephone:(610) 439-4566
Telecopy:(610) 439-4574
with a copy to:
Duane, Morris & Heckscher LLP
One Liberty Place
Philadelphia, PA 19103
Attention: Stephen D. Teaford, Esquire
Telephone: (215) 979-1220
Telecopy:(215) 979-1020
Notices shall be effective and deemed received three (3) days after being
deposited in the mails, postage prepaid, addressed as aforesaid and shall
whenever sent by telegram, telegraph or telefax or delivered in hand be
effective when received. Any party may change its address by a communication in
accordance herewith.
<PAGE>
10.7 Sharing of Collections, Proceeds and Set-Offs; Application of Payments.
(a) If any Bank, by exercising any right of set-off, counterclaim or
foreclosure against trade collateral or otherwise, receives payment of principal
or interest or other amount due on any Loan which is greater than the percentage
share of such Bank (determined as set forth below), the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Banks, and such other adjustments shall be made as may be
required, so that all such payments shall be shared by the Banks on the basis of
their percentage shares; provided that if all or any portion of such
proportionately greater payment of such indebtedness is thereafter recovered
from, or must otherwise be restored by, such purchasing Bank, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest being paid by such purchasing Bank. The percentage share of
each Bank shall be based on the portion of the outstanding Loans of such Bank
(prior to receiving any payment for which an adjustment must be made under this
Section in relation to the aggregate outstanding Loans of all the Banks. Each
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Loan or reimbursement obligation,
whether or not acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of such Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Bank receives a
secured claim in lieu of a set-off to which this Section would apply, such Bank
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Banks entitled under this
Section to share in the benefits of any recovery on such secured claim.
(b) If an Event of Default or Potential Default shall have occurred and
be continuing the Agent and each Bank and the Borrowers agree that all payments
on account of the Loans shall be applied by the Agent and the Banks as follows:
(1) First, to the Agent for any Agent fees then due and payable under
this Agreement until such fees are paid in full;
(2) Second, to the Agent for any fees, costs or expenses (including
expenses described in Section 10.8) incurred by the Agent under any of
the Loan Documents or this Agreement, then due and payable and not
reimbursed by the Borrowers or the Banks until such fees, costs and
expenses are paid in full;
(3) Third, to the Banks for their percentage shares of the Commitment
Fee then due and payable under this Agreement until such fee is paid in
full;
(4) Fourth, to the Banks for their respective shares of all costs,
expenses and fees then due and payable from the Borrowers until such
costs, expenses and fees are paid in full;
<PAGE>
(5) Fifth, to the Banks for their percentage shares of all interest
then due and payable from the Borrowers until such interest is paid in
full, which percentage shares shall be calculated by determining each
Bank's percentage share (determined as set forth in Section 10.7(a)) of
the amounts allocated in (a) above; and
(6) Sixth, to the Banks for their percentage shares of the principal
amount of the Loans then due and payable from the Borrowers until such
principal is paid in full, which percentage shares shall be calculated by
determining each Bank's percentage share (determined as set forth in
Section 10.7(a)) of the amounts allocated in (a) above.
10.8 Expenses of the Agent; Indemnification of the Agent and the Banks.
(a) The Borrowers will from time to time reimburse the Agent promptly
following demand for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel) in connection with (i) the
preparation of the Loan Documents, (ii) the making of any Loans, (iii) the
administration of the Loan Documents, (iv) the enforcement of the Loan
Documents, and (v) the Side Letter; and will reimburse the Banks for all
out-of-pocket expenses (including reasonable fees and expenses of legal counsel)
in connection with the foregoing, including, without limitation, the enforcement
of the Loan Documents, which expenses shall not be unreasonable. Notwithstanding
the foregoing, the Bank shall use their good faith best efforts to engage common
legal counsel with respect to any attempts by the Banks to enforce any of the
Loan Documents.
(b) In addition to the payment of the foregoing expenses, the Borrowers
hereby agree, jointly and severally, to indemnify, protect and hold the Agent,
each Bank and any holder of the Notes and the officers, directors, employees,
agents, affiliates and attorneys of the Agent, each Bank and such holder
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature, including reasonable
fees and expenses of legal counsel, which may be imposed on, incurred by, or
asserted against such Indemnitee by any Borrower or other third parties and
arise out of or relate to this Agreement or the other Loan Documents or any
other matter whatsoever related to the transactions contemplated by or referred
to in this Agreement or the other Loan Documents; provided, however, that the
Borrowers shall have no obligation to an Indemnitee hereunder to the extent that
the liability incurred by such Indemnitee has been determined by a court of
competent jurisdiction to be the result of gross negligence or willful
misconduct of such Indemnitee.
10.9 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder and
the execution and delivery of the Notes. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of the Borrowers set
forth in Sections 2.1(f), 2.5(a), 2.10, and 10.8, and the agreements of the
Banks set forth in Sections 9.1, 9.5 and 10.7 shall survive the payment of the
<PAGE>
Loans and the termination of this Agreement. This Agreement shall remain in full
force and effect until the latest to occur of the termination of the Aggregate
Revolving Loan Commitment or the repayment in full of all amounts owed by the
Borrowers under any Loan Document.
10.10 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement, the Notes
or other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
the Notes or other Loan Documents or of such provision or obligation in any
other jurisdiction.
10.11 Banks' Obligations Several; Independent Nature of Banks' Rights. The
obligation of each Bank hereunder is several and not joint and no Bank shall be
the agent of any other (except to the extent the Agent is authorized to act as
such hereunder). No Bank shall be responsible for the obligation or commitment
of any other Bank hereunder. In the event that any Bank at any time should fail
to make a Loan as herein provided, the other Banks, or any of them as may then
be agreed upon, at their sole option, may make the Loan that was to have been
made by the Bank so failing to make such Loan. Nothing contained in any Loan
Document and no action taken by Agent or any Bank pursuant hereto or thereto
shall be deemed to constitute Banks to be a partnership, an association, a joint
venture or any other kind of entity. The amounts payable at any time hereunder
to each Bank shall be a separate and independent debt, and, subject to the terms
of this Agreement, each Bank shall be entitled to protect and enforce its rights
arising out of this Agreement and it shall not be necessary for any other Bank
to be joined as an additional party in any proceeding for such purpose.
10.12 No Fiduciary Relationship. No provision in this Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create any fiduciary duty by Agent or any Bank to the Borrowers.
10.13 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE BORROWERS,
THE AGENT AND EACH BANK HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT OF PENNSYLVANIA AND
IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING
TO THE NOTES, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAYBE LITIGATED IN SUCH
COURTS. EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENT, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT, SUCH NOTE, OR SUCH OTHER LOAN DOCUMENT.
10.14 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT AND EACH BANK
HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS,
OR ANY DEALINGS BETWEEN
<PAGE>
THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER
RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. EACH OF THE BORROWERS, THE AGENT AND EACH BANK
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE TRANSACTION, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
OF THE BORROWERS, THE AGENT AND EACH BANK FURTHER WARRANTS AND REPRESENTS THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE
LOANS. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
10.15 Counterparts; Effectiveness. This Agreement and any amendment hereto or
waiver hereof may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement and any amendments hereto or
waivers hereof shall become effective when the Agent shall have received signed
counterparts or notice by telecopy of the signature page that the counterpart
has been signed and is being delivered to the Agent or facsimile that such
counterparts have been signed by all the parties hereto or thereto.
10.16 Use of Defined Terms. All words used herein in the singular or plural
shall be deemed to have been used in the plural or singular where the context or
construction so requires. Any defined term used in the singular preceded by
"any" shall be taken to indicate any number of the members of the relevant
class.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Borrowers and the Banks have caused this Agreement to be executed by their
proper corporate officers thereunto duly authorized as of the day and year first
above written.
INTERMAGNETICS GENERAL CORPORATION
By: /s/ Carl H. Rosner
-------------------------------
Name: Carl H. Rosner
Title: CEO
APD CRYOGENICS INC.
By: /s/ Michael C. Zeigler
-------------------------------
Name: Michael C. Zeigler
Title: Treasurer
MAGSTREAM CORPORATION
By: /s/ Michael C. Zeigler
-------------------------------
Name: Michael C. Zeigler
Title: Treasurer
MEDICAL ADVANCES, INC.
By: /s/ Carl H. Rosner
-------------------------------
Name: Carl H. Rosner
Title: CEO
INTERCOOL ENERGY CORPORATION
By: /s/ Michael C. Zeigler
-------------------------------
Name: Michael C. Zeigler
Title: Treasurer
<PAGE>
Commitment Percentage: 60% CORESTATES BANK, N.A.,
Revolving Loan Commitment: $15,000,000 individually
and as Agent
By: /s/ Kaj E. Karch
----------------------------
Name: Kaj E. Karch
Title: Vice President
Commitment Percentage: 40% THE CHASE MANHATTAN BANK
Revolving Loan Commitment: $10,000,000
By: /s/ Stephen P. Malinowski
----------------------------
Name: Stephen P. Malinowski
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23rd day of October, 1997, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
the CEO of Intermagnetics General Corporation, the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23rd day of October, 1997, before me personally came M. C.
Zeigler, to me known, who, being by me duly sworn, did depose and say that he is
the Treasurer of APD Cryogenics Inc., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23rd day of October, 1997, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
the CEO of Magstream Corporation, the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23rd day of October, 1997, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
the CEO of Medical Advances, Inc., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23rd day of October, 1997, before me personally came M.C.
Zeigler, to me known, who, being by me duly sworn, did depose and say that he is
the Treasurer of InterCool Energy Corporation, the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23 day of October, 1997, before me personally came Kaj Karch,
to me known, who, being by me duly sworn, did depose and say that he is the Vice
President of CoreStates Bank, N.A., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 23 day of October, 1997, before me personally came Stephen
Malinowski, to me known, who, being by me duly sworn, did depose and say that he
is the Vice President of The Chase Manhattan Bank, the corporation described in
and which executed the foregoing instrument and that he signed his name thereto
by order of the board of directors of said corporation.
/s/ Katherine M. Sheehan
NOTARY PUBLIC
<PAGE>
Exhibit A
Form of Borrowing Notice
CoreStates Bank, N.A.
645 Hamilton Mall
Allentown, PA 18101
Attention: Kaj Karch, Vice President
Ladies and Gentlemen:
The undersigned, INTERMAGNETICS GENERAL CORPORATION, on behalf of
itself and APD CRYOGENICS INC., MAGSTREAM CORPORATION, MEDICAL ADVANCES, INC.
and INTERCOOL ENERGY CORPORATION (collectively, the "Borrowers"), refers to the
Second Amended and Restated Loan and Agency Agreement, dated as of October 23,
1997, among the Borrowers, CoreStates Bank, N.A., as agent (the "Agent"), and
the Banks (as defined therein) (as amended, modified and/or extended to date,
the "Loan Agreement"), capitalized terms used herein having the definitions
given such terms in the Loan Agreement, and hereby:
1. Gives you notice, irrevocably, pursuant to Section 2.3 of the Loan
Agreement, that IGC on behalf of the Borrowers hereby requests a Loan
under the Loan Agreement and, in that regard, sets forth below the
information relating to that Loan (the "Proposed Advance") as required
by Section 2.3 of the Loan Agreement:
(a) the requested Business Day of the Proposed Advance is ______;
(b) the aggregate amount of the Proposed Advance is $________; and
(c) the Proposed Advance is intended to be a LIBO Rate Loan, and
the Interest Period for the Proposed Advance is ____ months;
or
the Proposed Advance is intended to be a Base Rate Loan.
2. Certifies to you as follows: (i) each Borrower is on the date hereof,
and will be on the date of the Proposed Advance, in compliance with all
covenants, agreements and conditions in each Loan Document; (ii) each
representation and warranty contained in each Loan Document is true on
the date hereof and will be true on the date of the Proposed Advance,
with the same effect as if such representation or warranty had been
made on each such respective date; and (iii) immediately prior to and
after giving effect to the Proposed Advance, no Event of Default or
Potential Default shall exist.
Very truly yours,
INTERMAGNETICS GENERAL CORPORATION
Dated: _______________, _________ By:
Name:
Title:
<PAGE>
Exhibit B
Form of Covenant Compliance Certificate
CoreStates Bank, N.A.
645 Hamilton Mall
Allentown, PA 18101
Attention: Kaj Karch, Vice President
Ladies and Gentlemen:
This Covenant Compliance Certificate (this "Certificate") is executed
and delivered pursuant to Section 5.2(d) of the Second Amended and Restated Loan
and Agency Agreement, dated October 23, 1997 (the "Loan Agreement"), by and
among Intermagnetics General Corporation, APD Cryogenics Inc., Magstream
Corporation, Medical Advances, Inc. and InterCool Energy Corporation
(collectively, the "Borrowers"), the Banks (as such term is defined in the Loan
Agreement), and CoreStates Bank, N.A., as agent for the Banks (the "Agent"). All
capitalized terms used herein without definition shall have the meanings given
to them in the Loan Agreement and Schedule 5.16 thereto.
The undersigned has reviewed the terms of the Loan Agreement and has
made, or caused to be made under his or her supervision, a review in reasonable
detail of the transactions and financial condition of the Borrowers during the
fiscal period covered by this Certificate.
As of ________, the following financial covenants have the
following values:
COVENANT ACTUAL
----------- ---------
1. Minimum Tangible Net Worth $55,000,000 $
2. Maximum Ratio of Senior Debt 0.5:1.0
to Tangible Net Worth
3. Minimum Ratio of EBIT to 2.0:1.0
Interest Expenses
Attached hereto are the calculations and information necessary to
determine the foregoing covenant values.
As of the date hereof: (a) no Event of Default or Potential Default has
occurred and is continuing; (b) the representations and warranties of the
Borrowers contained in Article
<PAGE>
III of the Loan Agreement are true and correct in all material respects as of
the date hereof, except that the representations and warranties in Section 3.4
of the Loan Agreement shall refer to the most recent financial statements
delivered to the Banks.
This Certificate is executed on _________, by the Chief Financial
Officer of IGC, on behalf of the Borrowers. The undersigned hereby certifies
that each and every matter contained herein is derived from the Borrowers'
books and records and is, to the best knowledge of the undersigned, true
and correct.
Chief Financial Officer,
Intermagnetics General Corporation
<PAGE>
Schedule 5.16
Financial Covenants
This Schedule is a part of the Second Amended and Restated Loan
Agreement dated October 23, 1997 (the "Loan Agreement"), among CoreStates Bank,
N.A. (as Bank and Agent), The Chase Manhattan Bank, Intermagnetics General
Corporation, and the other parties defined therein as the "Borrowers."
A. Tangible Net Worth. The Borrowers shall at all times maintain a
Tangible Net Worth of not less than $55,000,000; provided, however, that if (i)
within six (6) months of the date hereof, IGC shall have consummated a
contemplated acquisition pursuant to a certain letter of intent, a copy of which
has been provided to the Agent, and (ii) IGC acquires not less than $7,000,000
in goodwill as a result of such transaction, then from and after the date of
such acquisition, the Borrowers shall at all times maintain a Tangible Net Worth
of not less than $50,000,000.
B. Ratio of Senior Debt to Tangible Net Worth. The Borrowers, on a
consolidated basis, shall have a ratio of Senior Debt to Tangible Net Worth at
the end of each fiscal quarter of not more than 0.5 to 1.0.
C. Ratio of EBIT to Interest Expenses. The Borrowers, on a consolidated
basis, shall have a ratio of EBIT to Interest Expenses at the end of each fiscal
quarter on a rolling four quarter basis, of not less than 2.0 to 1.0.
For purposes of this Schedule, all capitalized terms used herein and
not otherwise defined shall have the meanings given to them, respectively, in
the Loan Agreement, and the following terms shall have the following meanings:
"EBIT" shall mean, for any period, the Net Income (or net loss) of the
Borrowers on a consolidated basis for such period as determined in accordance
with GAAP, plus the sum of, without duplication, the following for the Borrowers
on a consolidated basis: (i) Interest Expenses, and (ii) total income tax
expense.
"Senior Debt" shall mean, at any time, all Indebtedness less all
Subordinated Indebtedness.
"Stockholders' Equity" shall mean, at any time, stockholders' equity as
determined in accordance with GAAP.
"Tangible Net Worth" shall mean, at any time, the aggregate
Stockholders' Equity, less all intangible assets of the Borrowers, on a
consolidated basis, including, without limitation, organization costs,
securities issuance costs, unamortized debt discount and expense, goodwill,
excess of purchase costs over net assets acquired, patents, trademarks,
<PAGE>
trade names, copyrights, trade secrets, know how, licenses, franchises,
capitalized research and development expenses, and amounts owing from officers
and/or Affiliates.
<PAGE>
Exhibit 4.3
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
LOAN AND AGENCY AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND AGENCY
AGREEMENT (this "Amendment"), dated as of May 15, 1998, is by and among
INTERMAGNETICS GENERAL CORPORATION, a New York corporation, APD CRYOGENICS INC.,
a Pennsylvania corporation, MAGSTREAM CORPORATION, a New York corporation,
MEDICAL ADVANCES, INC., a Wisconsin corporation, and INTERCOOL ENERGY
CORPORATION, a Delaware corporation (each, an "Existing Borrower" and
collectively, the "Existing Borrowers"), POLYCOLD SYSTEMS INTERNATIONAL, INC., a
Delaware corporation (the "New Borrower" and, collectively with the Existing
Borrowers, the "Borrowers"), CORESTATES BANK, N.A., and THE CHASE MANHATTAN BANK
(the "Banks").
BACKGROUND
WHEREAS, the Existing Borrowers and the Banks are parties to a Second
Amended and Restated Loan and Agency Agreement dated October 23, 1997 (as at any
time amended and/or extended, the "Loan Agreement"), pursuant to which the Banks
agreed to make available to the Existing Borrowers certain credit facilities
upon the terms and conditions specified in the Loan Agreement; and
WHEREAS, the parties wish to amend the Loan Agreement as set forth
herein to, inter alia, add the New Borrower as a Borrower under the Loan
Agreement;
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein contained, the parties hereto, intending to be legally bound hereby,
agree to amend the Loan Agreement as herein stated.
1. Effect of Prior Agreements. This Amendment is intended to amend the
Loan Agreement as it has been in effect to the date hereof and as it shall be
amended on and after the date hereof. All terms used herein as defined terms
shall have the meanings ascribed to them in the Loan Agreement unless herein
provided to the contrary.
2. Amendments.
(a) The introductory paragraph of the Loan Agreement
is hereby amended and restated in its entirety as follows:
THIS SECOND AMENDED AND RESTATED LOAN AND AGENCY
AGREEMENT, dated as of October 23, 1997 (this "Agreement"), is
entered into by and among INTERMAGNETICS GENERAL CORPORATION,
<PAGE>
a New York corporation ("IGC"), APD CRYOGENICS INC., a
Pennsylvania corporation ("APD"), MAGSTREAM CORPORATION, a New
York corporation ("MC"), MEDICAL ADVANCES, INC., a Wisconsin
corporation ("MA"), INTERCOOL ENERGY CORPORATION, a Delaware
corporation ("IEC"), and POLYCOLD SYSTEMS INTERNATIONAL, INC.,
a Delaware corporation (each, a "Borrower" and collectively,
the "Borrowers"), the banking institutions signatories hereto
and such other institutions that hereafter become a "Bank"
pursuant to Section 10.4 hereof (each, a "Bank" and
collectively, the "Banks") and CORESTATES BANK, N.A., a
national banking association ("CoreStates"), as agent for the
Banks under this Agreement (in such capacity, the "Agent").
(b) The following definitions are hereby added to
Article I of the Loan Agreement, in alphabetical order:
"L/C Agreement" shall mean an Agreement for Standby
Letter of Credit, substantially in the form of Exhibit D
hereto, and in form and substance satisfactory to the Agent.
"Letter of Credit Sublimit" shall mean Four Million
Dollars ($4,000,000).
(c) The following definitions set forth in Article I
of the Loan Agreement are hereby amended and restated in their entirety
as follows:
"Loan Documents" shall mean this Agreement, the
Notes, the L/C Agreements, and all agreements, amendments,
certificates, financing statements, schedules, reports,
notices, and exhibits now or hereafter executed or delivered
in writing in connection with any of the foregoing, as may be
in effect from time to time.
(d) A new Section 2.1(g) is hereby added to the Loan
Agreement, to read as follows:
(g) Letters of Credit.
(1) Generally. In addition to making
Revolving Credit Loans to the Borrowers as provided in this
Section 2.1, the Agent, on behalf of the Banks, shall, upon
the request of the Borrowers and subject to the terms of this
Agreement, also issue one or more letters of credit and/or
bank guarantees ("Letters of Credit") for the account of the
Borrowers, provided that in connection with each issuance of a
<PAGE>
Letter of Credit the Borrowers shall execute and deliver to
the Agent an L/C Agreement substantially in the form of
Exhibit D hereto; and provided further, that in the event of
any conflict between the terms of any L/C Agreement and the
terms of this Agreement, the terms of this Agreement shall be
controlling. All amounts drawn under Letters of Credit shall
be deemed to be Revolving Credit Loans evidenced by the
Revolving Credit Notes, and the amount available to be
borrowed under the Revolving Credit facility, and the Letter
of Credit Sublimit, shall be reduced by the aggregate amounts
drawn and available to be drawn at any time under all
outstanding Letters of Credit. In no event shall the aggregate
amount available to be drawn on all outstanding Letters of
Credit plus the outstanding principal balance of Revolving
Credit Loans exceed the Aggregate Revolving Loan Commitment.
In no event shall the aggregate amount available to be drawn
on all outstanding Letters of Credit exceed the lesser of (i)
the Aggregate Revolving Loan Commitment, or (ii) the Letter of
Credit Sublimit. The duration of any Letter of Credit shall
not extend beyond the Revolver Termination Date. Not more than
three (3) Letters of Credit with a face amount of less than
$25,000 shall be outstanding hereunder at any one time. No
Letter of Credit in excess of $4,000,000 shall be issued by
the Agent on behalf of the Banks except upon the approval of
the Required Banks, in their sole discretion. Each Bank hereby
absolutely and unconditionally agrees to pay to the Agent such
Bank's Commitment Percentage of each disbursement made by the
Agent pursuant to a Letter of Credit and not reimbursed by the
Borrowers pursuant to Section 2.1(g)(3), or of any
reimbursement payment required to be refunded to the Borrowers
for any reason ("LC Disbursements").
(2) Issuance of Letters of Credit. Subject
to the provisions of Section 2.1(g)(1), the Agent, on behalf
of the Banks, shall issue Letters of Credit for the account of
the Borrowers, provided that the Borrowers (i) provide a
written request for each such Letter of Credit specifying the
terms thereof, including, without limitation, the amount and
the name and address of the beneficiary of such Letter of
Credit; (ii) execute and deliver to the Agent an application
for each such Letter of Credit pursuant to the form provided
for such purpose by the Agent; and (iii) execute and deliver
to the Agent such other documents and instruments which the
Agent, in its sole and absolute discretion, deems reasonable
and necessary. In connection with each Letter of Credit, the
Borrowers shall pay to the Agent, for the benefit of the
Banks, a non-refundable fee equal to: (A) for bank guarantees,
the Applicable Margin in effect on each day during the
calendar quarter, and (B) for letters of credit, such rate as
the Agent and the Borrowers may agree upon, in either case
multiplied by the amount of such Letter of Credit outstanding
each day during such calendar quarter (after giving effect to
any drawings thereunder); which fee shall be payable quarterly
in arrears. The Borrowers shall also pay to the Agent, for the
benefit of the Agent, and not for the benefit of the other
<PAGE>
Banks, all transactional and customary fees required by the
Agent in connection with the issuance of each Letter of Credit
hereunder, including, without limitation, the Agent's standard
remittance, transfer and issuance fees, which fees may be
deducted by the Agent from the Borrowers' account as such fees
are incurred.
(3) Reimbursement. If the Agent shall make
any LC Disbursement in respect of a Letter of Credit, then
either (i) the Borrowers shall reimburse such LC Disbursement
by paying to the Agent an amount equal to such LC Disbursement
not later than 12:00 noon, Philadelphia time, on the date that
such LC Disbursement is made, if the Borrowers shall have
received notice of such LC Disbursement prior to 10:00 a.m.
Philadelphia time on such date, or, if such notice is received
by the Borrowers after 10:00 a.m. Philadelphia time on such
date, then not later than 10:00 a.m. Philadelphia time on the
Business Day immediately following the day on which the
Borrowers receive such notice; or (ii) such LC Disbursement
shall become and be deemed a Revolving Credit Loan, bearing
interest at the Adjusted Base Rate in effect at such time. The
Agent shall notify each Bank of any LC Disbursement, the
payment then due from the Borrowers in respect thereof, and
such Bank's Commitment Percentage thereof. Promptly following
receipt of such notice, each Bank shall pay to the Agent its
Commitment Percentage of the payment then due from the
Borrowers, in the same manner as provided in Section 2.3, with
respect to Loans. Promptly following receipt by the Agent of
any payment from the Borrowers pursuant to this Section
2.1(g)(3), the Agent shall distribute such payment to the
Banks, to the extent that such Banks have made payments
pursuant to this Section to reimburse the Agent. Any payment
made by a Bank pursuant to this Section to reimburse the Agent
for any LC Disbursement shall not relieve the Borrowers of
their obligations to reimburse such LC Disbursement.
(4) Obligations Absolute. The Borrowers'
obligations to reimburse LC Disbursements as provided in
Section 2.1(g)(3) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of
validity or enforceability of any Letter of Credit or this
Agreement or any term or provision thereof; (ii) any draft or
other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect;
(iii) payment by the Agent under a Letter of Credit against
presentation of a draft or other document that does not comply
with the terms of such Letter of Credit; or (iv) any other
event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of
<PAGE>
this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrowers' obligations
hereunder. Neither the Agent nor the Banks, nor any of their
Affiliates, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any
payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or
delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any documents
required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising
from causes beyond the control of the Agent; provided, that
the foregoing shall not be construed to excuse the Agent from
liability to the Borrowers to the extent of any direct damages
(as opposed to consequential damages, claims in respect of
which are hereby waived by the Borrowers to the extent
permitted by applicable law) suffered by the Borrowers that
are caused by the Agent's failure to exercise care when
determining whether drafts and other documents presented under
a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the Agent (as
finally determined by a court of competent jurisdiction), the
Agent shall be deemed to have exercised care in each such
determination. In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with
respect to documents presented which appear on their face to
be in substantial compliance with the terms of a Letter of
Credit, the Agent may, in its sole discretion, either accept
and make payment upon such documents without responsibility
for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make
payment upon such documents if such documents are not in
strict compliance with the terms of such Letter of Credit.
Each Bank acknowledges and agrees that its obligations to make
payments to the Agent pursuant to this Section 2.1(g) are
absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and
continuance of an Event of Default or reduction or termination
of the Revolving Loan Commitments, and that each such payment
shall be made without any offset, abatement, withholding or
reduction whatsoever.
(e) Section 2.5(a) of the Loan Agreement is hereby
amended and restated in its entirety as follows:
(a) The Borrowers shall pay to the Agent for the
ratable benefit of the Banks, and as compensation for the
Banks' Revolving Loan Commitments, a fee (the "Commitment
Fee") computed at the rate per annum equal to 12.5 basis
<PAGE>
points (0.125%) on the average daily amount of the unused
portion of the Aggregate Revolving Loan Commitment (reduced by
the amount of Letters of Credit outstanding from time to time)
accrued from and after the date hereof. The Commitment Fee
shall be payable in arrears on the first day of each January,
April, July and October, commencing October 1, 1997 (for the
three month period or portion thereof ended on the preceding
day), and on the Revolver Termination Date. Payment shall be
made to the Agent on behalf of the Banks and the Agent shall
promptly forward to each Bank the portion of the Commitment
Fee amount due such Bank. The Commitment Fee shall be
calculated on the basis of a 360 day year.
(f) Section 2.6(a) of the Loan Agreement is hereby
amended and restated in its entirety as follows:
(a) Voluntary. The Borrowers may at any time, on not
less than three (3) Business Days' written notice, terminate
or permanently reduce the Aggregate Revolving Loan Commitment
pro rata among the Banks, provided that (i) any reduction
shall be in the amount of $1,000,000 or a multiple thereof,
(ii) no such termination or reduction shall cause the sum of
the aggregate principal amount of Loans outstanding and the
aggregate face amount of any Letters of Credit then
outstanding to exceed the Aggregate Revolving Loan Commitment,
as reduced, and (iii) no termination of the Aggregate
Revolving Loan Commitment shall reduce the Aggregate Revolving
Loan Commitment to an amount which is less than the aggregate
face amount of any Letters of Credit then outstanding.
3. Joinder of New Borrower The New Borrower hereby joins in the Loan
Agreement, the Obligations thereunder, the Notes and all other Loan Documents as
a joint and several obligor thereunder and party thereto, subject to all the
terms and provisions thereof. Without limiting the foregoing, the New Borrower
expressly agrees to be jointly and severally liable for all fees under the Loan
Agreement and all other amounts of principal and charges which may be due
thereunder, and hereby ratifies all actions heretofore taken, and all
obligations incurred by the Existing Borrowers under the Loan Agreement and the
other Loan Documents executed in connection therewith.
4. Representations, Warranties and Covenants. Each Borrower hereby
affirms and reaffirms to the Banks all representations and warranties made and
to be made under the Loan Agreement, and confirms that all are true and correct
as of the date hereof and that no Default has occurred and is continuing. Each
Borrower further represents and warrants that it has the authority and legal
right to execute, deliver and carry out the terms of this Amendment, that such
actions were duly authorized by its Board of Directors and that the officers
executing this Amendment on its behalf were similarly authorized and empowered,
and that this Amendment does not contravene any provision of its Certificate or
Articles of Incorporation or Bylaws, or of any contract or agreement to which it
<PAGE>
is a party or by which it or any of its properties is bound. Each Borrower
hereby affirms and reaffirms to the Banks all of the covenants contained in the
Loan Agreement including, without limitation, those contained in Articles V and
VI of the Loan Agreement and agrees to abide thereby until all of the
Obligations to the Banks are satisfied and/or discharged in their entirety.
5. Conditions. To induce the Banks to enter into this Amendment, the
Borrowers agree as follows:
(a) The Borrowers shall execute and deliver to the Agent, on
behalf of the Banks, this Amendment, an Allonge to Revolving Credit Note in form
and substance satisfactory to the Agent, and all other documents as the Agent
may require;
(b) The Borrowers shall deliver to the Agent, on behalf of the
Banks, certified resolutions of the Board of Directors of each Borrower
authorizing the execution and delivery of the Amendment and all other documents
executed in connection herewith and therewith, all in form and substance
satisfactory to the Agent; and
(c) Each Borrower shall deliver to the Bank an Officer's
Certificate in form and substance satisfactory to the Agent.
6. Further Assurances. Each Borrower hereby agrees to execute and
deliver to the Agent, on behalf of the Banks, such further agreements, and other
documentation as may be requested by the Agent at any time to assure the
protection and enforcement of the Banks' rights under the Loan Agreement as
amended hereby.
7. Reservation of Rights. To the extent any Event of Default exists on
the date hereof, any and all undertakings of any Bank under or pursuant to this
Amendment shall not be deemed a waiver by such Bank of any such Event of Default
or any of such Bank's rights and remedies under the Loan Agreement and/or
applicable law; and the Banks hereby reserve any and all such rights and
remedies.
8. Payment of Expenses. The Borrowers shall pay or reimburse the Agent,
on behalf of the Banks, for their respective reasonable attorneys' fees and
expenses in connection with the preparation and execution of this Amendment and
all other related documents.
9. Reaffirmation and Extension of Agreement. Except as modified by the
terms hereof, all of the terms and conditions of the Loan Agreement and all
other Loan Documents, including, without limitation, the Notes, are hereby
affirmed and shall continue in full force and effect.
10. Counterparts. This Amendment may be executed in two or more
counterparts, and by different parties on different counterparts, each of which
shall be
<PAGE>
deemed an original and all of which, taken together, shall constitute
one and the same instrument.
11. Governing Law. This Amendment and the rights and obligations of the
parties hereunder shall be construed in accordance with and shall be governed by
the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their proper and duly authorized officers, as of the
date first above written.
INTERMAGNETICS GENERAL CORPORATION
By: /s/ Carl H. Rosner
---------------------------------------
Name: Carl H. Rosner
Title: Chairman and Chief Executive Officer
APD CRYOGENICS INC.
By: /s/ Michael C. Zeigler
---------------------------------------
Name: Michael C. Zeigler
Title: Treasurer
MAGSTREAM CORPORATION
By: /s/ Michael C. Zeigler
---------------------------------------
Name: Michael C. Zeigler
Title: Treasurer
MEDICAL ADVANCES, INC.
By: /s/ Carl H. Rosner
---------------------------------------
Name: Carl H. Rosner
Title: Chief Executive Officer
INTERCOOL ENERGY CORPORATION
By: /s/ Michael C. Zeigler
---------------------------------------
Name: Michael C. Zeigler
Title: Treasurer
POLYCOLD SYSTEMS
INTERNATIONAL, INC.
By: /s/ Carl H. Rosner
---------------------------------------
Name: Carl H. Rosner
Title: Chairman and Chief Executive Officer
<PAGE>
CORESTATES BANK, N.A.,
individually and as Agent
By: /s/ Kaj E. Karch
------------------------------
Name: Kaj E. Karch
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Stephen P. Malinowski
------------------------------
Name: Stephen P. Malinowski
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 20th day of May, 1998, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
the Chairman and Chief Executive Officer of Intermagnetics General Corporation,
the corporation described in and which executed the foregoing instrument and
that he signed his name thereto by order of the board of directors of said
corporation.
/s/ Karen A. Greene
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 20th day of May, 1998, before me personally came Michael C.
Zeigler, to me known, who, being by me duly sworn, did depose and say that he is
the Treasurer of APD Cryogenics Inc., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Karen A. Greene
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 20th day of May, 1998, before me personally came Michael C.
Zeigler, to me known, who, being by me duly sworn, did depose and say that he is
the Treasurer of Magstream Corporation, the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Karen A. Greene
NOTARY PUBLIC
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 20th day of May, 1998, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
the Chief Executive Officer of Medical Advances, Inc., the corporation described
in and which executed the foregoing instrument and that he signed his name
thereto by order of the board of directors of said corporation.
/s/ Karen A. Greene
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 20th day of May, 1998, before me personally came Michael C.
Zeigler, to me known, who, being by me duly sworn, did depose and say that he is
the Treasurer of InterCool Energy Corporation, the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the board of directors of said corporation.
/s/ Karen A. Greene
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this 20th day of May, 1998, before me personally came Carl H.
Rosner, to me known, who, being by me duly sworn, did depose and say that he is
the Chairman & Chief Executive Officer of Polycold Systems International, Inc.,
the corporation described in and which executed the foregoing instrument and
that he signed his name thereto by order of the board of directors of said
corporation.
/s/ Karen A. Greene
NOTARY PUBLIC
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.
COUNTY OF LEHIGH )
On this 15th day of May, 1998, before me personally came Kaj E. Karch,
to me known, who, being by me duly sworn, did depose and say that he is the Vice
President of CoreStates Bank, N.A., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto by order
of the board of directors of said corporation.
/s/ Wanda A. Beahm
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF ALBANY )
On this day 5th of May, 1998, before me personally came Stephen P.
Malinowski, to me known, who, being by me duly sworn, did depose and say that he
is the Vice President of The Chase Manhattan Bank, the corporation described in
and which executed the foregoing instrument and that he signed his name thereto
by order of the board of directors of said corporation.
/s/ Katherine M. Vermilyea
NOTARY PUBLIC
<PAGE>
Exhibit 10.1
ROSNER - INTERMAGNETICS
1998 EMPLOYMENT AND CONSULTING AGREEMENT
EMPLOYMENT AND CONSULTING AGREEMENT (the "Agreement") dated
as of April 20, 1998 between Intermagnetics General Corporation, a New York
corporation (the "Company"), and Carl H. Rosner ("Employee").
WHEREAS, Employee served as the President and Chief Executive
Officer of the Company under an Employment and Consulting Agreement dated
September 22, 1992 between the Company and Employee (the "1992 Agreement");
WHEREAS, the 1992 Agreement was subsequently superseded by a
new Employment and Consulting Agreement, dated December 15, 1994, between the
Company and the Employee (the "1994 Agreement") which, among other things,
extended the service term of the employment provisions of the 1992 Agreement for
an additional two years;
WHEREAS. the parties reached an understanding during the
summer of 1996 to extend the service term of the employment provisions of the
1994 Agreement for an additional year, which understanding, although not reduced
to writing, was nonetheless documented in the minutes of the Compensation
Committee and the minutes of the Board of Directors of the Company for July and
August of 1996, and which understanding has been fully performed by both parties
(the "1996 Understanding");
WHEREAS, the parties now wish to extend the service term of
the employment provisions of the 1996 Understanding and make certain other
changes in the employment and consulting relationship between the Company and
the Employee on such terms and conditions as will secure the benefit of
Employees services to the Company; and
WHEREAS, Employee and the Company desire that the 1992
Agreement, the 1994 Agreement and the 1996 Understanding all be superseded by
this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. Employment. The Company hereby employs or retains Employee, and Employee
hereby accepts such employment or consulting assignment and agrees to perform
his duties and responsibilities hereunder, in accordance with the terms and
conditions hereinafter set forth.
1.1. Term.
(a) Employment Term. Employee shall be employed as a full-time employee
of the Company for the term (the "Employment Term") running two fiscal
years beginning retroactive to June 1, 1997 and ending on May 31, 1999.
(b) Consulting Term. For the five fiscal years immediately following
the Employment Term (the "Consulting Term"), Employee shall serve as a
consultant to the Company as set forth in Section 1.7 hereof.
(c) Agreement Term. The term of this Agreement (the "Agreement Term")
shall commence retroactively as of June 1, 1997 and shall continue for
the Employment Term plus the Consulting Term, unless terminated prior
thereto in accordance with Section 8 or 9 hereof.
1.2. Duties and Responsibilities.
<PAGE>
(a) During the Employment Term, Employee shall serve as Chief
Executive Officer of the Company and shall perform all duties
and accept all responsibilities incidental to such position or
as may be assigned to him by the Company's board of directors,
and he shall cooperate fully with the board of directors and
other executive officers of the Company. During the Employment
Term, Employee shall also be available to perform similar
duties on behalf of subsidiaries or divisions of the Company.
During the Employment Term, employee shall at all times comply
with policies and procedures adopted by the Company for
employees of the Company and its subsidiaries, including
without limitation the procedures and policies adopted by the
Company regarding conflicts of interest.
(b) During the Consulting Term, Employee shall provide consulting
services to the Company, and as such be involved in the
Company's external activities, policies and interests,
including joint ventures, investments, acquisitions, etc.
During the Consulting Term, Employee shall provide such
consulting services to the Company as an independent
contractor and not as an employee of the Company. Employee
shall at all times during the Consulting Term act as an
independent contractor and during such period nothing
hereunder shall create or imply a relationship of
employer-employee between the Company and Employee. During the
Consulting Term, Employee shall also be available to perform
similar duties on behalf of subsidiaries or divisions of the
Company. During the Consulting Term, Employee shall at all
times comply with policies and procedures adopted by the
Company for consultants to the Company, including without
limitation the procedures and policies adopted by the Company
regarding conflicts of interest.
(c) Employee represents and covenants to the Company that he is
not subject, or a party, to any employment agreement,
non-competition covenant, non-disclosure agreement or any
similar agreement, covenant, understanding or restriction
which would prohibit Employee from executing this Agreement
and performing his duties and responsibilities hereunder
during both the Employment Term and the Consulting Term, or
which would in any manner, directly or indirectly, limit or
affect the duties and responsibilities which may now or in the
future be assigned to Employee by the Company or the scope of
assistance to which he may now or in the future provide to
subsidiaries or divisions of the Company, including without
limitation any duties and responsibilities relating to the
development, production and/or sale of (i) superconductive
wire and materials, (ii) permanent and superconductive magnet
systems, or RF coils, used in MRI diagnostic imaging systems,
(iii) NMR spectroscopy systems, (iv) devices for separation of
materials by magnetic means, (v) cryogenic equipment and
refrigeration systems, (vi) permanent magnet applications as
part of the U.S. strategic defense initiative program, or
(vii) CFC replacement products.
1.3. Extent of Service.
(a) During the Employment Term, Employee agrees to use his best
efforts to carry out his duties and responsibilities under
Section 1.2(a} hereof and to devote his full time, attention
and energy thereto, provided, however, that Employee shall not
be required to transfer to a location other than the
metropolitan Albany, New York area without his prior consent.
Employee further agrees not to work either on a part time or
independent contracting basis for any other business or
enterprise during the Employment Term without the prior
consent of the board of directors of the Company.
(b) During the Consulting Term, Employee agrees to devote
approximately twenty (20) hours a week (inclusive of pro rata
vacation, holiday and sick leave) of his time, attention and
energy thereto; provided, however, that (i) Employee-shall
have complete discretion to select the specific dates required
for the performance of consulting activities hereunder, and
(ii) Employee shall not be required to perform such consulting
services outside the metropolitan Albany, New York area
without his prior consent.
<PAGE>
(c) Except as provided in Section 5 hereof, neither subsection (a)
nor (b) hereof shall be construed as preventing Employee from
making investments in other businesses or enterprises, or from
serving as a director of any other business or enterprise,
provided that Employee agrees not to become engaged in any
other business activity which may interfere with his ability
to discharge his duties and responsibilities to the Company as
an employee or consultant.
1.4. Base Compensation During Employment Term. For all the services
rendered by Employee during the Employment Term, the Company shall pay
Employee an annual salary at the rate of $335,000 for each full year of
the Employment Term, plus unused vacation at the end of each year and
such additional amounts, if any, as may be approved by the Company's
board of directors, less withholding required by law or agreed to by
Employee, payable in installments at such times as the Company
customarily pays its other senior officers (but in any event no less
often than monthly). The Compensation Committee of the board of
directors of the Company shall annually review Employee's salary to
determine if an increase is appropriate. During the Employment Term,
Employee shall also be (i) entitled to participate in such vacation
pay, life insurance, pension benefits and other fringe benefit plans as
may exist from time to time for the senior officers of the Company
(subject to payment of such portion of the costs thereof as the Company
requires from its senior officers); (ii) provided with one social club
membership as chosen by Employee; (iii) provided with a term life
insurance policy payable to Employee's designated beneficiary or
beneficiaries in the face amount of $500,000 less any amount currently
provided under the Company's group life insurance coverage; and (iv)
entitled to be reimbursed for the reasonable expenses incurred by him
in obtaining advice and services related to financial and retirement
planning. Notwithstanding the foregoing, during the Employment Term,
the Company shall purchase a disability insurance policy for Employee
with minimum coverage equal to 60% of his base salary adjusted annually
for inflation, payable for the periods set forth on Schedule 1 hereto,
with a waiting period not to exceed 26 weeks, subject to reductions for
Social Security disability and worker's compensation payments, if any,
received by Employee. The disability policy shall define "disability"
to be Employee's inability to perform all of his material duties on a
full-time basis, and shall provide for partial disability coverage in
the event the Employee is unable to perform those duties on a full-time
basis and his income is reduced because of such disability.
1.5. Incentive Compensation. In addition to the compensation set forth
above, during the Employment Term Employee shall be entitled to
participate in such incentive compensation or bonus plans, if any, as
may be adopted by the board of directors of the Company from time to
time (without any obligation to the board of directors of the Company
to do so). Notwithstanding the foregoing, Employee shall receive in
respect of each of the two fiscal years during the Employment Term a
minimum cash bonus equal to not less than 1% of the Company's income
before taxes for such fiscal year. The bonus shall be paid to Employee
as soon as possible after the audited financial statements for such
fiscal year are available, but in no event later than 90 days after the
end of the fiscal year.
1.6. Stock Options. In consideration for Employee's continued
employment under this Agreement, the Company on June 1, 1999 will grant
to Employee, if he elects to begin the Consulting Term and if the
Company at such date continues to be a publicly held company whose
shares of Common Stock are registered under the Securities Exchange Act
of 1934 (the "1934 Act"), a non-qualified option to purchase 75,000
shares (subject to adjustment for future stock dividends or splits) of
Common Stock of the Company, with the option vesting at a rate of
33.33% on each of June 1, 2000, June 1, 2001 and June 1, 2002. The
grant will be made pursuant to the 1990 Stock Option Plan of the
Company, or any successor plan qualified under the rules and
regulations pursuant to Section 16 of the 1934 Act, and adopted by the
Company's shareholders as required by Rule 16b-3 of the 1934 Act, and a
stock option agreement for non-qualified options in the form used
generally by the Company. The exercise price of the option will be
equal to the fair market value of the Company's common stock on the
date of grant, and the term of the stock option is five years.
<PAGE>
1.7. Consulting Term. For all services rendered by Employee as a
consultant to the Company during the Consulting Term, the Company shall
pay Employee compensation at the annual rate of 50% of his annual
salary at the end of the Employment Term for each full year of the
Consulting Term, provided however that for any week during the
Consulting Term in which Employee works more than twenty (20) hours,
the Company shall pay Employee additional compensation of 125% of the
Employee's then daily rate for each eight (8) hours, or portion
thereof, beyond such twenty (20) hours that the Employee worked that
week. For the purposes of the foregoing, hours worked shall include
time spent traveling on behalf of the Company. The Company shall also
pay Employee an incentive bonus in respect of each of the five fiscal
years during the Consulting Term equal to not less than 1/2% of the
Company's income before taxes for such fiscal year. The bonus shall be
paid to Employee as soon as possible after the audited financial
statements for such fiscal year are available, but in no event later
than 90 days after the end of the fiscal year, plus such additional
amounts, if any, as may be approved by the Company's board of
directors, payable in installments at such time as the Company
customarily pays its senior offices. During the Consulting Term,
Employee shall also be entitled to suitable office space at the
Company, including access to telephones, computers and copiers, and
appropriate executive support. During the Consulting Term, Employee
shall also be entitled to life, disability and health insurance
benefits provided generally to senior officers of the Company, and any
other privileges and perquisites granted to the Company's President,
Chief Operating Officer or Chief Executive Officer, during such periods
of time (subject to payment of such portion of the costs thereof as the
Company requires from its senior officers). During the Consulting Term,
Employee shall be solely responsible for the payment of all federal,
state and local taxes or contributions imposed or required under
unemployment insurance, social security and income tax laws that
pertain to the compensation paid to Employee for his performance of
consulting services.
2. Expenses. Employee shall be reimbursed for the reasonable business expenses
incurred by him in connection with his performance of services hereunder during
the Agreement Term upon presentation of an itemized account in accordance with
Company policies.
3. Developments. All developments (including inventions, whether patentable or
otherwise, trade secrets, discoveries, improvements, ideas and writings) which
either directly or indirectly relate to or may be useful in the business of the
Company or any of its affiliates (the "Developments") which Employee, either by
himself or in conjunction with any other person or persons, has conceived, made,
developed, acquired or acquired knowledge of while an employee of the Company or
which Employee, either by himself or in conjunction with any other person or
persons, shall conceive, make, develop, acquire or acquire knowledge of during
the Agreement Term, shall become and remain the sole and exclusive property of
the Company. Employee hereby assigns, transfers and conveys, and agrees to so
assign, transfer and convey, all of his right, title and interest in and to any
and all such Developments and to disclose fully as soon as practicable, in
writing, all such Developments to the board of directors of the Company. At any
time and from time to time, upon the request and at the expense of the Company,
Employee will execute and deliver any and all instruments, documents and papers,
give evidence and do any and all other acts which, in the opinion of counsel for
the Company, are or may be necessary or desirable to document such transfer or
to enable the Company to file and prosecute applications for and to acquire,
maintain and enforce any and all patents, trademark registrations or copyrights
under United States or foreign law with respect to any such Developments or to
obtain any extension, validation, re-issue, continuance or renewal of any such
patent, trademark or copyright. The Company will be responsible for the
preparation of any such instruments, documents and papers and for the
prosecution of any such proceedings and will reimburse Employee for all
reasonable expenses incurred by him in compliance with the provisions of this
Section.
4. Confidential Information. Employee recognizes and acknowledges that by reason
of his employment by the Company, he has had, and, by reason of his continued
employment by and consulting to the Company, he will continue to have, access to
confidential information of the Company and its affiliates, including, without
limitation, information and knowledge pertaining to products, inventions,
innovations, designs, ideas, plans,
<PAGE>
trade secrets, proprietary information, manufacturing, packaging, advertising,
distribution and sales methods and systems, sales and profit figures, customer
and client lists, and relationships between the Company and its affiliates and
dealers, distributors, wholesalers, customers, clients, suppliers and others who
have had or will have business dealings with the Company and its affiliates
("Confidential Information"). Employee acknowledges that such Confidential
Information is a valuable and unique asset and covenants that he will not,
either during or after the Agreement Term, disclose any such Confidential
Information to any person for any reason whatsoever (except as his duties during
the Agreement Term may require) without the prior written authorization of the
Company's board of directors, unless such information is in the public domain
through no fault of Employee or except as may be required by law.
5. Non-Competition.
5.1 Limitation. During such time as Employee is employed by the Company
as an employee or consultant and until the later of (x) June 1, 2001 or
(y) one year after termination of Employee's employment or consulting
relationship with the Company (whether such termination is during or
after the Agreement Term), Employee will not, unless acting pursuant
hereto or with the prior written consent of the board of directors of
the Company, directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as a director,
officer, employee, partner, principal, agent, representative,
consultant or otherwise with or use or permit his name to be used in
connection with, any business or enterprise engaged in the development,
production, sale, rental or repair of (i) superconductive wire and
materials, (ii) permanent and superconductive magnet systems, or RF
coils, used in MRI diagnostic imaging systems, (iii) NMR spectroscopy
systems, (iv) devices for separation of materials by magnetic means,
(v) cryogenic equipment and refrigeration systems, (vi) permanent
magnet applications as part of the U.S. strategic defense initiative
program, or (vii) CFC replacement products. It is recognized by
Employee that the business of the Company and the other subsidiaries or
divisions of the Company which provide similar products or services and
Employee's connection therewith is or will be international in scope,
and that geographical limitations on this non-competition covenant (and
the non-solicitation covenant set forth in Section 6 hereof) are
therefore not appropriate.
5.2 Exception. The foregoing restriction shall not be construed to
prohibit the ownership by Employee of not more than five percent (5%)
of any class of securities of any corporation which is engaged in any
of the foregoing businesses having a class of securities registered
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"),
provided that such ownership represents a passive investment and that
neither Employee nor any group of persons including Employee in any
way, either directly or indirectly, manages or exercises control of any
such corporation, guarantees any of its financial obligations,
otherwise takes any part in its business (other than exercising his
rights as a shareholder), or seeks to do any of the foregoing.
6. No Solicitation. Employee agrees that until the later of (x) June 1, 2001 or
(y) one year after termination of Employee's employment or consulting
relationship with the Company (whether such termination is during or after the
Agreement Term) he will not call on or solicit, either directly or indirectly,
any person, firm, corporation or other entity who or which at the time of such
termination was, or within two years prior to the termination of Employee's
employment or consulting relationship with the Company had been, a customer of
the Company or any of its affiliates with respect to the activities prohibited
by Section 5 hereof.
7. Equitable Relief.
7.1 Right to Equitable Relief. Employee acknowledges that the
restrictions contained in Sections 4, 5 and 6 hereof are reasonable and
necessary to protect the legitimate interests of the Company and its
affiliates, that the Company would not have entered into this Agreement
in the absence of such restrictions, and that any violation of any
provision of those Sections will result in irreparable injury to the
Company for which there would be no adequate remedy at law. Employee
also acknowledges
<PAGE>
that the Company shall be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, as
well as an equitable accounting of all earnings, profits and other
benefits arising from any such violation, which rights shall be
cumulative and in addition to any other rights or remedies to which the
Company may be entitled. Employee agrees that in the event of any such
violation, an action may be commenced by the Company for any such
preliminary and permanent injunctive relief and other equitable relief
in any court of competent jurisdiction within the State of New York or
in a court of competent jurisdiction in any other state. Employee
hereby waives any objections on the grounds of improper jurisdiction or
venue to the commencement of an action in the State of New York and
agrees that effective service of process may be made upon him by mail
under the notice provisions contained in Section 16 hereof. In the
event that any of the provisions of Sections 4, 5 or 6 hereof should
ever be adjudicated to exceed the time, geographic, product or other
'imitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum
time, geographic, product or other 'imitations permitted by applicable
law.
(b) Dissemination of Restrictions. Employee agrees that until the
expiration of the covenants contained in Sections 3, 4, 5 and 6 of this
Agreement, he will provide, and that the Company may similarly provide,
a copy of the covenants contained in such Sections to any business or
enterprise (i) which he may directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership,
management, operation, financing or control of, or (ii) with which he
may be connected with as a director, officer, employee, partner,
principal, agent, representative, consultant or otherwise, or in
connection with which he may use or permit his name to be used.
8. Termination. This Agreement shall terminate prior to the expiration of the
Agreement Term upon the occurrence of any one of the following events:
8.1. Disability. In the event that Employee is unable fully to perform
his duties and responsibilities hereunder to the full extent required
by the board of directors of the Company by reason of illness, injury
or incapacity for 26 consecutive weeks, during which time he shall
continue to be compensated as provided in Section 1.4 or 1.7 hereof, as
applicable (less any payments due Employee under disability benefit
programs, including Social Security disability, worker's compensation
and disability retirement benefits), this Agreement may be terminated
by the Company, and the Company shall have no further liability or
obligation to Employee for compensation hereunder; provided, however,
that Employee will be entitled to receive, in addition to amounts due
him in such circumstances under any pension or benefit plans of the
Company (including, without limitation, the Company's Retirement Plan,
Supplemental Retirement Plan, Supplemental Income Plan and Savings
Plan), (i) during the Employment Term, the payments prescribed under
any disability benefit plan which may be in effect for employees of the
Company and in which he participated (subject, however, to the minimum
disability benefit provisions set forth in Section 1.4 hereof), and a
pro rata portion of the incentive compensation, if any, referred to in
Section 1.5 hereof in respect of the period prior to the date on which
Employee first became disabled, and (ii) during the Consulting Term, an
equivalent level of benefits as provided by Section 1.7 hereof.
Employee agrees, in the event of any dispute under this Section 8.1, to
submit to a physical examination by a licensed physician selected by
the board of directors of the Company.
8.2. Death. In the event that Employee dies during the Agreement Term,
the Company shall pay to his executors, legal representatives or
administrators an amount equal to the installment of his salary or
compensation referred to in Section 1.4 or 1.7 hereof, as applicable,
for the month in which he dies plus a further amount equal to three
months' salary or compensation referred to in Section 1.4 or 1.7
hereof, as applicable, and thereafter the Company shall have no further
liability or obligation hereunder to his executors, legal
representatives, administrators, heirs or assigns or any other person
claiming under or through him; provided, however, that Employee's
estate or designated beneficiaries shall be entitled to receive, in
addition to amounts due him in such circumstances under any pension or
benefit plans of the Company (including, without limitation, the
Company's
<PAGE>
Retirement Plan, Supplemental Retirement Plan, Supplemental Income Plan
and Savings Plan), (i) during the Employment Term, the payments
prescribed for such recipients under any death benefit plan which may
be in effect for employees of the Company and in which Employee
participated (subject, however, to the minimum life insurance
provisions set forth in Section 1.4 hereof), and a pro rata portion of
the incentive compensation, if any, referred to in Section 1.5 hereof
in respect of the year during which Employee died, and (ii) during the
Consulting Term, an equivalent level of benefits as provided by Section
1.7 hereof.
8.3. Voluntary Termination. In the event that subsequent to June 1,
2000 Employee voluntarily terminates the Consulting Term at any time
upon 30 days prior written notice to the Company.
8.4. Cause. Nothing in this Agreement shall be construed to prevent its
termination by the Company at any time for "cause." For purposes of
this Agreement, "cause" shall mean the willful and intentional failure
of Employee to perform or observe any of the material terms or
provisions of this Agreement, dishonesty, conviction of a crime
involving moral turpitude, habitual insobriety, substance abuse or
misappropriation of funds. The Company's liability, if any, for
payments to Employee by virtue of any wrongful termination of
Employee's employment or consulting relationship pursuant to this
Agreement shall be reduced by and to the extent of any earnings
received by or accrued for the benefit of Employee during any unexpired
part of the Agreement Term.
9. Extraordinary Termination. In the event of an Extraordinary Termination
during the Agreement Term, as defined in Section 9.1(b), the following
provisions shall apply.
9.1. Definitions. The following terms shall have the meanings
indicated for purposes of this Section 9:
(a) "Control Transaction" means a change in control of the Company
of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act, as in effect on the date of this
Agreement, in a Form 8-K filed under the Exchange Act or in
any other filing by the Company with the Securities and
Exchange Commission; provided that, without limitation, such a
Control Transaction shall be deemed to have occurred if:
(1) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or
more of the voting power of the then outstanding securities of
the Company;
(2) during any period of two consecutive calendar years there
is a change of 25% or more in the composition of the board of
directors of the Company in office at the beginning of the
period except for changes approved by at least two-thirds of
the directors then in office who were directors at the
beginning of the period.
(b) "Extraordinary Termination" means (i) termination by the
Company of the employment of Employee with the Company, or
termination of the retention of Employee as a consultant, or
in either case for any reason other than as set forth in
Section 8 hereof, within three years after a Control
Transaction, or (ii) resignation of Employee upon the
occurrence of any of the following events within three years
after a Control Transaction:
(A) an assignment to Employee of any duties inconsistent with,
or a significant change in the nature or scope of Employee's
authority or duties from, those held by Employee immediately
prior to the Control Transaction;
<PAGE>
(B) a reduction in Employee's annual salary, consulting
payment or incentive compensation opportunities, as in effect
immediately prior to the Control Transaction or as the same
may be increased thereafter;
(C) a relocation of the site of employment of Employee (or the
site to which Employee regularly reports to work as a
consultant) more than 15 miles from his site of employment or
work at the time of the Control Transaction, or, if Employee
consents to his relocation, the failure of the Company to pay
(or promptly fully reimburse him for) all reasonable moving
expenses incurred by him relating to a change of his principal
residence in connection with such relocation and to indemnify
him against any loss realized in the sale of his principal
residence in connection with any change of residence;
(D) during the Employment Term, the failure by the Company to
provide Employee with a reasonable number of paid vacation
days at least equal to the number of paid vacation days to
which he was entitled in the last full calendar year prior to
the Control Transaction;
(E) the failure of the Company to provide Employee with
substantially the same fringe benefits that were provided to
him immediately prior to the Control Transaction, or with a
package of fringe benefits that, though one or more of such
benefits may vary from those in effect immediately prior to
the Control Transaction, is substantially at least as
beneficial to Employee in all material respects to such fringe
benefits taken as a whole; or
(F) the failure of the Company to obtain the express written
assumption of and agreement to perform this Agreement by any
successor as and to the extent required by Section 12 of this
Agreement.
9.2. Termination Payments.
(a) In the event of an Extraordinary Termination during the
Agreement Term, the Company shall, in addition to any amounts
due for periods prior to the Extraordinary Termination, pay to
Employee in cash within ten days after the Extraordinary
Termination an amount equal to the sum of:
(i) three times the greater of (A) Employee's annual salary or
annual consulting compensation at the time of the Control
Transaction, or (B) Employee's annual salary or annual
consulting compensation immediately prior to the Extraordinary
Termination; plus
(ii) if the Extraordinary Termination occurs during the
Employment Term, three times the greater of (A) the most
recent annual bonus paid to Employee prior to the
Extraordinary Termination or (B) the estimated amount of his
bonus for the year that includes the date of the Extraordinary
Termination; plus
(iii) at the option of Employee and in lieu of his exercising
any stock options that he might hold at the time, an amount
equal to the excess of the aggregate market price at the close
of business on the date of the Extraordinary Termination of
the Company's shares subject to all stock options outstanding
and unexercised, whether vested or unvested, over the
aggregate exercise price of all such stock options; plus
(iv) if the Extraordinary Termination occurs during the
Employment Term, payment in lieu of all unused vacation or
sick time.
(b) Employee may elect to defer the payment of all or part of the
amount to be paid to him under subsection (a) for up to twelve
months after the Extraordinary Termination, or to
<PAGE>
have all or part of such amount paid to him in installments
over a period not to exceed twelve months after the
Extraordinary Termination.
(c) In addition to payment of the amounts specified in subsection
(a), for a period of twelve months following an Extraordinary
Termination during the Employment Term or the Consulting Term,
the Company will continue or cause to be continued, at no cost
to Employee, medical care and life insurance benefits
substantially comparable to those furnished to Employee by the
Company immediately prior to the Extraordinary Termination.
(d) It is the intention of the parties that the payments under
this Section 9 shall not constitute "excess parachute
payments" within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended, and any regulations
promulgated by the Internal Revenue Service thereunder. In the
event that the independent accountants acting as auditors for
the Company on the date of a Control Transaction (or another
accounting firm designated by them) determine that the
payments under this Section constitute "excess parachute
payments," the amounts payable under this Section shall be
reduced to the maximum amount which may be paid without
constituting the payments "excess parachute payments." Such
determination shall take into account (i) whether the payments
under this Agreement are "parachute payments" within the
meaning of Section 280G and, if so, (ii) the amount of
payments under this Section that constitutes reasonable
compensation within the meaning of Section 280G. The fees and
expenses of the accountants performing this calculation shall
be paid in full by the Company. Nothing contained in this
Agreement shall prevent the Company after a Control
Transaction from agreeing to pay Employee compensation or
benefits in excess of those provided in this Agreement.
9.3. Interest and Expenses. If the Company shall fail or refuse to pay
any amount due under this Section 9 within the time required, the
Company shall pay to Employee, in addition to the payment of any other
sums required under this Section.
(1) interest, compounded daily, on any amount remaining unpaid
from the date payment is required under this Section until
payment to Employee, at the rate from time to time announced
by Corestates Bank as its prime rate plus 1.5%, each change in
the rate of interest hereunder to take effect on the effective
date of the change in such prime rate; and
(2) on demand, the amount necessary to reimburse Employee for all
expenses (including reasonable attorneys' fees and
disbursements) incurred by Employee in enforcing any of the
obligations of the Company under this Section.
9.4. Payment Obligations Absolute. The obligation of the Company to pay
Employee the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right that the Company may have against
him or anyone else. All amounts payable by the Company hereunder shall
be paid without notice or demand. The Company waives all rights which
it may now have or may hereafter have conferred upon it, by statute or
otherwise, to terminate, cancel or rescind this Section, or any other
section of this Agreement, in whole or in part. Each and every payment
made hereunder by the Company shall be final and the Company will not
seek to recover all or any part of such payment from Employee or from
whomsoever may be entitled thereto, for any reason whatsoever, except
as provided in Section 9.2(d) hereof. Employee shall not be required to
mitigate the amount of any payment provided for in this Section by
seeking other employment or otherwise.
10. Withholding of Taxes. The Company may withhold from any payments under this
Agreement all federal, state or local taxes as shall be required pursuant to any
law, regulation or ruling.
<PAGE>
11. Non-Alienation. Employee shall not have any right to pledge, hypothecate,
anticipate or in any way create a lien upon any amounts provided under this
Agreement, and no benefit payable hereunder shall be assignable in anticipation
of payment either by voluntary or involuntary acts, or by operation of law.
12. Successor Company. The Company shall require any successor or successors
(whether direct or indirect, by purchase, merger, consolidation or otherwise,
and whether in one transaction or a series of transactions) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement. As used in this
Agreement, the "Company'" shall mean the Company as hereinbefore defined and any
such successors to its business and/or assets.
13. Survival. Notwithstanding the termination of this Agreement by reason of
Employee's disability under Section 8.1, for cause under Section 8.3 or upon an
Extraordinary Termination of Employment under Section 9, his obligations under
Sections 3, 4, 5 and 6 hereof shall survive and remain in full force and effect
indefinitely, or for such shorter period therein provided, and the provisions
for equitable relief against Employee in Section 7 hereof shall likewise
continue in force.
14. Governing Law. This Agreement shall be governed by and interpreted under the
laws of the State of New York without giving effect to any conflict of laws
provisions.
15. Litigation Expenses. In the event of a lawsuit by either party to enforce
the provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable costs, expenses and attorneys' fees from the other party.
16. Notices. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):
If to the Company, to:
Intermagnetics General Corporation
450 Old Niskayuna Road
P.O. Box 461
Latham, N.Y. 12110
Attention: Board of Directors
If to Employee, to:
Carl H. Rosner
1180 Ruffner Road
Schenectacy, NY 1230.
or to such other names or addresses as the Company or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
17. Contents of Agreement; Amendment and Assignment.
(a) This Agreement supersedes all prior agreement (including the 1992
Agreement, the 1994 Agreement and the 1996 Understanding) and sets
forth the entire understanding among the parties
<PAGE>
hereto with respect to the subject matter hereof and cannot be changed,
modified, extended or terminated except upon written amendment approved
by the board of directors of the Company and executed on its behalf by
a duly authorized officer; provided, however, that (i) the provisions
of Sections 3, 4 and 7 shall be in addition to, and not in limitation
of, any other invention assignment, confidentiality or similar
agreement between the Company and Employee, and (ii) the
representations of Employee set forth in Section 1.2(b) of the
Employment Agreement dated January 12, 1988 between the Company and
Employee, Section 1.2(c) of the Employment Agreement dated February 14,
1990 between the Company and the Employee and Section 1.2(c) of the
1992 Agreement shall continue in full force and effect. Without
limitation, nothing in this Agreement shall be construed as giving
Employee any right to be retained in the employ of the Company or as a
consultant to the Company except as specifically provided herein during
the Agreement Term.
(b) Employee acknowledges that from time to time, the Company may
establish, maintain and distribute employee manuals or handbooks or
personnel policy manuals, and officers or other representatives of the
Company may make written or oral statements relating to personnel
policies and procedures. Such manuals, handbooks and statements are
intended only for general guidance. No policies, procedures or
statements of any nature by or on behalf of the Company (whether
written or oral, and whether or not contained in any employee manual or
handbook or personnel policy manual), and no acts or practices of any
nature, shall be construed to modify this Agreement or to create
express or implied obligations of any nature to Employee.
(c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, legal representatives, successors and
assigns of the parties hereto, except that the duties and
responsibilities of Employee hereunder are of a personal nature and
shall not be assignable or delegable in whole or in part by Employee.
18. Severabilitv. If any provision of this Agreement or application thereof to
anyone or under any circumstances is adjudicated to be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect any
other provision or application of this Agreement which can be given effect
without the invalid or unenforceable provision or application and shall not
invalidate or render unenforceable such provision or application in any other
jurisdiction.
19. Remedies Cumulative; No Waiver. No remedy conferred upon the Company by this
Agreement is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by the Company in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by the Company from time to time
and as often as may be deemed expedient or necessary by the Company in its sole
discretion
IN WITNESS WHEREOF, the ,undersigned have executed this
Employment and Consulting Agreement as of the date first above written.
ATTEST INTERMAGNETICS GENERAL CORPORATION
- -------------------- --------------------
Catherine E. Arduini Thomas L. Kempner
Corporate Secretary Chairman, Compensation Committee
of the Board of Directors
Witness CARL H. ROSNER
- -------------------- --------------------
Catherine E. Arduini
<PAGE>
EXHIBIT A
AMENDMENT TO OFFER OF EMPLOYMENT LETTER
This document is an Amendment to "Letter of Employment Agreement" made
by and between Intermagnetics General Corporation, a corporation having a
principal place of business at 450 Old Niskayuna Road, Latham, New York
12110-0461 ("Company") and Glenn H. Epstein, an individual having a residence
address of 11129 Oak Hollow Road, Knoxville, Tennessee 37932 ("Epstein").
RECITALS
Company and Epstein have entered an Offer of "Employment Letter" (as
executed by both parties) agreement dated March 20, 1997 (the "Letter").
Company and Epstein desire that the terms of the Letter, as clarified
by this Amendment, shall serve as a mutually binding employment agreement under
which Epstein shall be employed by the Company and agrees to devote his full
time, attention and energy thereto, as its President and Chief Operating
Officer, reporting to the Chief Executive Officer of the Company.
In consideration of the premises, the mutual covenants and agreements
contained in the Letter and this Amendment, as well as other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged by both
parties, Epstein and the Company agree as follows:
1. Incorporation of Amendment. The terms and conditions of the Letter
(a copy to which this Amendment is annexed as Exhibit A) as
explained and clarified by this Amendment are incorporated into the
Letter as fully set forth in this document.
2. Term of Employment. Epstein's employment by the Company pursuant to
this Amendment (the "Term") shall commence on Epstein's first day
of employment by the Company and shall continue for two (2)
consecutive years, including a possible one year "termination").
Epstein's annual base compensation throughout the Term (the "Base
Salary") shall be at a minimum of $180,000.00. As used in this
Amendment, the phrase "year" shall refer to a three hundred and
sixty-five (365) day period.
3. Termination.
A. In the event that the Company terminates Epstein's employment
or this Letter/Amendment involuntarily any time prior to the
end or during the first year of the Term, other than "for
cause", Company will pay Epstein (1) in a lump sum, a severance
equal to the difference between two times the amount of his
then current Base Salary less the amount of then current Base
Salary paid to Epstein on the effective date of such
termination; plus if applicable, (ii) the "performance bonus"
described in paragraph 2, page 1 of the Letter. The salary used
to calculate the said performance bonus shall be Epstein's then
current total annual Base Salary rate.
B. In the event that the Company terminates Epstein's employment
involuntarily any time during or after the second year of the
Term, other than "for cause", the
<PAGE>
Company will pay Epstein in a lump sum, a severance payment
equal to one full year of his then current Base Salary. The
provisions of this paragraph 3-B shall survive the expiration
or other termination of this Amendment and continue throughout
Epstein's employment by the Company.
C. The Company shall withhold from any such one year severance
payment required by paragraphs 3-A or B all income, payroll and
employment taxes required by applicable law or regulation to be
withheld. The Company shall pay Epstein any severance payment
due under the terms of paragraphs 3-A or 3-B within thirty (30)
days after the effective date of any such involuntary
termination; as well as any performance bonus earned within
thirty (30) days after the final audited results of fiscal year
1998 are accepted by the Board of Directors.
D. As used in this Amendment, the phrase "for cause" shall mean
and shall be limited to involuntary termination in case of;
Epstein's conviction or plea of guilty or no contest to any
crime involving moral turpitude; Epstein's misrepresentation of
a material fact, dishonesty or misappropriation of funds, or
concealment of a material fact from the Company's Chief
Executive Officer; or Epstein's willful violation of any
material rule, regulation or policy that may be established
from time to time for the conduct of the Company's business of
which Epstein is aware of or has notice.
E. The payments due under this paragraph 3 do not prevent Epstein
from competing with the Company after the effective date of any
involuntary termination of his employment, provided he
maintains his obligations and observes the terms of the
confidentiality agreement signed by him upon entering
employment with the Company.
4. Signing Bonus. With respect to the "earned bonus"/"signing bonus"
referred to in paragraph 3, page 1 of the Letter, the Company will
pay Epstein a $32,500.00 signing bonus within thirty-sixth (30-60)
days of the date that Epstein provides the Company with a copy of
Oxford Instrument, Inc.'s ("Oxford") written bonus scheme, and
provides a signed affidavit that Epstein has forfeited all bonus
entitlements from Oxford for the 1996/97 fiscal year.
5. Moving Expenses.
A. The "house" referred to in paragraph 6, page 1 of the Letter
includes two separately deeded properties: one for Epstein's
home and surrounding lot and one for an adjoining lot. The
appraisals described in paragraph 6, page 1 of the Letter shall
be prepared by three Tennessee State-certified appraisers, and
the cost of those three appraisals, shall be shared equally by
Epstein and the Company. If Epstein is unable to sell the
"home" within ninety (90) days of the date of start of
employment, the Company or its designee will purchase the home
from Epstein and his wife at a purchase price equal to the
greater of (1) the average of the three appraisals referenced
above or (ii) Epstein and his wife's documented cost basis as
defined per IRS guidelines. Detailed information on such
additional costs will be provided by Epstein to the Company in
the event that purchase of the "home" by the company is
required.
<PAGE>
B. The "reasonable and actual moving expenses" referred to in
paragraph 6, page 1 of the Letter shall include Epstein's house
sale related realtor, legal and closing costs, and all such
reasonable and actual moving expenses shall be reimbursed by
the Company within thirty (30) days after Epstein's submission
to the Company of reasonable evidence of payment thereof.
C. The one month's salary to cover "sundry expenditures"
referenced in paragraph 6, page 1 of the Letter shall be paid
by the Company to Epstein within thirty to sixty (30-60) days
of his start of employment by the Company.
6. References. After the execution of the Letter/Amendment, Epstein
will supply the three additional personal and business references
requested in paragraph 4, page 2 of the Letter.
7. Entire Amendment. This Amendment, including the Letter, constitutes
the entire written understanding and employment agreement between
the Company and Epstein with regard to all matters therein. This
Amendment may be changed only in a writing signed by both parties.
8. Severability. If any provision of this Letter/Amendment shall be
held, be deemed to be or shall in fact be invalid, inoperative or
unenforceable by law, such circumstances shall not have the effect
of rendering the provision(s) in question or any other provision(s)
in this Letter/Amendment invalid, and this Letter/Amendment shall
be reformed and construed as if the invalid, inoperative or
unenforceable provision had never been contained herein and the
provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted.
9. Remedies Cumulative; No Waiver. No remedy conferred upon the
Company by this Amendment is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and
shall be in addition to any other remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission by the
Company in exercising any right, remedy or power hereunder or
existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by
the Company from time to time and as often as may be deemed
expedient or necessary by the Company in its sole discretion.
Intermagnetics General Corporation
Dated April 1st, 1997 By: /s/ Carl H. Rosner
--------------- ---------------------
Carl H. Rosner
Chairman of the Board and
Chief Executive Officer
Glenn H. Epstein
Dated 1 April, 1997 /s/ Glenn Epstein
------------- -----------------
<PAGE>
Exhibit 21
Subsidiaries of Intermagnetics General Corporation
- --------------------------------------------------
APD Cryogenics Inc.
Intermagnetics General (Europe) Ltd.
Magstream Corporation (inactive)
Intermagnetics General Corporation Foreign Sales Corporation
InterCool Energy Corporation
IGC Medical Advances Inc.
IGC Polycold Systems Inc.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statements on
Form S-8 (Nos. 2-80041, 2-94701, 33-2517, 33-12762, 33-12763, 33-38145,
33-50598, 33-44693, 33-55092, 33-72160, 333-10553 and 333-42163) of
Intermagnetics General Corporation of our report dated July 14, 1998, relating
to the consolidated balance sheets of Intermagnetics General Corporation and
subsidiaries as of May 31, 1998 and May 25, 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three-year period ended May 31, 1998, and the related schedule, which
report appears in the May 31, 1998 annual report on Form 10-K of Intermagnetics
General Corporation.
/s/ KPMG Peat Marwick LLP
Albany, New York
August 27, 1998
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