<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
* * * * *
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ICC TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
same
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[X] Fee paid previously with preliminary materials (filed November 21, 1997).
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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0545432.01 01/30/98
<PAGE> 2
ICC TECHNOLOGIES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of ICC Technologies, Inc.:
A Special Meeting of Stockholders of ICC TECHNOLOGIES, INC. (the
"Company" or "ICC") will be held on February 23, 1998, at 10:00 A.M. (local
time), at 330 South Warminster Road, Hatboro, Pennsylvania 19040 for the
following purposes:
1. To approve a Master Agreement by and among ICC, Engelhard
Corporation ("Engelhard") and Engelhard/ICC, a joint venture owned equally by
ICC and Engelhard, which provides in substance for:
(a) the division of Engelhard/ICC into two separate operating
limited partnerships, one to manufacture and market complete, active
Climate Control Systems ("Box LP"), and the other to manufacture and
market the heat-exchange and desiccant coated wheel-shaped rotors that
are components of the Climate Control Systems ("Wheel LP"); and
(b) the exchange by ICC and Engelhard of certain of their
respective interests in each partnership and the payment by Engelhard
to ICC of approximately $18,600,000, such that after the exchanges:
(i) ICC will own 90% of Box LP and 20% of
Wheel LP; and
(ii) Engelhard will own 80% of Wheel LP and 10% of
Box LP (the "Restructuring"), all as more fully
described in the proxy statement accompanying
this notice.
The Board of Directors has fixed January 27, 1998, as the record date
for the determination of Stockholders entitled to vote at the meeting. Only
Stockholders of record at the close of business on the record date will be
entitled to notice of, and to vote at, the meeting or any postponement or
adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING OF
STOCKHOLDERS. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE
RESPECTFULLY REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED FORM OF
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
By Order of the Board of Directors.
Albert Resnick
Secretary February 3, 1998
<PAGE> 3
ICC TECHNOLOGIES, INC.
330 S. WARMINSTER ROAD
HATBORO, PENNSYLVANIA 19040
PROXY STATEMENT
This Proxy Statement, together with the accompanying proxy, is first
being mailed to the Stockholders ("Stockholders") of ICC Technologies, Inc., a
Delaware corporation ("ICC" or the "Company") on or about February 3, 1998. This
Proxy Statement is being furnished to Stockholders in connection with the
solicitation of proxies by the Board of Directors to be used in voting at a
Special Meeting of Stockholders to be held on February 23, 1998, at 10:00 am
(local time), at 330 South Warminster Road, Hatboro, Pennsylvania 19040, and at
any adjournment or postponement thereof. At the Special Meeting, the
Stockholders of ICC will consider and vote upon a proposal to approve a Master
Agreement by and among ICC, Engelhard Corporation ("Engelhard") and
Engelhard/ICC, a joint venture owned equally by ICC and Engelhard ("E/ICC"),
which provides in substance for:
(a) the division of E/ICC into two separate operating limited
partnerships, one to manufacture and market complete, active Climate
Control Systems ("Box LP"), and the other to manufacture and market the
heat-exchange and desiccant coated wheel-shaped rotors that are
components of the Climate Control Systems ("Wheel LP"); and
(b) the exchange by ICC and Engelhard of certain of their
respective interests in each partnership and the payment by Engelhard
to ICC of approximately $18,600,000, such that after the exchanges:
(i) ICC will own 90% of Box LP and 20% of
Wheel LP; and
(ii) Engelhard will own 80% of Wheel LP and 10% of
Box LP (the "Restructuring"), all as more fully
described in this proxy statement.
The persons named in the enclosed proxy will vote in favor of the
Master Agreement and the Restructuring. See "THE PROPOSED RESTRUCTURING" and
"VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF."
The cost of the solicitation of proxies will be borne by the Company.
The Company has engaged the firm of Morrow & Company to assist in the
solicitation of proxies, for which such firm will be paid a fee of $6,000 plus
reimbursement of out-of-pocket expenses. In addition, proxies may be solicited
by mail, in person or by telephone, telegraph or teletype by officers,
directors, employees or other representatives of the Company, without additional
compensation. The
<PAGE> 4
Company will pay the reasonable expenses incurred by record holders of the
Company's capital stock who are brokers, dealers, banks or voting trustees, or
their nominees, upon request, for mailing proxy material.
Following the Closing of the Restructuring contemplated by the Master
Agreement, ICC will continue to be principally a holding company with a 90%
interest in the operating partnership, Box LP. ICC, through its wholly-owned
subsidiary, I Partner, will manage and operate Box LP, which will succeed to
that portion of the Partnership's business consisting of the design,
manufacture, assembly, marketing and sale of Climate Control Systems for the
cooling, dehumidification, drying, heating, ventilation and microbe reduction
markets (the "Box Business"). ICC will also own, through I Partner, a 20%
passive investment interest in Wheel LP, as a limited partner. Wheel LP will be
managed and operated by Engelhard through its wholly-owned subsidiary, E
Partner, and will retain and operate that portion of the Partnership's business
consisting of the design, manufacture, assembly, marketing and sale of products
fabricated from honeycomb substrates and any and all rotor or wheels or similar
products used in Climate Control Systems (the "Wheel Business"). See "THE
PROPOSED RESTRUCTURING." The rights of the Stockholders of ICC will not be
affected by, nor will the Stockholders receive any property of any kind as a
result of, the Master Agreement or the consummation of the Restructuring
contemplated thereby.
The enclosed proxy confers discretionary authority to vote with respect
to any and all of the following matters that may come before the Special
Meeting, including: (i) matters which the Company's Board of Directors does not
know are to be presented a reasonable time before proxy solicitation; and (ii)
matters incidental to the conduct of the Special Meeting.
The Board of Directors is not currently aware of any matters (other
than procedural matters) which will be brought before the Special Meeting and
which are not referred to in the enclosed notice of meeting. If any such matters
are properly brought before the Special Meeting, the persons named in the
enclosed proxy will act or vote in accordance with their best judgment.
Any Stockholder who executes and returns a proxy may revoke it by
submitting a written revocation to the Secretary of ICC at any time before the
proxy is exercised, by submitting another duly executed proxy with a later date,
or by appearing and voting in person at the Special Meeting.
Any initially capitalized term not otherwise defined in this Proxy
Statement shall have the meaning given to such term as set forth on Exhibit "A"
to this Proxy Statement which is incorporated herein by reference.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300,
ii
<PAGE> 5
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Such reports, proxy statements and other
information filed by the Company is also available on the Internet at the
Commission's World Wide Web site at http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference into this Proxy
Statement: (i) the Company's Annual Report on Form 10-K for the Year ended
December 31, 1996, which incorporates by reference certain portions of its
definitive Proxy Statement dated April 28, 1997 distributed to the Company's
Stockholders in connection with the Annual Meeting of Stockholders held on June
5, 1997; (ii) the Company's Quarterly Report on Form 10-Q for the Quarter ended
March 31, 1997; (iii) the Company's Quarterly Report on Form 10-Q for the
Quarter ended June 30, 1997; (iv) the Company's Quarterly Report on Form 10-Q
for the Quarter ended September 30, 1997; and (v) the Company's Current Report
on Form 8-K dated August 27, 1997.
All documents filed by ICC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the date of the Special Meeting, and any adjournment or adjournments
thereof, shall be deemed to be incorporated by reference in this Proxy Statement
and to be a part hereof from the date of filing of such documents. All
information appearing in this Proxy Statement is qualified in its entirety by
the information and financial statements (including notes thereto) appearing in
the documents incorporated by reference herein.
Any statement contained in a document incorporated or deemed
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes any such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement.
This Proxy Statement incorporates documents by reference that are not
presented herein or delivered herewith. ICC hereby undertakes to provide without
charge to each person, including any beneficial owner, to whom a copy of this
Proxy Statement has been delivered, on written or oral request of any such
person, a copy of any and all of the documents referred to above that have been
or may be incorporated by reference, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Documents relating to ICC are available upon request from ICC
Technologies, Inc., 330 South Warminster Road, Hatboro PA 19040, Attention:
Manfred Hanuschek, Chief Financial Officer and Treasurer, (215) 682-6600.
iii
<PAGE> 6
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Except for historical matters contained herein, the matters discussed
in this Proxy Statement are forward-looking and are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Readers are cautioned that these forward-looking statements reflect numerous
assumptions and involve risks and uncertainties which may affect the Company's
business, financial position and prospects and cause actual results to differ
materially from these forward-looking statements. The assumptions and risks
include sufficient funds to finance working capital and other financing
requirements of the Company, market acceptance of the Partnership's products,
dependence on proprietary technology, competition in the air conditioning
industry and other assumptions and risks set forth in the Company's filings with
the Securities and Exchange Commission.
iv
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TABLE OF CONTENTS
<TABLE>
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Page
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SUMMARY..............................................................................................................1
The Special Meeting...............................................................................................1
The Proposed Restructuring Of E/ICC...............................................................................2
Certain Related Agreements........................................................................................5
Management of ICC.................................................................................................7
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA OF ICC...................................................10
THE SPECIAL MEETING.................................................................................................11
Date, Time and Place.............................................................................................11
Matters to be Considered at the Special Meeting..................................................................11
Recommendations of ICC's Board of Directors......................................................................12
Votes Required; Record Date......................................................................................12
Voting Proxies; Revocability of Proxies..........................................................................12
No Dissenters' Rights of Appraisal...............................................................................13
OVERVIEW OF THE BUSINESS OF ICC AND E/ICC...........................................................................14
The Company......................................................................................................14
The Partnership..................................................................................................16
OVERVIEW OF THE BUSINESS OF ENGELHARD...............................................................................22
THE PROPOSED RESTRUCTURING..........................................................................................23
General..........................................................................................................23
Background and Reasons for the Restructuring.....................................................................23
Basic Terms of the Master Agreement..............................................................................27
Basic Terms of the Contribution Agreement........................................................................31
Basic Terms of the E/ICC Purchase and Sale Agreement.............................................................33
The Box and Wheel Partnerships...................................................................................33
Basic Terms of the Box LP Limited Partnership Agreement..........................................................33
Formation; Partners...........................................................................................33
Name and Location.............................................................................................33
Partnership Business..........................................................................................33
Management of Box LP..........................................................................................34
Term of Partnership...........................................................................................34
Capital Contributions.........................................................................................34
Allocation of Items of Partnership Income, Gain, Loss, Deduction and Credit...................................34
Distributions.................................................................................................34
Partner Loans.................................................................................................34
ICC's Option..................................................................................................34
Limited Liability.............................................................................................35
</TABLE>
v
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<TABLE>
<S> <C>
Books and Records; Financial Reports..........................................................................35
Tax Returns and Information...................................................................................35
Transfer by Partners..........................................................................................35
Termination of the Partnership................................................................................36
Indemnification of Partners...................................................................................36
Basic Terms of the Wheel LP Limited Partnership Agreement........................................................36
Formation; Partners...........................................................................................36
Name and Location.............................................................................................36
Partnership Business..........................................................................................36
Management of Wheel LP........................................................................................36
Term of Partnership...........................................................................................37
Capital Contributions.........................................................................................37
Allocation of Items of Partnership Income, Gain, Loss, Deduction and Credit...................................37
Distributions.................................................................................................37
Partner Loans.................................................................................................37
Engelhard's Option............................................................................................37
Limited Liability.............................................................................................38
Books and Records; Financial Reports..........................................................................38
Tax Returns and Information...................................................................................38
Transfer by Partners..........................................................................................38
Termination of the Partnership................................................................................39
Indemnification of Partners...................................................................................39
Certain Related Agreements.......................................................................................39
Business of ICC and E/ICC Pending Closing........................................................................43
Business of ICC after Closing....................................................................................43
Business of ICC in the Event the Restructuring is not Closed.....................................................44
Accounting Treatment.............................................................................................44
Federal Income Tax Consequences..................................................................................44
COMPARATIVE PER SHARE DATA OF ICC CAPITAL STOCK.....................................................................46
MARKET PRICE OF ICC STOCK PRIOR TO
ANNOUNCEMENT OF THE RESTRUCTURING...................................................................................46
ICC UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS...........................................................47
Introduction.....................................................................................................47
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 (UNAUDITED)........................................48
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED).............................................................50
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED).....................................................................51
Notes to Unaudited Pro Forma Consolidated Financial Statements...................................................52
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF.....................................................................55
</TABLE>
vi
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<TABLE>
<S> <C>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................................56
EXPERTS.............................................................................................................57
REGULATORY REQUIREMENTS.............................................................................................57
</TABLE>
EXHIBITS:
A. Glossary of Terms Used in This Proxy Statement.
B. Master Agreement, by and among ICC, ICC Investment, L.P., ICC Desiccant
Technologies, Inc., and Engelhard Corporation, Engelhard DT, Inc., and
Engelhard/ICC.
C. Contribution Agreement between Engelhard/ICC and Fresh Air Solutions,
L.P.
vii
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. Reference is made to, and this summary is qualified in
its entirety by, the more detailed information contained or incorporated by
reference in this Proxy Statement and the Exhibits hereto.
THE SPECIAL MEETING
General. The Special Meeting of the Stockholders of ICC will be held at
330 South Warminster Road, Hatboro, Pennsylvania 19040 on February 23, 1998 at
10:00 a.m., local time. See "THE SPECIAL MEETING."
Matters to be Considered at the Special Meeting. At the Special
Meeting, the Stockholders of ICC Common Stock will consider and vote upon:
1. To approve a Master Agreement by and among ICC, Engelhard
Corporation ("Engelhard") and Engelhard/ICC, a joint venture owned equally by
ICC and Engelhard ("E/ICC"), which provides in substance for:
(a) the division of E/ICC into two separate operating limited
partnerships, one to manufacture and market complete, active Climate
Control Systems ("Box LP"), and the other to manufacture and market the
heat-exchange and desiccant coated wheel-shaped rotors that are
components of the Climate Control Systems ("Wheel LP"); and
(b) the exchange by ICC and Engelhard of certain of their
respective interests in each partnership and the payment by Engelhard
to ICC of approximately $18,600,000, such that after the exchanges:
(i) ICC will own 90% of Box LP and 20% of
Wheel LP; and
(ii) Engelhard will own 80% of Wheel LP and 10% of
Box LP (the "Restructuring"), all as more fully
described in this proxy statement.
ALL OF THE DIRECTORS OF ICC HAVE VOTED FOR AND APPROVED ITEM 1. AND
RECOMMEND A VOTE FOR APPROVAL OF THE FOREGOING ACTION BY THE STOCKHOLDERS
ENTITLED TO VOTE.
Vote Requirements; Revocability. The approval of each matter to be
brought before the Special Meeting will require the affirmative vote of the
holders of a majority of the voting power of all the outstanding shares of ICC
Common Stock. The presence at the Special Meeting, in person or by properly
executed proxy, of the holders of a majority of the voting power of all the
shares of Common Stock is necessary to constitute a quorum at the Special
Meeting. The directors and executive officers of ICC holding an aggregate of
approximately 21% of the outstanding shares of ICC Common Stock have indicated
that they intend to vote all of their shares for approval of the Master
Agreement and the Restructuring of E/ICC pursuant to the terms thereof. For the
purpose of determining the number of votes cast at the Special Meeting, those
votes cast "For" or "Against" will be counted. In addition, if no instructions
are indicated for a matter which will be brought
<PAGE> 11
before the Special Meeting, such proxies will be voted for approval of such
matter. Indication of "ABSTENTION" will be counted only for purposes of
determining whether a quorum is present at the Special Meeting. Therefore, a
properly executed proxy marked "ABSTENTION" will have the same effect as a vote
against approval of the matters brought before the meeting. See "THE SPECIAL
MEETING - Votes Required; Record Date."
Record Date. The Board of Directors of ICC has fixed January 27, 1998
as the Record Date for the determination of Stockholders entitled to notice of,
and to vote at, the Special Meeting.
No Dissenters' Rights of Appraisal. PURSUANT TO THE GENERAL CORPORATION
LAW OF DELAWARE, ANY STOCKHOLDER OF ICC WHO OBJECTS TO THE MASTER AGREEMENT AND
THE RESTRUCTURING OF ICC'S INTEREST IN E/ICC PURSUANT TO THE TERMS OF THE MASTER
AGREEMENT WILL NOT BE ENTITLED TO ANY DISSENTER'S RIGHTS AND WILL NOT RECEIVE
ANY PAYMENT IN CONNECTION WITH HIS OR HER STOCK.
STOCKHOLDERS SHOULD NOT TRANSMIT ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
THE PROPOSED RESTRUCTURING OF E/ICC
The Master Agreement and Restructuring Transactions. ICC and Engelhard
each owns, indirectly, a 50% general partner interest in Engelhard/ICC, which
was formed in February 1994 to design, manufacture and sell desiccant air
conditioners and desiccant and heat-exchange wheel components for the
dehumidification and cooling markets, the industrial drying/dehumidification
market and the air conditioning and microbe reduction market for health care
facilities (the "Partnership Business"). In connection with the formation of the
Partnership, (i) ICC transferred substantially all of its assets to E/ICC in
exchange for a 50% interest in E/ICC, and (ii) Engelhard contributed certain
cash and credit support and entered in a supply agreement to provide E/ICC with
certain desiccants materials in exchange for a 50% interest in the Partnership.
See "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC."
Although the formation of E/ICC served to enhance in numerous respects
the development of the Box Business and the Wheel Business, the Company and
Engelhard believe that they have derived a great many of the benefits for which
the Partnership was formed and that the growth of the Box Business and Wheel
Business could best be served at this time by separating those businesses and
operating them as independent entities. ICC desires to focus primarily on the
Box Business, while Engelhard desires to devote its entire focus to being a
supplier of desiccant and heat exchange wheel-shaped rotors. See "THE PROPOSED
RESTRUCTURING - Background and Reasons for the Restructuring." Accordingly, ICC
and Engelhard have determined to effect a restructuring of E/ICC, and to that
end, E/ICC, Engelhard, ICC and their respective wholly-owned subsidiaries have
entered into that certain Master Agreement dated November 17, 1997 pursuant to
which, among other things, E/ICC will transfer all of its assets, including the
lease and leasehold improvements in E/ICC's facility in Hatboro, Pennsylvania,
and liabilities related to the Box Business to a newly formed limited
partnership, Fresh Air Solutions, L.P. (sometimes referred to hereinafter as
"Box LP") in accordance with the terms of a Contribution Agreement dated
November 17, 1997 between
2
<PAGE> 12
E/ICC and Box LP (the "Contribution Agreement"). Upon the Closing of the Master
Agreement, I Partner, a wholly-owned subsidiary of ICC, will be the sole general
partner of Box LP with a 1% general partner interest and will also be a limited
partner of Box LP with an 89% limited partner interest. E Partner, a
wholly-owned subsidiary of Engelhard, will be the other limited partner of Box
LP with a 10% limited partner interest. See "THE PROPOSED RESTRUCTURING - Basic
Terms of the Master Agreement" and "THE PROPOSED RESTRUCTURING -- Basic Terms of
the Contribution Agreement."
E/ICC will retain those assets and liabilities related to the Wheel
Business and will be converted into a limited partnership under the laws of the
State of Delaware (referred to hereinafter as "Wheel LP"). Immediately prior to
such conversion, I Partner will assign 60% of its interest in E/ICC (30% of the
aggregate partner interest in the Partnership) to a newly-formed limited
partnership, ICC Investment LP, an Affiliate of ICC, which will sell such
interest to E Partner for $18.6 million at Closing pursuant to the terms of an
E/ICC Purchase and Sale Agreement dated November 17, 1997 between E Partner and
ICC Investment LP (the "E/ICC Purchase and Sale Agreement"). See "THE PROPOSED
RESTRUCTURING - Basic Terms of the E/ICC Purchase and Sale Agreement." As a
result of the Restructuring, Engelhard's wholly-owned subsidiary, E Partner,
will be the sole general partner of Wheel LP with a 1% general partner interest
and will also be a limited partner of Wheel LP with a 79% limited partner
interest. I Partner will be the other limited partner of Wheel LP with a 20%
limited partner interest. See "THE PROPOSED RESTRUCTURING - Basic Terms of the
Master Agreement."
In determining the fairness of the transactions contemplated by the
Master Agreement to the Company's Stockholders, the Board of Directors examined,
among other things, E/ICC's and ICC's current business and financial positions,
including the ability to fund future operating needs, business strategy and
prospects, including the potential value to Stockholders of ICC of separating
the Box Business and Wheel Business, the market outlook for the Box Business and
Wheel Business, the market price of ICC's Common Stock, the advantages and
disadvantages experienced by ICC in having Engelhard as a partner in the current
Partnership structure, the importance of having control over the management of
the Box Business and certain other factors which it deemed relevant to its
deliberations, none of which was material either individually or in the
aggregate. Based upon those factors, the Company entered into "arms length"
negotiations with Engelhard and entered into an agreement which it deems to be
fair, reasonable and in the best interests of the Company's Stockholders.
Neither Engelhard nor ICC engaged an investment banking firm to value the
businesses during or in furtherance of their negotiations of the Restructuring,
but subsequent to the establishment of the principal terms of the Restructuring
by the parties, the Company engaged a private investment bank for the sole
purpose of assisting it in determining the fair market values of the Box and
Wheel Businesses for financial reporting purposes. See "THE PROPOSED
RESTRUCTURING - Background and Reasons for the Restructuring."
The Master Agreement provides for customary warranties and
representations of both parties. The transaction, which is subject to approval
by the Stockholders of ICC, is required to be closed ("Closing") on or before
March 31, 1998, unless another date is mutually agreed-upon. See "THE PROPOSED
RESTRUCTURING - Basic Terms of the Master Agreement."
3
<PAGE> 13
Business of ICC after Closing; Effect on Stockholders. Following the
Closing of the Restructuring under the Master Agreement, ICC would remain
principally a holding company. ICC would operate the Box Business of Box LP
through ICC's wholly-owned subsidiary, I Partner, which would be the sole
general partner with complete management control and ownership of a 90% interest
in Box LP. ICC would also hold a passive 20% limited partner interest in Wheel
LP. ICC may enter any other business it deems appropriate, whether or not
related to the Box Business, except that it may not be a reseller of
wheel-shaped rotors acquired under the Rotor Supply Agreement with Wheel LP
other than as a component in the production and sale of Climate Control Systems
or in other limited circumstances. See "THE PROPOSED RESTRUCTURING - Certain
Related Agreements." Presently, although ICC is exploring the possibility of
pursuing other ventures, to date it has not entered into any agreements or
commitments to engage in any other activities following the Closing under the
Master Agreement. See "THE PROPOSED RESTRUCTURING - Business of ICC after
Closing."
In the event that the Master Agreement and Restructuring of E/ICC is
not consummated for any reason, including failure to obtain approval from the
Stockholders of ICC, E/ICC will remain in effect, and ICC will continue to own a
50% general partner interest therein, subject to the terms of the current
General Partnership Agreement dated February 7, 1994 between I Partner and E
Partner (the "Partnership Agreement"). See "OVERVIEW OF THE BUSINESS OF ICC AND
E/ICC" and "THE PROPOSED RESTRUCTURING - Business of ICC in the Event the
Restructuring is not Closed."
The Box LP Limited Partnership. The Fresh Air Solutions, L.P. Limited
Partnership Agreement (the "Box LP Limited Partnership Agreement"), which shall
govern the operation of Box LP, a newly-formed Pennsylvania limited partnership,
provides that: (i) Box LP will be managed solely by I Partner, a wholly-owned
subsidiary of ICC, without interference by Engelhard or any of its Affiliates;
(ii) any investments of property or cash in Box LP by ICC or its Affiliates
shall not dilute E Partner's percentage interest in Box LP, (iii) the general
partner and its Affiliates may make loans to Box LP which loans, together with
interest, shall be taken into account in determining the fair market value of
Box LP for purposes of I Partner's buyout option discussed below; and (iv) I
Partner shall have an option, to be exercisable on January 1, 2004, to acquire
100% of E Partner's interest in Box LP at a price equal to 95% of the fair
market value of Box LP on the date of exercise of the option multiplied by E
Partner's percentage interest in Box LP. See "THE PROPOSED RESTRUCTURING - Basic
Terms of the Box LP Limited Partnership Agreement."
The Wheel LP Limited Partnership. Pursuant to the Master Agreement,
E/ICC shall be converted into a Delaware limited partnership, and a Wheel LP
Limited Partnership Agreement (the "Wheel LP Limited Partnership Agreement")
shall govern the operation of Wheel LP. The Wheel LP Limited Partnership
Agreement is substantially similar to the Box LP Limited Partnership Agreement
and provides that: (i) Wheel LP will be managed solely by E Partner, a
wholly-owned subsidiary of Engelhard, without interference by ICC or any of its
Affiliates; (ii) any investments of property or cash in Wheel LP by Engelhard or
its Affiliates shall not dilute I Partner's percentage interest in Wheel LP;
(iii) the general partner and its Affiliates may make loans to Wheel LP which
loans, together with interest, shall be taken into account in determining the
fair market value of Wheel LP for purposes of E Partner's buyout option
discussed below; and (iv) E Partner shall have
4
<PAGE> 14
an option, to be exercisable on January 1, 2004, to acquire 100% of I Partner's
interest in Wheel LP at a price equal to 95% of the fair market value of Wheel
LP on the date of exercise of the option multiplied by I Partner's percentage
interest in Wheel LP. See "THE PROPOSED RESTRUCTURING - Basic Terms of the Wheel
LP Limited Partnership Agreement."
Certain Related Agreements
Rotor Supply Agreement. In connection with the Master Agreement,
Engelhard and Wheel LP will enter into a Rotor Supply Agreement (the "Rotor
Supply Agreement") with Box LP at Closing. Pursuant to the Rotor Supply
Agreement, Wheel LP shall supply Box LP's total requirements for heat-exchange
and desiccant wheel-shaped rotors. In turn, Box LP shall be obligated to
purchase its total requirements for heat-exchange and desiccant wheel-shaped
rotors from Wheel LP. All wheel-shaped rotors purchased under the Rotor Supply
Agreement will be sold at prices which are lower than the best prices Wheel LP
will offer its other customers for such rotors. The term of the Rotor Supply
Agreement will be fifteen (15) years from Closing.
Cassette Supply Agreement. Pursuant to the Master Agreement, Box LP and
Wheel LP will enter into the Cassette Supply Agreement (the "Cassette Supply
Agreement") at Closing, whereby Box LP will supply Wheel LP with Cassettes,
which consist of a sheetmetal or other structure that holds a rotor, coated or
uncoated with ETS(TM), supported by casters or a hub, which itself consist of
seals, drive motor, belt and other components required to conduct heat or mass
transfer, as currently designed and with any modifications to such design made
within twelve months from Closing. Cassettes sold under this agreement will be
at prices which are more favorable to Wheel LP than to other customers of Box LP
for such products. The term of the Cassette Supply Agreement will be five (5)
years from Closing.
Sensor Supply Agreement. In connection with the Master Agreement,
Engelhard Sensor Technologies, Inc., which is a subsidiary of Engelhard ("Sensor
Technologies"), will enter into a Sensor Supply Agreement ("Sensor Supply
Agreement") with Box LP at Closing, pursuant to which Sensor Technologies will
sell certain humidity and dew point infrared sensors that are manufactured by
Sensor Technologies to Box LP for use in the Box Business. The price to be paid
for such products shall be more favorable to Box LP than the price offered by
Sensor Technologies to its other customers for such products. The term of the
Sensor Supply Agreement will be five (5) years from Closing.
Substrate Supply Agreement. In connection with the Master Agreement,
Wheel LP will enter into a Substrate Supply Agreement (the "Substrate Supply
Agreement") with Engelhard at Closing, pursuant to which Wheel LP will supply
Engelhard's total requirements for substrates and related materials. Such
substrates or related materials will be sold to Engelhard at prices which are
more favorable to Engelhard than to other customers of Wheel LP for such
products.
Desiccant Supply Agreement Novation. As part of the Restructuring, at
Closing Engelhard, E/ICC and Wheel LP will execute a Novation relating to that
certain Supply Agreement dated February 7, 1994 between Engelhard and E/ICC for
the supply of desiccant materials (the "Desiccant Supply Agreement"). The effect
of this Novation will be that, effective after the Restructuring, the Desiccant
Supply Agreement will be between Engelhard and Wheel LP on the
5
<PAGE> 15
same terms and conditions set forth in the original Desiccant Supply Agreement.
Thus, Wheel LP will be obligated to purchase exclusively from Engelhard all
desiccant or drying materials or agents used in any adsorption system that Wheel
LP may require in connection with the conduct of the Wheel Business, subject to
a "competitive offer" provision which will enable Wheel LP to purchase from
third parties similar products at such prices, if available, subject to certain
conditions. In turn, Engelhard will be obligated to sell to Wheel LP its total
requirements for such products. For a discussion of the terms of the Desiccant
Supply Agreement, see "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The
Partnership."
Box Technology License Agreement. In connection with the Master
Agreement, Box LP will enter into the Box Technology License Agreement (the "Box
Technology License") with Wheel LP at Closing, pursuant to which Box LP will
grant to Wheel LP a nonexclusive, royalty free, world-wide, perpetual license,
with the further right to sublicense, to all technology relating to the Box
Business which is owned by Box LP, and all improvements to such technology that
are conceived by employees of Box LP and are subject to patents or patent
applications filed within twelve (12) months after execution of the Box
Technology License, other than improvements used solely on Gas Platform systems.
Wheel LP may, however, only use such technology in the Box Business and
businesses ancillary or reasonably related to the Box Business.
Wheel Technology License Agreement. In connection with the Master
Agreement, Box LP and Wheel LP shall enter into the Wheel Technology License
Agreement (the "Wheel Technology License") at Closing, pursuant to which Wheel
LP will grant Box LP a nonexclusive, royalty free, world-wide, perpetual license
with the further right to sublicense, for technology specifically covered by
certain patents relating to the Wheel Business and owned by Wheel LP (which will
not include Hexcel's proprietary process utilized in manufacturing the small
cell, honeycomb substrate material used to make E/ICC's rotors which will be
licensed to Wheel LP following the Closing) and any improvements to such
technology conceived by employees or representatives of Wheel LP that are
subject to patents or patent applications within the twelve (12) month period
after the signing of the agreement. Box LP may, however, utilize such technology
only in connection with the Box Business and businesses ancillary or reasonably
related to the Box Business.
E/ICC License Agreement. In connection with the Master Agreement, Box
LP shall enter into the E/ICC License Agreement (the "E/ICC License") with
Engelhard at Closing, pursuant to which Engelhard shall grant Box LP a
non-exclusive, royalty free license to use the name "Engelhard" as part of the
"Engelhard/ICC" mark. The E/ICC License shall commence on the Closing and shall
terminate two and one half years thereafter. If Box LP uses the "Engelhard/ICC"
mark in writing for any purpose (except for use on products produced by Box LP,
product packaging material or existing signage at Box LP's Hatboro facility),
such use shall be accompanied with a notation that Engelhard Corporation is a
10% passive investor in Box LP and is in no way involved in the business,
operations, management or control of Box LP.
Referral Agreement. In connection with the Master Agreement, Wheel LP
will enter into a Referral Agreement (the "Referral Agreement") with Box LP at
Closing, whereby Box LP will sell Climate Control Systems to customers referred
to it by Wheel LP in order to assist Wheel LP in generating interest in the
purchase of rotors by such customers. Climate Control Systems shall be
6
<PAGE> 16
sold pursuant to the Referral Agreement on the same pricing, payment and invoice
terms as in effect from time to time by Box LP for its wholesale customers.
Additionally, Wheel LP will be able to have continued, unhindered access to each
customer after consummation of any sale effected in accordance with this
Referral Agreement but will in no event be entitled to a commission for any sale
thereunder. Wheel LP specifically acknowledges in the Referral Agreement that
sales to customers it refers to Box LP shall be limited in nature.
General Releases. At Closing, Engelhard, E Partner and Sensor
Technologies shall enter into a General Release, under which the Company, I
Partner, ICC Investment LP and E/ICC will be released from any claims and
liability related to any matter, including the management of E/ICC and the
matters at issue in the litigation between such parties related to Engelhard's
acquisition of Telaire Systems, Inc. (the "Released Claims"). In addition, E/ICC
shall enter into a General Release of Engelhard, E Partner, Sensor Technologies,
Telaire Systems, Inc., ICC, ICC Investment LP and I Partner for any and all
Released Claims. Finally, ICC, ICC Investment LP and I Partner shall execute a
General Release of Engelhard, E Partner, Sensor Technologies, Telaire Systems,
Inc. and E/ICC for any and all Released Claims.
For a more comprehensive discussion of the above-described Related
Agreements, see "THE PROPOSED RESTRUCTURING - Certain Related Agreements."
MANAGEMENT OF ICC
At the Company's Board of Directors meeting held on November 18, 1997,
the Board elected current Board member William A. Wilson, former Chief Executive
Officer of Carrier Corporation, as President and Chief Executive Officer of the
Company. Mr. Wilson succeeds Irwin L. Gross who will remain as Chairman of the
Board of Directors of the Company. In addition, the Company has implemented
other management changes, none of which are material either individually or in
the aggregate, in preparation of the Company's becoming a stand-alone
manufacturer of Climate Control Systems upon consummation of the Partnership
Restructuring. See "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The Company."
ICC'S EXPOSURE TO ASIAN ECONOMIC PROBLEMS
The Company is focused primarily on the American, Japanese and Korean
markets. Recently, the Japanese and Korean economies have been experiencing
sharply lower economic growth than had been previously been enjoyed by such
countries, and commensurate with such decline in economic growth, the Japanese
yen and Korean won have depreciated significantly against the U.S. dollar. The
impact of these economic developments is that products produced in America, such
as E/ICC's Climate Control Systems, have become more expensive in Japan and
Korea as the currencies in those countries become less valuable in comparison to
the U.S. dollar and that potential consumer and commercial purchasers of the
Company's products have less money to spend on new Climate Control Systems.
However, the Company believes that, because its sales in Japan and Korea are
still limited, its current financial condition will not be materially adversely
affected by the economic difficulties of those countries in the near-term. For a
more comprehensive discussion of the Company's exposure to Asian economic
difficulties, see "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The Company."
7
<PAGE> 17
ACCOUNTING TREATMENT
The acquisition of the partnership interests in Box LP by ICC will be
accounted for under the purchase method of accounting. For the reasons discussed
later in this Proxy Statement, the non-monetary considerations exchanged for the
ownership interests in Box LP and Wheel LP were based upon the recorded amounts.
See "THE PROPOSED RESTRUCTURING - Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
In evaluating the consequences of the transactions described in this
Proxy Statement under the Internal Revenue Code of 1986, as amended, the Company
has come to believe that E/ICC's transfer of certain of its assets, subject to
certain liabilities, to Box LP will constitute a tax free division of the
partnership. The Company also believes that the subsequent distribution by E/ICC
of its entire limited partnership interest in Box LP to I Partner and E Partner
will be tax free. Further, the distribution of assets by E/ICC to Box LP will
cause I Partner and E Partner's basis in their respective partnership interests
in E/ICC to be reduced by the adjusted basis of the assets distributed, but not
below zero. The reduction in liabilities as the result of the transfer to Box LP
is treated as a distribution of money, which could cause recognition of gain.
The Company believes that some gain may be recognized as a result thereof.
In addition, the Company believes that I Partner's transfer of a
portion of its interest in E/ICC to ICC Investment LP and ICC Investment LP's
subsequent transfer of such interest to E Partner will constitute a sale of such
interest to E Partner. The sale will produce gain to ICC Investment LP, and
through its ownership of ICC Investment LP and its partners, ICC will report
such gain to the extent that the cash consideration exceeds the adjusted tax
basis of the partnership interest sold to E Partner. The Company believes that
some of the gain may be ordinary income if the partnership owns unrealized
receivables or inventory items. Conversely, the Company believes that the
conversion of E/ICC into a limited partnership interest is not considered an
exchange of a partnership interest, and therefore no gain or loss results. In
addition, the partners' bases and holding periods in their partnership interests
will not be affected. For a more detailed discussion of the tax consequences of
the proposed Restructuring, see "THE PROPOSED RESTRUCTURING - Federal Income Tax
Consequences."
THE RIGHTS OF STOCKHOLDERS OF ICC WILL NOT BE AFFECTED BY THE
CONSUMMATION OF THE MASTER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREUNDER, NOR WILL THE STOCKHOLDERS RECEIVE ANY PROPERTY OF ANY KIND AS A
RESULT OF, OR IN CONNECTION WITH, THE CONSUMMATION OF THE MASTER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY.
The following charts show the organizational structure of the entities
before and after the consummation of the proposed Restructuring.
8
<PAGE> 18
Organizational Structure before Restructuring:
<TABLE>
<S> <C> <C>
ICC Technologies, Inc. Engelhard Corporation
(Delaware corporation) (Delaware corporation)
100% Interest 100% Interest
ICC Desiccant Technologies, Engelhard Desiccant
Inc. Technologies, Inc.
(Delaware corporation) (Delaware corporation)
50% Interest 50% Interest
Engelhard/ICC
(Pennsylvania general
partnership)
</TABLE>
Organizational Structure after Restructuring:
<TABLE>
<S> <C>
ICC Technologies, Inc. Engelhard Corporation
(Delaware corporation) (Delaware corporation)
100% Interest 100% Interest
ICC Desiccant Technologies, Engelhard Desiccant
Inc. Technologies, Inc.
(Delaware corporation) (Delaware corporation)
1% GP Interest 1% GP Interest
89% LP Interest 79% LP Interest
10% LP Interest 20% LP Interest
Fresh Air Solutions, LP Wheel LP
(Box LP) (Delaware limited partnership)
(Delaware limited partnership)
</TABLE>
9
<PAGE> 19
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA OF ICC
The historical selected financial data of the Company for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992 have been derived from
consolidated financial statements that have been audited by the Company's
Independent Accountants, whose report thereon includes an explanatory paragraph
regarding substantial doubt about the Company's ability to continue as a going
concern. There were no cash dividends paid to the holders of Common Stock in any
of these years. The data should be read in conjunction with the Company's
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
(All amounts expressed in dollars excepted weighted average shares
outstanding)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------------
For the
nine months
ended
September 30, For the Year Ended December 31,
---------------------------------------------------------------------------------
Income statement data: 1997(1) 1996(1) 1995(1) 1994(1) 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues(2) $ 411,897 $ 688,411 $ 362,153 $ 162,285 $1,216,032 $ 962,185
Expenses(3) 6,052,614 7,843,020 6,685,526 4,553,367 5,273,884 3,529,058
Net Loss (5,640,717) (7,154,609) (6,323,373) (4,391,082) (4,057,852) (2,566,873)
Cumulative Preferred Stock
Dividend Requirement 0 (49,655) (301,413) (227,750) (261,500) (241,938)
Net loss applicable to
Common Stockholders (5,640,717) (7,204,264) (6,624,786) (4,618,832) (4,319,352) (2,808,811)
Loss per Common
Share (.26) (.35) (.47) (.41) (.51) (.47)
Weighted average
Shares Outstanding 21,304,645 20,322,952 14,072,867 11,390,981 8,550,852 5,978,505
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
-------------------------------
For the nine For the Year
months ended ended
September 30, December 31,
-------------------------------
Income statement data: 1997(4) 1996(4)
---- ----
<S> <C> <C>
Revenues(2) $ 6,063,018 $ 6,807,335
Expenses(3) 15,992,880 19,293,603
Net Loss (9,929,862) (12,486,268)
Cumulative Preferred Stock
Dividend Requirement 0 (49,655)
Net loss applicable to
Common Stockholders (9,929,862) (12,535,923)
Loss per Common
Share (0.47) (.61)
Weighted average
Shares Outstanding 21,304,645 20,322,952
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED
HISTORICAL PRO FORMA
------------------------------------------------------------------------------------------------
As of As of
September 30, As of December 31, September 30,
------------------------------------------------------------------------------------------------
Balance sheet data: 1997(1) 1996(1) 1995(1) 1994(1) 1993 1992 1997(5)
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets $7,057,485 $12,250,865 $4,796,426 $2,397,522 $2,564,302 $ 997,632 $35,378,702
Working Capital (Deficit) 4,387,986 9,661,805 1,827,797 1,072,485 1,206,700 (416,301) 25,088,161
Long Term Obligations 0 0 0 150,000 650,000 300,000 207,624
Total Liabilities 2,416,391 2,179,467 3,262,614 426,782 1,520,631 1,458,648 6,498,038
Stockholders' Equity 4,641,094 10,071,398 1,533,812 1,970,740 1,043,671 (461,016) 28,561,018
(Deficit)
Book Value per Share of
Common Stock Outstanding 0.22 0.47 0.10 0.16 0.10 (0.07) 1.33
</TABLE>
(1) On February 7, 1994, the Company transferred its desiccant-based
Climate Control Systems business in exchange for a 50% interest in
E/ICC.
(2) Revenues consist of interest income and other income. For pro forma
periods presented and periods presented prior to the formation of E/ICC
on February 7, 1994, revenues include sale of equipment.
(3) Expenses consists of equity interest in net loss of investee, operating
expenses and interest expense. For pro forma periods presented and
periods presented prior to the formation of E/ICC on February 7, 1994,
expenses also include cost of goods sold and minority interest.
(4) The pro forma consolidated financial information is presented to
illustrate the effect of the restructuring of the Partnership, pursuant
to the Master Agreement, on the Company's results of operations as if
it occurred on January 1, 1996. Refer to the unaudited Pro Forma
Consolidated Financial Statements appearing in this Proxy Statement.
(5) The pro forma consolidated financial information is presented to
illustrate the effect of the restructuring of the Partnership, pursuant
to the Master Agreement, or the Company's financial position as if it
occurred September 30, 1997. Refer to the unaudited Pro Forma
Consolidated Financial Statements appearing in this Proxy Statement.
<PAGE> 20
THE SPECIAL MEETING
DATE, TIME AND PLACE
This Proxy Statement is being furnished to holders of ICC Common Stock
in connection with the solicitation of proxies by the Board of Directors of ICC
for use at the Special Meeting to be held on February 23, 1998 at 330 South
Warminster Road, Hatboro, Pennsylvania 19040, commencing at 10:00 a.m., local
time, and at any adjournment or postponement thereof.
This Proxy Statement and the accompanying forms of proxy are first
being mailed to Stockholders of ICC on or about February 3, 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of ICC Common Stock will consider and
vote upon:
(i) the approval of a Master Agreement by and among ICC, Engelhard
Corporation ("Engelhard") and Engelhard/ICC, a joint venture
owned equally by ICC and Engelhard ("E/ICC"), which provides
in substance for:
(a) the division of E/ICC into two separate operating limited
partnerships, one to manufacture and market complete, active
Climate Control Systems ("Box LP"), and the other to
manufacture and market the heat-exchange and desiccant coated
wheel-shaped rotors that are components of the Climate Control
Systems ("Wheel LP"); and
(b) the exchange by ICC and Engelhard of certain of their
respective interests in each partnership and the payment by
Engelhard to ICC of approximately $18,600,000, such that after
the exchanges:
(i) ICC will own 90% of Box LP and 20% of
Wheel LP; and
(ii) Engelhard will own 80% of Wheel LP and
10% of Box LP (the "Restructuring"),
all as more fully described in this proxy statement.
See "THE PROPOSED RESTRUCTURING;" and "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF;"
As of the date of this Proxy Statement, the management of ICC knows of
no matters to be brought before the Special Meeting other than the matters
referred to herein. If, however, further business is presented, the proxy
holders will act in accordance with their best judgment.
<PAGE> 21
RECOMMENDATIONS OF ICC'S BOARD OF DIRECTORS
All of the directors of ICC have voted for and approved item (i) above
and recommend a vote for approval of the foregoing action by the Stockholders of
ICC entitled to vote.
VOTES REQUIRED; RECORD DATE
The Board of Directors of ICC has fixed January 27, 1998 as the Record
Date for the determination of Stockholders entitled to notice of, and to vote
at, the Special Meeting. Accordingly, only holders of record of Common Stock on
the Record Date will be entitled to vote at the Special Meeting. As of the
Record Date, there were 21,453,771 shares of ICC Common Stock outstanding and
entitled to vote, held by 11,123 holders of record, including 4,540,671 shares
of Common Stock held by directors and executive officers of ICC who have agreed
with ICC to vote in favor of approving the Master Agreement and the
Restructuring of ICC's interest in E/ICC. Each holder of record of Common Stock
on the Record Date is entitled to cast one vote per share on all matters
properly submitted for the vote of Stockholders. The presence at the Special
Meeting, in person or by properly executed proxy, of the holders of a majority
of the voting power of all the shares of Common Stock is necessary to constitute
a quorum at the Special Meeting. For the purpose of determining the number of
votes cast at the Special Meeting, those cast "For" or "Against" will be
counted. In addition, if no instructions are indicated for a matter which will
be brought before the Special Meeting, such proxies will be voted for approval
of each such matter. Indication of "ABSTENTION" will be counted only for
purposes of determining whether a quorum is present at the Special Meeting.
Therefore, a properly executed proxy marked "ABSTENTION" will have the same
effect as a vote against approval of the matters brought before the meeting. See
"VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF."
The approval of each matter to be brought before the Special Meeting
will require the affirmative vote of the holders of a majority of the voting
power of all the outstanding shares of ICC Common Stock as of the Record Date.
VOTING PROXIES; REVOCABILITY OF PROXIES
This Proxy Statement is being furnished to ICC Stockholders in
connection with the solicitation of proxies by and on behalf of the Board of
Directors for use at the Special Meeting. All shares of Common Stock represented
at the Special Meeting by properly executed proxies received prior to or at the
Special Meeting, and not revoked, will be voted in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will be voted for approval of all the matters which will be brought
before the Special Meeting and for which no instructions are indicated.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of ICC, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of ICC before the taking of the vote at the
Special Meeting, or (iii) attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not in and of itself
12
<PAGE> 22
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent and delivered to ICC Technologies, Inc., 330
South Warminster Road, Hatboro, PA 19040, Attention: Albert Resnick, Secretary,
or hand delivered to the Secretary of ICC at or before the taking of the vote at
the Special Meeting.
In addition to solicitation by use of the mail, proxies may be
solicited by directors, officers and employees of ICC in person, or by
telephone, telegram, facsimile or other means of communication and also by any
proxy solicitation firm, organization or person engaged for that purpose. Such
directors, officers and employees will not be additionally compensated, but may
be reimbursed for reasonable out of pocket expenses in connection with such
solicitation. Further, the Company has engaged the firm of Morrow & Company to
aid in the solicitation of proxies, for which such firm will be paid a fee of
$6,000, plus reimbursement of out-of-pocket expenses. ICC will also pay the fees
and expenses of its counsel, accountants and financial advisors in connection
with the preparation of this Proxy Statement. ICC will bear all costs associated
with mailing the Proxy Statement and all other fees and expenses (including the
printing costs associated with the Proxy Statement) relating to the filing of
this Proxy Statement. Arrangements also will be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and ICC will reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
NO DISSENTERS' RIGHTS OF APPRAISAL
PURSUANT TO THE GENERAL CORPORATION LAW OF DELAWARE, ANY STOCKHOLDER OF
ICC WHO OBJECTS TO THE RESTRUCTURING OF ICC'S INTEREST IN E/ICC PURSUANT TO THE
MASTER AGREEMENT WILL NOT BE ENTITLED TO ANY DISSENTER'S RIGHTS AND WILL NOT
RECEIVE ANY PAYMENT IN CONNECTION WITH HIS OR HER STOCK.
STOCKHOLDERS SHOULD NOT TRANSMIT ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
13
<PAGE> 23
OVERVIEW OF THE BUSINESS OF ICC AND E/ICC
THE COMPANY
The Company, through the Partnership, designs, manufactures and markets
innovative Climate Control Systems to supplement or replace conventional air
conditioning systems. The Partnership's Climate Control Systems are based on
proprietary desiccant technology initially developed by the Company, licensed
honeycomb rotor technology and Engelhard's patented titanium silicate desiccant,
ETS(TM). The Partnership's Climate Control Systems are designed to address
indoor air quality, energy and environmental concerns and regulations currently
affecting the air conditioning market. The Partnership currently markets its
systems to certain targeted applications within the commercial air conditioning
market in North America and Asia-Pacific. The Company believes that the
Partnership's Climate Control Systems more effectively control humidity, improve
indoor air quality, reduce energy consumption, address certain environmental
concerns than other systems and provide customers a choice from a variety of
energy sources such as natural gas, steam, waste heat or electricity.
ICC was incorporated in 1984 under the name "International Cogeneration
Corporation." Initially, the Company designed, manufactured, and sold
cogeneration equipment. The proprietary desiccant cooling design currently
utilized by E/ICC was initially developed by the Company as an extension of this
cogeneration business. In 1990, the Company changed its strategy and began to
design, manufacture and market climate control equipment based upon desiccant
technology, at which time the Company also changed its name to "ICC
Technologies, Inc." The Company has since discontinued its cogeneration
business.
In May 1992, the Company entered into a Joint Development Agreement
with Engelhard in order to design a desiccant-based Climate Control System
utilizing Engelhard's proprietary desiccant technology principally for the
heating, ventilation, air conditioning and dehumidification markets. In February
1994 pursuant to a Joint Venture Asset Transfer Agreement, the Company and
Engelhard formed E/ICC which replaced the Joint Development Agreement and
succeeded to the desiccant-based Climate Control System business which had been
previously conducted by the Company. See also "THE PROPOSED RESTRUCTURING --
Background and Reasons for the Restructuring." Since the formation of the
Partnership, the Company has become principally a holding company whose
activities have related primarily to its participation in the management of the
Partnership in which it owns a 50% interest. The Company is not permitted to
engage directly or indirectly in any activities which would conflict with the
Partnership's business as long as the Partnership is in effect, but the Company
is not precluded from engaging in other activities.
On November 17, 1997, ICC and Engelhard entered into the Master
Agreement which, if approved by Stockholders of ICC and consummated, would
restructure E/ICC so that the business of the Partnership would be divided into
the Box Business and the Wheel Business. See "THE PROPOSED RESTRUCTURING - Basic
Terms of the Master Agreement."
At the Company's Board of Directors meeting held on November 18, 1997,
the Board elected current Board member William A. Wilson, former Chief Executive
Officer of Carrier Corporation, as President and Chief Executive Officer of the
Company. Mr. Wilson succeeds Irwin
14
<PAGE> 24
L. Gross who will remain as Chairman of the Board of Directors of the Company.
In addition to having held the position of Chief Executive Officer of Carrier
Corporation, a $4.5 billion unit of United Technologies Corporation ("United
Technologies"), Mr. Wilson held the title of Senior Vice President of United
Technologies' Commercial/Industrial Group and has also served in Europe as
President of Otis Elevator Co. Prior to United Technologies, he was President of
the Pollution Control Systems Division of Wheelabrator-Frye, Inc. and previously
also held various management and engineering positions with Westinghouse
Electric Corporation. In addition, the Company has implemented other management
changes, none of which are material either individually or in the aggregate, in
preparation of the Company becoming a stand-alone manufacturer of Climate
Control Systems upon consummation of the Partnership Restructuring.
These management changes are designed to reduce costs and focus the
resources of the Company on those aspects of the business which management
believes will yield positive results in the shortest possible amount of time.
The Company estimates that the management changes and other, non-material
overhead reductions will produce an annual savings of $5 million and will
improve teamwork and communication among the Company's staff. In addition, the
new organizational structure will be more narrowly focused both geographically
and with respect to market segments. Geographically, the Company is focused on
the American, Japanese and Korean markets. The Japanese and Korean operations
have already been established, and it is not anticipated that they will require
any significant expense to maintain.
It is important to note that the Japanese and Korean economies have
been experiencing sharply lower economic growth than had been previously been
enjoyed by such countries, and commensurate with such decline in economic
growth, the Japanese yen and Korean won have depreciated significantly against
the U.S. dollar. The impact of these economic developments is that products
produced in America, such as E/ICC's Climate Control Systems, have become more
expensive in Japan and Korea as the currencies in those countries become less
valuable in comparison to the U.S. dollar and that potential consumer and
commercial purchasers of the Company's products have less money to spend on new
Climate Control Systems. However, E/ICC estimates that its sales to these
countries, in the aggregate, will represent only 8.9% of its total revenues in
1997. Given this relatively small percentage of total revenues, the Company
believes that its overall financial condition will not be materially adversely
affected by economic problems in Japan and Korea in the short-term. Although
sales to Japan and Korea declined somewhat between 1996 and 1997 from $1.3 to
$1.089 million, respectively, the Company believes that this decrease in sales
resulted primarily from a slight reduction in orders received specifically
through its marketing relationship with Samsung Corporation of Korea and not
from the Asian economic problems. The consummation of the Restructuring will,
however, increase the Company's dependence on the Japanese and Korean markets
due to the Company's increased dependence on the Box Business. Thus, it is
possible that, if Japan and Korea continue to experience economic problems or
such problems become significantly worse, the Company's financial performance
will be materially adversely affected by Japanese and Korean economic problems.
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THE PARTNERSHIP
General. The Company and Engelhard, through their respective
wholly-owned subsidiaries, formed E/ICC in February 1994 to engage in the
business of the design, manufacture and sale of desiccant wheel components and
desiccant Climate Control Systems for the dehumidification and cooling markets,
the industrial drying/dehumidification market and the air conditioning and
microbe reduction market for health care facilities (the "Partnership
Business"). In exchange for a 50% interest in E/ICC, the Company transferred to
E/ICC substantially all of its assets relating to its desiccant-based air
conditioning business, subject to certain liabilities. Engelhard, in exchange
for a 50% interest in E/ICC, (i) contributed $8,600,000 in capital to E/ICC,
(ii) entered into a license agreement and a supply agreement, and (iii) agreed
to provide credit support to E/ICC in the amount of $3,000,000.
Pursuant to the Partnership Agreement, E/ICC is managed by a Management
Committee comprised of two members, one selected by each of the Company and
Engelhard. Except as expressly delegated to the Chief Executive Officer or the
Chief Operating Officer of E/ICC, all significant and material actions by E/ICC
require approval of the Management Committee.
In accordance with the Partnership Agreement, the Company granted
Engelhard options to acquire up to all of the Company's interest in E/ICC at the
rate of 25% of such interest per year, with each such 25% option exercisable on
December 31 of each year commencing in 1997 and extending through and including
2000 (each an "Exercise Date"), based on a price equal to 95% of the fair market
value of E/ICC as of the exercise date of the option in each year in which an
option is exercisable. Pursuant to the terms of the Partnership Agreement, E/ICC
is obligated, at its own expense, to engage an investment banker selected by I
Partner and E Partner to render an opinion as to its estimate of the fair market
value of E/ICC in each year in which Engelhard may exercise its option;
provided, that Engelhard may waive such requirement for any year it does not
intend to exercise an option, other than the exercise date on December 31, 2000.
In selecting the investment banking firm, I Partner and E Partner shall first
try to mutually agree on one of the five following firms: Dillon, Read & Co.
Inc., Goldman Sachs & Co., J.P. Morgan & Co., Merrill Lynch & Co. and S.G.
Warburg & Co. If I Partner and E Partner cannot so mutually agree, then they
shall promptly meet in person and on a random basis select one name from among
the firms listed above. If either partner objects to the firm so chosen, another
name shall be chosen until there is no objection or there is only one firm left,
in which case the remaining firm shall perform the valuation.
Each 25% option is exercisable for a limited period of time after the
respective exercise date. Upon the occurrence of an event of default by the
Company under the Partnership Agreement (including bankruptcy of the Company or
failure by the Company to comply with, or a violation of, any material term or
condition of the Partnership Agreement which is not cured within a 45-day cure
period), Engelhard may accelerate the option. In addition, Engelhard's purchase
options are cumulative and any option unexercised as of the end of the exercise
period may be exercised as of any future exercise period; provided that all
previously unexercised options must be exercised and all options automatically
expire if Engelhard does not elect to exercise both of its first two options. In
the event that Engelhard's interest in E/ICC increases to more than 70%,
Engelhard will be entitled to control the management of E/ICC. There can be no
assurances, however, that if the
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Restructuring contemplated under the Master Agreement is not approved, Engelhard
will or will not exercise any or all of its options to purchase the Company's
interest in E/ICC.
The Partnership Agreement also provides that in the event I Partner
owns any interest in E/ICC at any time when an event of default by E Partner
occurs and is continuing, then within thirty days thereafter I Partner, at its
sole option, may exercise its option to purchase E Partner's entire interest in
E/ICC. Further, the Partnership Agreement provides that if I Partner holds any
remaining interest in E/ICC on the latter of (i) the date which is six months
after the last exercise date of E Partner's options, or (ii) the date on which E
Partner's options expire, then either partner, at its option, on ten days prior
written notice to the other partner, may commence a sale procedure in which case
the interest of both I Partner and E Partner will be put up for sale through an
investment banking firm which will solicit bids for the interest of both
partners.
As of September 30, 1997, the Company employed 5 full-time persons, and
E/ICC employed 169 full-time persons. Persons employed by E/ICC have experience
and expertise in industrial engineering and operations, energy economics,
equipment service and installation, sales and marketing, and finance, while
ICC's employees are limited primarily to executive and administrative personnel.
As of October 31, 1997, E/ICC's equipment sales backlog was approximately $1.4
million, as compared to approximately $2 million on November 11, 1996. Please
note that the reports of the auditors for the Company and E/ICC, Coopers &
Lybrand L.L.P., relating to the financial statements of both such entities
include an explanatory paragraph which refers to conditions that raise
substantial doubt about the ability of ICC and E/ICC to continue as going
concerns. See "EXPERTS."
Effect of Restructuring on the E/ICC Partnership Agreement. The
consummation of the Restructuring will result in the termination of the
Partnership Agreement, at which time the terms and conditions of the Partnership
Agreement, including the Engelhard buy-out option discussed above, will be of no
further effect. The management of the two partnerships which will result from
the division of E/ICC pursuant to the Restructuring, Box LP and Wheel LP, will
be governed by two new partnership agreements, respectively, to be executed at
Closing. For a more detailed discussion of the terms of these two new
partnership agreements, see "THE PROPOSED RESTRUCTURING - Basic Terms of the Box
LP Limited Partnership Agreement" and "THE PROPOSED RESTRUCTURING -- Basic Terms
of the Wheel LP Limited Partnership Agreement."
Desiccant Technology. E/ICC's Climate Control Systems utilize two
wheel-shaped rotors with honeycomb passages. The honeycomb substrate material
used to make the rotors is manufactured through a licensed proprietary process
for manufacturing lightweight structural honeycomb core. This substrate material
offers lighter weight, superior airflow and more efficient heat and moisture
transfer than the corrugated rotors used by E/ICC's competitors. The Company
believes that E/ICC's honeycomb rotors are unique and would be difficult and
costly for competitors to duplicate.
The first rotor in E/ICC's two rotor systems is coated with ETS(TM), a
unique molecular sieve that can remove moisture from air, and the second serves
as a heat exchange rotor. Recirculated air
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(air from the building), or up to 100% fresh air, is first dehumidified by
passing it through a slowly rotating rotor treated with ETS(TM) that adsorbs
airborne moisture, and thereby raises the temperature in proportion to the
reduction in humidity. As the desiccant rotor rotates to the other side of the
unit, heated air is blown through the desiccant rotor which releases the
moisture from the ETS(TM), regenerating the desiccant rotor for further
dehumidification. The warm, dehumidified air is next cooled by passing it
through a similar rotor which has not been coated with ETS(TM). Depending upon
climatic conditions, the temperature of the process air is generally reduced to
a temperature approximately 10% lower than outside air temperature. The heat
exchange rotor is cooled by an evaporative cooler on the other side of the unit.
The moderate temperature, dry air can be cooled further by partially
dehumidifying the air through an evaporative cooler, which does not use any
refrigerants, or a smaller cooling coil than would be required by a conventional
air conditioning system. The process air is then delivered to the building by
the normal system of fans and ducts.
Products of E/ICC. E/ICC currently manufactures and sells two types of
desiccant-based Climate Control Systems, the "Desert Cool(TM)" and "Desert
Breeze(TM)," which differ based upon function and energy source. The Desert
Cool(TM) systems typically operate on natural gas, but are also available in
steam or waste heat operated models, and also have gas heating capabilities.
Consistent with general industry practices, E/ICC warrants its systems for one
year from the date of installation and warrants its desiccant and heat exchange
rotors for an additional four years.
The Desert Cool(TM) system is designed to cool commercial applications
with the flexibility of utilizing any combination of circulated or fresh air.
The Desert Cool(TM) can displace up to 250 tons of conventional cooling with the
number of units required for each application depending on the size and
configuration of the building. The Desert Breeze(TM) system, the first
all-electric desiccant-based Climate Control System prototype, was introduced in
1995. An all-electric model is important to compete in those markets where
electricity is the only or most practical source of energy. Currently, the
majority of air conditioning systems worldwide are electric powered. Desert
Breeze(TM) is designed to cool commercial applications with the flexibility of
utilizing either circulated or fresh air. Unlike E/ICC's natural gas systems,
the electric units combine desiccant technology with conventional coils and
compressors which provide heat to regenerate the desiccant rotors and partially
cool the process air. An additional conventional coil may be added to provide
further post-cooling as in the natural gas units. The system can use smaller
compressors with hydrochlorofluorocarbon refrigerant than conventional air
conditioning equipment, reducing the amount of refrigerant required and power
usage and peak kilowatt demand. The system is also currently designed to allow
for use of hydrofluorocarbon refrigerant.
Sales and Marketing. Currently, E/ICC markets its systems to specific
applications in the commercial air conditioning market in which its systems
offer the greatest advantages compared to conventional air conditioning systems.
To date, E/ICC has marketed its systems primarily as a supplement to, or partial
replacement of, conventional air conditioning systems. Since E/ICC's products
utilize an emerging technology, potential customers carefully evaluate and, in
most cases, purchase the E/ICC's systems for testing before committing to
further purchases. E/ICC sells its systems principally to end users either
directly or through independent manufacturers representatives who purchase units
at a discount or receive a commission. E/ICC has developed separate plans and
departments for domestic and international sales and marketing.
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United States. E/ICC employs a direct sales staff and engages
independent manufacturers' representatives to market its systems in the United
States. The direct sales staff markets the systems to supermarket chains and
national retailers, and oversees the manufacturers representatives. E/ICC's
manufacturers' representatives market to regional customers and to national
accounts which are not assigned to the direct sales staff. At present, a
majority of the manufacturers' representatives are located in the southern and
eastern regions of the country.
International. International sales and marketing efforts have focused
on the high humidity, rapidly developing regions of the Asian-Pacific market. In
this region, manufacturing and industrial companies are generally interested in
E/ICC's systems to improve workers' comfort by lowering humidity. E/ICC has
manufactured and sold units to customers in Japan, South Korea, Taiwan and
Thailand through its licensing and distribution agreements and other
relationships.
Manufacturing; Facilities. E/ICC currently assembles its Climate
Control Systems at a 138,000 square foot manufacturing facility located in
Hatboro, Pennsylvania (the "Hatboro facility"). The term of the lease for this
facility is ten years and two months, commencing on April 1, 1997, but it may be
terminated at the end of the sixty-second month (an "Early Termination"), upon
twelve months prior written notice and the payment of an early termination fee.
Under the Master Agreement, at Closing, Box LP shall grant Engelhard a power of
attorney authorizing Engelhard to cause an Early Termination of the lease if Box
LP fails to cause Engelhard's guaranty of this lease to be terminated on or
before February 2, 2001. See "THE PROPOSED RESTRUCTURING - Basic Terms of the
Master Agreement." Box LP, as successor to E/ICC under the lease, shall pay any
fees resulting from an Early Termination regardless of whether the termination
of the lease was initiated by Box LP or Engelhard. The Company believes that the
Hatboro facility is adequate for the current and future needs of the Box
Business.
E/ICC currently produces the small cell, honeycomb substrate material
and the desiccant and heat-exchange rotors in its 75,000 square feet
manufacturing facility in Miami, Florida and had leased a 24,000 square foot
storage facility and parking lot adjacent to the manufacturing facility. In
December 1994, E/ICC acquired for $8 million in cash, the real property and
substantially all of the assets of Ciba-Geigy's manufacturing facility in Miami,
from which E/ICC had been purchasing the honeycomb substrate currently used in
producing E/ICC's desiccant and heat-exchange rotors. E/ICC sought to
manufacture its own substrate and rotors to lower production costs, further
improve the rotors and expand production capacity to meet potential market
demand. In addition, the acquisition gave E/ICC more control of a critical
technology and manufacturing process for its current products. E/ICC acquired a
perpetual, exclusive technology license for the proprietary process to
manufacture such small cell, honeycomb substrate for use in air cooling,
conditioning and dehumidification applications, and certain other fluid
applications. In connection with the acquisition of the Miami facility, E/ICC
entered into a five-year requirements contract to continue to supply Ciba-Geigy
with the honeycomb substrate material for the aerospace industry. As a result of
the combination of the composite businesses of Ciba-Geigy and Hexcel
Corporation, the combined businesses operate now under the name Hexcel. All
rights and obligations under the requirements contract were assigned to Hexcel.
E/ICC is required to make available to Hexcel in each year of the contract
certain percentages of the Miami facility's production capacity, ranging from
75% in 1996
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to 30% in 2000. The contract is subject to early termination by Hexcel at any
time after 18 months, upon six months' notice.
Supplies and Materials. Except as described below, E/ICC generally uses
standard parts and components in the manufacture of its systems and obtains such
parts and components from various independent suppliers. The Company believes
E/ICC is not highly dependent on any specific supplier and could obtain similar
components from other suppliers, except for the substrate material used in its
rotors and ETS(TM).
E/ICC purchases a proprietary strong, lightweight material from a
single supplier which is used as the base material in manufacturing the
honeycomb substrate for E/ICC's desiccant and heat-exchange rotors. While this
material is critical in the manufacture of the rotors and E/ICC does not have a
contractual agreement with such supplier, the Company believes that E/ICC can
obtain all of its requirements for such material from such supplier for the
foreseeable future.
ETS(TM) is a patented desiccant material manufactured exclusively by
Engelhard. Pursuant to a Supply Agreement (the "Desiccant Supply Agreement"),
E/ICC has agreed to purchase exclusively from Engelhard all of the ETS(TM) or
any improved desiccant material developed by Engelhard that E/ICC may require in
connection with the conduct of E/ICC's business. In turn, Engelhard has agreed
to sell to E/ICC its total requirements for ETS(TM) or any improved desiccant
material developed by Engelhard. The price for ETS(TM) is adjusted as of January
1 of each year during the term of the Desiccant Supply Agreement, which
initially expires December 31, 1997, but may be extended by either party for
additional two-year periods up to December 31, 2003. The Desiccant Supply
Agreement does not include specific purchase prices but does contain a
'competitive offer' provision, whereby E/ICC is able to purchase from third
parties similar desiccant products that are equal to or better than the products
sold by Engelhard should they become available, at a price that is lower than
the price established for ETS(TM) or any improved desiccant material sold by
Engelhard under the Desiccant Supply Agreement, provided, however, that (i)
Engelhard has the right to meet such 'competitive offer' in all material
respects and (ii) any such third party offer must be able to meet E/ICC's
requirements for such desiccants in all material respects in order to be
considered a 'competitive offer.' For a discussion of the Novation to the
Desiccant Supply Agreement pursuant to the proposed Restructuring, see "THE
PROPOSED RESTRUCTURING -- Certain Related Agreements."
Patents and Proprietary Information. E/ICC's ability to compete
effectively with other manufacturers of climate control equipment has been
dependent upon, among other things, a combination of (i) E/ICC's proprietary
desiccant system design, (ii) Engelhard's patented ETS(TM) and (iii) Hexcel's
proprietary process licensed to E/ICC and utilized in manufacturing the small
cell, honeycomb substrate material used to make E/ICC's rotors. E/ICC has been
issued eleven United States patents covering certain of its desiccant
technology. Several U.S. and foreign patent applications are pending which are
directed to the products manufactured and sold by E/ICC and additional patent
filings are expected to be made in the future.
The Company was granted one U.S. patent expiring in 2010, which it
assigned to E/ICC, relating to the use of a microprocessor to control the
desiccant cooling systems in order to increase
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the energy efficiency or effectiveness of the desiccant cooling process. E/ICC
was granted ten U.S. patents expiring between 2013 and 2015, protecting E/ICC's
intellectual property. The patents granted relate to E/ICC's desiccant Climate
Control Systems which E/ICC believes provides it with meaningful exclusivity
rights. Similar patents have also been applied for by E/ICC in selected
Asia-Pacific rim countries.
Under the Engelhard License Agreement, Engelhard granted E/ICC an
exclusive, royalty-free license during the existence of E/ICC to use Engelhard's
proprietary technology relating to ETS(TM) for use in E/ICC's business,
including heating, ventilation and air conditioning applications.
In connection with the acquisition of Ciba-Geigy's manufacturing
facility in Miami, E/ICC acquired an exclusive, perpetual technology license to
use Hexcel's (successor to Ciba-Geigy) proprietary process in air cooling,
conditioning and dehumidifying applications, which is currently necessary to
manufacture the small cell, honeycomb substrate material used in manufacturing
E/ICC's proprietary desiccant and heat exchange rotors.
After the Closing of the Restructuring, while ICC, through Box LP, will
continue to have the right to use the technology covered by the patents and the
proprietary desiccant system design in conducting the Box Business and will
derive benefit from the ETS(TM) and small-cell, honeycomb substrate material
used to make the E/ICC rotors through the purchase of rotors under the Rotor
Supply Agreement, Box LP will no longer have or share in the exclusive right to
any such technology. Moreover, Engelhard, through Wheel LP, will have the right
to use and, except with respect to Hexcel, sublicense others to use, such
technology through its rights under the Box Technology License and ownership of
the patented ETS(TM) and the Hexcel license. See "THE PROPOSED RESTRUCTURING."
Competition. E/ICC competes against other manufacturers of conventional
and desiccant-based air conditioning systems primarily on the basis of
capabilities, performance, reliability, price and operating efficiencies. E/ICC
competes with numerous other manufacturers in the conventional heating,
ventilation and air conditioning equipment industry, including Trane Company,
York International Corporation, Carrier and others that have significantly more
resources and experience in designing, manufacturing and marketing of air
conditioning systems than does E/ICC. The Company believes E/ICC's systems
provide the following advantages over conventional air conditioning systems:
more effectively control humidity; improve indoor air quality; reduce energy
consumption; offer energy versatility; and reduce the amount of refrigerants
required. E/ICC also competes with several companies selling desiccant-based
Climate Control Systems, including Munters Corporation and Semco Incorporated.
However, the Company believes E/ICC's systems perform better and are more
economical to operate than competing desiccant-based systems due to its
honeycomb rotors and Engelhard's ETS(TM). See "THE PROPOSED RESTRUCTURING."
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OVERVIEW OF THE BUSINESS OF ENGELHARD
Engelhard, through its wholly-owned subsidiary Engelhard DT, Inc., is a
50% partner in E/ICC.
Engelhard and its subsidiaries are the successors to the businesses
previously operated by Engelhard Minerals & Chemicals Corporation ("EMC")
through its Engelhard Industries and Minerals & Chemicals Divisions. In 1981,
Engelhard's common stock was distributed, as a spin-off, to the shareholders of
EMC, and Engelhard became a separate, publicly-held corporation. Engelhard's
principal executive offices are located at 101 Wood Avenue, Iselin, New Jersey,
08830 (telephone number (908) 205-5000).
Engelhard and its subsidiaries develop, manufacture and market
technology-based specialty chemical products and engineered materials for a wide
spectrum of industrial customers and provides services to precious metals
customers.
Engelhard and its subsidiaries employed approximately 6,300 people as
of January 1, 1997 and operate on a worldwide basis with corporate and operating
headquarters and principal manufacturing facilities and mineral reserves in the
United States with other operations conducted in the European Community, the
Russian Federation and the Far East.
Engelhard and its subsidiaries' businesses are organized into three
segments - Catalysts and Chemicals, Pigments and Additives, and Engineered
Materials and Precious Metals Management.
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THE PROPOSED RESTRUCTURING
GENERAL
The proposed Restructuring of E/ICC will be effectuated pursuant to the
Master Agreement by and among ICC and Engelhard and their respective
wholly-owned subsidiaries, as well as certain transactional agreements
contemplated thereunder, namely the Contribution Agreement between E/ICC and Box
LP and the E/ICC Purchase and Sale Agreement between E Partner and ICC
Investment LP, a newly formed limited partnership and Affiliate of ICC, all of
which agreements were entered into on November 17, 1997. See "THE PROPOSED
RESTRUCTURING - Basic Terms of the Master Agreement." The consummation of the
Restructuring contemplated by the Master Agreement, which has been approved by
the Boards of Directors of ICC and Engelhard, is conditioned upon approval by
the Stockholders of ICC, and other conditions set forth in the Master Agreement.
Closing on the transactions contemplated by the Master Agreement is required to
be completed on or before March 31, 1998. See "THE PROPOSED RESTRUCTURING -
Basic Terms of the Master Agreement."
THE RIGHTS OF THE STOCKHOLDERS OF ICC WILL NOT BE AFFECTED BY THE
CONSUMMATION OF THE RESTRUCTURING CONTEMPLATED BY THE MASTER AGREEMENT, NOR WILL
THE STOCKHOLDERS RECEIVE ANY PROPERTY OF ANY KIND AS A RESULT OF, OR IN
CONNECTION WITH, THE CONSUMMATION OF THE MASTER AGREEMENT.
BACKGROUND AND REASONS FOR THE RESTRUCTURING
History. As discussed previously (see "OVERVIEW OF THE BUSINESS OF ICC
AND E/ICC - The Company"), in May, 1992, ICC and Engelhard entered into the
Joint Development Agreement to develop sorption component products principally
for the heating, ventilation, air conditioning and dehumidification markets.
During the course of the research and development program which was conducted by
the Company and Engelhard pursuant to the Joint Development Agreement, the
Company and Engelhard determined to form a joint venture to exploit any products
developed by ICC and Engelhard under the Joint Development Agreement and,
accordingly, entered into the Joint Venture Asset Transfer Agreement dated
February 7, 1994, which superseded the Joint Development Agreement and resulted
in the formation of the Partnership.
Although the transactions effected by the Joint Venture Asset Transfer
Agreement, including the formation of E/ICC, served to enhance in numerous
respects the development of the Box Business and Wheel Business, the Company and
Engelhard believe that they have derived a great many of the benefits for which
the current joint venture arrangement was formed and that the growth of the Box
Business and Wheel Business and the interests of ICC and Engelhard could best be
served at this time by separating those businesses and operating them as
independent entities. ICC desires to focus primarily on the Box Business which
encompasses the sale of complete Climate Control Systems or parts for such
systems to end-users, a market in which ICC believes it has a particular
expertise. The Restructuring permits ICC, in its discretion, to devote more
resources than are currently being allocated by E/ICC for the marketing of
complete Climate
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Control Systems and the development of strategic alliances in key market sectors
and geographic locations and secures exclusivity with respect to certain
important market segments. Conversely, Engelhard initially entered into the
joint venture with ICC in order to accelerate its entry into the market for
desiccant and heat-exchange rotors, and having substantially achieved that goal,
it now wishes to devote its entire focus to being a supplier of desiccant and
heat-exchange rotors. Both ICC and Engelhard, however, wish to maintain a number
of the advantageous aspects of the existing E/ICC structure, including, their
access to each other's technology and supply of certain products and components
utilized in the Box and Wheel Businesses and have, therefore, entered into
certain Related Agreements, including a Rotor Supply Agreement pursuant to which
the Box Business will have access to the desiccant rotor supplies that are
necessary for the continued operation and expansion of its business. See "THE
PROPOSED RESTRUCTURING - Certain Related Agreements." The Company will also be
able to profit to a limited extent in the future growth of the heat-exchange and
desiccant rotor business of Wheel LP through its minority interest in Wheel LP.
Negotiations. The negotiations relating to, and the agreements which
provide for, the Restructuring were based on the desire of ICC and Engelhard to
focus on different markets. The desires of the parties became apparent at the
meetings of the Management Committee of E/ICC. As mentioned previously, under
the current Partnership Agreement a Management Committee comprised of two
representatives from each partner of E/ICC was established to manage the affairs
of E/ICC. For a more detailed discussion of the management of E/ICC, see
"OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The Partnership." Regular meetings
of the Management Committee were held to discuss various issues relating to the
operation and management of E/ICC. In early 1997, disagreements between ICC and
Engelhard relating to the implementation of the business strategy of E/ICC began
to develop. Engelhard's representatives expressed a desire to emphasize the
development and sale of rotors, while ICC desired to emphasize marketing entire
Climate Control Systems. In addition, relations between the parties were
strained as a result of Engelhard's acquisition of substantially all of the
assets of Telaire Systems, Inc. and the Company's subsequent lawsuit instituted
in February 1997 against Engelhard and its subsidiaries in connection with such
acquisition. In light of the fact that the Partnership Agreement granted a
buy-out option of ICC's interest in E/ICC to Engelhard commencing in the end of
1997 and the fact that the parties desired to settle the Telaire lawsuit, ICC
and Engelhard commenced discussions which led to the Restructuring. For a
description of Engelhard's buy-out option under the Partnership Agreement, see
"OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The Partnership."
Two meetings were held at which initial discussions relating to a
settlement of the Telaire litigation were conducted. These meetings were
attended by the four people who were the members of the Management Committee of
E/ICC: two senior executives from Engelhard and two executives from ICC. Counsel
for both ICC and Engelhard also attended such meetings. The meetings did not
yield any meaningful results. Consequently, the parties determined to change the
negotiating teams to replace the Management Committee members with
representatives who were not involved with the management of E/ICC. The sole
exception to these changes was William A. Wilson who remained a member of the
ICC negotiating team. In addition to Mr. Wilson, this second series of
negotiating meetings were attended by Charles Condy, a Director of ICC, and
David Wexler, a Vice President of Engelhard. Counsel to the parties were also
generally in attendance. The meetings
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were held on various dates from mid March, 1997 through mid August, 1997 when an
agreement in principle was reached. The negotiations evolved fairly rapidly from
a discussion relating to the resolution of the Telaire litigation to a
negotiation of the principal terms of the Restructuring. The negotiations began
with an offer by ICC to settle the Telaire lawsuit in exchange for Engelhard's
entire interest in the Box Business. This would have resulted in ICC's owning
100% of the Box Business and 50% of the E/ICC. Engelhard rejected this offer and
made a counteroffer which would have involved ICC's transferring a more
significant percentage of E/ICC to Engelhard in exchange for the 50% interest in
the Box Business and the settlement of the lawsuit. The counteroffer was
rejected by ICC at which time the parties appeared to reach an impasse. At this
point in the negotiations, the parties determined that the most feasible
transaction would involve a significant restructuring of E/ICC. ICC was
unwilling to reduce its interest in E/ICC without receiving a cash payment and
Engelhard was unwilling to transfer its interest in the Box Business unless it
had sole management authority over the Wheel Business. ICC also desired to
maintain an interest in the Wheel Business. ICC offered to restructure E/ICC by
exchanging 60% of its interest in E/ICC (representing an interest in the Wheel
Business) for a cash payment of $28.0 million and 40% of the Box Business of
E/ICC. Engelhard proposed a cash payment of $15.0 million. After protracted
negotiations, the parties agreed upon a cash payment of $20.0 million which the
Board determined was reasonable based upon consideration of the positive and
negative factors enumerated below. Prior to executing the Master Agreement, ICC
sought and obtained additional favorable pricing for the rotors in exchange for
a reduction in the cash payment of $20.0 million to $18.6 million. As part of
the Restructuring, ICC agreed to purchase from Engelhard all of its requirements
for rotors for a period of 15 years.
The term sheet for the Restructuring contained the principal terms of
the Related Agreements so that the negotiation of the provisions of the Related
Agreements were less difficult since they were primarily an amplification of the
provisions in the term sheet. The parties settled upon such principal terms on
the basis of the arms' length negotiation process described in the preceding
paragraph and on the parties' mutual knowledge of the technology, production
capacity, costs, margins, and other aspects of the Box and Wheel Businesses,
none of which is material either individually or in the aggregate. This also
enabled the parties to achieve more favorable terms for the Related Agreements
regarding the supply of products than the Company or Engelhard could have
obtained from third-parties. While the specific provisions of the Related
Agreements were established in the course of the parties' negotiations, the form
of the Related Agreements and the manner in which such agreements were drafted
were primarily based on the text of the prior agreements executed by the
parties, in particular the Desiccant Supply Agreement. For a discussion of the
Desiccant Supply Agreement, see "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The
Partnership."
The Board of Directors of ICC considered the following factors in
approving the Restructuring: E/ICC's and ICC's current business and financial
positions, including the ability of ICC to fund future operating needs, business
strategy and prospects, including the potential value to Stockholders of ICC of
separating the Wheel and Box Businesses, the market outlook for the Box Business
and Wheel Business, the market price of the Company's Common Stock, the
importance of ICC having control over the management of the Box Business, the
advantages and disadvantages experienced by ICC in having Engelhard as a partner
in the current Partnership structure, and certain
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other factors which it deemed relevant to its deliberations, none of which was
material either individually or in the aggregate. After due consideration of
these factors, the Board of Directors of ICC concluded that the Restructuring,
as negotiated, would be beneficial to the Company and its Stockholders in that
it would: (i) allow the Company to have managerial control over the operations
of the Box Business and, consequently, devote more resources in marketing
Climate Control Systems than had previously been afforded the Box Business, (ii)
place the Company in a more financially secure position as a result of the $18.6
million cash consideration to be provided by Engelhard in connection with the
Restructuring, (iii) allow the Company to retain a minority interest in Wheel LP
and, to a limited extent, benefit from any increase in the value of the Wheel
Business, (iv) enable the Company to retain many of the beneficial aspects of
the E/ICC venture through the favorable pricing arrangements for the Rotors, and
(v) generally afford the management and Board of ICC with more flexibility over
the control of the Box Business to take such other action and make such other
investments as the Board and management of ICC deem appropriate and desirable to
increase Stockholder value.
The Board, nonetheless, identified the following negative factors which
tended to mitigate against approval of the Restructuring: (i) the Box Business'
dependence on key components and materials supplied by the Wheel Business, (ii)
the Company's ability to continue in operation without the financial support
Engelhard provided to E/ICC, and (iii) the lack of significant market
penetration desiccant-based Climate Control Systems have enjoyed to date and the
increased dependence of the Company on the Box Business once the Restructuring
is consummated.
After carefully weighing these positive and negative factors, the Board
concluded that any concern regarding the Box Business' dependence on components
and supplies from Wheel LP was reasonably addressed through the Related
Agreements. In addition, it concluded that the Company would have adequate
resources to continue in operation and that in conjunction with managerial
control over the Box Business, would enable the Company to more effectively
increase market penetration of desiccant-based Climate Control Systems than
E/ICC had heretofore been able to achieve. Therefore, the Board of ICC
determined that the negative factors that could arise from the Restructuring
were not sufficient to outweigh its benefits and that the Restructuring was
fair, reasonable and in the best interests of the Company's Stockholders.
Neither ICC nor Engelhard engaged an investment banker or other party
to value the businesses during or in furtherance of these negotiations.
Subsequent to negotiating the principal terms of the Restructuring, the Company
retained Howard, Lawson & Company, a private investment banking firm, for the
sole purpose of assisting it in determining the fair market values of the
respective Box Business and Wheel Business of the Partnership for financial
reporting purposes. Howard, Lawson & Company, which was selected on the basis of
its reputation for valuing businesses, was paid the sum of $16,260.00 plus
expenses for its services. After a review of the relevant issues, Howard, Lawson
& Company concluded that, because the nature and prospects of the Box Business
and Wheel Business, in each case, are highly speculative and any indication of
value premised on future operating results for each business would be
speculative, fair market value could not be determined in either case within
reasonable limits. See also "THE PROPOSED RESTRUCTURING - Accounting Treatment."
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BASIC TERMS OF THE MASTER AGREEMENT
Pursuant to the terms of the Master Agreement, the following
transactions (except A.) will be effectuated at Closing:
Transaction Documents.
A. A new limited partnership, Box LP, has been formed under the laws of
the Commonwealth of Pennsylvania, with I Partner as the general partner holding
a 1% general partner interest. See generally, "THE PROPOSED RESTRUCTURING - The
Box and Wheel Partnerships."
B. Pursuant to the Contribution Agreement, E/ICC will contribute all of
the assets and liabilities of the Box Business to Box LP in exchange for a 99%
limited partner interest in Box LP (as to which I Partner will be the general
partner) (the "Contribution"). Pursuant to the Contribution Agreement, among
other things, E/ICC will indemnify Box LP against any and all losses resulting
from liabilities of the Wheel Business, and Box LP will indemnify E/ICC against
any and all losses resulting from liabilities of the Box Business. See "THE
PROPOSED RESTRUCTURING - Basic Terms of the Contribution Agreement."
C. Pursuant to a Distribution Resolution, E/ICC will distribute (i) an
89% limited partner interest in Box LP to I Partner and (ii) a 10% limited
partner interest in Box LP to E Partner (the "Distribution").
D. Pursuant to an Assignment and Assumption Agreement, I Partner will
assign to ICC Investment LP, 60% of I Partner's partner interest in E/ICC (a 30%
interest in the Partnership) remaining immediately after giving effect to the
Contribution and the Distribution.
E. Pursuant to the E/ICC Purchase and Sale Agreement, ICC Investment LP
will transfer to E Partner all of ICC Investment LP's interest in E/ICC in
exchange for $18,628,571 such that E Partner will thereafter hold 80% of the
total partnership interests in E/ICC, which, after its conversion into a limited
partnership under the laws of the State of Delaware, will include all general
partner interests, and I Partner will thereafter hold the remaining 20% of the
total partnership interests in E/ICC as a limited partner. See "THE PROPOSED
RESTRUCTURING - Basic Terms of the E/ICC Purchase and Sale Agreement."
F. E Partner and I Partner will convert E/ICC from a general
partnership to a limited partnership by filing a Certificate of Conversion to
Limited Partnership and a Certificate of Limited Partnership with the State of
Delaware.
G. The General Releases will be executed. See "THE PROPOSED
RESTRUCTURING - Certain Related Agreements."
H. The Box LP Limited Partnership Agreement and Wheel LP Limited
Partnership Agreement will be adopted for the governance of Box LP and Wheel LP,
respectively. See "THE PROPOSED RESTRUCTURING - Basic Terms of the Box LP
Limited Partnership Agreement"
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and "THE PROPOSED RESTRUCTURING - Basic Terms of the Wheel LP Limited
Partnership Agreement."
Certain Related Agreements. The Master Agreement provides for the
execution of certain supply and license agreements which are described later in
this Proxy Statement under the heading "THE PROPOSED RESTRUCTURING - Certain
Related Agreements."
In addition, the Master Agreement contains the following provisions:
Representations and Warranties. In the Master Agreement, ICC, ICC
Investment LP, I Partner, Engelhard, E Partner and E/ICC each make certain
customary representations and warranties to the other with respect to, among
other things, their organization and good standing and the existence of proper
authorization for the parties to enter into and perform their respective
obligations under the Master Agreement.
E/ICC Funding; Partnership Losses. Until the earlier of the Closing
Date or December 31, 1997, ICC and I Partner shall provide E/ICC with such funds
that are sufficient, when taken together with funds provided by Engelhard and E
Partner, for E/ICC to operate in the normal course of business. In any event,
Engelhard and E Partner will not be required to fund Box LP in the aggregate any
amounts in excess of $500,000, $375,000, $250,000, $250,000, $150,000 and
$400,000 for the months of July, August, September, October, November, and
December, 1997, respectively. On or after January 1, 1998 and until the earlier
of the Closing Date or termination of the Master Agreement, E Partner will
provide the Miami operations of E/ICC and I Partner will provide the Hatboro
operations of E/ICC with funds that are sufficient to operate in the normal
course of business and consistent with past operations and accounting practices.
The parties to the Master Agreement further agree that, for accounting purposes,
(i) the losses of E/ICC for the year ending December 31, 1997 that shall be
allocable to Engelhard and E Partner shall not exceed $4,739,000 and the
remainder of any losses shall be allocable to ICC and I Partner, and (ii) on or
after January 1, 1998 and until the earlier of Closing or the termination of the
Master Agreement, the profits and losses of E/ICC allocable to Engelhard and E
Partner shall be the profits and losses of E/ICC attributable to the Miami
operations of E/ICC, and the profits and losses allocable to ICC and I Partner
shall be the profits and losses of E/ICC attributable to the Hatboro operations
of E/ICC.
Covenants of ICC and I Partner. Pursuant to the terms of the Master
Agreement, ICC and I Partner have agreed to, among other things, (i) prior to
Closing, obtain all governmental approvals and consents, if any, necessary or
required for the consummation of the Restructuring, (ii) prior to Closing, make
or cause to be made any declarations, filings and registrations with
governmental authorities, which are necessary for the consummation of the
Restructuring, (iii) prior to Closing, obtain the approval of the ICC
Stockholders of the Master Agreement and the Restructuring, (iv) provide further
assurances to the other parties to the Master Agreement, (v) use reasonable
efforts to cause the fulfillment of ICC's and I Partner's obligations under the
Master Agreement, (vi) use best efforts to relieve Engelhard of all liability
arising in connection with its guaranty of the lease for E/ICC's Hatboro
facility prior to February 2, 2001, and (vii) reduce Engelhard's guaranties of
the line of credit with Mellon Bank, N.A., the line of credit with PIDC Local
Development Corporation
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and the loan arrangement with the Delaware Valley Industrial Research Center to
$2 million, in the aggregate, as of Closing and $1 million, in the aggregate, no
later than one year after the Closing Date, and completely terminated no later
than two years after the Closing Date. The Company and Engelhard intend to
effectuate this reduction in Engelhard's guaranties by renegotiating with
E/ICC's lenders, prior to Closing, to revise the terms of its existing line of
credit. There can be no assurance that the Company and Engelhard will be able to
successfully renegotiate such terms. In the event that the Company and Engelhard
are unable to renegotiate the terms, the Company may be required to repay a
portion of the line or pledge certain assets as collateral.
Covenants of Engelhard and E Partner. Pursuant to the terms of the
Master Agreement, Engelhard and E Partner have agreed to, among other things,
(i) prior to Closing, obtain all governmental approvals and consents, if any,
necessary or required for the consummation of the Restructuring, (ii) prior to
Closing, make or cause to be made any declarations, filings and registrations
with governmental authorities, which are necessary for the consummation of the
Restructuring, (iii) provide further assurances to the other parties to the
Master Agreement, and (iv) use reasonable efforts to cause the fulfillment of
Engelhard's and E Partner's obligations under the Master Agreement.
Conditions. In addition to the approval of the Master Agreement by
Stockholders owning a majority of the outstanding voting power of the shares of
ICC Common Stock, and approval by the Board of Directors of Engelhard, the
obligations of the parties to consummate the Master Agreement are subject to a
number of conditions, including (i) the Related Agreements shall have been
entered into by the parties thereto and such parties shall have performed all of
the obligations required to have been performed thereunder, (ii) no government
entity shall have indicated its objection to, or its intent to challenge, as
violative of any federal, state or foreign laws, any of the transactions
contemplated by the Master Agreement, (iii) the accuracy in all material
respects of the representations and warranties, and the performance of the
covenants contained in the Master Agreement, (iv) the absence of any litigation
or proceedings by any government entity seeking to restrain or prohibit the
Master Agreement. The obligations of ICC and I Partner to consummate the Master
Agreement are also subject, among other conditions, to (i) the termination of
the agreement by and among Engelhard, ICC, and E/ICC relating to ICC's guaranty
of the Industrial Development Bonds, Series 1995, (ii) the assignment of the
existing lease between E/ICC and 330 South Warminster Associates, L.P. for the
Hatboro facility to Box LP, and the consent of the landlord to such assignment,
(iii) the assignment of each of the lines of credit in the aggregate amount
approximately $3 million, with Mellon Bank, N.A., PIDC Local Development
Corporation and Delaware Valley Industrial Research Center to Box LP and any
required consents of the respective lenders obtained therefor, and (iv)
Engelhard and E Partner shall have furnished ICC and I Partner with certificates
of Engelhard and E Partner signed by an officer thereof certifying compliance
with the conditions set forth in the Master Agreement and a certified copy of
the resolutions of the Board of Directors of Engelhard and E Partner authorizing
execution and delivery of the Master Agreement, the Transaction Documents, the
Related Agreements and the consummation of the transactions contemplated
thereby.
Similarly, the obligations of Engelhard and E Partner to consummate the
Master Agreement are subject, among other conditions, to (i) ICC, ICC Investment
LP and I Partner having furnished
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Engelhard and E Partner with certificates of ICC, ICC Investment LP and I
Partner signed by an officer thereof certifying compliance with the conditions
set forth in the Master Agreement and a certified copy of resolutions of the
Board of Directors of ICC, ICC Investment LP and I Partner authorizing the
execution and delivery of the Master Agreement, the Transaction Documents, the
Related Agreements and the consummation of the transactions contemplated
thereby, (ii) an irrevocable power of attorney with respect to E/ICC's lease for
the Hatboro facility at 330 South Warminster Road, Hatboro, Pennsylvania 19040
granted by the Company authorizing Engelhard to terminate the lease in the event
ICC fails to have Engelhard's guaranty of the lease terminated no later than
February 2, 2001, and (iii) Engelhard's guaranties of the lines of credit with
Mellon Bank, N.A., PIDC Local Development Corporation and the Delaware Valley
Industrial Research Center reduced to $2,000,000 in the aggregate.
Termination and Abandonment, etc. The Master Agreement may be
terminated and the transfer of the Box Business to Box LP and the purchase of
additional interest in E/ICC by E Partner contemplated in the Master Agreement
may be abandoned at any time prior to the date of Closing: (i) by mutual written
consent of ICC and Engelhard; (ii) by either ICC or Engelhard, by written notice
to the other, if the Closing has not occurred on or before March 31, 1998 (the
"Termination Date"), unless a later date is established by the mutual written
consent of such parties or unless the failure of such consummation by the
Termination Date shall be due to the failure of the party seeking to terminate
the Transfer Agreement; or (iii) by either ICC, I Partner and ICC Investment LP
or Engelhard and E Partner by written notice to the other if there has been a
material breach by the other of any of its representations, warranties,
covenants or other agreements under the Transfer Agreement and such breach is
not cured within twenty (20) days of such notice.
Indemnification. Pursuant to the terms of the Master Agreement, ICC, I
Partner, ICC Investment LP and Box LP agreed to indemnify and hold harmless
Engelhard, E Partner and Wheel LP against all losses, liabilities and damages
resulting from: (i) any liabilities related to the Box Business, (ii) any
warranty claims concerning rotors shipped by E/ICC prior to Closing, or (iii)
any contingent or undetected liability of Wheel LP (including any liability as
the successor of E/ICC) that is known to ICC, I Partner, or ICC Investment LP
prior to the Closing of the Master Agreement and is not actually known by
Engelhard or E Partner prior to Closing; provided, that ICC, I Partner, ICC
Investment LP and Box LP shall only have an obligation to indemnify the other
parties to the extent that the aggregate amount of losses exceeds $50,000. Note,
however, that this $50,000 threshold shall not be applicable to losses arising
out of or related to warranty claims for products shipped, or services provided,
by E/ICC prior to the Closing Date. Conversely, Engelhard, E Partner and Wheel
LP agreed to indemnify and hold harmless ICC, I Partner and Box LP against all
losses, liabilities and damages resulting from: (i) any liabilities related to
the Wheel Business or (ii) any contingent or undetected liability of the Box LP
(including any liability as the successor to E/ICC) that is known to Engelhard
or E Partner prior to the Closing of the Master Agreement and is not actually
known by ICC, ICC Investment LP or I Partner prior to Closing; provided, that
Engelhard, E Partner and Wheel LP shall only have an obligation to indemnify the
other parties to the extent that the aggregate amount of losses exceeds $50,000.
In addition, for purposes of the parties' indemnification obligations, the
actual knowledge of Engelhard and E Partner shall include the actual knowledge
of employees of E/ICC who were employed at the request of, or were nominated for
employment by, Engelhard. Similarly, the actual knowledge of ICC, I Partner and
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ICC Investment LP shall include the actual knowledge of employees of E/ICC who
were employed at the request of, or were nominated for employment by, ICC.
Expenses. Each of the parties will bear all expenses incurred by it in
connection with the Master Agreement and the Related Agreements and the
consummation of the transactions contemplated thereby. In addition, Box LP shall
pay all transfer and other similar taxes incurred in connection with the
assignment and transfer of the Box Business.
Press Releases. Prior to Closing of the Master Agreement, the content
and timing of all press releases and other public statements relating to the
Master Agreement, Related Agreements, the Restructuring and E/ICC's businesses
and/or operations shall be subject to prior mutual agreement of ICC and
Engelhard.
Conciliation. Engelhard and E Partner, and their respective Affiliates,
successors and assigns, have agreed not to initiate or otherwise be a party to
any legal proceedings, claims or suits with respect to the management, business
or operations of Box LP and further agreed that the general partner of Box LP, I
Partner, shall have the unfettered right to make all decisions relating to Box
LP. Conversely, ICC, I Partner and ICC Investment LP, and their respective
Affiliates, successors and assigns, have agreed not to initiate or otherwise be
a party to any legal proceedings, claims or suits with respect to the
management, business or operations of Wheel LP and further agreed that the
general partner of Wheel LP, E Partner, shall have the unfettered right to make
all decisions relating to Wheel LP.
The foregoing description of the Master Agreement covers all material
terms of the Master Agreement. It is, however, only a summary and does not
purport to be exhaustive. Please refer to the copy of the Master Agreement,
which is attached hereto as Exhibit "B" and is incorporated herein by reference.
BASIC TERMS OF THE CONTRIBUTION AGREEMENT
E/ICC's Transfer of Box Assets and Liabilities. On the date of Closing,
I Partner and E Partner will cause E/ICC to transfer all of its right, title and
interest in and to all of its assets, properties and business, directly relating
to or directly used in the Box Business ("Box Assets") (it being presumed that
an asset or property shall be a Box Asset insofar as it is directly related to
or is located at the Hatboro facility). The Box Assets of E/ICC being
transferred will be subject to certain liabilities. Accordingly, Box LP will
assume all liability for and undertake to pay and/or perform all debts,
liabilities and executory obligations insofar as they relate to or are directly
a result of the Box Business ("Box Liabilities") (it being presumed that a debt,
liability or executory obligation relating to or arising out of the Hatboro
facility should be deemed a Box Liability), including all warranty claims for
products shipped, or services provided, by E/ICC prior to the Closing Date, and
liabilities with respect to all obligations of E/ICC in connection with the line
of credit provided by Mellon Bank, N.A. Pursuant to the terms of the
Contribution Agreement, Box LP shall receive the Box Assets on an "AS IS/WHERE
IS" basis, and E/ICC has not made, and shall not be deemed to have made, any
representations or warranties as to title to the Box Assets or to the value,
merchantability, condition or fitness for use of the Box Assets, or any other
representation or warranty, express or
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implied. Further, E/ICC expressly disclaims any liability for latent, hidden or
patent defects in the Box Assets or the failure of any of the Box Assets to
comply with applicable law.
E/ICC's Retention of Wheel Assets and Liabilities. Upon Closing, E/ICC
will retain all of its right, title and interest in and to all of its assets,
properties and business, directly relating to or directly used in the Wheel
Business ("Wheel Assets") (it being presumed that an asset or property shall be
a Wheel Asset insofar as it is directly related to or is located at the Miami
facility). The Wheel Assets of E/ICC being retained will be subject to certain
liabilities. Accordingly, Wheel LP will retain liability for and undertake to
pay and/or perform all debts liabilities and executory obligations insofar as
they relate to or are directly a result of the Wheel Business ("Wheel
Liabilities") (it being presumed that a debt, liability or executory obligation
relating to or arising out of the Miami facility should be deemed a Wheel
Liability), including the $8,500,000 industrial development bond which is
currently being guaranteed by Engelhard (ICC will be released from any
obligations it has in connection with such bond).
Shared Assets and Liabilities. Box LP and Wheel LP will share equally
in the liabilities and reasonable expenses (and any recoveries) arising out of
any claims or suits that result from the termination by E/ICC of two leases with
Arsenal, Inc. in September, 1996 for E/ICC's former manufacturing facilities
located at the Arsenal Business Center, 5301 Tacony Street, Philadelphia,
Pennsylvania.
Intercompany Accounts. At the Closing Date, all internal
intrapartnership accounts of E/ICC (including charges to and from the Miami and
Hatboro facilities of E/ICC) shall be eliminated, and all amounts owing by E/ICC
to Engelhard, E Partner, ICC or I Partner shall be paid in full.
Employee Benefit Plans. Prior to the Closing Date, the parties to the
Master Agreement shall cooperate with each other to arrange for mutually
satisfactory arrangements with respect to the transfer or termination of the
E/ICC employee benefit plans.
Royalty Agreement. Prior to Closing, E/ICC and Box LP shall cooperate
with each other to arrange for mutually satisfactory arrangements with respect
to the division of rights and obligations under the Royalty Agreement among
E/ICC, James Coellner and Dean Calton dated February 7, 1994.
Resolution of this matter shall be a condition to Closing.
Employees. Substantially all of the employees who currently work at
E/ICC's facility in Hatboro, Pennsylvania will become employees of Box LP, and,
conversely, substantially all of the employees who currently work in E/ICC's
Miami, Florida facility will become employees of Wheel LP.
The foregoing description of the Contribution Agreement covers all
material terms of the Master Agreement. It is, however, only a summary and does
not purport to be exhaustive. Please refer to the copy of the Contribution
Agreement, which is attached hereto as Exhibit "C" and is incorporated herein by
reference.
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BASIC TERMS OF THE E/ICC PURCHASE AND SALE AGREEMENT
Transfer of Partnership Interest. At Closing, immediately following the
Contribution and Distribution, ICC Investment LP will transfer to E Partner a
30% interest in E/ICC. In exchange therefor, E Partner will pay to ICC
Investment LP the sum of $18,628,571. In addition, ICC, ICC Investment LP, I
Partner and E Partner will make customary representatives and warranties to each
other.
The foregoing description of the E/ICC Purchase and Sale Agreement
covers all material terms of such Agreement. It is, however, only a summary and
does not purport to be exhaustive.
THE BOX AND WHEEL PARTNERSHIPS
Upon Closing under the Master Agreement, the activities previously
conducted by E/ICC will be divided between two limited partnerships, Box LP and
Wheel LP, and the Partnership Agreement which is currently governing the
management of E/ICC will be terminated in its entirety and of no further effect.
See "THE PROPOSED RESTRUCTURING - Basic Terms of the Master Agreement" for a
general discussion of the Restructuring. After the Restructuring contemplated
under the Master Agreement is complete, I Partner, a wholly-owned subsidiary of
ICC, will be the sole general partner and a limited partner of Box LP, and E
Partner, a wholly-owned subsidiary of Engelhard, shall be the other limited
partner of Box LP (I Partner and E Partner, in their respective capacities as
partners of Box LP, are hereinafter collectively referred to as the "Box LP
Partners"). In turn, the sole general partner of Wheel LP will be E Partner and
the limited partners of Wheel LP will be E Partner and I Partner (I Partner and
E Partner, in their respective capacities as partners of Wheel LP, are
collectively referred to hereinafter as the "Wheel LP Partners"). The following
descriptions of the partnership agreements of Box LP and Wheel LP cover all
material terms of such agreements but are, nonetheless, only summaries and
should not be considered exhaustive.
BASIC TERMS OF THE BOX LP LIMITED PARTNERSHIP AGREEMENT
Formation; Partners. Pursuant to the terms of the Master Agreement, Box
LP shall be formed as a limited partnership under the laws of the Commonwealth
of Pennsylvania and upon Closing, the partners of Box LP shall be I Partner as a
general partner with a 1% interest and a limited partner with an 89% interest
and E Partner as a limited partner with a 10% interest.
Name and Location. The name of the partnership shall be Fresh Air
Solutions, L.P., and its principal address shall be 330 South Warminster Road,
Hatboro, Pennsylvania 19040.
Partnership Business The business of Box LP shall be to: (i) engage in
any business that may be lawfully conducted by a limited partnership pursuant to
the Pennsylvania Revised Uniform Limited Partnership Act, (ii) enter into any
other partnership, joint venture, or other relationship to engage in the
foregoing, (iii) make loans, guarantees, indemnities or other financial
accommodations, or (iv) to do any of the foregoing with respect to any Affiliate
and (v) do anything necessary or incidental to the foregoing.
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Management of Box LP. The general partner, I Partner, shall have full,
exclusive and complete discretion to manage the business affairs of Box LP, to
make all decisions affecting the business and affairs of Box LP and to take all
such action as it deems necessary or appropriate in connection with the business
of Box LP. The limited partners shall not have any authority, right or power to
bind Box LP, or to manage, or to participate in any way whatsoever in the
management of the business and affairs of Box LP.
Term of Partnership. The term of Box LP shall continue until the year
2096, unless sooner dissolved and terminated in accordance with the terms of the
Box LP Limited Partnership Agreement.
Capital Contributions. After the contribution of the Box Business to
Box LP, I Partner and E Partner will be deemed to have made capital
contributions to Box LP as set forth in the Box LP Limited Partnership
Agreement. No Box LP Partner shall be required under any circumstances to
contribute additional capital to the partnership. In addition, the partnership
may not issue additional partnership interests if a limited partner objects to
such issuance (thereby effectively preventing the partnership from diluting each
limited partner's interest without consent).
Allocation of Items of Partnership Income, Gain, Loss, Deduction and
Credit. Except in special circumstances, profits and losses of Box LP will be
allocated to the Box LP Partners in accordance with their respective percentage
interests in the partnership, which will initially be 90% to I Partner and 10%
to E Partner.
Distributions No Box LP Partner shall have any right to demand or
receive a distribution from Box LP; provided, that at the general partner's
election, Box LP shall make periodic distributions in accordance with the Box LP
Partners' percentage interests to each partner in amounts such that, after
giving effect to such distribution, the Box LP Partners shall have received an
amount sufficient to satisfy all federal, state and local income taxes actually
payable by the Box LP Partners as a result of their respective interests in the
profits of Box LP for such period. In addition, the partnership shall, at such
times as the General Partner shall determine, distribute cash to the Box LP
Partners in amounts that the General Partner shall determine. All such
distributions shall be made in accordance with the Box LP Partners' percentage
interests, which will initially be 90% to I Partner and 10% to E Partner.
Partner Loans. The general partner, I Partner, or any of its
Affiliates, may make a loan to Box LP at any time, and interest and principal on
such loan shall be paid at such times as may be determined by the general
partner, which loans shall bear interest at a rate equal to the three month
LIBOR plus 1% per annum (a "Partner Loan"). Any Partner Loan shall be taken into
account in determining the fair market value of Box LP for purposes of ICC's
buyout option discussed below.
ICC's Option. Under the terms of the Box LP Limited Partnership
Agreement, I Partner will be granted an option to purchase E Partner's entire
interest in Box LP on January 1, 2004. The exercise price for the option will be
equal to 95% of the fair market value of Box LP, determined as of the exercise
date as to which such option is being exercised and taking into account any
indebtedness of E/ICC (including Partner Loans made by the general partner, I
Partner, and its Affiliates), multiplied by a percentage equal to the E
Partner's interest being purchased pursuant to
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such option. Box LP will engage an investment banking firm to be selected by the
Box LP Partners to render a value opinion as to its estimate of the fair market
value of Box LP as of the exercise date. In selecting the investment banking
firm, the Box LP Partners shall first try to mutually agree on one of the four
following firms: SBC Warburg Dillon Read Inc., Goldman, Sachs & Co., J.P. Morgan
& Co. or Merrill Lynch. If the Box LP Partners cannot so mutually agree, then
the Box LP Partners shall promptly meet in person and on a random basis select
one name from among the firms listed above. If either Box LP Partner objects to
the firm so chosen, another name shall be chosen until there is no objection or
there is only one firm left, in which case that remaining firm shall perform the
valuation. The option price, together with interest at a rate per annum equal to
the three month London Interbank Offered Rate, will be payable by I Partner in
immediately available funds on or before the tenth day following the giving of
notice of exercise of the option.
Limited Liability. No limited partner (in its capacity as a limited
partner of Box LP) shall be personally liable for losses, costs, expenses,
liabilities or obligations of Box LP in excess of its required capital
contribution.
Books and Records; Financial Reports. I Partner, as general partner of
Box LP, will be obligated to keep full and complete books of accounts and
business records which will be available to each limited partner of Box LP upon
written demand. In addition, the general partner shall provide unaudited
financial statements of Box LP within thirty (30) days after the end of each
fiscal quarter and audited annual financial statements within seventy five (75)
days after the end of each fiscal year, in each case until the earlier of 2096
or the date when E Partner is no longer a limited partner of Box LP.
Tax Returns and Information. The general partner will be designated the
"Tax Matters Partner" for Box LP and will cause income tax returns for Box LP to
be prepared and filed with the appropriate authorities on a timely basis. The
Tax Matters Partner will also provide each Box LP Partner with information
required for the preparation of such Box LP's income tax returns as soon as
possible after the close of Box LP's calendar year.
Transfer by Partners. Under the Box LP Limited Partnership Agreement, a
limited partner may transfer all or a portion of its limited partnership
interest only upon the written consent of the then-current general partner of
Box LP and the execution, adoption and acknowledgment of the Box LP Limited
Partnership Agreement. In addition, a transferee shall become a substitute
limited partner under the Box LP Limited Partnership Agreement only if the
assigning limited partner and the transferee files a notice of such transfer
with the general partner, the transferee executes, adopts, and acknowledges the
Box LP Limited Partnership Agreement, and the assignor or transferee pays the
costs incurred to effect the transfer. Conversely, the general partner of Box LP
may not voluntarily withdraw or transfer all or any portion of its interest in
E/ICC, but it may nonetheless pledge such interest in furtherance of Box LP's
business. If I Partner decides to sell all or any portion of its interest in Box
LP while E Partner still has an interest in Box LP, it shall notify E Partner of
its intention to sell such interest at least sixty (60) days before the closing
date of such sale. I Partner may review any bids for such interest submitted by
E Partner but in no event shall be required to accept such bids.
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Termination of the Partnership. Box LP shall be dissolved and its
affairs wound up and the Box LP Limited Partnership Agreement terminated upon
the first to occur of the following: (i) the expiration of the term of Box LP,
(ii) the involuntary or voluntary withdrawal of the general partner, unless
within ninety (90) days after such withdrawal, a majority of the limited
partners remaining agree in writing to the continuation of Box LP and the
appointment of a successor general partner, (iii) the entry of a decree of
judicial dissolution of Box LP, (iv) the sale, exchange or other disposition of
all or substantially all of the assets of Box LP, (v) the dissolution, winding
up, cessation of business, withdrawal or removal of all the Box LP Partners, or
(vi) the affirmative vote of the holders of at least two-thirds of the limited
partnership interests. Upon an event of termination, the affairs of Box LP will
be wound up and the assets and properties of Box LP will be liquidated as
promptly as possible, with the proceeds of liquidation applied in the following
order of priority: (i) to the payment of the debts and liabilities of the Box LP
to creditors other than Box LP Partners, (ii) to the discharge of debts of Box
LP owed to Box LP Partners, and (iii) to the Box LP Partners in an amount equal
to the positive balance in each Box LP Partner's capital account.
Indemnification of Partners. Pursuant to the terms of the Box LP
Limited Partnership Agreement, Box LP will indemnify and hold each general
partner of Box LP harmless from any claim, liability or expense incurred by such
partner arising out of or in connection with the operations of Box LP. Further,
Box LP shall have the authority to purchase and maintain insurance policies for
indemnified parties as the general partner shall determine.
BASIC TERMS OF THE WHEEL LP LIMITED PARTNERSHIP AGREEMENT
Formation; Partners. Pursuant to the terms of the Master Agreement, at
Closing, I Partner and E Partner will execute and deliver a Wheel LP Limited
Partnership Agreement and documents necessary to make E/ICC a limited
partnership under the laws of the State of Delaware. Upon such conversion into a
limited partnership, the partners of Wheel LP shall be E Partner as a general
partner with a 1% interest and a limited partner with an 79% interest and I
Partner as a limited partner with a 20% interest.
Name and Location. Upon the conversion of the partnership to a limited
partnership, the name of E/ICC will be determined. Wheel LP's principal address
shall be 3550 N.W. 49th Street, Miami, Florida 33142.
Partnership Business. The business of Wheel LP shall be to: (i) engage
in any business that may be lawfully conducted by a limited partnership pursuant
to the Delaware Revised Uniform Limited Partnership Act, (ii) enter into any
other partnership, joint venture, or other relationship to engage in the
foregoing, (iii) make loans, guarantees, indemnities or other financial
accommodations, or (iv) do any other foregoing with respect to any Affiliate,
and (v) do anything necessary or incidental to the foregoing.
Management of Wheel LP. The general partner, E Partner, shall have
full, exclusive and complete discretion to manage the business affairs of Wheel
LP, to make all decisions affecting the business and affairs of Wheel LP and to
take all such action as it deems necessary or appropriate in connection with the
business of Wheel LP. The limited partners shall not have any authority, right
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or power to bind Wheel LP, or to manage, or to participate in any way whatsoever
in the management of the business and affairs of Wheel LP.
Term of Partnership. The term of Wheel LP shall continue until the year
2096, unless sooner dissolved and terminated in accordance with the terms of
Wheel LP Limited Partnership Agreement.
Capital Contributions. I Partner and E Partner will be deemed to have
made capital contributions to Wheel LP as set forth in the Wheel LP Limited
Partnership Agreement. No Wheel LP Partner shall be required under any
circumstances to contribute additional capital to the partnership. In addition,
the partnership may not issue additional partnership interest if a limited
partner objects to such issuance (thereby effectively preventing the partnership
from diluting each limited partner's interest without its consent).
Allocation of Items of Partnership Income, Gain, Loss, Deduction and
Credit. Except in special circumstances, Wheel LP profits and losses will be
allocated to the Wheel LP Partners in accordance with their respective
partnership percentage interests, which will initially be 20% to I Partner and
80% to E Partner.
Distributions. No Wheel LP Partner shall have any right to demand or
receive a distribution from Wheel LP unless otherwise agreed by all of the Wheel
LP Partners; provided, that at the general partner's election, Wheel LP shall
make periodic distributions in accordance with the Wheel LP Partners' percentage
interests to each partner in amounts such that, after giving effect to such
distribution, the Wheel LP Partners shall have received an amount sufficient to
satisfy all federal, state and local income taxes actually payable by the Wheel
LP Partners as a result of their respective interests in the profits of Wheel LP
for such period. In addition, the partnership shall, at such times as the
General Partner shall determine, distribute cash to the Wheel LP Partners in
amounts that the General Partner shall determine. All such distributions shall
be made in accordance with the Wheel LP Partners' percentage interests, which
will initially be 20% to I Partner and 80% to E Partner.
Partner Loans. The general partner, E Partner, or any of its Affiliates
may make a loan to Wheel LP at any time, and interest and principal on such loan
shall be paid at such times as may be determined by the general partner, which
loans shall bear interest at a rate equal to the three month LIBOR plus 1% per
annum (a "Partner Loan"). Any Partner Loan shall be taken into account in
determining the fair market value of Wheel LP for purposes of Engelhard's buyout
option discussed below.
Engelhard's Option. Under the terms of Limited Partnership Agreement, E
Partner will be granted an option to purchase I Partner's entire interest in
Wheel LP on January 1, 2004. The exercise price for the option will be equal to
95% of the fair market value of Wheel LP, determined as of the exercise date as
to which such option is being exercised and taking into account any indebtedness
of Wheel LP (including Partner Loans made by the general partner, E Partner, and
its Affiliates), multiplied by a percentage equal to the I Partner's interest
being purchased pursuant to such option. Wheel LP will engage an investment
banking firm to be selected by the Wheel LP Partners to render a value opinion
as to its estimate of the fair market value of Wheel LP as of the exercise date.
In selecting the investment banking firm, the Wheel LP
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Partners shall first try to mutually agree on one of the four following firms:
SBC Warburg Dillon Read Inc., Goldman, Sachs & Co., J.P. Morgan & Co. or Merrill
Lynch. If the Wheel LP Partners cannot so mutually agree, then the Wheel LP
Partners shall promptly meet in person and on a random basis select one name
from among the firms listed above. If either Wheel LP Partner objects to the
firm so chosen, another name shall be chosen until there is no objection or
there is only one firm left, in which case that remaining firm shall perform the
valuation. The option price, together with interest at a rate per annum equal to
the three month London Interbank Offered Rate, will be payable by E Partner in
immediately available funds on or before the tenth day following the giving of
notice of exercise of the option. Please note that the Partnership Agreement
which is currently governing E/ICC will be terminated upon Closing and all terms
thereof shall be of no further effect, including Engelhard's option to buy-out
ICC's interest in E/ICC which is described previously in "OVERVIEW OF THE
BUSINESS OF ICC AND E/ICC - The Partnership."
Limited Liability. No limited partner (in its capacity as a limited
partner of Wheel LP) shall be personally liable for losses, costs, expenses,
liabilities or obligations of the partnership in excess of its required capital
contribution.
Books and Records; Financial Reports. E Partner, as general partner of
Wheel LP, will be obligated to keep full and complete books of accounts and
business records which will be available to each limited partner of Wheel LP
upon written demand. In addition, the general partner shall provide unaudited
financial statements of Wheel LP within thirty (30) days after the end of each
fiscal quarter and audited annual financial statements within seventy five (75)
days after the end of each fiscal year, in each case until the earlier of 2096
or the date I Partner is no longer a limited partner of Wheel LP.
Tax Returns and Information. The general partner will be designated the
"Tax Matters Partner" for Wheel LP and will cause income tax returns for Wheel
LP to be prepared and filed with the appropriate authorities on a timely basis.
The Tax Matters Partner will also provide each Partner with information required
for the preparation of such Partner's income tax returns as soon as possible
after the close of Wheel LP's calendar year.
Transfer by Partners. Under the Wheel LP Limited Partner Agreement, a
limited partner may transfer all or a portion of its limited partnership
interest in Wheel LP only upon the written consent of the then-current general
partner of Wheel LP and the execution, adoption and acknowledgment of the Wheel
LP Limited Partnership Agreement. In addition, a transferee may become a
substitute limited partner under the Wheel LP Limited Partnership Agreement only
if the assigning limited partner and the transferee files a notice of such
transfer with the general partner, the transferee executes, adopts, and
acknowledges the Wheel LP Limited Partnership Agreement, and the assignor or
transferee pays the costs incurred to effect the transfer. Conversely, the
general partner of Wheel LP may not voluntarily withdraw or transfer all or any
portion of its interest in the partnership, but it may nonetheless pledge such
interest in furtherance of Wheel LP's business. If E Partner decides to sell all
or any portion of its interest in Wheel LP while I Partner still has an interest
in Wheel LP, it shall notify I Partner of its intention to sell such interest at
least sixty (60) days before the closing date of such sale. E Partner may review
any bids for such interest made by I Partner but in no event shall be required
to accept I Partner's bids.
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Termination of the Partnership. Wheel LP shall be dissolved and its
affairs wound up and Wheel LP Limited Partnership Agreement terminated upon the
first to occur of the following: (i) the expiration of the term of Wheel LP,
(ii) the involuntary or voluntary withdrawal of the general partner, unless
within ninety (90) days after such withdrawal, a majority of the limited
partners remaining agree in writing to the continuation of the partnership and
the appointment of a successor general partner, (iii) the entry of a decree of
judicial dissolution of Wheel LP, (iv) the sale, exchange or other disposition
of all or substantially all of the assets of Wheel LP, (v) the dissolution,
winding up, cessation of business, withdrawal or removal of all the Wheel LP
Partners, or (vi) the affirmative vote of the holders of at least two-thirds of
the limited partnership interests. Upon an event of termination, the affairs of
Wheel LP will be wound up and the assets and properties of Wheel LP will be
liquidated as promptly as possible, with the proceeds of liquidation applied in
the following order of priority: (i) to the payment of the debts and liabilities
of Wheel LP to creditors other than the Wheel LP Partners, (ii) to discharge of
debts of Wheel LP owed to the Wheel LP Partners, and (iii) to the Wheel LP
Partners in an amount equal to the positive balance in each Wheel LP Partner's
capital account.
Indemnification of Partners. Pursuant to the terms of Wheel LP Limited
Partnership Agreement, Wheel LP will indemnify and hold each general partner of
Wheel LP harmless from any claim, liability or expense incurred by such partner
arising out of or in connection with the operations of Wheel LP. Further, Wheel
LP shall have the authority to purchase and maintain insurance policies for
indemnified parties as the general partner shall determine.
CERTAIN RELATED AGREEMENTS
Rotor Supply Agreement. In connection with the Master Agreement, Wheel
LP will enter into a Rotor Supply Agreement with Box LP at Closing. Pursuant to
the Rotor Supply Agreement, for a term of 15 years, Wheel LP shall be obligated
to supply Box LP's total requirements for desiccant and heat-exchange rotors or
similar products used in Climate Control Systems, and Box LP will be obligated
to purchase exclusively from Wheel LP, Box LP's total requirements for such
rotor products. Such rotors products shall have the same specifications as those
products manufactured by Wheel LP as of the date of the agreement unless the
parties mutually agree to alter such specifications. Rotors supplied to Box LP
may be used only as a component in the production for sale of complete Climate
Control Systems or as part of a Climate Control Systems kit for assembly, or for
sale by Box LP as part of a Cassette to its Affiliates or strategic partners for
inclusion in a complete Climate Control System. Wheel LP may sell such products
to third parties, but it shall not have the right to sell, or license others to
sell, desiccant rotors or Climate Control Systems containing desiccant rotors
for standalone supermarkets, ice rinks, and pachinko halls in North America,
Japan and Korea for a period of seven (7) years from the date of this agreement,
provided that Box LP meets certain agreed to performance targets for sales to
these market segments on a combined basis. If Box LP requires any heat-exchange
or desiccant rotors that have performance characteristics that are substantially
different from those previously provided by Wheel LP, Box LP shall first request
such rotors from Wheel LP under the terms of the Rotor Supply Agreement. If
Wheel LP fails to respond to such request or elects in writing not to provide
such specialty rotors, in each case within 90 days of receipt of such request,
Box LP may purchase the requested specialty rotors from any third party,
provided that Box LP may purchase such specialty
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rotors from third parties only to the extent such purchases do not exceed, in
aggregate, 5% of Box LP's total requirements for rotors in that year.
Wheel LP will warrant that all products supplied to Box LP under the
Rotor Supply will be free from defects in material and workmanship for a period
of five years. Such warranty is limited to repair or replacement (including
labor for one year from the date of original installation of a Climate Control
System containing the product or eighteen (18) months from the date of shipment
from Wheel LP's factory) or a refund of the purchase price of the rotors, at
Wheel LP's option, during the warranty period.
Under the Rotor Supply Agreement, Wheel LP will sell all such desiccant
and heat-exchange rotors to Box LP at prices which are lower than it will sell
such rotors to others ("Favorable Wheel Prices"). Moreover, during the first two
years under the Rotor Supply Agreement, Wheel LP has agreed to sell such rotors
to Box LP at prices which are lower than the Favorable Wheel Prices.
If Wheel LP completely exits the business of producing heat-exchange
and desiccant rotors and similar products, Wheel LP shall give Box LP the option
to acquire all assets and liabilities related to the Wheel Business at its fair
market value. Alternately, in the event Wheel LP transfers its assets to a third
party, the surviving or acquiring entity shall assume the obligations of Wheel
LP under the Rotor Supply Agreement. Box LP may not assign its rights under the
Rotor Supply Agreement, unless such assignment is made in connection with the
sale or transfer of the assets of Box LP.
Cassette Supply Agreement. Pursuant to the Master Agreement, Box LP and
Wheel LP will enter into the Cassette Supply Agreement, whereby Box LP will sell
to Wheel LP, and Wheel LP will buy from Box LP, for a term of five years,
Cassettes which consist of a sheetmetal or other structure that holds a rotor,
coated or uncoated with ETS(TM), supported by casters or a hub and which consist
of seals, drive motor, belt and other components required to conduct heat or
mass transfer, as are manufactured as of the date of this agreement and
including any modifications to such design within twelve (12) months thereafter.
Box LP will warrant that Cassettes sold under the agreement will be free from
defects in material and workmanship for one year from the earlier of the date of
installation in a Climate Control System containing the product or eighteen (18)
months from the date of delivery from Box LP's factory. Such Cassettes will be
sold to Wheel LP on pricing terms that are more favorable to Wheel LP than the
prices offered to Box LP's other customers for Cassettes.
Sensor Supply Agreement. Pursuant to the Master Agreement, Sensor
Technologies, a subsidiary of Engelhard, will enter into the Sensor Supply
Agreement, whereby Sensor Technologies will sell to Box LP, for a term of five
years, certain humidity and dew point infrared sensors that are manufactured by
Sensor Technologies. Sensor Technologies will warrant that sensors sold under
the agreement will be free from defects in material and workmanship for one year
from the earlier of the date of installation in a Climate Control System
containing the product or eighteen (18) months from the date of delivery from
Sensor Technologies' factory. Such sensors
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will be sold to Box LP on pricing terms that are more favorable to Box LP than
the prices offered to Sensor Technologies' other customers for such products.
Substrate Supply Agreement. Pursuant to the Master Agreement, Wheel LP
will enter into a Substrate Supply Agreement (the "Substrate Supply Agreement"),
whereby Wheel LP will sell to Engelhard, for a term of five years, substrates or
related materials. Wheel LP will warrant that products sold under the agreement
will be free from defects in material and workmanship for one year from the
earlier of the date of installation or eighteen (18) months from the date of
delivery from Wheel LP's factory. Such substrate products will be sold to
Engelhard on pricing terms that are more favorable to Engelhard than the prices
offered to Wheel LP's other customers for those products.
Novation for Desiccant Supply Agreement. As part of the Restructuring,
Engelhard, E/ICC and Wheel LP will execute a Novation in connection with that
certain Supply Agreement dated February 7, 1994 between Engelhard and E/ICC (the
"Desiccant Supply Agreement"). The effect of this Novation will be that the
Desiccant Supply Agreement will remain effective after the Restructuring as
between Engelhard and Wheel LP. Thus, Wheel LP will be obligated to purchase
exclusively from Engelhard all desiccant or drying materials or agents used in
any adsorption system that Wheel LP may require in connection with the conduct
of the Wheel Business. In turn, Engelhard will be obligated to sell to Wheel LP
the partnership's total requirements for such products in accordance with the
original terms thereof. For a more detailed discussion of the Desiccant Supply
Agreement, see "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The Partnership."
Box Technology License Agreement. In connection with the Master
Agreement, at Closing, Box LP will enter into the Box Technology License
Agreement (the "Box Technology License") with Wheel LP pursuant to which Box LP
will grant to Wheel LP a nonexclusive, royalty free, world-wide, perpetual
license with the further right to sublicense, for all technology ("Box
Technology") owned by Box LP relating directly to the Box Business and any
improvements thereto that are conceived by employees of Box LP or
representatives and are subject to patents or patents applications filed within
12 months after the execution of the agreement. Such improvements shall not
include any improvements that are related solely to any Climate Control System
that utilizes a Gas Platform to regenerate the desiccant material which is used
to treat the wheel-shaped rotor in a Climate Control System. To assist Wheel LP
in gathering such technology, it shall have access to written materials and
software related to the Box Technology for a period of 45 days after the Closing
Date. Wheel LP, however, shall not have any rights to obtain the know-how and
experience of the employees of Box LP for so long as such persons are employees
of Box LP.
Wheel LP may only use the licensed Box Technology in connection with
the design, manufacture, assembly, marketing and sale of Climate Control Systems
for the cooling, dehumidification, drying, heating, ventilation and microbe
reduction markets and businesses ancillary or reasonably related thereto, and it
acknowledges that any assignment or sublicense of Box Technology by Wheel LP
must be made in connection with the sale, or potential sale, of rotors by Wheel
LP.
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Each party to this Box Technology License shall be further required to
promptly notify the other party of any infringement of a patent licensed
thereunder, in which case Box LP may bring an action at its own expense to
defend such patent, which action Wheel LP may join, if it so desires.
Alternately, Wheel LP may initiate such a patent defense if Box LP fails to do
so. Wheel LP and Box LP shall share equally in all maintenance fees associated
with the Box Technology.
Wheel Technology License Agreement. In conjunction with the Master
Agreement, at Closing, Box LP and Wheel LP shall enter into the Wheel Technology
License Agreement ("Wheel Technology License") pursuant to which Wheel LP will
grant Box LP a nonexclusive, royalty free, world-wide, perpetual license with
the further right to sublicense, for all technology that is specifically covered
by certain patents set forth in the Wheel Technology License and any
improvements to such technology conceived by employees or representatives of
Wheel LP that are subject to patents or patent applications within the twelve
(12) month period after the signing of this agreement ("Wheel Technology"). Such
licensed Wheel Technology will not include Hexcel's proprietary process utilized
in manufacturing the small-cell, honeycomb substrate material used to make
E/ICC's rotors, which will be licensed to Wheel LP following the Closing.
Box LP may only utilize the licensed technology in connection with the
Box Business or any businesses ancillary or reasonably related thereto, and it
acknowledges that any assignment or sublicense of Wheel Technology must be made
in connection with the sale, or potential sale, of Climate Control Systems, kits
and/or Cassettes.
Each party to this Wheel Technology License shall be further required
to promptly notify the other party of any infringement of a patent licensed
thereunder, in which case Wheel LP may bring an action at its own expense to
defend such patent, which action Box LP may join, if it so desires. Alternately,
Box LP may initiate such a patent defense if Wheel LP fails to do so. Wheel LP
and Box LP shall share equally in all maintenance fees associated with Wheel
Technology.
E/ICC License Agreement. As part of the Restructuring, Engelhard shall
enter into a E/ICC License Agreement (the "E/ICC License") with Box LP pursuant
to which Engelhard shall grant Box LP a non-exclusive, royalty free license to
use the name "Engelhard" as part of the "Engelhard/ICC" mark. Box LP will not be
able to further sublicense or assign this right without the prior approval of
Engelhard, but Engelhard shall be free to license or grant rights in the
Engelhard name to any party. In using the Engelhard name under this E/ICC
License, Box LP will be prohibited from representing to third parties that it
has any right or title to such name.
If Box LP uses the "Engelhard/ICC" mark in writing for any purpose
(except for use on products, product packaging materials or existing signage at
Box LP's Hatboro facility), such writing shall include the following language:
"Engelhard Corporation is a 10% passive investor in Box LP, and is in no way
involved in the business, operations, management or control of Box."
Notwithstanding the foregoing, if the name is used in product literature, it
must be accompanied by the following language in the same point size and type as
the remainder of the text of such literature: "Engelhard Corporation is a 10%
passive investor in Box LP." The E/ICC License shall commence on the date of
Closing and shall terminate two and one half years thereafter.
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Referral Agreement. In connection with the Master Agreement, Wheel LP
will enter into a Referral Agreement with Box LP, whereby Box LP will agree to
sell Climate Control Systems to customers introduced to it by Wheel LP from time
to time in connection with field testing or beta testing or otherwise
demonstrating the Climate Control System technology to generate interest in the
purchase of rotors from Wheel LP by such customers. Wheel LP will be allowed to
have continued unhindered access to each customer after consummation of any sale
made pursuant to the Referral Agreement but will in no event be entitled to a
commission for any sale thereunder. The sale of products to any customers
introduced pursuant to this agreement shall be on pricing, payment and invoice
terms as in effect from time to time by Box LP for its wholesale customers
receiving the most favorable pricing, payment and invoice terms. Wheel LP
specifically acknowledges in the Referral Agreement that sales to customers it
refers to Box LP shall be limited in nature. This Agreement shall commence on
the date of Closing of the Master Agreement and shall terminate five years
thereafter.
General Releases. Engelhard, E Partner and Sensor Technologies shall
enter into a General Release, under which the Company, I Partner, ICC Investment
LP and E/ICC will be released from any and all claims and liabilities, known or
unknown, by reason of any matter through the date of the release, including
without limitation the management and operation of E/ICC and the matters at
issue in the litigation between such parties related to Engelhard's acquisition
of Telaire Systems, Inc. In addition, E/ICC shall enter into a General Release
under which Engelhard, E Partner, Sensor Technologies, Telaire Systems, Inc.,
ICC, ICC Investment LP and I Partner will be released from any and all claims
and liabilities, known or unknown, by reason of any matter through the date of
the release, including without limitation the management and operation of E/ICC
and the matters at issue in the litigation between such parties related to
Engelhard's acquisition of Telaire Systems, Inc. Finally, ICC, ICC Investment LP
and I Partner shall enter into a General Release, under which Engelhard, E
Partner, Sensor Technologies, Telaire Systems, Inc. and E/ICC will be released
from any and all claims and liabilities, known or unknown, by reason of any
matter through the date of the release, including without limitation the
management and operation of E/ICC and the matters at issue in the litigation
between such parties related to Engelhard's acquisition of Telaire Systems, Inc.
The foregoing descriptions of the Related Agreements cover all material
terms of such agreements but are, nonetheless, only summaries and should not be
considered exhaustive.
BUSINESS OF ICC AND E/ICC PENDING CLOSING
Subject to certain covenants and agreements set forth in the Master
Agreement, prior to the Closing under the Master Agreement and the Restructuring
contemplated thereunder, ICC and E/ICC will continue to conduct their business
in the ordinary course. See "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC."
BUSINESS OF ICC AFTER CLOSING
Following the Closing under the Master Agreement and the consummation
of the transactions contemplated thereunder, ICC will remain principally a
holding company. ICC will conduct the Box Business through its wholly-owned
subsidiary I Partner, which will be the sole
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general partner of, and will hold a 90% interest in, Box LP. I Partner will also
hold a 20% limited partner interest in Wheel LP as a passive investor and will
in no way be involved in the business, operations, management or control of
Wheel LP. ICC will be free to pursue and participate in businesses outside of
the Box Business, except that it may not engage in the resale of rotors
purchased under the Rotor Supply Agreement except as a component of a Climate
Control System or as part of a Climate Control System kit for sale, or as a part
of a Cassette for sale to its Affiliates or strategic partners for inclusion in
a complete Climate Control System. In addition, the Company will not be
permitted to use the patented Wheel Technology licensed to it under the Wheel
Technology License except in connection with the Box Business. See "THE PROPOSED
RESTRUCTURING - Certain Related Agreements." Presently, although ICC is
exploring the possibility of pursuing other ventures, to date it has not entered
into any agreements or commitments to engage in any other activities following
the Closing under the Master Agreement.
BUSINESS OF ICC IN THE EVENT THE RESTRUCTURING IS NOT CLOSED
In the event that the Master Agreement and Restructuring of E/ICC is
not consummated for any reason, including failure to obtain approval from the
Stockholders of ICC, E/ICC will remain in existence and ICC will continue to own
a 50% general partner interest therein, subject to the terms of the current
Partnership Agreement. See "OVERVIEW OF THE BUSINESS OF ICC AND E/ICC - The
Partnership."
THE RIGHTS OF STOCKHOLDERS OF ICC WILL NOT BE AFFECTED BY THE
CONSUMMATION OF THE MASTER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREUNDER, NOR WILL THE STOCKHOLDERS RECEIVE ANY PROPERTY OF ANY KIND AS A
RESULT OF, OR IN CONNECTION WITH, THE CONSUMMATION OF THE MASTER AGREEMENT.
ACCOUNTING TREATMENT
The acquisition of the partnership interests in Box LP by ICC will be
accounted for under the purchase method of accounting. In connection with ICC's
sale of a portion of its interest in Wheel LP and the acquisition of the
partnership interests in Box LP, the Company was unable to determine fair market
values of either Box LP or Wheel LP for financial reporting purposes and
retained Howard, Lawson & Company, a private investment banking firm, for the
sole purpose of assisting it in determining the fair market values of those
businesses. Howard, Lawson & Company concluded that fair market value could not
be determined within reasonable limits. As a result, the non-monetary
considerations exchanged for the ownership interests in Box LP and Wheel LP were
based upon the recorded amounts.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences associated with the transactions described in this Proxy Statement
(hereinafter "the Transactions") under the Internal Revenue Code of 1986, as
amended (hereinafter "the Code"). Because each stockholder's tax situation is
unique and the following discussion cannot address every aspect of the Code as
it would apply to every stockholder, each stockholder of the Company should
consult his or
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her own tax adviser regarding the tax consequences of the Transactions to such
stockholder in light of their own tax situation. The law firm of Mesirov Gelman
Jaffe Cramer & Jamieson, Philadelphia, Pennsylvania has advised the Company with
respect to the tax consequences of the Restructuring discussed below.
E/ICC's Transfer of Assets. The Company believes that E/ICC's transfer
of a portion of its assets subject to liabilities to Box LP will constitute a
tax free division of the partnership pursuant to Code Section 708(b)(2)(B). This
section provides that where a partnership is divided into two or more
partnerships, the resulting partnerships are considered as continuations of the
prior partnership. The Company also believes that the subsequent distribution by
E/ICC of its entire limited partnership interest in Box LP to I Partner and E
Partner will, except as described below, be tax free pursuant to Code
Section 731, which provides that no gain or loss will be recognized by either a
partner or a partnership on a distribution by the partnership.
The distribution of assets by E/ICC to Box LP will cause I Partner and
E Partner's basis in their respective partnership interests in E/ICC to be
reduced by the adjusted basis of the assets distributed, but not below zero. The
reduction in liabilities as the result of the transfer to Box LP is treated as a
distribution of money, which could cause recognition of gain. The Company
believes that some gain may be recognized as a result thereof. Code Section 733
and Section 752(b).
ICC's Transfer of Partnership Interest. The Company believes that I
Partner's transfer of sixty percent (60%) of its general partnership interest in
E/ICC to ICC Investment LP and ICC Investment LP's subsequent transfer of this
general partnership interest to E Partner for $18,628,571 will constitute a sale
of such general partnership interest to E Partner. The sale will produce gain to
ICC Investment LP, and through its ownership of ICC Investment LP and its
partners, ICC will report such gain pursuant to Code Section 741 to the extent
that the cash consideration exceeds the adjusted tax basis of the partnership
interest sold to E Partner. The Company believes that some of the gain may be
ordinary income if the partnership owns unrealized receivables or inventory
items. Code Section 751.
Conversion of E/ICC From General Partnership to Limited Partnership.
The Company believes that the conversion of its general partnership interest in
E/ICC into a limited partnership interest in Wheel LP is not considered an
exchange of a partnership interest, and therefore no gain or loss results. In
addition, the partners' bases and holding periods in their partnership interests
will not be affected.
Internal Revenue Service Treatment of Similar Transactions. The
Internal Revenue Service has not ruled on the Transactions, nor has a request
for such a ruling been made by the Company. However, in similar factual
situations, the Internal Revenue Service has ruled that the Transfers will be
accorded the income tax treatment as discussed above.
Moreover, this discussion does not address the state, local or foreign
tax aspects of the Transactions. This discussion is based on currently-existing
provisions of the Code, existing and proposed Treasury Regulations promulgated
thereunder, and current administrative rulings and court decisions. All of the
foregoing is subject to change, and any change could affect the continuing
validity of this discussion.
45
<PAGE> 55
COMPARATIVE PER SHARE DATA OF ICC CAPITAL STOCK
Set forth below is information concerning the unaudited net loss and
book value per common share data of ICC on both a historical and pro forma
basis.
<TABLE>
<CAPTION>
Nine Months
ended Year ended
September 30, December 31,
1997 (1) 1996 (1)
-------- --------
ICC Technologies - Historical:
<S> <C> <C>
Net Loss $ (0.26) $ (0.35)
Book Value per common share outstanding 0.22 0.47
ICC Technologies - Pro Forma:
Net Loss(2)(3) $ (.47) $ (.61)
Book Value per common share outstanding 1.33 1.80
</TABLE>
(1) Information for ICC Technologies is for the calendar year ended
December 31, 1996 and the nine months ended September 30, 1997.
(2) Based upon ICC's net loss of $9,929,862 and $12,486,268 and weighted
average common shares outstanding of 21,304,645 and 20,322,952 for the
nine months ended September 30, 1997 and December 31, 1996
respectively. Pro Forma Loss per share considers $49,655 cumulative
preferred stock dividend requirement for the year ended December 31,
1996.
(3) The unaudited pro forma consolidated financial data is presented to
illustrate the effect of the restructuring of the Partnership, pursuant
to the Master Agreement on the Company's results of operations as if it
occurred January 1, 1996. Refer to the unaudited Pro Forma Consolidated
Financial Statements appearing in this Proxy Statement.
MARKET PRICE OF ICC STOCK PRIOR TO ANNOUNCEMENT OF THE RESTRUCTURING
ICC's Common Stock is listed on the National Association of Securities
Dealers, Inc. Automatic Quotation System (NASDAQ) National Market under the
symbol ICGN. Based on reports provided by NASDAQ, on August 26, 1997, the date
immediately preceding the Company's public announcement through a press release
of an agreement, in principle, with Engelhard to restructuring E/ICC, subject to
negotiation of definitive contracts and approval by the two companies' boards of
directors and ICC's Stockholders, the high and low sale prices for ICC's Common
Stock were $6.3125 and $6.0625, respectively.
46
<PAGE> 56
ICC UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The following financial statements set forth the Company's: (i)
unaudited pro forma consolidated balance sheet as of September 30, 1997 in order
to demonstrate the effects upon the Company's historical financial position, as
if the restructuring of the Partnership contemplated under the Master Agreement
(the "Transaction") occurred on that date; (ii) unaudited pro forma consolidated
statement of operations for the nine month period ended September 30, 1997 in
order to demonstrate the effects upon the Company's historical results of
operations, as if the transaction occurred at January 1, 1996; and (iii)
unaudited pro forma consolidated statement of operations for the year ended
December 31, 1996 in order to demonstrate the effects upon the Company's
historical results of operations, as if the Transaction occurred at January 1,
1996.
The pro forma consolidated financial statements have been prepared from
the historical financial statements of the Company and the Partnership and
contain certain adjustments with respect to the transaction as explained
hereafter.
47
<PAGE> 57
ICC TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Pro Forma
ICC Pro Forma Adjustments Pro Forma
Technologies Box L.P.(1) Dr. (Cr.) As Adjusted
------------ ----------- --------- -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $4,389,474 $ (32,913) $18,628,571 (2) $ 25,485,132
2,500,000 (3)
Accounts receivable -- 2,392,129 -- 2,392,129
Inventories, net -- 3,099,021 -- 3,099,021
Prepaid expenses and other 159,415 242,878 -- 402,293
---------- ----------- ----------- ------------
Total current assets 4,548,889 5,701,115 21,128,571 31,378,575
INVESTMENT IN WHEEL L.P. -- -- 897,625 (4) 359,050
(538,575)(2)
PROPERTY AND EQUIPMENT, net 8,596 2,843,894 -- 2,852,490
OTHER ASSETS -- 788,587 -- 788,587
RESTRICTED CASH 2,500,000 -- (2,500,000)(3) --
---------- ----------- ----------- ------------
Total Assets $7,057,485 $ 9,333,596 $18,987,621 $ 35,378,702
========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
Continued
48
<PAGE> 58
ICC TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET, CONTINUED
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Pro Forma
ICC Pro Forma Adjustments Pro Forma
Technologies Box L.P.(1) Dr. (Cr.) As Adjusted
------------ ----------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
CURRENT LIABILITIES $ 160,903 $5,929,511 $ (200,000)(2) $6,290,414
LOSSES OF ENGELHARD/ICC IN EXCESS OF
INVESTMENTS 2,255,488 - $6,029,928 (2) -
(897,625)(4)
(2,876,815)(1)
LONG TERM DEBT - 207,624 - 207,624
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST - - (319,646)(1) 319,646
STOCKHOLDERS' EQUITY:
Partners' capital - 3,196,461 3,196,461 (1) -
Common stock, $.01 par value, authorized
50,000,000 shares, issued 21,470,998 shares at
September 30, 1997 214,711 - - 214,711
Additional paid -- in capital 51,169,325 - - 51,169,325
Note receivable from officer (230,467) - - (230,467)
Accumulated Deficit (46,341,045) - (23,919,924)(2) (22,421,121)
Less: Treasury common stock at cost, 66,227 shares (171,430) - - (171,430)
---------- -------- ----------- -----------
Total stockholders' equity 4,641,094 3,196,461 (20,723,463) 28,561,018
----------- --------- ----------- ----------
Total liabilities and stockholders' equity $ 7,057,485 $ 9,333,596 $(18,987,621) $35,378,702
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
49
<PAGE> 59
ICC TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Pro Forma
ICC Pro Forma Adjustments Pro Forma
Technologies Box L.P. Dr. (Cr.) As Adjusted
------------ -------- --------- -----------
<S> <C> <C> <C> <C>
REVENUES $ - $5,713,172 $ - $5,713,172
COST OF GOODS SOLD - 7,803,546 - 7,803,546
----------- ----------- ----------- -----------
Gross Loss - (2,090,374) - (2,090,374)
OPERATING EXPENSES:
Marketing - 2,952,452 - 2,952,452
Engineering - 1,324,797 - 1,324,797
Research and development - 449,977 - 449,977
General and administrative 1,514,123 1,885,648 - 3,399,771
----------- ----------- ----------- -----------
Total operating expenses 1,514,123 6,612,874 - 8,126,997
Loss from operations (1,514,123) (8,703,248) - (10,217,371)
OTHER INCOME (EXPENSE):
Equity interest in net loss of investee (4,538,491) - (4,538,491)(5) (62,337)
62,337 (5)
Interest Income (expense), net 411,897 (62,051) - 349,846
Minority Interest - - - -
----------- ----------- ----------- -----------
NET LOSS $(5,640,717) $(8,765,299) $(4,476,154) $(9,929,862)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (.26) $ (.47)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES 21,304,645 21,304,645
=========== ===========
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
50
<PAGE> 60
ICC TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Historical Pro Forma
ICC Pro Forma Adjustments Pro Forma
Technologies Box L.P. Dr. (Cr.) As Adjusted
------------ -------- --------- -----------
<S> <C> <C> <C> <C>
REVENUES $ - $6,202,376 $ - $6,202,376
COST OF GOODS SOLD - 8,248,882 - 8,248,882
------ ---------- ----------- ----------
Gross Loss - (2,046,506) - (2,046,506)
OPERATING EXPENSES:
Marketing - 3,563,817 - 3,563,817
Engineering - 1,053,809 - 1,053,809
Research and development - 1,055,758 - 1,055,758
General and administrative 1,545,594 4,010,681 - 5,556,275
--------- --------- ----------- ---------
Total operating expenses 1,545,594 9,684,065 - 11,229,659
Loss from operations (1,545,594) (11,730,571) - (13,276,165)
OTHER INCOME (EXPENSE):
Equity interest in net loss of investee (6,294,832) - (6,294,832)(5) (155,647)
155,647 (5)
Interest Income (Expense), net 685,817 (80,858) - 604,959
Minority Interest - - (340,585)(5) 340,585
----------- ------------ ----------- ------------
NET LOSS $(7,154,609) $(11,811,429) $(6,479,770) $(12,486,268)
CUMULATIVE PREFERRED STOCK
DIVIDEND REQUIREMENTS (49,655) (49,655)
------------ --------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $(7,204,264) $(12,535,923)
=========== ============
NET (LOSS) PER COMMON SHARE $ (.35) $ (.61)
=========== ============
WEIGHTED AVERAGE COMMON SHARES 20,322,952 20,322,952
=========== ============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
51
<PAGE> 61
ICC TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation: The unaudited pro forma consolidated financial
statements are presented to illustrate the effect of the restructuring of the
Partnership, pursuant to the Master Agreement, on the Company's financial
position as if it occurred on September 30, 1997, and to demonstrate the effects
upon the Company's historical results of operations for the fiscal year ended
December 31, 1996, and for the nine months ended September 30, 1997, as if the
Transaction occurred on January 1, 1996.
The Transaction contemplated under the Master Agreement will
restructure the Partnership into two separate companies, Box LP and Wheel LP
(see Note 3). The Company will have an ownership interest of 90% in Box LP and
20% in Wheel LP. The assets, liabilities and results of operations of Box LP
will be consolidated in the Company's financial statements. The Company will
account for its 20% investment in Wheel LP under the equity method of
accounting. Under the equity method of accounting, the Company will recognize
its proportionate share of the net income or loss on a current basis.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the financial position or results of operations had
the aforementioned Transaction occurred on those dates, nor are they necessarily
indicative of future results of the Company's operations.
The unaudited pro forma consolidated financial statements have been
prepared from the historical financial statements of the Company and contain
certain adjustments with respect to the Transaction as explained hereafter. The
unaudited pro forma consolidated statements of operations for the nine months
ended September 30, 1997 and the year ended December 31, 1996 do not include any
nonrecurring adjustments that may result from the Transaction.
2. Pro Forma Adjustments:
(1) The pro forma adjustment column (Pro Forma Box L.P.) reflects the
consolidation of 100% of the assets and liabilities of Box LP and the pro
forma adjustments reflect the elimination of Box LP equity in consolidation
and recording of Engelhard's 10% minority interest.
(2) The pro forma adjustment reflects the Company's sale of 60% of its interest
in Wheel LP amounting to $539 thousand for consideration of approximately
$18.6 million in cash and 80% of Engelhard's interest in Box LP amounting to
$6.0 million. The Transaction would result in a gain of $23.9 million, net
of estimated transaction costs of $200 thousand.
52
<PAGE> 62
2. Pro Forma Adjustments, continued:
(3) The pro forma adjustment reflects the reclassification of $2.5 million from
restricted cash to cash available for operations due to the release of the
Company's portion of a guarantee on Wheel LP's bond obligation.
(4) The pro forma adjustment reflects the reclassification of the Company's 50%
equity investment in Wheel LP in connection with the Transaction.
(5) The pro forma adjustment reflects the elimination of the equity interest in
net loss of investee recorded in ICC's historical financial statements
because Box LP will now be consolidated, the recording of the minority
shareholders portion of the Box LP net loss and the recording of the equity
interest in net loss of Wheel LP based on the Company's 20% ownership
interest.
3. Pro Forma Summarized Financial Data of the Partnership:
The Master Agreement provides that the Partnership will be split into
two separate companies, one to manufacture and market complete, active Climate
Control Systems (Box LP) and the other to manufacture and market the desiccant
and heat-exchange rotors that are a component of Climate Control Systems (Wheel
LP).
The following summarizes selected unaudited pro forma financial
information of Box LP and Wheel LP as of September 30, 1997 and for the nine
months then ended, and for the year ended December 31, 1996, as if the
Transaction had occurred on January 1, 1996:
<TABLE>
<CAPTION>
As of September 30, 1997
Historical Pro Forma Pro Forma
Balance Sheet Data Partnership Box LP Wheel LP
----------- ------ --------
<S> <C> <C> <C>
Total Assets $19,887,808 $ 9,333,596 $10,554,212
Total Liabilities 14,896,098 6,137,135 8,759,163
Partners' Capital 4,991,170 3,196,461 1,795,049
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
Historical Pro Forma Pro Forma
Income Statement Data Partnership Eliminations Box LP Wheel LP
----------- ------------ ------ --------
<S> <C> <C> <C> <C>
Revenue $10,084,346 $1,003,418 $5,713,172 $5,374,592
Expenses 19,161,328 1,003,418 14,478,471 5,686,275
Net(Loss) (9,076,982) - (8,765,299) (311,683)
</TABLE>
53
<PAGE> 63
3. Pro Forma Summarized Financial Data of the Partnership, continued:
<TABLE>
<CAPTION>
Year ended December 31, 1996
Historical Pro Forma Pro Forma
Income Statement Data Partnership Eliminations Box LP Wheel LP
----------- ------------ ------ --------
<S> <C> <C> <C> <C>
Revenues $ 10,504,609 $1,730,000 $ 6,202,376 $ 6,032,233
Expenses 23,094,273 1,730,000 18,013,805 6,810,468
Net (Loss) (12,589,664) -- (11,811,429) (778,235)
</TABLE>
4. Purchase Price:
In connection with the acquisition of Box LP and Wheel LP, the Company
and an investment banker were unable to determine the fair market values of
either Box LP or Wheel LP within reasonable limits. As a result, the
non-monetary consideration paid and received by the Company, the ownership
interests in Box LP and Wheel LP, were based upon their recorded amounts in the
accompanying unaudited pro forma consolidated financial statements.
5. Interest Income:
The Company expects to earn interest income of approximately $1 million
in 1998 from investment of the cash proceeds received in connection with the
Transaction. The accompanying unaudited pro forma consolidated financial
statements do not reflect any adjustments for such income expected to be earned.
54
<PAGE> 64
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The total number of shares of ICC voting stock outstanding on January
27, 1998, the record date for the determination of Stockholders entitled to
receive notice of and to vote at the Special Meeting, was 21,453,771, all of
which is Common Stock, par value $.01. Each share of Common Stock entitles the
registered owner thereof to one vote on each matter which may be brought before
the Special Meeting. The presence at the Special Meeting, in person or by
properly executed proxy, of the holders of a majority of the voting power of all
the outstanding shares of Common Stock is necessary to constitute a quorum for
the transaction of the business at the Special Meeting. The approval of the
Master Agreement and the Restructuring contemplated thereunder, as described in
this Proxy Statement, will require the affirmative vote of the holders of a
majority of the voting power of all the outstanding shares of ICC Common Stock
as of the Record Date. See "SPECIAL MEETING."
The following table sets forth certain information, as of September 30,
1997, regarding beneficial ownership of the Company's Common Stock by (i) each
person who is known to the Company to be the beneficial owner of more than 5% of
the Company's Common Stock, (ii) each of the Company's named executive officers,
(iii) each director, and (iv) all executive officers and directors as a group.
Unless otherwise indicated, the stockholders listed possess sole voting and
investment power with respect to the shares indicated as owned by them.
<TABLE>
<CAPTION>
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Name and Address(1) Position Number of Percentage
- ---------------- -------- Shares of Class
Owned
- -------------------------------------------- -------------------------------------- ------------------- -----------------
<S> <C> <C> <C>
Irwin L. Gross Chairman of the Board 2,903,046(2) 13.2%
330 South Warminster Road
Hatboro, PA 19040
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Albert Resnick Secretary and Director 1,953,969(3) 9.0%
330 South Warminster Road
Hatboro, PA 19040
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Andrew L. Shapiro Director 1,069,914(4) 5.0%
330 South Warminster Road
Hatboro, PA 19040
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Stephen Schachman Director 60,000(5) 0.3%
- -------------------------------------------- -------------------------------------- ------------------- -----------------
William A. Wilson Vice Chairman of the Board, 168,334(7) 0.8%
President, and Chief Executive
Officer
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Mark S. Hauser Director 172,000(6) 0.8%
- -------------------------------------------- -------------------------------------- ------------------- -----------------
</TABLE>
55
<PAGE> 65
<TABLE>
<CAPTION>
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Name and Address(1) Position Number of Percentage
- ---------------- -------- Shares of Class
Owned --------
-----
- -------------------------------------------- -------------------------------------- ------------------- -----------------
<S> <C> <C> <C>
Charles T. Condy Director -0- 0%
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Robert Aders Director 10,000 0.05%
- -------------------------------------------- -------------------------------------- ------------------- -----------------
Manfred Hanuschek Chief Financial Officer and Treasurer 34,000(7) 0.2%
- -------------------------------------------- -------------------------------------- ------------------- -----------------
All Executive Officers, Directors and 6,371,263 27.5%
Nominees as a group (9 persons)
- -------------------------------------------- -------------------------------------- ------------------- -----------------
</TABLE>
Footnotes to Stock Ownership of Management
(1) Addresses are included for beneficial owners of more than 5%.
Beneficial ownership has been determined pursuant to Rule 13d-3 of the
Securities and Exchange Act.
(2) Includes 1,413,354 shares of Common Stock and currently exercisable
options to purchase 170,000 shares of Common Stock, and warrants to
purchase 548,000 shares of Common Stock. Also includes 771,692 shares
of Common Stock held of record by trust for the benefit of the children
of Mr. Gross, with respect to which he exercises voting and investment
power.
(3) Includes 1,552,969 shares of Common Stock and currently exercisable
options to purchase 391,000 shares of Common Stock.
(4) Includes 767,056 shares of Common Stock and currently exercisable
options to purchase 302,858 shares of Common Stock.
(5) Includes 25,000 shares of Common Stock and currently exercisable
options to purchase 35,000 shares of Common Stock.
(6) Includes 165,000 shares of Common Stock which may be acquired pursuant
to currently exercisable warrants and 7,000 shares of Common Stock
which may be acquired pursuant to currently exercisable options.
(7) Consists of shares of Common Stock which may be acquired pursuant to
currently exercisable options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Irwin Gross Employment Agreement. At Closing, the Employment Agreement
between E/ICC and Irwin L. Gross, Chairman and a principal stockholder of ICC,
will be terminated.
56
<PAGE> 66
EXPERTS
The consolidated financial statements of ICC as of December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996
incorporated by reference in this Proxy Statement have been audited by Coopers &
Lybrand L.L.P., (whose report dated March 19, 1997 includes an explanatory
paragraph which refers to conditions that raise substantial doubt about ICC's
ability to continue as a going concern) and have been included herein in
reliance upon the authority of that firm as experts in accounting and auditing.
The financial statements of the Partnership as of December 31, 1996 and 1995,
and for the years then ended incorporated by reference in the Proxy Statement
have been audited by Coopers & Lybrand L.L.P., (whose reported dated March 19,
1997 includes an explanatory paragraph which refers to conditions that raise
substantial doubt about the Partnership's ability to continue as a going
concern) and have been included herein in reliance upon the authority of that
firm as experts in accounting and auditing. A representative of ICC's principal
accountants, Coopers & Lybrand L.L.P., will be present at the Special Meeting of
Stockholders and will have the opportunity to answer questions and make a
statement if they desire to do so.
REGULATORY REQUIREMENTS
ICC is unaware of any federal or state regulatory requirements which
must be complied with in order to consummate the Master Agreement and the
transactions contemplated thereunder, other than those federal laws relating to
the form and substance of Proxy Statements and Pennsylvania and Delaware law
pertaining to corporations and partnerships. ICC believes that it is, and
anticipates that it will continue to be, in compliance with all such statutory
requirements and will not be precluded by any governmental body from
consummating the Master Agreement and the transaction contemplated thereunder.
By Order of the Board of Directors
Albert Resnick
Secretary
February 3, 1998
Philadelphia, Pennsylvania
57
<PAGE> 67
Exhibit A
GLOSSARY OF TERMS USED THIS PROXY STATEMENT
"Affiliate": at to any person means any other person controlled by,
controlling or under common control with such person.
"Box Business": means the design, manufacture, assembly, marketing and
sale of Climate Control Systems for the cooling, dehumidification, drying,
heating, ventilation and microbe reduction markets.
"Box LP": means Fresh Air Solutions, L.P., a limited partnership (of
which I Partner is the general partner with a 1% interest and upon Closing, the
limited partners will be I Partner with an 89% interest and E Partner with a 10%
interest) organized under the laws of the Commonwealth of Pennsylvania.
"Box LP Limited Partnership Agreement": means the Agreement of Limited
Partnership of Box LP governing the operation of Box LP.
"Box Technology": means all technology owned on the date of Closing by
Box LP, including all inventions, patents, patent applications, improvements,
technical information, trade secrets, prototypes, models, experience, ideas,
reports, data, software, engineering drawings, operating manuals, all results
from experiments, testing and demonstrations and any other information (whether
or not patentable) related thereto, and improvements to such technology owned by
Box LP, conceived by employees or representatives of Box LP or Affiliates of Box
LP subject to patents or patent applications filed during the twelve (12) month
period after Closing other than improvements in such twelve (12) month period
related solely to the Gas Platform which cannot be used on other (non-gas)
platforms.
"Box Technology License": means the Box Technology License Agreement to
be entered into at Closing by and between Box LP and Wheel LP pursuant to which
Box LP will license its Box Technology to Wheel LP.
"Cassette": means a sheetmetal or other structure that holds a
wheel-shaped rotor, coated with a desiccant material or uncoated, supported by
casters or a hub, consisting of seals, drive motor, belt and other components
required to conduct heat or mass transfer.
"Cassette Supply Agreement": means the Cassette Supply Agreement to be
entered into at Closing by and between Box LP and Wheel LP pursuant to which Box
LP will supply Cassettes to Wheel LP.
"Climate Control Systems": means all air conditioning or air treatment
systems (whether pre-assembled units or kits that are to be assembled by
distributors, licensees, customers or Affiliates of the Purchaser) that cool,
dehumidify, dry, heat and/or filter air; provided, however, that any such system
shall only be a "Climate Control System" if it operates, in part, by passing air
<PAGE> 68
through one or more wheel-shaped rotors, which rotors may or may not be treated
with a desiccant material.
"Closing" or "Closing Date": means the closing of the Master Agreement
and transactions contemplated thereunder.
"Contribution": means the transfer by E/ICC of E/ICC's assets and
liabilities directly related to the Box Business to Box LP, pursuant to the
Contribution Agreement at Closing.
"Contribution Agreement": means the Contribution Agreement dated
November 17, 1997, by and between E/ICC and Box LP pursuant to which at Closing
E/ICC will transfer E/ICC's assets and liabilities directly related to the Box
Business to Box LP, a copy of which is attached to this Proxy Statement as
Exhibit "C."
"Conversion": means the conversion of E/ICC into a limited partnership
under the laws of the State of Delaware upon Closing immediately following the
consummation of the E/ICC Purchase and Sale Agreement.
"Desiccant Supply Agreement Novation" or "Novation": means the novation
of the Desiccant Supply Agreement, dated February 7, 1994, between Engelhard and
E/ICC to be entered into at Closing by and between Engelhard, E/ICC and Wheel LP
pursuant to which Wheel LP will be affirmed as a party to the Supply Agreement
for the supply of desiccants or drying materials or agents used in any
adsorption system on the original terms thereof.
"Distribution": means E/ICC's distribution of its entire limited
partnership interest in Box LP to I Partner and E Partner at Closing, as a
result of which I Partner will hold a 90% interest and E Partner will hold a 10%
interest therein.
"Distribution Resolution": means the resolution of the partners of
E/ICC effecting the Distribution.
"E Partner": means Engelhard DT, Inc., a corporation organized under
the laws of the State of Delaware and a wholly-owned subsidiary of Engelhard.
"E/ICC" or "Partnership": means Engelhard/ICC, a Pennsylvania general
partnership in which Engelhard and ICC, through their respective subsidiaries,
each has a 50% general partnership interest.
"E/ICC License Agreement": means the E/ICC License Agreement to be
entered into at Closing pursuant to which Engelhard will license Box LP to use
the name "Engelhard" as part of the "Engelhard/ICC" mark, under certain
conditions, for a period of two and one half years from the Closing Date.
"E/ICC Purchase and Sale Agreement" means the E/ICC Purchase and Sale
Agreement dated November 17, 1997, between ICC Investment LP, I Partner and E
Partner, pursuant to which
2
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at Closing ICC Investment LP will sell a 30% aggregate partnership interest in
E/ICC to E Partner for approximately $18.6 million.
"Engelhard": means Engelhard Corporation, a corporation organized under
the laws of the State of Delaware.
"Gas Platform": means any Climate Control System that utilizes gas to
regenerate the desiccant material that is used to treat a wheel-shaped rotor in
a Climate Control System.
"General Releases": mean those three general releases to be entered at
Closing whereby ICC, I Partner, ICC Investment LP, E/ICC, Engelhard, E Partner,
Telaire Systems, Inc. and Sensor Technologies shall mutually release each other
from any and all claims or liability arising out of any matter through the
Closing Date including without limitation the management of E/ICC and the
matters at issue in the litigation related to Engelhard's acquisition of Telaire
Systems, Inc.
"I Partner": means ICC Desiccant Technologies, Inc., a corporation
organized under the laws of the State of Delaware and a wholly-owned subsidiary
of ICC.
"ICC Investment LP": means ICC Investment, LP, a limited partnership
(of which I Partner is the sole general partner and ICC is the sole limited
partner) organized under the laws of the Commonwealth of Pennsylvania.
"Joint Venture Asset Transfer Agreement": means the Joint Venture Asset
Transfer Agreement between ICC, I Partner, Engelhard and E Partner dated as of
September 8, 1993.
"Master Agreement": The Master Agreement, dated November 17, 1997, by
and among ICC, I Partner, ICC Investment LP, Engelhard, E Partner, and E/ICC
pursuant to which, among other things, the Restructuring of E/ICC will be
effectuated at Closing, the form of which is attached to this Proxy Statement as
Exhibit "B."
"Partnership Agreement" means the General Partnership Agreement of
E/ICC, dated February 7, 1994 between E Partner and I Partner.
"Partnership Business": means the design, manufacture and sale of
desiccant wheel components and desiccant air conditioners for dehumidification
and cooling markets, the industrial drying/dehumidification market and the air
conditioning and microbe reduction market for health care facilities.
"Partnership Loan": means any loan made by the general partner or an
Affiliate of the general partner of Box LP or Wheel LP, as the case may be, to
the partnership, which loan shall bear interest at a rate equal to the three
month London Interbank Offered Rate (as published in the Wall Street Journal)
plus 1.00% per annum, such rate to be set on the date of the making of the loan
and to be reset on the first day of each succeeding quarter.
"Record Date": means January 27, 1998.
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"Referral Agreement": means the Referral Agreement to be entered into
at Closing between Box LP and Wheel LP pursuant to which Box LP will sell
Climate Control Systems to customers referred to it by Wheel LP.
"Related Agreements": means the Rotor Supply Agreement, Cassette Supply
Agreement, Sensor Supply Agreement, Substrate Supply Agreement, Desiccant Supply
Agreement Novation, Box Technology License, Wheel Technology License, E/ICC
License Agreement, Referral Agreement, and the General Releases.
"Restructuring": means the restructuring of E/ICC as contemplated under
the Master Agreement.
"Rotor Supply Agreement": means the Rotor Supply Agreement to be
entered into at Closing between Wheel LP and Box LP pursuant to which Wheel LP
will sell heat-exchange and desiccant wheel-shaped rotors to Box LP.
"Sensor Supply Agreement": means the Sensor Supply Agreement to be
entered into at Closing between Sensor Technologies and Box LP for the supply of
certain humidity and dew point infrared sensors to Box LP.
"Sensor Technologies": means Engelhard Sensor Technologies, Inc., a
corporation organized under the laws of the State of Delaware and a wholly-owned
subsidiary of Engelhard.
"Special Meeting": means the Special Meeting of Stockholders of ICC to
be held on February 23, 1998, at 10:00 am (local time), at 330 South Warminster
Road, Hatboro, Pennsylvania 19040, and at any adjournment or postponement
thereof.
"Substrate Supply Agreement": means the Substrate Supply Agreement to
be entered into at Closing between Engelhard and Wheel LP pursuant to which
Wheel LP will sell substrates and related materials to Engelhard.
"Transaction Documents": means the Master Agreement, the Contribution
Agreement, the Box LP Limited Partnership Agreement, the Wheel LP Limited
Partnership Agreement, the Distribution Resolutions, the E/ICC Purchase and Sale
Agreement, the General Releases and the certificate effecting the Conversion of
E/ICC into a limited partnership.
"Wheel Business": means the design, manufacture, assembly, marketing
and sale of products fabricated from honeycomb substrates and any and all rotor
or wheels or similar products used in Climate Control Systems.
"Wheel LP": means the limited partnership into which E/ICC will be
converted under the laws of the State of Delaware, upon Closing, in which E
Partner will own an 80% interest and I Partner will own a 20% interest.
"Wheel LP Limited Partnership Agreement": means the Agreement of
Limited Partnership of Wheel LP governing the operation of Wheel LP.
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"Wheel Technology License": means the Wheel Technology License
Agreement to be entered into at Closing by and between Wheel LP and Box LP
pursuant to which Wheel LP will license certain patented Wheel Technology to Box
LP.
"Wheel Technology": means the technology owned as of the Date of
Closing by Wheel LP that is specifically covered by the patents listed on
Schedule A to the Wheel Technology License.
5
<PAGE> 72
Exhibit B
Master Agreement
<PAGE> 73
================================================================================
MASTER AGREEMENT
Among
ICC TECHNOLOGIES, INC.,
ICC DESICCANT TECHNOLOGIES, INC.,
ICC INVESTMENT, L.P.,
ENGELHARD CORPORATION,
ENGELHARD DT, INC.
And
ENGELHARD/ICC
Dated as of November 17, 1997
================================================================================
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS.......................................... 2
ARTICLE II TRANSACTIONS......................................... 6
2.1. Transaction Documents................................ 6
2.2. Supply Agreements.................................... 8
2.3. License Agreements................................... 8
2.4. Referral Agreement................................... 9
2.5. Agreements Control................................... 9
ARTICLE III CLOSING.............................................. 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ICC AND I ......... 10
4.1. Corporate Organization, etc.......................... 10
4.2. Authorization; Execution and Delivery, etc........... 10
4.3. Consents and Approvals of Governmental Authorities... 10
4.4. No Violation......................................... 11
4.5. Absence of Insolvency Proceedings.................... 11
4.6. Brokerage............................................ 11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ENGELHARD
AND E PARTNER........................................ 12
5.1. Corporate Organization............................... 12
5.2. Authorization; Execution and Delivery, etc........... 12
5.3. Consents and Approvals of Governmental Authorities.... 12
5.4. No Violation......................................... 13
5.5. Absence of Insolvency Proceedings.................... 13
5.6. Brokerage............................................ 13
ARTICLE VI COVENANTS OF ICC AND I PARTNER AND NEW ICC........... 14
6.1. Approvals and Consents............................... 14
6.2. ICC Proxy Statement.................................. 14
6.3. Further Assurances................................... 14
6.4. Reasonable Efforts................................... 14
6.5. Partnership Funding.................................. 15
6.6. Hatboro Lease........................................ 15
6.7. Bank Guaranties...................................... 15
</TABLE>
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<PAGE> 75
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE VII COVENANTS OF ENGELHARD AND E PARTNER................. 16
7.1. Approvals and Consents............................... 16
7.2. Further Assurances................................... 16
7.3. Reasonable Efforts................................... 16
7.4. Partnership Funding.................................. 17
ARTICLE VIII CONDITIONS PRECEDENT TO ALL PARTIES'
OBLIGATIONS.......................................... 17
8.1. Transaction Documents................................ 18
8.2. Related Agreements................................... 18
8.3. ICC Stockholder Approval............................. 18
8.4. Board of Directors Approval.......................... 18
8.5 General Releases..................................... 18
ARTICLE IX CONDITIONS PRECEDENT TO ICC'S AND I PARTNER'S
AND NEW ICC'S OBLIGATIONS............................ 18
9.1. Representations and Warranties....................... 19
9.2. Performance.......................................... 19
9.3. Litigation and Proceedings........................... 19
9.4. Approvals and Consents............................... 19
9.5. Corporate Action..................................... 20
9.6. Certificates......................................... 20
9.7. Dade County Bond..................................... 20
9.8. Hatboro Lease Assignment............................. 20
9.9. Bank Loan Assignments................................ 20
ARTICLE X CONDITIONS PRECEDENT TO ENGELHARD'S AND
E PARTNER'S OBLIGATIONS.............................. 21
10.1. Representations and Warranties....................... 21
10.2. Performance.......................................... 21
10.3. Litigation and Proceedings........................... 21
10.4. Approvals and Consents............................... 22
10.5. Corporate Action..................................... 22
10.6. Certificates......................................... 22
10.7. Hatboro Lease Power of Attorney...................... 22
10.8. Bank Guaranties...................................... 23
ARTICLE XI CLOSING DATE; CLOSING................................ 23
11.1. Closing Date; Closing................................ 23
ARTICLE XII TERMINATION AND ABANDONMENT, ETC..................... 24
12.1. Methods of Termination............................... 24
12.2. Effect of Termination................................ 24
</TABLE>
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<PAGE> 76
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE XIII INDEMNIFICATION...................................... 25
13.1. Indemnification by Box LP, ICC and I
Partner........................................... 25
13.2. Indemnification by Wheel LP, Engelhard
and E Partner..................................... 27
ARTICLE XIV MISCELLANEOUS PROVISIONS............................. 29
14.1. Expenses............................................. 29
14.2. Assignment and Binding Effect........................ 29
14.3. Construction......................................... 29
14.4. Notices.............................................. 29
14.5. Benefit.............................................. 30
14.6. Press Releases....................................... 30
14.7. Headings............................................. 31
14.8. Schedules, etc....................................... 31
14.9. Counterparts......................................... 31
14.10. Entire Agreement and Amendment....................... 31
14.11. Waiver of Compliance................................. 32
14.12. Conciliation; Remedies; etc.......................... 32
14.13. Joinder of Box LP and Wheel LP....................... 33
</TABLE>
Exhibits
--------
Exhibit 1 Contribution Agreement
Exhibit 2 Box LP Agreement
Exhibit 3 Distribution Resolution
Exhibit 4 E/ICC Purchase and Sale Agreement
Exhibit 5 Wheel LP Agreement
Exhibit 6 Certificate of Conversion to Limited Partnership
Exhibit 7 General Releases
Exhibit 8 Cassette Supply Agreement
Exhibit 9 Desiccant Supply Agreement Novation
Exhibit 10 Rotor Supply Agreement
Exhibit 11 Substrate Supply Agreement
Exhibit 12 Referral Agreement
Exhibit 13 Box Technology License Agreement
Exhibit 14 E/ICC License Agreement
Exhibit 15 Sensor Supply Agreement
Exhibit 16 Wheel Technology License Agreement
iii
<PAGE> 77
MASTER AGREEMENT
MASTER AGREEMENT dated as of November 17, 1997 (the "Agreement"), by
and among ICC Technologies, Inc., a Delaware corporation ("ICC"), ICC Desiccant
Technologies, Inc., a Delaware corporation ("I Partner"), ICC Investment, L.P.,
a Pennsylvania limited partnership ("New ICC"), Engelhard Corporation, a
Delaware corporation ("Engelhard"), Engelhard DT, Inc., a Delaware corporation
("E Partner"), and Engelhard/ICC, a Pennsylvania general partnership ("E/ICC").
W I T N E S S E T H :
WHEREAS, ICC, I Partner, Engelhard and E Partner formed E/ICC to engage
in the Partnership Business (as hereinafter defined);
WHEREAS, the Partnership Business consists of the Wheel Business (as
hereinafter defined) and the Box Business (as hereinafter defined);
WHEREAS, ICC, I Partner, Engelhard and E Partner desire to enter into a
series of transactions pursuant to which, among other things: (i) E/ICC will
contribute (the "Contribution") all assets and liabilities related to the Box
Business to Box LP (as hereinafter defined) pursuant to the Contribution
Agreement (as hereinafter defined) in return for a 99% limited partnership
interest in Box LP (as to which I Partner will be the general partner); (ii)
E/ICC will distribute (the "Distribution") pursuant to the Distribution
Resolution (as hereinafter defined) (A) an 89% Box LP limited partnership
interest to I Partner and (B) a 10% Box LP limited partnership interest to E
Partner; (iii) I Partner will assign to New ICC (the "Assignment") pursuant to
an assignment and assumption agreement (the "Assignment and Assumption
Agreement") 60% of I Partner's partnership interests in E/ICC remaining
immediately after giving effect to the Contribution and the Distribution; (iv)
New ICC will transfer (the "Transfer") pursuant to the E/ICC Purchase and Sale
Agreement (as hereinafter defined) to E Partner for $18,628,571 all of its
partnership interests in E/ICC such that E Partner will thereafter hold 80% of
the total partnership interests in E/ICC, which after the Conversion (as defined
below) will include all general partnership interests, and I Partner, together
with its Affiliates, will thereafter hold 20% of the total partnership interests
in E/ICC; and (v) E/ICC will be converted (the "Conversion" and together with
the Contribution, the Distribution and the Transfer, the
<PAGE> 78
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"Transaction") into Wheel LP (as hereinafter defined) with the result that E
Partner holds a 1% general partnership and a 79% limited partnership interest in
Wheel LP and I Partner holds a 20% limited partnership interest in Wheel LP; and
WHEREAS, the parties desire to set forth herein certain terms and
conditions pursuant to which the Transaction shall be consummated;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally bound hereby
agree as follows:
ARTICLE I
DEFINITIONS
"Affiliate" as to any Person means any other Person Controlled by,
Controlling or under common Control with such Person.
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement between I Partner and New ICC in the form to be mutually
agreed by the parties hereto.
"Box Business" shall mean the design, manufacture, assembly, marketing
and sale of Climate Control Systems (as defined in the Rotor Supply Agreement)
for the cooling, dehumidification, drying, heating, ventilation, and microbe
reduction markets.
"Box Liabilities" has the meaning set forth in Section 3.2 of the
Contribution Agreement.
"Box LP" means Fresh Air Solutions, L.P., a limited partnership (of
which I Partner is the general partner) organized under the laws of the
Commonwealth of Pennsylvania.
"Box LP Agreement" means the Agreement of Limited Partnership of Box LP
substantially in the form attached hereto as Exhibit 2.
<PAGE> 79
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"Box Technology License Agreement" means the Box Technology License
Agreement between Box LP and Wheel LP substantially in the form attached hereto
as Exhibit 13.
"Cassette" means a sheetmetal or other structure that holds a Rotor (as
defined in the Rotor Supply Agreement), coated with ETS or uncoated, supported
by casters or a hub, consisting of seals, drive motor, belt and other components
required to conduct heat or mass transfer.
"Cassette Supply Agreement" means the Cassette Supply Agreement between
Box LP and Wheel LP substantially in the form attached hereto as Exhibit 8.
"Certificate of Conversion" means the Certificate of Conversion to
Limited Partnership to be filed with the Secretary of State of the State of
Delaware substantially in the form attached hereto as Exhibit 6.
"Closing" has the meaning ascribed to such term in Article II hereof.
"Closing Date" has the meaning ascribed to such term in Section 11.1
hereof.
"Contribution Agreement" means the Asset and Liability Contribution
Agreement substantially in the form attached hereto as Exhibit 1.
"Control, Controlling, Controlled" as to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or partnership interests, by contract or
otherwise.
"Distribution Resolution" means the resolution of E/ICC effecting the
Distribution substantially in the form attached hereto as Exhibit 3.
"Desiccant Supply Agreement Novation" means the novation of the Supply
Agreement between Engelhard and E/ICC in the form attached hereto as Exhibit 9.
"E/ICC License Agreement" means the E/ICC License Agreement between Box
LP and Wheel LP substantially in the form attached hereto as Exhibit 14.
<PAGE> 80
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"E/ICC Purchase and Sale Agreement" means the E/ICC Purchase and Sale
Agreement substantially in the form attached hereto as Exhibit 4.
"ESTI-Telaire" means Engelhard Sensor Technologies, Inc., a Delaware
corporation.
"General Releases" means the general releases by and among Engelhard,
ICC, E Partner, I Partner, New ICC, E/ICC, Wheel LP, Box LP and ESTI-Telaire,
substantially in the form attached hereto as Exhibit 7.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, whether city,
state, federal or foreign.
"Joint Venture Asset Transfer Agreement" means the Joint Venture
Asset Transfer Agreement between I, I Partner, Engelhard and E Partner dated as
of September 8, 1993.
"License Agreements" means each of the Box Technology License
Agreement, the Wheel Technology License Agreement and the E/ICC License
Agreement.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including, without limitation, any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Losses" has the meaning ascribed to such term in Section 13.2
hereof.
"Partner" has the meaning ascribed to such term in the Partnership
Agreement.
"Partnership Agreement" means the General Partnership Agreement of
E/ICC.
"Partnership Business" means the Wheel Business and the Box Business
conducted by E/ICC.
"Person" or "person" means an individual or a corporation, partnership,
trust, unincorporated association or other entity.
<PAGE> 81
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"Referral Agreement" means the Referral Agreement between Box LP and
Wheel LP substantially in the form attached hereto as Exhibit 12.
"Related Agreements" means the Supply Agreements, the Referral
Agreement and the License Agreements.
"Rotor Supply Agreement" means the Rotor Supply Agreement between Wheel
LP and Box LP substantially in the form attached hereto as Exhibit 10.
"Sensor Supply Agreement" means the Sensor Supply Agreement between
ESTI-Telaire and Box LP substantially in the form attached hereto as Exhibit 15.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person or (ii) any other person (other than a corporation)
in which such person, one or more Subsidiaries of such person, or such person
and one or more Subsidiaries of such person, directly or indirectly, at the date
of determination thereof has at least a majority ownership interest.
"Substrate Supply Agreement" means the Substrate Supply Agreement
substantially in the form attached hereto as Exhibit 11.
"Supply Agreements" means each of the Cassette Supply Agreement,
Desiccant Supply Agreement Novation, Rotor Supply Agreement, Sensor Supply
Agreement and Substrate Supply Agreement.
"Transaction Documents" means this Agreement, the Contribution
Agreement, the Box LP Agreement, the Distribution Resolution, the E/ICC Purchase
and Sale Agreement, the Wheel LP Agreement, the Certificate of Conversion and
the General Releases.
"Wheel Business" means the design, manufacture, assembly, marketing and
sale of products fabricated from honeycomb subtrates and any and all rotors or
wheels or similar products used in Climate Control Systems (as defined in the
Rotor Supply Agreement).
<PAGE> 82
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"Wheel Liabilities" has the meaning set forth in Section 3.4 of the
Contribution Agreement.
"Wheel LP" means the entity organized under the laws of the State of
Delaware that E/ICC will be converted into pursuant to the Conversion, a limited
partnership organized under the laws of the State of Delaware.
"Wheel LP Agreement" means the Agreement of Limited Partnership of
Wheel LP substantially in the form attached hereto as Exhibit 5.
"Wheel Technology License Agreement" means the Wheel Technology License
Agreement between Wheel LP and Box LP substantially in the form attached hereto
as Exhibit 16.
ARTICLE II
TRANSACTIONS
2.1. Transaction Documents.
A. E/ICC will form Box LP, a new limited partnership, by filing a
Certificate of Limited Partnership with the Commonwealth of Pennsylvania.
B. Pursuant to the Contribution Agreement, E/ICC will contribute all of
the assets and liabilities of the Box Business to Box LP in exchange for a 99%
limited partnership interest in Box LP (as to which I Partner will be the
general partner). Pursuant to the Contribution Agreement, among other things,
E/ICC will indemnify Box LP against any and all Losses (as defined in the
Contribution Agreement) resulting from liabilities of the Wheel Business and Box
LP will indemnify E/ICC against any and all Losses resulting from liabilities of
the Box Business, in each case, to the extent set forth in the Contribution
Agreement.
C. Pursuant to the Distribution Resolution, E/ICC will distribute (i)
an 89% limited partnership interest in Box LP to I Partner and (ii) a 10%
limited partnership interest in Box LP to E Partner.
D. Pursuant to the Assignment and Assumption Agreement, I Partner
will assign to New ICC 60% of I Partner's part-
<PAGE> 83
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nership interests in E/ICC remaining immediately after giving effect to the
Contribution and the Distribution.
E. Pursuant to the E/ICC Purchase and Sale Agreement, New ICC will
transfer to E Partner all of New ICC's partnership interests in E/ICC in
exchange for $18,628,571 such that E Partner will thereafter hold 80% of the
total partnership interests in E/ICC, which after the Conversion will include
all general partnership interests, and I Partner will thereafter hold 20% of the
total partnership interests in E/ICC, which after the Conversion will consist
solely of limited partnership interests.
F. E Partner and I Partner will convert E/ICC from a general
partnership to a limited partnership by filing a Certificate of Conversion to
Limited Partnership and a Certificate of Limited Partnership with the State of
Delaware.
G. Pursuant to the General Releases, (i) Engelhard, E Partner and
ESTI-Telaire released and discharged ICC, I Partner, New ICC and E/ICC from any
and all claims, actions, proceedings, etc., (ii) E/ICC released and discharged
Engelhard, E Partner, ESTI-Telaire, ICC, I Partner and New ICC from any and all
claims, actions, proceedings, etc. and (iii) ICC, I Partner and New ICC released
and discharged Engelhard, E Partner, ESTI-Telaire and E/ICC from any and all
claims, actions, proceedings, etc., in each case, to the extent set forth in the
General Releases.
H. Pursuant to the Box LP Agreement, among other things, (i) I Partner,
as general partner, will have full, exclusive and complete discretion to manage
the business and affairs of Box LP, (ii) E Partner will have no right to
transfer all or any portion of its partnership interests in Box LP without the
prior consent of the general partner, (iii) on January 1, 2004, I Partner will
have the right to purchase E Partner's entire interest in Box LP for a price
equal to E Partner's entire percentage interest multiplied by 95% of the fair
market value of Box LP (subject to certain adjustments) and (iv) if I Partner
decides to sell all or a part of its interests in Box LP, E Partner will have
the right to offer to acquire all or a portion of such interests.
I. Pursuant to the Wheel LP Agreement, among other things, (i) E
Partner, as general partner, will have full, exclusive and complete discretion
to manage the business and affairs of Wheel LP, (ii) I Partner will have no
right to transfer all or any portion of its partnership interests in Wheel LP
<PAGE> 84
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without the prior consent of the general partner, (iii) on January 1, 2004, E
Partner will have the right to purchase I Partner's entire interest in Wheel LP
for a price equal to I Partner's entire percentage interest multiplied by 95% of
the fair market value of Wheel LP (subject to certain adjustments) and (iv) if E
Partner decides to sell all or a part of its interests in Wheel LP, I Partner
will have the right to offer to acquire all or a portion of such interests.
2.2. Supply Agreements.
A. Pursuant to the Cassette Supply Agreement, Box LP will agree to
supply Cassettes to Wheel LP on the terms set forth therein.
B. Pursuant to the Desiccant Supply Agreement Novation, the Desiccant
Supply Agreement dated as of February 7, 1994 between Engelhard and E/ICC will
remain in full force and effect and the parties thereto shall be Engelhard and
Wheel LP.
C. Pursuant to the Rotor Supply Agreement, (i) Box LP will agree to
purchase from Wheel LP and Wheel LP will agree to supply to Box LP, all of Box
LP's Requirements of rotors or wheels or similar products used in Climate
Control Systems (each as defined in the Rotor Supply Agreement) and (ii) Wheel
LP will have the right to supply such rotors or wheels or similar products to
third parties other than for standalone supermarkets, ice rinks and pachinko
halls in North America, Japan and Korea, in each case, on the terms set forth
therein.
D. Pursuant to the Sensor Supply Agreement, Telaire will agree to
supply Products (as defined in the Rotor Supply Agreement) to Box LP on the
terms set forth therein.
E. Pursuant to the Substrate Supply Agreement, Wheel LP will agree to
supply Products (as defined in the Substrate Supply Agreement) to Engelhard on
the terms set forth therein.
2.3. License Agreements.
A. Pursuant to the E/ICC License Agreement, Wheel LP will agree to
grant to Box LP a nonexclusive, royalty free sublicense to use the "Engelhard"
name as part of the "Engelhard/ICC" name on the terms set forth therein for a
2 1/2 year period.
<PAGE> 85
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B. Pursuant to the Box Technology License Agreement, Box LP will agree
to grant to Wheel LP a nonexclusive, royalty free, perpetual license to utilize
the Box Technology (as defined in the Box Technology License Agreement) on the
terms set forth therein.
C. Pursuant to the Wheel Technology License Agreement, Wheel LP will
agree to grant to Box LP a nonexclusive, royalty free, perpetual license to
utilize the Wheel Technology (as defined in the Wheel Technology License
Agreement) on the terms set forth therein.
2.4. Referral Agreement.
Pursuant to the Referral Agreement, Wheel LP will have the right to
request that Box LP sell Climate Control Systems (as defined in the Referral
Agreement) to customers introduced to Box LP by Wheel LP on the terms set forth
therein.
2.5. Agreements Control.
Notwithstanding anything contained in this Agreement to the contrary,
the terms and provisions contained in the Transaction Documents and Related
Agreements referenced or described herein shall exclusively control as to the
subject matter covered thereby and shall not in any way be affected by any
description of such document or agreement contained herein.
ARTICLE III
CLOSING
The closing of (i) the effectiveness of the General Releases, (ii) the
transactions contemplated by the Contribution Agreement, (iii) the Distribution,
(iv) the transactions contemplated by the E/ICC Purchase and Sale Agreement, (v)
the Conversion, and (vi) the effectiveness of the Related Agreements
(collectively, the "Closing") shall take place on the Closing Date at such
location as the parties shall mutually agree. At the Closing, the parties shall
deliver the documents provided in Section 11.1 hereof.
<PAGE> 86
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ICC, I PARTNER AND NEW ICC
Each of ICC, I Partner and New ICC represents and warrants to Engelhard
and E Partner as follows:
4.1. Corporate Organization, etc.
Each of ICC and I Partner is a corporation, and New ICC is a limited
partnership, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization.
4.2. Authorization; Execution and Delivery, etc.
Subject to the receipt of the approval of ICC's Board of Directors and
shareholders, each of ICC, I Partner and New ICC has full power and authority to
execute and deliver this Agreement, the Transaction Documents and the Related
Agreements to which it is a party, and has full power and authority to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement, the Transaction Documents and the Related Agreements to which ICC, I
Partner and New ICC are a party and the performance of ICC's and I Partner's and
New ICC's obligations hereunder and thereunder have been duly authorized by the
Board of Directors of ICC and I Partner and by the general partner of New ICC,
respectively. This Agreement constitutes, and the Transaction Documents and
Related Agreements to which each is a party when executed and delivered will
each constitute, the valid and binding agreement of each of ICC, I Partner and
New ICC Partner, respectively, each enforceable in accordance with its terms,
except (i) as the enforcement of this Agreement, the Transaction Documents and
the Related Agreements to which each is a party may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) as the
obligations of ICC, I Partner and New ICC under this Agreement, the Transaction
Documents and the Related Agreements to which each is a party are subject to
general principles of equity.
4.3. Consents and Approvals of Governmental Authorities.
Except as set forth on Schedules 4.3 or 4.4 attached hereto, no
consent, approval or authorization of, or declara-
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tion, filing or registration with or notice to, any governmental or regulatory
authority or any other third party is required in connection with or as a result
of the execution and delivery by ICC, I Partner and New ICC of this Agreement,
the Transaction Documents and the Related Agreements to which each is a party or
the performance by each of ICC, I Partner and New ICC of its obligations
hereunder and thereunder.
4.4. No Violation.
Assuming that all consents, approvals or authorizations and other
actions listed on Schedule 4.3 have been obtained and all notices listed on such
Schedule have been given, the execution and delivery of this Agreement, the
Transaction Documents and the Related Agreements to which each is a party by
ICC, I Partner and New ICC and the performance by ICC, I Partner and New ICC of
their respective obligations hereunder and thereunder do not and will not (a)
constitute or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or the lapse of time, or
both, has the potential of constituting a default) under, (i) any charter
document or By-laws of ICC, I Partner or New ICC or (ii) any material mortgage,
indenture, loan or credit agreement or any other material agreement or
instrument to which ICC, I Partner or New ICC is a party, or pursuant to which
it is the direct or indirect obligor or (b) violate any law, regulation,
judgment, injunction, order or decree binding upon ICC, I Partner or New ICC, or
(c) require the consent of any third party.
4.5. Absence of Insolvency Proceedings.
As of the date hereof there is no insolvency proceeding of any
character, voluntary or involuntary, relating to ICC, I Partner and New ICC,
which is pending or, to the best of ICC's, I Partner's or New ICC's knowledge,
threatened. None of ICC, I Partner or New ICC has made any assignment for the
benefit of creditors or taken any action with a view to, or which would
constitute a basis for, the institution of an insolvency proceeding.
4.6. Brokerage.
No broker or finder has acted directly or indirectly for ICC, I Partner
or New ICC in connection with this Agreement, the Transaction Documents or the
Related Agreements or the transactions contemplated hereby or thereby, and no
broker or finder is entitled to any brokerage or finder's fee or other
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commission in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of any of ICC, I Partner or New ICC.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ENGELHARD AND E PARTNER
Each of Engelhard and E Partner represents and warrants to ICC, I
Partner and New ICC as follows:
5.1. Corporate Organization.
Each of Engelhard and E Partner is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2. Authorization; Execution and Delivery, etc.
Subject to the receipt of the approval of Engelhard's Board of
Directors, each of Engelhard and E Partner has full corporate power and
authority to execute and deliver this Agreement, the Transaction Documents and
the Related Agreements to which it is a party, and each of Engelhard and E
Partner has full corporate power and authority to perform its obligations
hereunder and thereunder. This Agreement constitutes, and the Transaction
Documents and Related Agreements to which each is a party when executed and
delivered will each constitute, the valid and binding agreement of each of
Engelhard and E Partner, each enforceable in accordance with their terms, except
(i) as the enforcement of this Agreement, the Transaction Documents and the
Related Agreements to which each is a party may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (ii) as the
obligations of Engelhard and E Partner under this Agreement, the Transaction
Documents and the Related Agreements to which each is a party are subject to
general principles of equity.
5.3. Consents and Approvals of Governmental Authorities.
No consent, approval or authorization of, or declaration, filing or
registration with or notice to, any governmental or regulatory authority or any
other third party is required in connection with or as a result of the execution
and
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delivery by each of Engelhard and E Partner of this Agreement, the Transaction
Documents and the Related Agreements to which each is a party or the performance
by each of Engelhard and E Partner of their obligations hereunder and
thereunder.
5.4. No Violation.
The execution and delivery of this Agreement, the Transaction Documents
and the Related Agreements to which each is a party by each of Engelhard and E
Partner and the performance by Engelhard and E Partner of their respective
obligations hereunder and thereunder do not and will not (a) constitute or
result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or the lapse of time, or both, has the
potential of constituting a default) under (i) any charter document or By-laws
of Engelhard or E Partner or (ii) any material mortgage, indenture, loan or
credit agreement or any other material agreement or instrument to which
Engelhard or E Partner is a party, or pursuant to which it is the direct or
indirect obligor, or (b) violate any law, regulation, judgment, injunction,
order or decree binding upon Engelhard or E Partner or (c) require the consent
of any third party.
5.5. Absence of Insolvency Proceedings.
As of the date hereof there is no insolvency proceeding of any
character, voluntary or involuntary, relating to Engelhard or E Partner, which
is pending or, to the best of Engelhard's and E Partner's knowledge, threatened.
Neither Engelhard nor E Partner has made any assignment for the benefit of
creditors or taken any action with a view to, or which would constitute a basis
for, the institution of an insolvency proceeding.
5.6. Brokerage.
No broker or finder has acted directly or indirectly for either
Engelhard or E Partner in connection with this Agreement, the Transaction
Documents or the Related Agreements or the transactions contemplated hereby or
thereby, and no broker or finder is entitled to any brokerage or finder's fee or
other commission in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of either Engelhard or E Partner.
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ARTICLE VI
COVENANTS OF ICC, I PARTNER AND NEW ICC
From and after the date of this Agreement through the Closing Date or
thereafter as contemplated in the following covenants, ICC, I Partner and New
ICC shall comply with the following covenants:
6.1. Approvals and Consents.
Use its best efforts to (i) obtain all governmental and shareholder
approvals and consents, if any, necessary or required for the consummation of
the transactions contemplated hereby, including those specified in Schedule 4.3
hereto; and (ii) make or cause to be made any and all declarations, filings and
registrations with governmental authorities, including those specified in
Schedule 4.3 hereto, which approvals, consents, declarations, filings and
registrations are necessary or required for the consummation of the transactions
contemplated hereby and by the other Transaction Documents.
6.2. ICC Proxy Statement.
Prepare all materials required to obtain the approval of the
shareholders of ICC for this Agreement and the transactions contemplated hereby;
provided, however, that all references to Engelhard and E Partner in such
materials shall be subject to the reasonable prior approval of Engelhard.
6.3. Further Assurances.
To do or cause to be done such further acts and things and deliver or
cause to be delivered to the Partnership, Box LP or Wheel LP and/or their
respective designees such additional assignments, agreements, powers and
instruments, as E/ICC, Box LP or Wheel LP and/or their respective designees may
reasonably require or deem advisable to carry into effect the purposes of this
Agreement, the Transaction Documents and the Related Agreements or to better
assure and confirm unto E/ICC, Box LP or Wheel LP and/or their respective
designees the rights, powers and remedies of each hereunder and thereunder.
6.4. Reasonable Efforts.
Subject to the terms and conditions herein provided, to use their
reasonable efforts to cause the fulfillment of
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ICC's and I Partner's obligations hereunder. Each of ICC and I Partner agrees
not to take any action to intentionally breach any representation or warranty or
covenant contained herein.
6.5. Partnership Funding.
Until the earlier of the Closing and December 31, 1997, each of ICC and
I Partner will provide E/ICC with funds that are sufficient, when taken together
with funds provided by Engelhard and E Partner pursuant to Section 7.4, to
operate E/ICC in the normal course of business consistent with past operations
and accounting practices. On and after January 1, 1998 and until the earlier of
the Closing or termination of this Agreement in accordance with the provisions
of Section 12.1 below, E Partner will provide the Miami operations of E/ICC and
I Partner will provide the Hatboro operations of E/ICC with funds that are
sufficient to operate in the normal course of business and consistent with past
operations and accounting practices. Notwithstanding the foregoing, ICC and I
Partner, on the one hand, and Engelhard and E Partner, on the other hand, agree
to share equally those liabilities and expenses relating to the Arsenal referred
to in Section 2.6(B) of the Contribution Agreement.
6.6. Hatboro Lease.
ICC and I Partner shall use their best efforts to have Engelhard
unconditionally relieved of all liability pursuant to Engelhard's guaranty of
the Lease dated February 4, 1997 between 330 South Warminster Associates, L.P.
as landlord and E/ICC as tenant (the "Hatboro Lease") as soon as practicable
after the Closing Date and, in any event, prior to February 2, 2001. In
connection with the foregoing, at the Closing Date, ICC and I Partner agree to
cause Box LP to deliver to Engelhard an irrevocable power of attorney
authorizing Engelhard to give a notice of termination pursuant to Section 29 of
the Hatboro Lease if Engelhard has not been unconditionally released from its
guaranty on or prior to February 2, 2001.
6.7. Bank Guaranties.
ICC, I Partner and New ICC shall have Engelhard's guaranties of (i) the
line of credit with Mellon Bank, N.A., (ii) the line of credit with the PIDC
Local Development Corporation and (iii) the loan arrangement with the Delaware
Valley Industrial Research Center reduced to $1 million in the aggregate no
later than one year after the Closing Date and shall
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have such guaranties terminated no later than two years after the Closing Date.
ARTICLE VII
COVENANTS OF ENGELHARD AND E PARTNER
From and after the date of this Agreement through the Closing Date,
each of Engelhard and E Partner shall comply with the following covenants:
7.1. Approvals and Consents.
Use its best efforts to (i) obtain all governmental approvals and
consents, if any, necessary or required for the consummation of the transactions
contemplated hereby; and (ii) make or cause to be made any and all declarations,
filings and registrations with governmental authorities, which approvals,
consents, declarations, filings and registrations are necessary or required for
the consummation of the transactions contemplated hereby and by the other
Transaction Documents.
7.2. Further Assurances.
Engelhard and E Partner agree to do or cause to be done such further
acts and things and deliver or cause to be delivered to the Partnership, Box LP
or Wheel LP and/or their respective designees such additional assignments,
agreements, powers and instruments as E/ICC, Box LP or Wheel LP and/or their
respective designees may reasonably require or deem advisable to carry into
effect the purposes of this Agreement, the Transaction Documents and the Related
Agreements or to better assure and confirm unto E/ICC, Box LP or Wheel LP and/or
their respective designees the rights, powers and remedies of each hereunder and
thereunder.
7.3. Reasonable Efforts.
Subject to the terms and conditions herein provided, Engelhard and E
Partner agree to use their reasonable efforts to cause the fulfillment of
Engelhard's and E Partner's obligations hereunder. Engelhard and E Partner agree
not to take any action to intentionally breach any representation or warranty or
covenant contained herein.
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7.4. Partnership Funding.
(a) Until the Closing Date, each of Engelhard and E Partner will
provide E/ICC with funds so that E/ICC may operate in the ordinary course of
business consistent with past operations and accounting practices; provided,
however, that in no event will Engelhard or E Partner be required to fund in the
aggregate any amounts in excess of $500,000, $375,000, $250,000, $250,000,
$150,000 and $400,000 for the months of July, August, September, October,
November and December, 1997, respectively. On and after January 1, 1998 and
until the earlier of the Closing or the termination of this Agreement in
accordance with the provisions of Section 12.1 below, each Partner of E/ICC will
provide funds to E/ICC in accordance with the second sentence of Section 6.5
above. Notwithstanding the foregoing, ICC and I Partner, on the one hand, and
Engelhard and E Partner, on the other hand, agree to share equally those
liabilities and expenses relating to the Arsenal referred to in Section 2.6(b)
of the Contribution Agreement.
(b) It is agreed by the parties hereto that, for accounting purposes,
the losses of E/ICC for the year ending December 31, 1997 that shall be
allocable to Engelhard and E Partner shall not exceed $4,739,000, which amount
represents the aggregate amount of the book loss through June 30, 1997 and the
funds anticipated to be provided by E/ICC by Engelhard and E Partner for the
period from July 1, 1997 through December 31, 1997 and the remainder of any
such losses shall be allocable to ICC and I Partner and (ii) on and after
January 1, 1998 and until the earlier of the Closing or the termination of this
Agreement in accordance with the provisions of Section 12.1 below, the profits
and losses of E/ICC allocable to Engelhard and E Partner shall be the profits
and losses attributable to the Miami operations of E/ICC and the profits and
losses of E/ICC allocable to ICC and I Partner shall be the profits and losses
attributable to the Hatboro operations of E/ICC.
ARTICLE VIII
CONDITIONS PRECEDENT TO ALL PARTIES' OBLIGATIONS
The performance of the obligations of each of the parties hereto on the
Closing Date is subject to the following conditions precedent:
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8.1. Transaction Documents.
Prior to the Closing, the Transaction Documents shall have been entered
into by each of the parties thereto and each Transaction Document shall be in
full force and effect, no party shall be in default thereunder, and no
circumstances shall exist which with the passage of time or notice or both would
constitute a default thereunder.
8.2. Related Agreements.
At a time agreed to by all parties herein, the Related Agreements, in
the form annexed hereto, shall have been entered into by each of the parties
thereto and shall be in full force and effect.
8.3. ICC Stockholder Approval.
This Agreement and the transactions contemplated hereby shall have been
duly approved by shareholders owning a majority of the outstanding shares of
common stock of ICC.
8.4. Board of Directors Approval.
This Agreement and the transactions contemplated hereby shall have been
duly approved by the Board of Directors of each of ICC and Engelhard.
8.5. General Releases.
Prior to the Closing, the General Releases shall have been entered
into by each of the parties thereto and each of the General Releases shall be in
full force and effect.
ARTICLE IX
CONDITIONS PRECEDENT TO ICC'S, I PARTNER'S AND NEW ICC'S OBLIGATIONS
The performance of the obligations of ICC, I Partner and New ICC, on
the Closing Date, in addition to being subject to the satisfaction of the
conditions set forth in Article Eight hereof, is subject to satisfaction of the
following conditions at or prior to the Closing Date (any of which may be waived
by ICC, I Partner and New ICC):
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9.1. Representations and Warranties.
The representations and warranties of Engelhard and E Partner set forth
in this Agreement shall be true and correct in all material respects at and as
of the Closing Date as if made on that date (except to the extent such
representations and warranties relate to an earlier date).
9.2. Performance.
The covenants and agreements set forth in this Agreement, the
Transaction Documents and the Related Agreements and the obligations and
conditions required by this Agreement to be met, performed or complied with by
Engelhard and E Partner prior to or at the Closing, shall have been performed
and complied with in all material respects prior to or at the Closing Date.
9.3. Litigation and Proceedings.
No action or proceeding shall have been instituted or threatened
against any of the parties to this Agreement or their partners, directors or
officers by or before any Governmental Entity to restrain, enjoin, prohibit or
otherwise challenge, or to obtain substantial damages or other relief in respect
of, this Agreement, the Transaction Documents and the Related Agreements or the
consummation of the transactions contemplated hereby and thereby which in the
opinion of ICC would make it inadvisable to consummate such transactions. No
party to this Agreement, the Transaction Documents and the Related Agreements
shall have received written notice from any Governmental Entity of its intention
to (i) institute any action or proceeding to restrain or enjoin the consummation
of the transactions contemplated hereby or thereby or to nullify or render
ineffective this Agreement, the Transaction Documents, the Related Agreements or
such transactions if consummated, or (ii) commence any investigation into the
execution of this Agreement, the Transaction Documents or the Related Agreements
and the consummation of the transactions contemplated hereby or thereby, which
action, proceeding or investigation in the opinion of ICC would make it
inadvisable to consummate the transactions contemplated hereby or thereby.
9.4. Approvals and Consents.
No Governmental Entity shall have indicated its objection to, or its
intent to challenge as violative of any fed-
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eral, state or foreign laws, any of the transactions contemplated by this
Agreement.
9.5. Corporate Action.
All corporate and other actions necessary to authorize and effectuate
the consummation of the transactions contemplated hereby by Engelhard and E
Partner shall have been duly taken prior to the Closing, and Engelhard and E
Partner shall have delivered to ICC, I Partner and New ICC a certified copy of
resolutions of the Board of Directors of Engelhard and E Partner authorizing the
execution and delivery of this Agreement, the Transaction Documents and the
Related Agreements to which each is a party and the consummation of the
transactions contemplated hereby and thereby.
9.6. Certificates.
Engelhard and E Partner shall furnish ICC, I Partner and New ICC with
certificates of Engelhard and E Partner signed by an officer of Engelhard or E
Partner, as the case may be, certifying compliance with the conditions set forth
in this Article Nine in a form acceptable to ICC, I Partner and New ICC.
9.7. Dade County Bond.
The agreement relating to the Industrial Development Revenue Bonds,
Series 1995 (Engelhard/ICC Project) dated as of April 1, 1995 by and among
Engelhard, ICC and E/ICC shall have been terminated.
9.8. Hatboro Lease Assignment.
The Hatboro Lease shall have been assigned to Box LP and the consent of
the landlord shall have been obtained therefor.
9.9. Bank Loan Assignments.
Each of the (i) the line of credit with Mellon Bank, N.A., (ii) the
line of credit with the PIDC Local Development Corporation and (iii) the loan
arrangement with the Delaware Valley Industrial Research Center shall have been
assigned to Box LP and any required consents of the respective lenders
thereunder shall have been obtained therefor.
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ARTICLE X
CONDITIONS PRECEDENT TO ENGELHARD'S
AND E PARTNER'S OBLIGATIONS
The performance of the obligations of Engelhard and E Partner, on the
Closing Date, in addition to being subject to the satisfaction of the conditions
set forth in Article Eight hereof, is subject to satisfaction of the following
conditions at or prior to the Closing Date (any of which may be waived by
Engelhard and E Partner):
10.1. Representations and Warranties.
The representations and warranties of ICC, I Partner and New ICC set
forth in this Agreement shall be true and correct in all material respects at
and as of the Closing Date as if made on that date (except to the extent such
representations and warranties relate to an earlier date).
10.2. Performance.
The covenants and agreements set forth in this Agreement, the
Transaction Documents and the Related Agreements and the obligations and
conditions required by this Agreement to be met, performed or complied with by
ICC, I Partner and New ICC prior to or at the Closing, shall have been performed
and complied with in all material respects prior to or at the Closing Date.
10.3. Litigation and Proceedings.
No action or proceeding shall have been instituted or threatened
against any of the parties to this Agreement, or their partners, directors or
officers by or before any Governmental Entity to restrain, enjoin, prohibit or
otherwise challenge, or to obtain substantial damages or other relief in respect
of, this Agreement, the Transaction Documents and the Related Agreements or the
consummation of the transactions contemplated hereby and thereby which in the
opinion of Engelhard would make it inadvisable to consummate such transactions.
No party to this Agreement, the Transaction Documents and the Related Agreements
shall have received written notice from any Governmental Entity of its intention
to (i) institute any action or proceeding to restrain or enjoin the consummation
of the transactions contemplated hereby or thereby or to nullify or render
ineffective this Agreement, the Transaction Docu-
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ments, the Related Agreements or such transactions if consummated, or (ii)
commence any investigation into the execution of this Agreement, the Transaction
Documents or the Related Agreements and the consummation of the transactions
contemplated hereby or thereby, which action, proceeding or investigation in the
opinion of Engelhard would make it inadvisable to consummate the transactions
contemplated hereby or thereby.
10.4. Approvals and Consents.
All consents, authorizations and approvals listed on Schedule 4.3
hereof and which are indicated on such Schedule as being required to be obtained
prior to the Closing Date shall have been obtained; and no Governmental Entity
shall have indicated its objection to, or its intent to challenge as violative
of any federal, state or foreign laws, any of the transactions contemplated by
this Agreement.
10.5. Corporate Action.
All corporate and other actions necessary to authorize and effectuate
the consummation of the transactions contemplated hereby by ICC, I Partner and
New ICC shall have been duly taken prior to the Closing, and ICC, I Partner and
New ICC shall have delivered to Engelhard a certified copy of resolutions of the
Board of Directors of ICC and I Partner and of the Board of Directors of the
General Partner of New ICC and of the shareholders of ICC authorizing the
execution and delivery of this Agreement, the Transaction Documents and the
Related Agreements to which each is a party and the consummation of the
transactions contemplated hereby and thereby.
10.6. Certificates.
ICC, I Partner and New ICC shall furnish Engelhard, upon request, with
certificates of ICC, I Partner and New ICC signed by an officer of ICC, I
Partner or New ICC, as the case may be, certifying compliance with the
conditions set forth in this Article Ten in a form satisfactory to Engelhard.
10.7. Hatboro Lease Power of Attorney.
Engelhard shall have received the irrevocable power of attorney with
respect to the Hatboro Lease contemplated by Section 6.6.
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10.8. Bank Guaranties.
Engelhard's guaranties of (i) the line of credit with Mellon Bank,
N.A., (ii) the line of credit with the PDIC Local Development Corporation and
(iii) the loan arrangement with the Delaware Valley Industrial Resource Center
shall be reduced to $2,000,000 in the aggregate as of the Closing Date.
ARTICLE XI
CLOSING DATE; CLOSING
11.1. Closing Date; Closing.
The Closing hereunder shall take place on the date on which all the
conditions precedent set forth in Articles Eight, Nine and Ten hereof shall have
been satisfied or waived, or at such other time and place as the parties hereto
shall agree (the "Closing Date"). At the Closing, the parties will exchange
certificates evidencing satisfaction or waiver of all conditions set forth in
Articles Eight, Nine and Ten hereof and, upon satisfaction or waiver of all such
conditions, (i) each of the parties shall deliver executed copies of the General
Releases, (ii) E/ICC shall deliver to Box LP the instruments of transfer and
conveyance contemplated by Section 10.1 of the Contribution Agreement, (iii) Box
LP shall deliver to E/ICC its initial partnership interests, as contemplated by
the Contribution Agreement, (iv) the Distribution shall occur pursuant to the
Distribution Resolution, (v) E Partner shall deliver to New ICC the cash
consideration pursuant to the E/ICC Purchase and Sale Agreement, (vi) New ICC
shall deliver to E Partner the Interest required to be delivered pursuant to the
E/ICC Purchase and Sale Agreement, (vii) the Conversion shall occur pursuant to
the Certification of Conversion and (viii) each of the parties shall deliver
executed copies of each of the Related Agreements to which it is a party, and
thereupon the Closing will be deemed accomplished. Upon the accomplishment of
the Closing, (i) the General Releases shall be effective, (ii) the transactions
contemplated by the Contribution Agreement shall have been consummated, (iii)
the Distribution shall have occurred, (iv) the transactions contemplated by the
E/ICC Purchase and Sale Agreement shall have been consummated, (v) the
Conversion shall have been consummated, and (vi) each of the Related Agreements
shall be in full force and effect.
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ARTICLE XII
TERMINATION AND ABANDONMENT, ETC.
12.1. Methods of Termination.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing: (a) by mutual written
consent of ICC and Engelhard; (b) by either ICC or Engelhard, by written notice
to the other, if either (1) the Closing has not occurred on or before the
Termination Date unless a later date is established by the mutual written
consent of such parties before or after such date or unless the failure of such
consummation by the Termination Date shall be due to the failure of the party
seeking to terminate this Agreement to perform its obligations under this
Agreement required to be performed by it on or prior to such date pursuant to
the terms hereof or (2) this Agreement and the transactions contemplated hereby
shall not have been duly approved by the Board of Directors of each of ICC and
Engelhard on or prior to December 21, 1997; or (c) by any of ICC, I Partner and
New ICC or Engelhard and E Partner, as the case may be, by written notice to the
other if there has been a material breach by the other of any of its
representations, warranties, covenants or other agreements hereunder and such
breach is not cured within 20 days of such notice. The "Termination Date" shall
be March 31, 1998.
12.2. Effect of Termination.
After termination and abandonment as permitted by Section 12.1 hereof:
(a) Termination of this Agreement pursuant to Section 12.1 shall
terminate all obligations and liabilities of the parties hereunder,
including their officers and directors, except for the obligations under
this Section 12.2, Section 14.1, Section 14.6, Section 14.10 and Section
14.12; provided, however, that termination pursuant to clause (b) or (c) of
Section 12.1 shall not relieve the defaulting or breaching party from any
liability to any other party hereto; and
(b) Each party hereto will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, and all copies of
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such materials, whether so obtained before or after the execution
hereof, to the party furnishing the same.
ARTICLE XIII
INDEMNIFICATION
13.1. Indemnification by Box LP, ICC, I Partner and New ICC.
From and after the Closing Date, each of Box LP, ICC, I Partner and New
ICC hereby agrees to indemnify and hold harmless Wheel LP, Engelhard and E
Partner against any and all losses, liabilities and damages or actions or claims
in respect thereof (including, without limitation, amounts paid in settlement
and reasonable costs of investigation and legal expenses) (hereinafter referred
to collectively in Sections 13.1 and 13.2 as "Losses") arising out of or
resulting from (i) any Box Liabilities or (ii) any contingent or undetected
liability of Wheel LP (including without limitation any liability as the
successor of E/ICC) that is known to ICC, I Partner or New ICC prior to the
Closing Date and is not actually known by Engelhard or E Partner prior to the
Closing Date; provided, however, that (a) the actual knowledge of Engelhard and
E Partner shall be deemed to include the actual knowledge of employees of E/ICC
who were employed at the request of, or nominated for employment by, Engelhard
and (b) the knowledge of ICC, I Partner or New ICC shall be deemed to include
the knowledge of employees of E/ICC who were employed at the request of, or were
nominated for employment by, ICC; provided, further, that Box LP, ICC, I Partner
and New ICC shall only have an obligation to indemnify Wheel LP, Engelhard and E
Partner to the extent that the aggregate amount of Losses exceeds $50,000; and
provided that such $50,000 threshold shall not be applicable with respect to
losses arising out of or related to warranty claims for products shipped, or
services provided, by E/ICC prior to the Closing Date.
If any action, proceeding or claim shall be brought or asserted against
Wheel LP, Engelhard or E Partner, as the case may be, by any third party, which
action, proceeding or claim, if determined adversely to the interests of Wheel
LP, Engelhard or E Partner, as the case may be, would entitle Wheel LP,
Engelhard or E Partner, as the case may be, to indemnity pursuant to this
Section 13.1, Wheel LP, Engelhard or E Partner, as the case may be, shall,
promptly but in no event later
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than 60 days from the date Wheel LP, Engelhard or E Partner, as the case may be,
receives written notice of such action, proceeding or claim, notify Box LP, ICC,
I Partner and New ICC of the same in writing specifying in detail the basis of
such claim and the facts pertaining thereto, and Box LP, ICC, I Partner and New
ICC shall be entitled to assume the defense thereof by written notice thereof to
Engelhard, E Partner or Wheel LP, as the case may be, and have the sole control
of defense and settlement thereof, including the employment of counsel
reasonably satisfactory to Wheel LP, Engelhard or E Partner, as the case may be,
and the payment of all expenses; provided, however, that Wheel LP, Engelhard or
E Partner, as the case may be, shall have the right to employ counsel separate
from counsel employed by Box LP, ICC, I Partner and New ICC in any such action
and to participate in the defense thereof, and the fees and expenses of such
counsel employed by Wheel LP, Engelhard or E Partner, as the case may be, shall
be at the expense of Wheel LP, Engelhard or E Partner, as the case may be,
unless the employment thereof (i) has been specifically authorized by Box LP,
ICC, I Partner and New ICC in writing or (ii) relates to the defense of any
claim which seeks injunctive, specific or other non-monetary relief involving or
affecting the business, operations or assets of Wheel LP, Engelhard or E
Partner, as the case may be. If Box LP, ICC, I Partner and New ICC have failed
to assume the defense of any such action, proceeding or claim or, if in the
opinion of counsel to Wheel LP, E Partner or Engelhard, as the case may be, the
use of the same counsel to represent Box LP, ICC, I Partner and New ICC and
Wheel LP, E Partner or Engelhard would present a conflict of interest, Wheel LP,
Engelhard or E Partner, as the case may be, may employ their own counsel at Box
LP's, ICC's, I Partner's and New ICC's expense; provided, however, that Box LP,
ICC, I Partner and New ICC shall not be liable for any settlement of any such
action or proceeding effected without the written consent of Box LP, ICC, I
Partner and New ICC (unless such consent is unreasonably withheld by Box LP,
ICC, I Partner and New ICC). Notwithstanding the foregoing, without the written
consent (which shall not be unreasonably withheld) of Wheel LP, Engelhard or E
Partner, as the case may be, Box LP, ICC, I Partner and New ICC shall not be
entitled to settle any non-monetary claim involving the business operations or
assets of Wheel LP, Engelhard or E Partner, as the case may be, if such
settlement could impose on Wheel LP, Engelhard or E Partner, as the case may be,
any obligation which cannot be satisfied by the payment of money. Each of Box
LP, ICC, I Partner and New ICC agrees to indemnify and hold harmless Wheel LP,
Engelhard or E Partner, as the case may be, from any and all legal expenses
reasonably incurred by Wheel LP, Engelhard or E Partner,
<PAGE> 103
-27-
as the case may be, in connection with the successful enforcement of its rights,
in whole or in part, to indemnity under this Section 13.1. The obligations of
Box LP, ICC, I Partner and New ICC under this Section 13.1 shall be joint and
several.
13.2. Indemnification by Wheel LP, Engelhard and E Partner.
Each of Wheel LP, Engelhard and E Partner hereby agrees to indemnify
and hold harmless, Box LP, ICC, I Partner and New ICC against any and all Losses
resulting from (i) any Wheel Liabilities or (ii) any contingent or undetected
liability of Box LP (including without limitation any liability as the successor
of E/ICC) that is known to Engelhard or E Partner prior to the Closing Date and
is not actually known by ICC, I Partner or New ICC prior to the Closing Date;
provided, however, that (a) the actual knowledge of ICC and I Partner shall be
deemed to include the actual knowledge of employees of E/ICC who were employed
at the request of, or were nominated for employment by, ICC and (b) the
knowledge of Engelhard or E Partner shall be deemed to include the knowledge of
employees of E/ICC who were employed at the request of, or were nominated for
employment by, Engelhard; provided, further, that Wheel LP, Engelhard and E
Partner shall only have an obligation to indemnify Box LP, ICC, I Partner and
New ICC to the extent that the aggregate amount of Losses exceeds $50,000.
If any action, proceeding or claim shall be brought or asserted against
Box LP, ICC, I Partner or New ICC, as the case may be, by any third party, which
action, proceeding or claim, if determined adversely to the interests of Box LP,
ICC, I Partner or New ICC, as the case may be, would entitle Box LP, ICC, I
Partner or New ICC, as the case may be, to indemnity pursuant to this Section
13.2, Box LP, ICC, I Partner or New ICC shall promptly but in no event later
than 60 days from the date Box LP, ICC, I Partner or New ICC, as the case may
be, receives written notice of such action, proceeding or claim, notify Wheel
LP, Engelhard and E Partner of the same in writing specifying in detail the
basis of such claim and the facts pertaining thereto, and Wheel LP, Engelhard
and E Partner shall be entitled to assume the defense thereof by written notice
thereof to Box LP, ICC, I Partner or New ICC, as the case may be, and have the
sole control of defense and settlement thereof, including the employment of
counsel reasonably satisfactory to Box LP, I Partner, ICC or New ICC, as the
case may be, and the payment of all expenses; provided, however, that Box LP,
ICC, I Partner or New ICC, as the case may be, shall have the right to employ
counsel separate from counsel employed
<PAGE> 104
-28-
by Wheel LP, Engelhard and E Partner in any such action and to participate in
the defense thereof, and the fees and expenses of such counsel employed by Box
LP, ICC, I Partner or New ICC, as the case may be, shall be at the expense of
Box LP, ICC, I Partner or New ICC, as the case may be, unless the employment
thereof (i) has been specifically authorized by Wheel LP, Engelhard and E
Partner in writing or (ii) relates to the defense of any claim which seeks
injunctive, specific or other non-monetary relief involving or affecting the
business, operations or assets of Box LP, I Partner, ICC or New ICC, as the case
may be. If Wheel LP, Engelhard and E Partner have failed to assume the defense
of any such action, proceeding or claim or, if in the opinion of counsel to Box
LP, ICC, I Partner or New ICC, as the case may be, the use of the same counsel
to represent Wheel LP, Engelhard, E Partner, Box LP, ICC, I Partner or New ICC
would present a conflict of interest, Box LP, ICC, I Partner or New ICC, as the
case may be, may employ their own counsel at Wheel LP's, Engelhard's and E
Partner's expense; provided, however, that Wheel LP, Engelhard and E Partner
shall not be liable for any settlement of any such action or proceeding effected
without the written consent of Wheel LP, Engelhard and E Partner (unless such
consent is unreasonably withheld by Wheel LP, Engelhard and E Partner).
Notwithstanding the foregoing, without the written consent (which shall not be
unreasonably withheld) of Box LP, ICC, I Partner or New ICC, as the case may be,
Wheel LP, Engelhard and E Partner shall not be entitled to settle any
non-monetary claim involving the business operations or assets of Box LP, ICC, I
Partner or New ICC, as the case may be, if such settlement could impose on Box
LP, ICC, I Partner or New ICC, as the case may be, any obligation which cannot
be satisfied by the payment of money. Wheel LP, Engelhard and E Partner agree to
indemnify and hold harmless Box LP, ICC, I Partner and New ICC, from any and all
legal expenses reasonably incurred by Box LP, ICC, I Partner or New ICC, as the
case may be, in connection with the successful enforcement of its rights, in
whole or in part, to indemnity under this Section 13.2. The obligations of Wheel
LP, Engelhard and E Partner under this Section 13.2 shall be joint and several.
<PAGE> 105
-29-
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1. Expenses.
Each of the parties hereto shall bear all expenses incurred by it in
connection with this Agreement, the Transaction Documents and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby and preparation therefor.
14.2. Assignment and Binding Effect.
This Agreement and any of the rights or obligations hereunder shall not
be assignable except to an Affiliate by any party without the prior written
consent of the other parties hereto. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
14.3. Construction.
This Agreement shall be governed, construed and enforced in accordance
with the laws of the Commonwealth of Pennsylvania without regard to principles
of conflicts of laws.
14.4. Notices.
All notices, demands, requests and other communications required or
permitted to be given hereunder shall be in writing and deemed duly given on the
date delivered by hand, mailed by registered or certified mail, postage prepaid
or sent by overnight courier and, pending the designation of another address,
addressed as follows:
If to ICC, I Partner or New ICC:
ICC Technologies, Inc.
330 South Warminster Road
Hatboro, Pennsylvania 19040
Attn: Chairman
<PAGE> 106
-30-
With a copy to:
Mesirov Gelman Jaffe
Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103
Attn: Richard P. Jaffe, Esquire
If to Engelhard or E Partner:
Engelhard Corporation
101 Wood Avenue
Iselin, New Jersey 08830-077
Attn: Senior Vice President,
Corporate Development
With a copy to: General Counsel
If to E/ICC:
330 South Warminster Road
Hatboro, Pennsylvania 19040
With a copy to:
All other parties listed above.
14.5. Benefit.
Nothing in this Agreement, express or implied, is intended or shall be
construed to confer upon or give to any person, firm or corporation other than
the parties hereto any remedy or claim under or by reason of this Agreement or
any term, covenant or condition hereof, all of which shall be for the sole and
exclusive benefit of the parties hereto.
14.6. Press Releases.
Prior to the Closing, the content and timing of all press releases and
other public statements relating to this Agreement, the Transaction Documents,
the Related Agreements, and E/ICC businesses and/or operations shall at all
times be subject to the prior mutual agreement of Engelhard and ICC.
Notwithstanding the foregoing, in the event that Engelhard or ICC determines
that it is legally required to make a disclosure relating to this Agreement, the
Transaction Documents or the Related Agreements, after adequate notice, as soon
as reasonably possible, it shall endeavor in good faith to obtain the
<PAGE> 107
-31-
consent of the other party, which consent shall not be unreasonably withheld, to
any such disclosure. In the event such consent cannot be secured, the other
party shall be permitted to make its disclosure, but such disclosure shall be
limited to those matters legally required. Following the Closing, use of the
E/ICC name by Box LP, ICC, I Partner or New ICC shall only be in accordance with
the terms of the E/ICC License Agreement.
14.7. Headings.
The headings of the Sections and Articles of this Agreement are
inserted as a matter of convenience and for reference purposes only, are of no
binding effect, and in no respect define, limit or describe the scope of this
Agreement or the intent of any Section or Article.
14.8. Schedules, etc.
All schedules delivered pursuant to this Agreement shall be deemed part
of this Agreement and incorporated herein, where applicable, as if fully set
forth herein. All statements contained in any exhibit or schedule delivered by
or on behalf of the parties hereto, or in connection with the transactions
contemplated hereby, are an integral part of this Agreement.
14.9. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which for all purposes shall be deemed to be an original and all of which
together shall constitute the same agreement.
14.10. Entire Agreement and Amendment.
This Agreement, including the Exhibits and Schedules hereto, and the
Transaction Documents and Related Agreements, represent the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof. This Agreement can be amended, modified, supplemented, extended,
terminated (except as provided in Article XII hereof), discharged or changed
only by an agreement in writing which makes specific reference to this Agreement
and which is signed by the party against whom enforcement of any such amendment,
modification, supplement, extension, termination, discharge or change is sought.
<PAGE> 108
-32-
14.11. Waiver of Compliance.
Any failure of ICC, I Partner, New ICC, Engelhard, E Partner or E/ICC
to comply with any obligation, covenant, agreement or condition herein contained
may be expressly waived, in writing only, by the other parties hereto and such
waiver shall be effective only in the specific instance and for the specific
purpose for which made or given.
14.12. Conciliation; Remedies; etc.
A. Engelhard and E Partner (on behalf of themselves, their Affiliates
and their successors and assigns) hereby agree not to initiate or otherwise be
party to, any legal proceedings, claims or suits (whether in contract or tort,
for gross negligence or negligence, or as a minority equity holder) whatsoever
with respect to the management, business or operations of Box LP, and agree that
the general partner (and its successors and Affiliates) of Box LP shall have the
full and unfettered right to make any and all decisions regarding the
management, business and operations of Box LP. ICC, I Partner and New ICC (on
behalf of themselves, their Affiliates and their successors and assigns) hereby
agree not to initiate or otherwise be party to any legal proceedings, claims or
suits (whether in contract or tort, for gross negligence or negligence, or as a
minority equity holder) whatsoever with respect to the business or operations of
Wheel LP, and agree that the general partner (and its successors and Affiliates)
of Wheel LP shall have the full and unfettered right to make any and all
decisions regarding the business and operations of Wheel LP. In the event that
any provision of this paragraph A is unenforceable or inapplicable with respect
to any legal proceedings, the parties agree that Sections 14.12B and C shall
nonetheless apply with full force and effect.
B. The parties agree that, prior and as a condition to the commencement
of any litigation or proceeding relating in any way to this Agreement, the
Related Agreements or the Transaction Documents, the aggrieved party shall first
submit to the other parties a detailed summary of all asserted grievances.
Within fifteen days thereafter, the parties shall submit such grievances for
conciliation to a conciliator appointed by the American Arbitration Association,
which entity shall make a written determination within thirty days as to whether
such grievances relate principally to the matters covered in Section 14.12A
above.
<PAGE> 109
-33-
C. EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND STATE OF DELAWARE COURTS IN CONNECTION WITH ANY
DISPUTE WHATSOEVER RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS OR THE
TRANSACTION DOCUMENTS. EACH OF THE PARTIES TO THIS AGREEMENT AGREES THAT ANY
SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY RIGHTS UNDER OR WITH RESPECT
TO THIS AGREEMENT, THE RELATED AGREEMENTS OR THE TRANSACTION DOCUMENTS MAY ONLY
BE INSTITUTED IN SUCH COURTS, WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
14.13. Joinder of Box LP and Wheel LP.
At the Closing, each of Box LP and Wheel LP shall execute and deliver a
counterpart of this Agreement to each of the other parties hereto and each of
the parties agrees that by virtue thereof each of Box LP and Wheel LP shall
become a party hereto and shall be entitled to all of the rights and benefits
granted, and bound by all of the obligations designated, to each of them under
this Agreement.
<PAGE> 110
-34-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed in its name and on its behalf, all as of the date
first above written.
ICC TECHNOLOGIES, INC.
By: /s/ Irwin Gross
---------------------------------------
Name: Irwin Gross
Title: CEO
ICC DESICCANT TECHNOLOGIES, INC.
By: /s/ Irwin Gross
---------------------------------------
Name: Irwin Gross
Title: President
ICC INVESTMENT, L.P.
By: ILLEGIBLE SIGNATURE
---------------------------------------
its general partner
By: /s/ Irwin Gross
---------------------------------------
Name: Irwin Gross
Title: President
ENGELHARD CORPORATION
By: /s/ David M. Wexler
---------------------------------------
Name: David M. Wexler
Title: Vice President
ENGELHARD DT, INC.
By: /s/ David M. Wexler
---------------------------------------
Name: David M. Wexler
Title: President
<PAGE> 111
-35-
ENGELHARD/ICC
By its General Partners
ICC DESICCANT TECHNOLOGIES, INC.
By: /s/ Irwin Gross
---------------------------------------
Name: Irwin Gross
Title: President
ENGELHARD DT, INC.
By: /s/ David M. Wexler
---------------------------------------
Name: David M. Wexler
Title: President
<PAGE> 112
Exhibit C
Contribution Agreement
<PAGE> 113
================================================================================
CONTRIBUTION AGREEMENT
Between
ENGELHARD/ICC
And
FRESH AIR SOLUTIONS, L.P.
Dated as of November 17, 1997
================================================================================
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS..................................................................................... 1
ARTICLE II TRANSFER AND RETENTION OF ASSETS AND LIABILITIES................................................ 4
2.1. Transfer of Box Assets.......................................................................... 4
2.2. Assumption of Box Liabilities................................................................... 7
2.3. E/ICC Retention of Wheel Assets................................................................. 8
2.4. E/ICC Retention of Wheel Liabilities............................................................ 10
2.5. As Is/Where Is.................................................................................. 11
2.6. Other Assets and Liabilities of E/ICC........................................................... 12
2.7. Closing......................................................................................... 12
2.8. Instruments of Transfer and Conveyance.......................................................... 13
2.9. Intercompany Accounts........................................................................... 13
2.10. Employee Benefit Plans.......................................................................... 13
2.11. Royalty Agreement............................................................................... 13
ARTICLE III COVENANTS OF E/ICC.............................................................................. 13
ARTICLE IV COVENANTS OF BOX................................................................................ 14
ARTICLE V CONDITIONS PRECEDENT TO ALL PARTIES' OBLIGATIONS................................................ 14
5.1. Partnership In Effect........................................................................... 14
5.2. Related Agreements.............................................................................. 14
5.3. ICC Stockholder Approval........................................................................ 15
ARTICLE VI CONDITIONS PRECEDENT TO E/ICC'S OBLIGATIONS..................................................... 15
6.1. Litigation and Proceedings...................................................................... 15
6.2. Approvals and Consents.......................................................................... 16
ARTICLE VII CONDITIONS PRECEDENT TO BOX'S OBLIGATIONS....................................................... 16
7.1. Litigation and Proceedings...................................................................... 16
7.2. Approvals and Consents.......................................................................... 16
</TABLE>
-i-
<PAGE> 115
<TABLE>
Page
----
<S> <C> <C>
ARTICLE VIII CLOSING DATE; CLOSING.......................................................................... 17
8.1. Closing Date; Closing.......................................................................... 17
ARTICLE IX TERMINATION AND ABANDONMENT, ETC............................................................... 17
9.1. Methods of Termination......................................................................... 17
9.2. Effect of Termination.......................................................................... 18
ARTICLE X MISCELLANEOUS PROVISIONS....................................................................... 18
10.1. Expenses....................................................................................... 18
10.2. Assignment and Binding Effect.................................................................. 18
10.3. Construction................................................................................... 19
10.4. Notices........................................................................................ 19
10.5. Benefit........................................................................................ 19
10.6. Headings....................................................................................... 20
10.7. Schedules, etc................................................................................. 20
10.8. Counterparts................................................................................... 20
10.9. Entire Agreement and Amendment................................................................. 20
10.10. Waiver of Compliance........................................................................... 20
10.11. Waiver of Bulk Transfer Requirements........................................................... 21
10.12. Joinder of Wheel LP............................................................................ 21
</TABLE>
-ii-
<PAGE> 116
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT dated as of November 17, 1997 (the "Agreement"),
by and between Engelhard/ICC, a Pennsylvania general partnership ("E/ICC"), and
Fresh Air Solutions, L.P., a Pennsylvania limited partnership ("Box").
W I T N E S S E T H :
WHEREAS, E/ICC, ICC Technologies, Inc., a Delaware corporation ("ICC"),
ICC Dessicant Technologies, Inc., a Delaware corporation ("I Partner"), ICC
Investment LP, a Pennsylvania limited partnership ("New ICC"), Engelhard
Corporation, a Delaware corporation ("Engelhard"), and Engelhard DT, Inc., a
Delaware corporation ("E Partner"), have entered into a Master Agreement dated
as of November 17, 1997 (the "Master Agreement") relating, among other things,
to this Agreement;
WHEREAS, E/ICC is engaged in the Box Business (as hereinafter defined)
and the Wheel Business (as hereinafter defined); and
WHEREAS, E/ICC wishes to contribute the assets and liabilities of the
Box Business to Box in return for all of the partnership interests of Box;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally bound hereby
agree as follows:
ARTICLE I
DEFINITIONS
"Affiliate" as to any person means any other Person Controlled by,
Controlling or under common Control with such Person.
"Box Assets" has the meaning ascribed to such term in Section 2.1
hereof.
<PAGE> 117
-2-
"Box Business" means the design, manufacture, assembly, marketing and
sale of Climate Control Systems for the cooling, dehumidification, drying,
heating, ventilation, and microbe reduction markets.
"Box Liabilities" has the meaning ascribed to such term in Section 2.2
hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
"Climate Control Systems" means all air conditioning or air treatment
systems (whether preassembled units or kits that are to be assembled by
distributors, licensees, customers or affiliates of Box) that cool, dehumidify,
dry, heat and/or filter air; provided, however, that any such system shall only
be a "Climate Control System" if it operates, in part, by passing air through
one or more wheel-shaped rotors, which rotors may or may not be treated with a
desiccant material.
"Closing" has the meaning ascribed to such term in Section 2.7 hereof.
"Closing Date" has the meaning ascribed to such term in Section 8.1
hereof.
"Control, Controlling, Controlled" as to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or partnership interests, by contract or
otherwise.
"Environmental Laws" means all Federal, state, local and foreign laws
and regulations, codes, orders, decrees, judgments, injunctions or consent
orders applicable to the business of E/ICC, and all notices or requests for
information received by E/ICC relating to the business of E/ICC issued,
promulgated, approved or entered thereunder relating to public health or safety,
worker health or safety, or pollution (including noise and radiation pollution),
damage to or protection of the environment including, without limitation, laws
relating to emissions, discharges, Releases or threatened Releases (as defined
in CERCLA) of pollutants, contaminants, chemicals, or industrial, toxic or
Hazardous Substances, or wastes into the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, generation, disposal, transport or
<PAGE> 118
-3-
handling of pollutants, contaminants, chemicals, or industrial, toxic or
Hazardous Substances, or wastes.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, whether local,
city, state, federal or foreign.
"Hazardous Substances" means all Hazardous Substances as defined in
CERCLA or in OSHA's Hazardous Communication Standard and petroleum products and
waste and all radioactive materials and waste.
"Lien" means any lien, mortgage, pledge, security interest charge or
encumbrance of any kind (including, without limitation, any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Losses" has the meaning ascribed to such term in Section 10.1 hereof.
"Permitted Encumbrances" means (i) any Lien for current taxes not
delinquent or taxes being contested in good faith and by appropriate
proceedings, (ii) any Lien (including, without limitation, mechanics' liens and
similar Liens) arising in the ordinary course of business for sums not now due
or sums being contested in good faith and by appropriate proceedings and Liens
securing appeal bonds, workmen's compensation bonds and similar bonds, and (iii)
covenants, conditions and restrictions of record arising in the ordinary course
of business, which covenants, conditions and restrictions are not violated by
existing uses or improvements and do not materially interfere with the use of
the property and do not affect the merchantability of title or contain any
provision for reversion or forfeiture.
"Person" or "person" means an individual or a corporation, partnership,
trust, unincorporated association or other entity.
"Subsidiary" means, with respect to any person, (i) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person or (ii) any other person (other than a corporation)
in which such person, one or more Subsidiaries of such person, or such person
and one or more
<PAGE> 119
-4-
Subsidiaries of such person, directly or indirectly, at the date of
determination thereof has at least a majority ownership interest.
"Taxes" means all Federal, state, local, foreign and provincial income,
capital gains, property transfer, payroll, withholding, excise, sales, use, use
and occupancy, mercantile, real estate, personal property, value added, capital
stock, franchise or other taxes, assessments or charges and estimated taxes
relating thereto (and interest and penalties thereon).
"Wheel Assets" has the meaning ascribed to such term in Section 2.3
hereof.
"Wheel Business" means the design, manufacture, assembly, marketing and
sale of products fabricated from honeycomb substrates and any and all rotors or
wheels or similar products used in Climate Control Systems.
"Wheel Liabilities" has the meaning ascribed to such term in Section
2.4 hereof.
ARTICLE II
TRANSFER AND RETENTION OF ASSETS AND LIABILITIES
2.1. Transfer of Box Assets.
Subject to the terms and conditions of this Agreement, on the Closing
Date, E/ICC agrees to transfer, convey, assign and deliver to (and reserve no
rights with respect to) Box all of its respective right, title and interest in
and to the Box Assets, in exchange for a 99% limited partnership interest and a
1% general partnership interest in Box. The term "Box Assets" shall mean all of
the assets (including cash), properties and business of E/ICC of every kind and
description, wherever located, whether tangible or intangible, real, personal or
mixed, as such assets shall exist on the Closing Date and which directly relate
to or are directly used in the Box Business (it being presumed that an asset
(including cash) or property insofar as it is directly related to or is located
at the Hatboro facility shall be a Box Asset). In furtherance of the foregoing,
the Box Assets shall include, without limitation, assets, properties and
business listed below in subparagraphs (a)-(m); provided that the Box Assets
shall not include (x) the E/ICC name or (y) the Wheel Assets:
<PAGE> 120
-5-
(a) All gross accounts and notes receivable (trade or otherwise) of
E/ICC arising out of the Box Business and outstanding at the Closing Date;
(b) All inventories of E/ICC intended for use or sale in the Box
Business, including, without limitation, all raw materials, work in process,
labeling and packaging, finished goods and products ordered and held for
shipment or in transit and other finished goods and products;
(c) All right, title and interest of E/ICC in and to all real property
owned or leased by E/ICC and used in the Box Business, as set forth on
Schedule 2.1(c) hereto, together with all interests of E/ICC in the
buildings, facilities, fixtures and other improvements thereon and all
easements, rights of way, licenses, transferable permits and other
appurtenances thereto;
(d) All right, title and interest of E/ICC in and to all plant,
machinery, manufacturing and laboratory equipment, testing equipment, parts,
furniture, furnishings, office and computer equipment and other fixed assets
owned or leased by E/ICC and used in the Box Business, as set forth on
Schedule 2.1(d) hereto;
(e) All right, title and interest of E/ICC in and to all trucks, cars,
rolling stock and other similar vehicles owned or leased by E/ICC and used
in the Box Business, as set forth on Schedule 2.1(e) hereto;
(f) All trademarks and trademark applications, patents and patent
applications, service marks, service mark registrations and service mark
applications, trade names (whether or not registered or registrable) and
applications therefor, product names, copyrights and copyright registrations
and applications therefor of E/ICC and relating directly to the Box
Business, as set forth on Schedule 2.1(f) hereto and other than those
covered by the E/ICC License Agreement (as defined in the Master Agreement);
(g) All trade secrets, proprietary information, inventions, methods,
designs, processes, manufacturing methods, procedures and formulas owned or
licensed by E/ICC and relating directly to the Box Business, and any and all
improvements thereon, refinements thereof or know-how relating thereto, in
each case whether or not patented or
<PAGE> 121
-6-
able to be patented or registered or able to be registered with any
governmental authorities and other than those relating directly to products
to be supplied by Wheel LP under the Rotor Supply Agreement (as defined in
the Master Agreement);
(h) All right, title and interest of E/ICC in and to all interests in
any and all assignable and transferable insurance policies, third-party
indemnities, and fidelity, surety or similar bonds and the coverages
afforded thereby of E/ICC which relate directly to the Box Business, as set
forth on Schedule 2.1(h) hereto;
(i) All rights of E/ICC under or pursuant to all warranties,
representations and guarantees made by third-party suppliers in connection
with products or services furnished to E/ICC or affecting the real estate,
machinery or equipment of E/ICC, in each case, which are used in the Box
Business;
(j) All rights and interests of E/ICC (including prepaid expenses) to
any pending or executory contracts with respect to the purchase of
materials, supplies, services and claims and with respect to the sale of the
products or services of E/ICC and claims and rights of every kind, including
without limitation judgments and causes of action, in each case, which
relate directly to the Box Business and as set forth on Schedule 2.1(j)
hereto;
(k) All joint development agreements, distribution agreements, license
agreements and other agreements which relate directly to the Box Business,
as set forth on Schedule 2.1(k) hereto;
(l) All of E/ICC's licenses and permits and records, files and papers,
including but not limited to drawings, engineering information, computer
programs, manuals and data, catalogues, quotations, sales and advertising
materials, sales and purchase correspondence, trade association memberships,
research and development records, lists of present and former customers and
suppliers, customer credit information, books of account, financial records
and employee files and records which relate to the Box Business (other than
historical corporate records not necessary for operation of the Box
Business); and
(m) All of the rights of E/ICC to the services of the employees listed
on Schedule 2.1(m) hereto.
<PAGE> 122
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2.2. Assumption of Box Liabilities.
(a) As part of the consideration for the transfer, conveyance,
assignment and delivery of the Box Assets to Box by E/ICC referred to in Section
2.1 hereof, Box will assume and undertake to pay and perform in accordance with
and subject to their respective terms all debts, liabilities and executory
obligations insofar as they relate to or are directly a result of the Box
Business (it being presumed that a debt, liability or executory obligation
relating to or arising out of the Hatboro facility shall be a Box Liability (as
defined below)) and all warranty claims for products shipped, or services
provided, by E/ICC prior to the Closing Date and including, without limitation,
the following debts, liabilities and executory obligations of E/ICC as such
debts, liabilities and obligations shall exist on the Closing Date and shall
arise thereafter (the "Box Liabilities"):
(i) liability for all trade accounts payable of E/ICC incurred in
connection with the Box Business;
(ii) liability for E/ICC's employee wages, salaries, payroll taxes and
accrued, earned and deferred vacations related to the Box Business,
including those employees listed on Schedule 2.1(m) arising in the ordinary
course of business (and not arising pursuant to any employment, consulting
or similar contract) and remaining unpaid in the ordinary course of business
on the Closing Date except with respect to those employees listed on
Schedule 2.2(a)(ii) and Schedule 2.3(m);
(iii) liability for the obligations under the contracts, agreements,
commitments and equipment leases being transferred as part of the Box Assets
and liabilities related to or arising out of all warranty claims by third
parties;
(iv) liabilities related to or arising out of any employment,
consulting or similar contract or unemployment compensation benefits or
costs, worker's compensation claims or any other employment plans or
policies, related to the Box Business, except with respect to those
employees listed on Schedule 2.2(a)(ii) and Schedule 2.3(m);
(v) liabilities under Environmental Laws, any costs and expenses of
any proceeding relating thereto and any costs and expenses of avoiding such
liabilities which arise out of or relate to the ownership, leasing or
opera-
<PAGE> 123
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tion of any of the Box Assets (or assets previously used or related to the
Box Business);
(vi) all liabilities arising out of or related to warranty claims for
products shipped, or services provided, by E/ICC prior to the Closing Date;
and
(vii) liabilities with respect to all obligations of E/ICC with respect
to the line of credit provided by Mellon Bank, N.A.
(b) Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, Box does not assume or undertake any debt, liability
or executory obligation of E/ICC which is a Wheel Liability.
2.3. E/ICC Retention of Wheel Assets.
Subject to the terms and conditions of this Agreement, on the Closing
Date, E/ICC will retain (and reserve all of its respective right, title and
interest in and to the Wheel Assets. The term "Wheel Assets" shall mean all of
the assets, properties and business of E/ICC of every kind and description,
wherever located, whether tangible or intangible, real, personal or mixed, as
such assets shall exist on the Closing Date and which directly relate to or are
used in the Wheel Business (it being presumed that an asset (including cash) or
property insofar as it is directly related to or is located at the Miami
facility shall be a Wheel Asset). In furtherance of the foregoing, the Wheel
Assets shall include, without limitation, the assets, properties and business
listed below in subparagraphs (a)-(m); provided that the Wheel Assets shall not
include the Box Assets:
(a) All gross accounts and notes receivable (trade or otherwise) of
E/ICC arising out of the Wheel Business and outstanding at the Closing Date;
(b) All inventories of E/ICC intended for use or sale in the Wheel
Business, including, without limitation, all raw materials, work in process,
labeling and packaging, finished goods and products ordered and held for
shipment or in transit and other finished goods and products;
(c) All right, title and interest of E/ICC in and to all real property
owned or leased by E/ICC and used in the Wheel Business, as set forth on
Schedule 2.3(c) hereto,
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together with all interests of E/ICC in the buildings, facilities, fixtures
and other improvements thereon and all easements, rights of way, licenses,
transferable permits and other appurtenances thereto;
(d) All right, title and interest of E/ICC in and to all plant,
machinery, manufacturing and laboratory equipment, testing equipment, parts,
furniture, furnishings, office and computer equipment and other fixed assets
owned or leased by E/ICC and used in the Wheel Business, as set forth on
Schedule 2.3(d) hereto;
(e) All right, title and interest of E/ICC in and to all trucks, cars,
rolling stock and other similar vehicles owned or leased by E/ICC and used
in the Wheel Business, as set forth on Schedule 2.3(e) hereto;
(f) All trademarks and trademark applications, patents and patent
applications, service marks, service mark registrations and service mark
applications, trade names (whether or not registered or registrable) and
applications therefor, product names, copyrights and copyright registrations
and applications therefor of E/ICC and relating directly to the Wheel
Business, as set forth on Schedule 2.3(f) hereto;
(g) All trade secrets, proprietary information, inventions, methods,
designs, processes, manufacturing methods, procedures and formulas owned or
licensed by E/ICC and relating directly to the Wheel Business, and any and
all improvements thereon, refinements thereof or know-how relating thereto,
in each case whether or not patented or able to be patented or registered or
able to be registered with any governmental authorities and other than those
covered by the Box Technology License Agreement (as defined in the Master
Agreement);
(h) All right, title and interest of E/ICC in and to all interests in
any and all assignable and transferable insurance policies, third-party
indemnities, and fidelity, surety or similar bonds and the coverages
afforded thereby of E/ICC which relate directly to the Wheel Business as set
forth on Schedule 2.3(h) hereto;
(i) All rights of E/ICC under or pursuant to all warranties,
representations and guarantees made by third-party suppliers in connection
with products or services furnished to E/ICC or affecting the real estate,
machinery
<PAGE> 125
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or equipment of E/ICC, in each case, which are used in the Wheel Business;
(j) All rights and interests of E/ICC (including prepaid expenses) to
any pending or executory contracts with respect to the purchase of
materials, supplies, services and claims and with respect to the sale of the
products or services of E/ICC and claims and rights of every kind, including
without limitation judgments and causes of action, in each case, which
relate directly to the Wheel Business and as set forth on Schedule 2.3(j)
hereto;
(k) All joint development agreements, distribution agreements, license
agreements and other agreements which relate directly to the Wheel Business,
as set forth on Schedule 2.3(k) hereto;
(l) All of E/ICC's licenses and permits and records, files and papers,
including but not limited to drawings, engineering information, computer
programs, manuals and data, catalogues, quotations, sales and advertising
materials, sales and purchase correspondence, trade association memberships,
research and development records, lists of present and former customers and
suppliers, customer credit information, books of account, financial records
and employee files and records which relate to the Wheel Business (other
than historical corporate records not necessary for operation of the Wheel
Business); and
(m) All of the rights of E/ICC to the services of the employees listed
on Schedule 2.3(m) hereto.
2.4. E/ICC Retention of Wheel Liabilities.
(a) E/ICC will retain and pay and perform in accordance with and
subject to their respective terms all debts, liabilities and executory
obligations insofar as they relate to or are directly a result of the Wheel
Business (it being presumed that a debt, liability or executory obligation
relating to or arising out of the Miami facility shall be a Wheel Liability (as
defined below)) and including, without limitation, the following debts,
liabilities and executory obligations of E/ICC as such debts, liabilities and
obligations shall exist on the Closing Date and shall arise thereafter (the
"Wheel Liabilities"):
(i) liability for all trade accounts payable of E/ICC incurred in
connection with the Wheel Business;
<PAGE> 126
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(ii) liability for E/ICC's employee wages, salaries, payroll taxes and
accrued, earned and deferred vacations related to the Wheel Business,
including those employees listed on Schedule 2.2(a)(ii) and Schedule 2.3(m)
arising in the ordinary course of business (and not arising pursuant to any
employment, consulting or similar contract) and remaining unpaid in the
ordinary course of business on the Closing Date;
(iii) liability for the obligations under the contracts, agreements,
commitments and equipment leases being retained as part of the Wheel Assets;
(iv) liabilities related to or arising out of any employment,
consulting or similar contract or for unemployment compensation benefits or
costs, worker's compensation claims or any other employment plans or
policies related to the Wheel Business, including those employees listed on
Schedule 2.2(a)(ii) and Schedule 2.3(m);
(v) liability for the obligations under the $8,500,000 Dade County
Industrial Development Revenue Bonds, Series 1995 of E/ICC; and
(vi) liabilities under Environmental Laws, any costs and expenses of
any proceeding relating thereto and any costs and expenses of avoiding such
liabilities which arise out of or relate to the ownership, leasing or
operation of any of the Wheel Assets (or assets previously used or related
to the Wheel Business).
(b) Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, E/ICC will not retain or pay any debt, liability or
executory obligation of E/ICC which is a Box Liability, including, without
limitation, with respect to warranty claims for products shipped, or services
provided, by E/ICC prior to the Closing Date.
2.5. As Is/Where Is.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IT IS THE
EXPRESS INTENTION OF THE PARTIES THAT BOX SHALL RECEIVE THE BOX ASSETS ON AN "AS
IS/WHERE IS" BASIS. EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT IT IS INFORMED
AND AWARE OF ALL FACTS CONCERNING THE ASSETS AND LIABILITIES RELATING TO THE BOX
ASSETS AND THE BOX BUSINESS. E/ICC HAS NOT MADE, AND SHALL NOT BE DEEMED TO HAVE
MADE, ANY REPRESENTATION OR WARRANTY, NOR SHALL E/ICC HAVE ANY LIABILITY
WHATSOEVER, AS
<PAGE> 127
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TO TITLE TO THE BOX ASSETS OR TO THE VALUE, MERCHANTABILITY, CONDITION OR
FITNESS FOR USE OF THE BOX ASSETS, OR ANY PORTION THEREOF, OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE BOX ASSETS
OR ANY PORTION THEREOF, AND E/ICC SHALL NOT BE LIABLE FOR ANY LATENT, HIDDEN OR
PATENT DEFECT THEREIN OR THE FAILURE OF ANY OF THE BOX ASSETS TO COMPLY WITH
APPLICABLE LAW.
2.6. Other Assets and Liabilities of E/ICC.
(a) To the extent that assets or liabilities of E/ICC are not
specifically identified herein to be transferred to Box or retained by E/ICC,
each of Box and E/ICC agree to negotiate in good faith regarding the transfer or
retention of such assets or liabilities based on a reasonable determination as
to whether such asset or liability relates, directly or indirectly, principally
to the Wheel Business, on the one hand, or principally to the Box Business, on
the other.
(b) Notwithstanding anything to the contrary set forth herein or in the
Master Agreement, Box and Wheel hereby agree to share equally in the liabilities
and reasonable expenses (and any recoveries) arising solely out of any claims,
demands, actions or suits that are related to or result from E/ICC's termination
of two (2) leases, dated March 25, 1993 and June, 1995, as supplemented by
various assignments, by and between Arsenal, Inc. ("Arsenal"), as landlord, and
E/ICC, as tenant. It is agreed that the sharing of such liabilities and expenses
shall not be subject to the $50,000 liability threshold set forth in Section 13
of the Master Agreement. Such claims may include, without limitation, a demand
for unpaid rent by Arsenal against I Partner, E Partner, E/ICC or any of their
respective affiliates and may or may not be presented by Arsenal as a
counterclaim in the litigation captioned ICC Desiccant Technologies, Inc. v.
Arsenal, Inc., No. 0134, Filed August, 1997 in the court of Common Pleas of
Philadelphia County, Pennsylvania.
2.7. Closing.
The closing of (i) the transfer of the Box Assets and the Box
Liabilities to Box and (ii) the distribution of the partnership interests of Box
to E/ICC (the "Closing") shall take place on the Closing Date at such location
as the parties shall mutually agree. At the Closing, E/ICC shall deliver to Box
the documents provided in Section 8.1 hereof and Box shall deliver to E/ICC the
documents provided in Section 8.1 hereof.
<PAGE> 128
-13-
2.8. Instruments of Transfer and Conveyance.
The conveyance, transfer, assignment and delivery of the Box Assets as
herein provided shall be effected by delivery by E/ICC on the Closing Date of a
blanket bill of sale for all personal property and appropriate conveyancing
documents for all interests in real property and delivery by Box of an
assumption agreement relating to the Box liabilities.
2.9. Intercompany Accounts.
At the Closing, all internal intrapartnership accounts of E/ICC
(including charges to and from the Miami and Hatboro facilities) shall be
eliminated. At the Closing, all amounts owing by E/ICC to Engelhard, E Partner,
ICC or I Partner shall be paid in full (net of any amounts owed by such party to
E/ICC).
2.10. Employee Benefit Plans.
Prior to the Closing, the parties shall cooperate with each other to
arrange for mutually satisfactory arrangements with respect to the transfer or
termination of E/ICC employee benefit plans and the resolution of such matters
to the satisfaction of each party hereto shall be a condition to the Closing.
2.11. Royalty Agreement.
Prior to Closing, the parties shall cooperate with each other to
arrange for mutually satisfactory arrangements with respect to the division of
rights and obligations under the Royalty Agreement among Engelhard/ICC, James
Coellner and Dean Calton dated February 7, 1994 and the resolution of such
matters to the satisfaction of each party hereto shall be a condition to the
Closing.
ARTICLE III
COVENANTS OF E/ICC
From and after the date of this Agreement E/ICC shall (i) do or cause
to be done such further acts and things and deliver or cause to be delivered to
Box and/or its designees such additional assignments, agreements, powers and
instruments, as Box and/or its designees may reasonably require to carry into
<PAGE> 129
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effect the purposes of this Agreement and (ii) use its reasonable efforts to
cause the fulfillment of E/ICC's obligations hereunder.
ARTICLE IV
COVENANTS OF BOX
From and after the date of this Agreement, Box shall (i) do or cause to
be done such further acts and things and deliver or cause to be delivered to
E/ICC and/or its designees such additional assignments, agreements, powers and
instruments as E/ICC and/or its designees may reasonably require to carry into
effect the purposes of this Agreement and (ii) use its reasonable efforts to
cause the fulfillment of Box's obligations hereunder.
ARTICLE V
CONDITIONS PRECEDENT TO ALL PARTIES' OBLIGATIONS
The performance of the obligations of each of the parties hereto on the
Closing Date is subject to the following conditions precedent:
5.1. Partnership In Effect.
Box shall have full partnership power and authority to carry on its
business as contemplated to be conducted and to execute, deliver and perform its
obligations under the Related Agreements to which it is a party. The Box
Partnership Agreement shall be in full force and effect, no party shall be in
default thereunder, and no circumstances shall exist which with the passage of
time or notice or both would constitute a default thereunder.
5.2. Related Agreements.
At a time agreed to by all parties thereto, the Transaction Documents
and the Related Agreements shall have been entered into by the parties thereto,
such parties shall have performed all obligations required to be performed
thereunder and such documents shall be in full force and effect.
<PAGE> 130
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5.3. ICC Stockholder Approval.
This Agreement and the transactions contemplated hereby (including the
Master Agreement, the Transaction Documents and the Related Agreements) shall
have been duly approved by shareholders owning a majority of the outstanding
shares of common stock of ICC.
ARTICLE VI
CONDITIONS PRECEDENT TO E/ICC'S OBLIGATIONS
The performance of the obligations of E/ICC on the Closing Date, in
addition to being subject to the satisfaction of the conditions set forth in
Article V hereof, is subject to satisfaction of the following conditions at or
prior to the Closing Date (any of which may be waived by E/ICC as evidenced by a
written instrument executed by both of its general partners):
6.1. Litigation and Proceedings.
No action or proceeding shall have been instituted or threatened
against any of the parties to this Agreement or their partners, directors or
officers by or before any Governmental Entity to restrain, enjoin, prohibit or
otherwise challenge, or to obtain substantial damages or other relief in respect
of, this Agreement and/or the consummation of the transactions contemplated
hereby and thereby which in the opinion of E/ICC (as evidenced by a written
instrument executed by both of its general partners) would make it inadvisable
to consummate such transactions. No party to this Agreement shall have received
written notice from any Governmental Entity of its intention to (i) institute
any action or proceeding to restrain or enjoin the consummation of the
transactions contemplated hereby or thereby or to nullify or render ineffective
this Agreement, the Transaction Documents, the Related Agreements or such
transactions if consummated, or (ii) commence any investigation into the
execution of this Agreement, the Transaction Documents or the Related Agreements
and the consummation of the transactions contemplated hereby or thereby, which
action, proceeding or investigation in the opinion of E/ICC (as evidenced by a
written instrument executed by both of its general partners) would make it
inadvisable to consummate the transactions contemplated hereby or thereby.
<PAGE> 131
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6.2. Approvals and Consents.
No Governmental Entity shall have indicated its objection to, or its
intent to challenge as violative of any federal, state or foreign laws, any of
the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO
BOX'S OBLIGATIONS
The performance of the obligations of Box, on the Closing Date, in
addition to being subject to the satisfaction of the conditions set forth in
Article V hereof, is subject to satisfaction of the following conditions at or
prior to the Closing Date (any of which may be waived by Box):
7.1. Litigation and Proceedings.
No action or proceeding shall have been instituted or threatened
against any of the parties to this Agreement, or their partners, directors or
officers by or before any Governmental Entity to restrain, enjoin, prohibit or
otherwise challenge, or to obtain substantial damages or other relief in respect
of, this Agreement or the consummation of the transactions contemplated hereby
which in the opinion of Box would make it inadvisable to consummate such
transactions. No party to this Agreement, the Transaction Documents and the
Related Agreements shall have received written notice from any Governmental
Entity of its intention to (i) institute any action or proceeding to restrain or
enjoin the consummation of the transactions contemplated hereby or thereby or to
nullify or render ineffective this Agreement, the Transaction Documents, the
Related Agreements or such transactions if consummated, or (ii) commence any
investigation into the execution of this Agreement, the Transaction Documents or
the Related Agreements and the consummation of the transactions contemplated
hereby or thereby, which action, proceeding or investigation in the opinion of
Box would make it inadvisable to consummate the transactions contemplated hereby
or thereby.
7.2. Approvals and Consents.
No Governmental Entity shall have indicated its objection to, or its
intent to challenge as violative of any fed-
<PAGE> 132
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eral, state or foreign laws, any of the transactions contemplated by this
Agreement.
ARTICLE VIII
CLOSING DATE; CLOSING
8.1. Closing Date; Closing.
The Closing hereunder shall take place on the date on which all the
conditions precedent set forth in Articles V, VI and VII hereof shall have been
satisfied or waived, or at such other time and place as the parties hereto shall
agree (the "Closing Date"). At the Closing, the parties will exchange
certificates evidencing satisfaction or waiver of all conditions set forth in
Articles V, VI and VII hereof and, upon satisfaction or waiver of all such
conditions, (i) E/ICC shall deliver to Box the instruments of transfer and
conveyance required by Section 2.8, and (ii) Box shall deliver to E/ICC its
initial partnership interests.
ARTICLE IX
TERMINATION AND ABANDONMENT, ETC.
9.1. Methods of Termination.
This Agreement may be terminated and the transfer of the Box Assets
herein contemplated may be abandoned at any time prior to the Closing: (a) by
mutual written consent of E/ICC and Box; or (b) by either E/ICC or Box, by
written notice to the other, if the Closing has not occurred on or before the
Termination Date unless a later date is established by the mutual written
consent of such parties before or after such date or unless the failure of such
consummation by the Termination Date shall be due to the failure of the party
seeking to terminate this Agreement to perform its obligations under this
Agreement required to be performed by it on or prior to such date pursuant to
the terms hereof. The "Termination Date" shall be March 31, 1998.
<PAGE> 133
-18-
9.2. Effect of Termination.
After termination and abandonment as permitted by Section 9.1 hereof:
(a) Termination of this Agreement pursuant to Section 9.1 shall
terminate all obligations and liabilities of the parties hereunder,
including their officers and directors, except for the obligations under
this Section 9.2, Section 10.1 and Section 10.10; provided, however, that
termination pursuant to clause (b) of Section 9.1 shall not relieve the
defaulting or breaching party from any liability to any other party hereto;
and
(b) Each party hereto will redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, and all copies of such materials, whether so obtained before or
after the execution hereof, to the party furnishing the same.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Expenses.
Each of the parties hereto shall bear all expenses incurred by it in
connection with this Agreement and the consummation of the transactions
contemplated hereby and thereby and preparation therefor; provided, however,
that Box shall pay all transfer and other similar taxes incurred in connection
with the assignment and transfer of the Box Assets.
10.2. Assignment and Binding Effect.
This Agreement and any of the rights or obligations hereunder shall not
be assignable except to an Affiliate by any party without the prior written
consent of the other parties hereto. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
<PAGE> 134
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10.3. Construction.
This Agreement shall be governed, construed and enforced in accordance
with the laws of the State of Pennsylvania without regard to principles of
conflicts of laws.
10.4. Notices.
All notices, demands, requests and other communications required or
permitted to be given hereunder shall be in writing and deemed duly given on the
date delivered by hand, mailed by registered or certified mail, postage prepaid
or sent by overnight courier and, pending the designation of another address,
addressed as follows:
If to Box:
Fresh Air Solutions, L.P.
330 South Warminster Road
Hatboro, Pennsylvania 19040
Attn: Chairman
With a copy to:
Mesirov Gelman Jaffe
Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103
Attn: Richard P. Jaffe, Esquire
If to E/ICC:
E/ICC
3550 N.W. 49th Street
Miami, Florida 33142
Attn:
With a copy to:
General Counsel at
3550 N.W. 49th Street
Miami, Florida 33142
10.5. Benefit.
Nothing in this Agreement, express or implied, is intended or shall be
construed to confer upon or give to any person, firm or corporation other than
the parties hereto any remedy or claim under or by reason of this Agreement or
any term,
<PAGE> 135
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covenant or condition hereof, all of which shall be for the sole and exclusive
benefit of the parties hereto.
10.6. Headings.
The headings of the Sections and Articles of this Agreement are
inserted as a matter of convenience and for reference purposes only, are of no
binding effect, and in no respect define, limit or describe the scope of this
Agreement or the intent of any Section or Article.
10.7. Schedules, etc.
All schedules delivered pursuant to this Agreement shall be deemed part
of this Agreement and incorporated herein, where applicable, as if fully set
forth herein. All statements contained in any exhibit or schedule delivered by
or on behalf of the parties hereto, or in connection with the transactions
contemplated hereby, are an integral part of this Agreement.
10.8. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which for all purposes shall be deemed to be an original and all of which
together shall constitute the same agreement.
10.9. Entire Agreement and Amendment.
This Agreement, the Master Agreement, the Transaction Documents, and
the Related Agreements represent the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof. This Agreement can
be amended, modified, supplemented, extended, terminated (except as provided in
Article IX hereof), discharged or changed only by an agreement in writing which
makes specific reference to this Agreement and which is signed by the party
against whom enforcement of any such amendment, modification, supplement,
extension, termination, discharge or change is sought.
10.10. Waiver of Compliance.
Any failure of E/ICC or Box to comply with any obligation, covenant,
agreement or condition herein contained may be expressly waived, in writing
only, by the other parties hereto (and, in the case of E/ICC, evidenced by a
written instrument executed by both of its general partners) and such
<PAGE> 136
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waiver shall be effective only in the specific instance and for the specific
purpose for which made or given.
10.11. Waiver of Bulk Transfer Requirements.
The parties hereby waive compliance by E/ICC and Box with the
requirements of Article 6 of the Uniform Commercial Code (Bulk Transfers) as in
effect in any jurisdiction and all other applicable bulk sales laws.
10.12. Joinder of Wheel LP.
At the Closing, Wheel LP shall execute and deliver a counterpart of
this Agreement to each of the other parties hereto and each of the parties
agrees that by virtue thereof Wheel LP shall become a party hereto and shall be
entitled to all of the rights and benefits granted, and bound by all of the
obligations designated, to it (either expressly or as a successor to E/ICC upon
the Conversion (as defined in the Master Agreement)) under this Agreement.
<PAGE> 137
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed in its name and on its behalf, all as of the date
first above written.
ENGELHARD/ICC
By Its General Partners
ICC DESICCANT TECHNOLOGIES, INC.
By: /s/ Irvin Gross
--------------------------------------
Name: /s/ Irvin Gross
Title: President
ENGELHARD DT, INC.
By: /s/ David M. Wexler
--------------------------------------
Name: David M. Wexler
Title: President
FRESH AIR SOLUTIONS, L.P.
By Its General Partner
By: /s/ Irvin Gross
--------------------------------------
Name: /s/ Irvin Gross
Title: President
<PAGE> 138
-23-
The undersigned has caused this Agreement to be duly executed in its
name and on its behalf, as of , 1997, to by virtue thereof become a party to
this Agreement and entitled to all of the rights and benefits granted, and bound
by all of the obligations delegated to it (either expressly or as a successor to
E/ICC upon the Conversion (as defined in the Master Agreement)) under this
Agreement.
[WHEEL LP]
By: _________________________________
Name:
Title:
<PAGE> 139
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS ON FEBRUARY 23, 1998 SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY CONSTITUTES AND APPOINTS IRWIN L. GROSS,
CHAIRMAN OF THE BOARD OF ICC TECHNOLOGIES, INC. ("ICC") AND WILLIAM A. WILSON,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR OF THE COMPANY, OR EITHER OF
THEM INDIVIDUALLY AND EACH OF THEM WITH THE FULL POWER OF SUBSTITUTION, AS
ATTORNEY AND PROXY OF THE UNDERSIGNED FOR AND IN THE NAME, PLACE AND STEAD OF
THE UNDERSIGNED, TO APPEAR AT THE SPECIAL MEETING OF STOCKHOLDERS OF ICC TO BE
HELD ON THE 23RD DAY OF FEBRUARY 1998 AT 330 SOUTH WARMINSTER ROAD, HATBORO,
PENNSYLVANIA 19040, AND AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF, AND TO VOTE
ALL OF THE SHARES OF COMMON STOCK, WHICH THE UNDERSIGNED IS ENTITLED TO VOTE,
WITH ALL THE POWERS AND AUTHORITY THE UNDERSIGNED WOULD POSSESS IF PERSONALLY
PRESENT. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MASTER
AGREEMENT, DATED NOVEMBER 17, 1997, AMONG ICC, ICC DESICCANT TECHNOLOGIES, INC.,
ICC INVESTMENT, L.P., ENGELHARD CORPORATION, ENGELHARD DT, INC. AND
ENGELHARD/ICC, A GENERAL PARTNERSHIP IN WHICH ICC AND ENGELHARD CORPORATION,
THROUGH THEIR RESPECTIVE SUBSIDIARIES, EACH HAVE A FIFTY PERCENT (50%) GENERAL
PARTNERSHIP INTEREST, AND THE TRANSACTIONS CONTEMPLATED THEREUNDER.
THE UNDERSIGNED HEREBY DIRECTS THAT THIS PROXY BE VOTED AS FOLLOWS:
I. Approval of a Master Agreement by and among ICC, Engelhard Corporation
("Engelhard") and Engelhard/ICC, a joint venture owned equally by ICC
and Engelhard, which provides in substance for:
(a) the division of Engelhard/ICC into two separate operating limited
partnerships, one to manufacture and market complete, active Climate
Control Systems ("Box LP"), and the other to manufacture and market the
heat-exchange and desiccant coated wheel-shaped rotors that are
components of the Climate Control Systems ("Wheel LP"); and
(b) the exchange by ICC and Engelhard of certain of their respective
interests in each partnership and the payment by Engelhard to ICC of
approximately $18,600,000, such that after the exchanges:
(i) ICC will own 90% of Box LP and 20% of Wheel LP; and
(ii) Engelhard will own 80% of Wheel LP and 10% of Box LP,
as more fully described in the accompanying Proxy Statement and the
Master Agreement, a copy of which is attached thereto as Exhibit "B".
<PAGE> 140
FOR____ AGAINST____ ABSTAIN____
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED IN THE BOXES PROVIDED, THE PERSONS
NAMED HEREIN INTEND TO VOTE FOR APPROVAL OF THE MASTER AGREEMENT DATED NOVEMBER
17, 1997 AMONG ICC TECHNOLOGIES, INC., ICC DESICCANT TECHNOLOGIES, INC., ICC
INVESTMENT, L.P., ENGELHARD CORPORATION, ENGELHARD DT, INC. AND ENGELHARD/ICC,
AND THE TRANSACTIONS CONTEMPLATED THEREUNDER.
THIS PROXY CONFERS CERTAIN DISCRETIONARY AUTHORITY DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT. THE SAID ATTORNEY AND PROXY PRESENTED AT SAID
MEETING MAY EXERCISE ALL OF THE POWERS HEREUNDER. THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING PROXY STATEMENT.
Stockholder's Signature:
________________________________________ Dated: _____________ 1998
________________________________________ Dated: _____________ 1998
Note: It is necessary that you date this Proxy and sign your name (or names)
exactly as it appears on the label, indicating any official position or
representative capacity.
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