SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 14, 1998
EXCEL TECHNOLOGY, INC.
(Exact name of registrant as specified in charter)
Delaware 0-19306 11-2780242
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) identification No.)
incorporation)
41 Research Way, E. Setauket, New York 11733
(Address of principal executive officer)
Registrant's telephone number, including area code: (516) 273-6900
Item 2. Acquisition and Disposition of Assets
.....................................
On August 14, 1998, Excel Technology, Inc. (the "Company"), through
a newly formed wholly-owned subsidiary, Excel Purchasing Corporation
(name changed to Synrad, Inc. subsequent to the acquisition), acquired
substantially all of the assets and properties ("Business Assets") of
Synrad, Inc. ("Synrad"), a company engaged in the business of developing,
manufacturing and marketing sealed CO2 lasers and related accessories
(the "Business"), for $19,100,000 in cash, which includes transaction
costs, plus the assumption of approximately $2,600,000 of debt, all of
which has been paid, and the assumption of trade payables, accrued
expenses and other specified liabilities. The purchase price was
determined by arms length negotiations between the Company and Peter
Laakmann, the Chairman of Synrad and Trustee of the sole shareholder of
Synrad. A copy of the Asset Purchase Agreement is attached hereto as an
Exhibit and is incorporated herein by reference.
Jan Melles, a director of the Company, also served as a director of
Synrad.
In acquiring the Business Assets, the Company utilized its own cash
and borrowed $6,500,000 from its new $15 million line of credit from The
Bank of New York.
The Company will continue to utilize the Business Assets,
substantially all of which are located at a facility in Mukilteo,
Washington, in conducting the Business. Pursuant to the Asset Purchase
Agreement, the Company has retained substantially all of Synrad's
employees, but has no continuing employment arrangement with Mr.
Laakmann.
Item 7. Financial Statements, Pro Forma Financial Information and
.........................................................
Exhibits
........
(a) Financial Statements of Businesses Acquired.
Audited financial statements of Synrad, Inc. for the year ended
December 31, 1997; unaudited interim balance sheets of Synrad, Inc. as of
June 30, 1998 and 1997, respectively; and unaudited statements of income
for the six months ended June 30, 1998 and 1997, respectively.
(b) Pro Forma Financial Information
Pro forma combined balance sheet for Excel Technology, Inc. and
Synrad Inc. as of June 30, 1998 and combined income statements for Excel
Technology, Inc. and Synrad Inc. for the year ended December 31, 1997 and
for the six months ended June 30, 1998.
(c) Exhibits included herein
See Exhibit index below for exhibits filed as part of this Form
8-K Current Report.
SIGNATURES
..........
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: August 27, 1998
Excel Technology, Inc.
By: /s/ Antoine Dominic
...................
Name: Antoine Dominic
Title: President
INDEX TO EXHIBITS
.................
Exhibit
Number
............
2.1 Asset Purchase Agreement, dated as of August 14, 1998, by and
among Excel Technology, Inc., Excel Purchasing Corporation,
Synrad, Inc., The Amended Revocable Living Trust of Peter
Laakmann, and Peter Laakmann.
99.1 Audited financial statements of Synrad, Inc. for the year
ended December 31, 1997; unaudited interim balance sheets of
Synrad, Inc. as of June 30, 1998 and 1997, respectively; and
unaudited statements of income for the six months ended
June 30, 1998 and 1997, respectively.
99.2 Pro forma combined balance sheet for Excel Technology, Inc.
and Synrad Inc. as of June 30, 1998 and combined income
statements for Excel Technology, Inc. and Synrad Inc. for the
year ended December 31, 1997 and for the six months ended
June 30, 1998.
EXHIBIT 99.1
...........
SYNRAD, INC.
Financial Statements
December 31, 1997
(With Independent Auditor's Report Thereon)
Synrad, Inc.
Table of Contents
Page
Independent Auditors' Report 1
Balance Sheet 2
Statement of Earnings and Retained Earnings 3
Statement of Cash Flows 4
Notes to Financial Statements 5
<AUDIT-REPORT>
Independent Auditors' Report
To the Board of Directors
Excel Technology, Inc.
We have audited the accompanying balance sheet of Synrad, Inc. as of
December 31, 1997, and the related statements of earnings and retained
earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Synrad, Inc.
as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted
accounting principles.
August 17, 1998
</AUDIT-REPORT>
SYNRAD, INC.
Balance Sheet
December 31, 1997
ASSETS
......
Current assets:
Cash $ 65,400
Trade accounts receivable, less allowance for doubtful
accounts of $100,000 2,930,500
Inventories 4,331,700
Prepaid expenses 40,900
..............
Total current assets 7,368,500
Equipment and leasehold improvements, net 1,617,800
Patents, net of accumulated amortization of $141,200 190,300
Deposits 10,500
..............
Total assets $ 9,187,100
..............
..............
LIABILITIES AND SHAREHOLDERS' EQUITY
....................................
Current liabilities:
Current portion of notes payable $ 364,300
Accounts payable 1,802,400
Customer deposits 767,200
Payables to affiliates 915,500
Accrued payroll and benefits 285,400
Other accrued liabilities 238,200
Note payable to related party 628,800
..............
Total current liabilities 5,001,800
..............
Notes payable, less current portion 1,394,900
..............
Shareholders' equity:
Synrad, Inc. common stock, no par value,
2,000,000 shares authorized; 1,020,000
shares issued and outstanding 421,500
Retained earnings 2,368,900
..............
Total shareholders' equity 2,790,400
Commitments, contingencies and subsequent event
Total liabilities and shareholders' equity $ 9,187,100
..............
..............
See accompanying notes to financial statements.
SYNRAD, INC.
Statement of Earnings and Retained Earnings
Year ended December 31, 1997
Revenue $ 27,542,800
Cost of sales 15,435,300
..............
Gross profit 12,107,500
..............
Operating expenses:
General and administrative expense 2,303,300
Research and development expense 3,220,800
Selling expense 2,548,700
..............
8,072,800
..............
Operating income 4,034,700
Other income (expense):
Interest expense (211,000)
Other 33,300
..............
Net income 3,857,000
..............
Retained earnings at beginning of year 100,100
..............
Dividends (1,588,200)
..............
Retained earnings at end of year $ 2,368,900
..............
..............
Pro forma (unaudited):
Net income before income taxes 3,857,000
Income taxes 1,194,800
..............
Net income $ 2,662,200
..............
..............
See accompanying notes to financial statements.
SYNRAD, INC.
Statement of Cash Flows
Year ended December 31, 1997
Cash flows from operating activities:
Net income $ 3,857,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 405,500
Changes in assets and liabilities:
Trade accounts receivable (709,400)
Inventories (1,464,400)
Prepaid expenses and other assets 44,800
Accounts payable 154,300
Customer deposits 695,400
Payables to affiliates 96,500
Accrued payroll and benefits 129,500
Other accrued liabilities 67,900
..............
Net cash provided by operating activities 3,277,100
..............
Cash flows from investing activities:
Purchases of equipment (990,700)
Patent costs (64,800)
..............
Net cash used in investing activities (1,055,500)
Cash flows from financing activities:
Net repayment of line of credit (322,500)
Net repayment of long-term debt (484,700)
Net proceeds from issuance of note payable to related party 232,500
Dividends (1,588,200)
..............
Net cash used in financing activities (2,162,900)
..............
Net increase in cash 58,700
Cash at beginning of year 6,700
..............
Cash at end of year $ 65,400
..............
..............
Supplemental disclosures of cash flow information -
cash paid during the year for:
Interest $ 213,000
..............
..............
See accompanying notes to financial statements.
SYNRAD, INC.
Notes to Financial Statements
December 31, 1997
(1) Description of Business and Summary of Accounting Policies
..........................................................
(a) Description of Business
Synrad, Inc. is engaged in the design, manufacture and sale of
lasers and laser tubes for commercial and industrial uses. Approximately
half of the lasers are sold domestically. International sales are
primarily made to customers in Japan and Germany. Management expects
international sales to slightly decrease in the near term due to the
status of the Asian economy. International sales are denominated in U.S.
dollars. Synrad, Inc. owns a majority interest in Synrad Europe Holding
S.V., Netherlands. The subsidiary had no operations in 1997.
(b) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
(c) Revenue Recognition
The Company recognizes revenue on product sales upon shipment
to customers or when title to the related product has passed to
customers.
(d) Inventories
Inventories are stated at the lower of cost (first in, first
out method) or market (net realizable value).
(e) Fair Value of Financial Instruments
The carrying value of cash, trade accounts receivable, accounts
payable, customer deposits, payables to affiliates, accrued payroll and
benefits and other accrued liabilities approximate fair value due to the
short-term maturities of these assets and liabilities. The fair value of
certain notes payable, including the current portion, and notes payable
to related party approximate carrying value and are estimated based on
the current rates offered to the Company for debt of the same maturities.
(f) Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost.
Depreciation of equipment is calculated on the straight-line method,
based on the estimated useful lives of the assets ranging from three to
ten years. Leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or estimated useful life of the asset.
Expenditures for maintenance and repairs are charged to expense
as incurred. Upon sale or retirement, the cost and related accumulated
depreciation or amortization are removed from the accounts and any
resulting gain or loss is reflected in other income or expense.
(g) Patents
Patents are amortized using the straight-line method over their
remaining lives, ranging from five to ten years. Amortization expense
was $27,500 in 1997.
(h) Accounting for Income Taxes
The shareholders of Synrad, Inc. have elected to be taxed as an
S Corporation. Under this election, the income or loss of the
Corporation is included on the individual returns of the shareholders.
(i) Accounting for Long-Lived Assets
The Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount of which the carrying amount of the
assets exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount of fair value less costs to
sell.
(j) Warranty Costs
The Company warranties its lasers for a one-year period after
the sale. Estimated warranty costs are provided at the time of sale of
the warranted lasers.
(k) Advertising
Advertising costs are expensed as incurred and are included in
selling expense. Advertising expense was $338,600 during 1997.
(l) Stock-Based Compensation
The Company accounts for its stock option plan for employees in
accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense related to employee stock
options is recorded if, on the date of grant, the fair value of the
underlying stock exceeds the exercise price. The Company applies the
disclosure-only requirements of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, which
allows entities to continue to apply the provisions of APB Opinion No. 25
for the transactions with employees, and to provide pro forma results of
operations disclosures as if the fair-value-based method of accounting in
SFAS No. 123 had been applied to these employee stock option
transactions.
(2) Concentration of Risk
.....................
The Company sells its products to approved customers on an open-
account basis. Receivables are generally unsecured. The Company
monitors the credit limits and payment habits of its customers to
mitigate its risk of loss from uncollectible accounts.
Approximately 11% and 10%, respectively, of the Company's revenues
were derived from sales to two customers. Approximately $352,000 and
$76,900, respectively, of the Company's outstanding receivables were from
these customers at December 31, 1997.
(3) Inventories
...........
Inventories consist of the following at December 31, 1997:
Raw materials $ 2,384,700
Work in process 1,453,200
Finished goods 493,800
............
$ 4,331,700
............
............
(4) Equipment and Leasehold Improvements
....................................
Equipment and leasehold improvements consist of the following at
December 31, 1997:
Equipment $ 1,597,500
Office furniture and equipment 1,167,800
Leasehold improvements 232,100
............
2,997,400
Less accumulated depreciation
and amortization 1,379,600
............
$ 1,617,800
............
............
(5) Notes Payable
.............
Notes payable at December 31, 1997 consist of the following:
Line of credit $ 750,000
Note payable to a bank, due in monthly
installments of $29,500, including
interest at 8.25%, due April 1, 2000,
collateralized by accounts receivable,
inventories, equipment and leasehold
improvements, guaranteed by the majority
shareholder 748,500
Note payable to a former employee, due in
monthly installments of $4,657, including
interest at 8%, due January 2002,
guaranteed by the majority shareholder of
the Company 194,100
Note payable to a former employee, due in
monthly installments of $1,923, including
interest at 8%, due April 15, 2001 66,600
............
1,759,200
Less current portion 364,300
............
$ 1,394,900
............
............
The $2,000,000 revolving line of credit with a bank matures April
30, 1998. Advances under the line are limited to 65% of eligible
accounts receivable. The line is collateralized by capital assets,
accounts receivable and inventories. Interest is payable monthly at the
bank's prime rate plus .75% (9.25% at December 31, 1997). The Company
negotiated a new line of credit effective May 1, 1998, which matures May
1, 1999. The new line of credit has a $2,500,000 limit and an interest
rate equal to prime plus .25%. Terms of the note payable to bank and
line of credit include debt covenants requiring the Company to maintain
specified levels of working capital and equity, and financial ratios.
The Company was in compliance with its debt covenants at December 31,
1997. Giving effect to the new line of credit, the maturity of the
amounts outstanding at December 31, 1997 under the line of credit have
been shown as long-term.
The following is a schedule of future principal maturities of notes
payable:
Year ending December 31,
1998 $ 364,300
1999 1,145,500
2000 184,900
2001 59,900
2002 4,600
............
$ 1,759,200
............
............
(6) Pro forma Federal Income Taxes (unaudited)
..........................................
Pro forma income tax expense for the year ended December 31, 1997
consists of:
Current Deferred Total
....... ........ .........
U.S. federal $ 744,200 450,600 1,194,800
Pro forma income tax expense differs from the "expected" tax expense
computed by applying the U.S. federal corporate graduated tax rate to
income before pro forma income taxes primarily due to the following:
Computed expected pro forma tax expense $ 1,311,400
Research credit (128,300)
Other 11,700
............
$ 1,194,800
............
............
The tax effect of temporary differences that give rise to
significant portions of deferred tax liabilities at December 31, 1997,
primarily relate to prepaid research and development.
(7) Commitment
..........
In June 1996, the Company moved into its current premises which it
leases under a noncancelable operating lease expiring in April 2001. The
total of the scheduled lease payments is being charged to expense on a
straight-line method over the life of the lease. The lease for the
Company's previous premises, into which the Company had moved in
September 1992, remains in effect until its expiration in January 1999.
The Company has negotiated subleases to another tenant for the remaining
lease term.
Future minimum lease payments under noncancelable operating leases
are as follows:
Minimum Less
lease sublease
Year ending December 31 payments payments Total
....................... .......... .......... .........
1998 $ 942,000 (213,900) 728,100
1999 732,700 (4,200) 728,500
2000 728,100 0 728,100
2001 242,700 0 242,700
.......... .......... .........
$2,645,500 (218,100) 2,427,400
.......... .......... .........
.......... .......... .........
Total rent expense amounted to $817,200 for 1997.
(8) Related Party Transactions
..........................
The Company has a note payable to a limited partnership where the
majority shareholder of the Company is a partner. The note matures
December 31, 1998 and bears interest at 10% per annum. The note is
unsecured and subordinated to the bank. Interest expense related to this
note amounted to $39,600 in 1997.
Synrad, Inc. has a research and development arrangement with Emerald
Laser Ltd. (Emerald), an affiliate that is owned by the major shareholder
of the Company. In accordance with the arrangement, Emerald develops
certain products and Synrad reimburses Emerald for the development costs
incurred. Total costs under the arrangement amounted to $2,061,700
during 1997. Synrad has a commitment to reimburse development costs
incurred of $2,000,000 in 1998 and to pay Emerald an additional
$2,000,000 by December 31, 1998, upon delivery of working model
prototypes to Synrad.
The Company guaranteed a term note payable due October 2003 to the
bank of an affiliated company. The outstanding balance on this note at
December 31, 1997 was $264,000.
The Company distributes certain products to international markets
through an affiliate. Total commission expenses to the affiliate
amounted to $153,400 in 1997.
Included in trade accounts receivable is a $66,200 receivable from
affiliate, which has been fully reserved.
(9) Non-Qualified Stock Option Plan
...............................
Synrad, Inc. provides a non-qualified stock option plan for
officers, directors, and certain key employees of Synrad, Inc. and
Emerald. Options to purchase the Company's common stock may be granted
at an exercise price determined by the Board of Directors; the price is
generally equal to the fair market value of the stock at the date of
grant. Outstanding options become exercisable after a one to three-year
vesting period. Options may be exercised up to 15 years from the date of
grant. The Company has authorized a total of 255,000 shares for issuance
under the plan.
The following summary sets forth the activity under the plan in
1997:
Weighted
Number of Number of average
shares shares exercise
available under price per
for grant option share
......... ........ ........
Outstanding
at December 31, 1996 77,190 177,810 $ 1.80
Granted (44,625) 44,625 12.00
......... ........ ........
Outstanding
at December 31, 1997 32,565 222,435 $ 3.85
......... ........ ........
......... ........ ........
The following table summarizes information concerning outstanding
and exercisable options at December 31, 1997:
Options outstanding Options exercisable
................................. .....................
Weighted
average Weighted Weighted
remaining average average
Range of Number contractual exercise Number exercise
exercise prices Outstanding life price exercisable price
............... ........... ........... ........ ........... .........
$0.23 - $ 1.00 132,935 8.56 $ 0.44 132,935 $ 0.44
$1.00 - $ 4.50 24,125 11.88 2.78 24,125 2.78
$8.00 - $12.00 65,375 14.16 11.17 27,125 10.00
........... ........... ........ ........... .........
222,435 10.56 $ 3.85 184,185 $ 2.16
Had compensation costs for stock-based compensation been determined
based on the fair value at the grant dates consistent with the method of
SFAS No. 123, the Company's net income would have been reduced by
approximately $133,900. The fair value of the options granted is
estimated using the Black-Scholes option-pricing model with the following
weighted average assumptions: risk-free interest rate of 6.31%; dividend
yield of zero; forfeiture rate of zero; and an expected life of 10 years.
(10) Profit Sharing Plan
...................
The Company has a profit sharing plan pursuant to Section 401(k) of
the Internal Revenue Code (Code) that covers all employees with one or
more years of service. Participants may contribute a percentage of
compensation, not to exceed the maximum allowed under the Code. The plan
provides for a matching contribution by the Company approximating $54,200
in 1997.
(11) International Operations
........................
The Company is primarily engaged in the design, manufacture and sale
of lasers. Company operations are primarily conducted in the United
States, Japan, and Germany.
Revenue:
United States $ 13,220,500
Japan 4,964,700
Germany 3,016,900
Other European countries 6,340,700
............
Total $ 27,542,800
............
............
Net income:
United States $ 2,319,300
Japan 595,800
Germany 181,000
Other European countries 760,900
............
Total $ 3,857,000
............
............
(12) Contingencies and Environmental Matters
.......................................
The Company is subject to various claims and contingencies related
to lawsuits and other matters arising in the normal course of business.
Management believes the ultimate liability, if any, arising from such
claims or contingencies is not likely to have a material adverse effect
on the Company's results of operations or financial condition.
The Company is presently in arbitration with a former employee,
which has asserted that the Company is liable to him for severance. The
former employee terminated employment on June 9, 1998. Management
expects to settle this claim for an amount between $150,000 and $200,000.
Consistent with the industry, the Company's operations result in
noncontact cooling water and process wastewater, collectively called
wastewater. The permit under which the Company disposes wastewater
expires August 15, 1998. Without a permit, the Company's operations and
financial results could be significantly affected. The Company is
currently operating under an extension and the original permit is in the
process of being renewed. Although the Company's environmental policies
and practices are designed to ensure compliance with laws and
regulations, future developments could require the Company to make
additional environmental expenditures.
(13) Subsequent Event
................
Subsequent to December 31, 1997, the primary shareholder of the
Company sold the assets of the Company in exchange for cash.
Synrad Inc.
Income Statement
For the Six Months Ended June 30,
(unaudited)
1998 1997
........... ...........
Revenue $13,881,477 $13,078,113
Cost of goods sold 8,126,905 7,262,273
........... ...........
Gross profit 5,754,572 5,815,840
Operating Expenses:
Research and development 1,972,179 1,286,164
Selling and marketing 1,377,442 721,181
General and administrative 1,241,984 1,019,760
........... ...........
Total operating expenses 4,591,605 3,027,105
........... ...........
Operating income 1,162,967 2,788,735
........... ...........
Other income/(expense) (196,324) (191,003)
........... ...........
Net income $ 966,643 $ 2,597,732
........... ...........
........... ...........
Synrad Inc.
Balance Sheet
As of June 30,
(unaudited)
ASSETS:
.......
1998 1997
.............. ...........
Cash $ (6,239) $ (43,900)
Accounts receivable 3,116,205 3,107,427
Inventory 3,146,478 3,171,873
Prepaid expenses 25,292 76,631
............. ...........
Total current assets 6,281,736 6,312,031
............. ...........
Property, plant and equipment 1,410,137 1,107,036
Other assets 207,115 177,248
............. ...........
Total assets $ 7,898,988 $ 7,596,315
.............. ...........
.............. ...........
Liabilities:
...........
Notes payable, short-term $ 1,250,000 $ 597,153
Accounts payable 2,189,290 1,777,930
Accrued liabilities 957,856 269,183
Current portion of long-term debt 364,320 373,552
............. ...........
Total current liabilities 4,761,466 3,017,818
............. ...........
Long-term debt, less current portion 469,016 1,371,441
Note payable to related party 660,000 0
............. ...........
Total liability 5,890,482 4,389,259
............. ...........
Common stock 423,518 423,518
Retained earnings 1,584,988 2,783,538
............. ...........
Total equity 2,008,506 3,207,056
............. ...........
Total Liabilities and equity $ 7,898,988 $ 7,596,315
............. ...........
............. ...........
EXHIBIT 99.2
<TABLE>
EXCEL TECHNOLOGY, INC. AND SYNRAD
INC.
PROFORMA COMBINED BALANCE SHEET
<CAPTION>
Proforma
Adjustments
As of As of
June 30, 1998 June 30, 1998
Proforma
Excel Tech. Synrad
Dr. Cr. Combined
.............. ..............
............. .......... ............
<S> <C> <C> <C>
<C> <C>
Assets:
.......
Cash $ 7,429,290 $ (6,239) $
0 $ 3,751,842 <F1> $ 3,671,209
Investments 11,672,801 0
0 11,500,000 <F1> 172,801
Accounts receivable 11,968,652 3,116,205
0 0 15,084,857
Inventory 11,711,323 3,146,478
0 0 14,857,801
Prepaid expenses 0 25,292
0 0 25,292
Deferred income taxes 645,100 0
0 0 645,100
Other current assets 391,732 0
0 0 391,732
........... ..............
............ ............ ...........
Total current assets 43,818,898 6,281,736
0 15,251,842 34,848,792
Excess of costs over fair market value
of assets acquired 5,938,015 0
17,000,000 <F1> 0 22,938,015
Property, plant and equipment 9,625,931 1,410,137
0 0 11,036,068
Other assets 439,086 207,115
0 0 646,201
Deferred income taxes 1,722,000 0
0 0 1,722,000
........... ..............
............ ............ ...........
Total assets $61,543,930 $ 7,898,988
$17,000,000 $15,251,842 $71,191,076
........... ..............
............ ............ ...........
........... ..............
............ ............ ...........
Liabilities:
...........
Notes payable, short-term $ 144,943 $ 1,250,000 $
1,250,000 <F1> $ 0 $ 144,943
Accounts payable 2,470,834 2,189,290
0 0 4,660,124
Current installment of long-term debt 0 364,320
364,320 <F1> 0 0
Accrued expenses and other
current liabilities 6,685,916 957,856
0 0 7,643,772
........... ..............
............ ............ ...........
Total current liabilities 9,301,693 4,761,466
1,614,320 12,448,839
Long-term debt 0 469,016
469,016 <F1> 6,500,000 <F2> 6,500,000
Notes payable, long-term 0 660,000
660,000 <F1> 0 0
........... ..............
............ ............ ...........
Total liabilities 9,301,693 5,890,482
2,743,336 6,500,000 18,948,839
Common stock 11,764 423,518
423,518 <F1> 11,764
Additional paid in capital 48,966,184 0
0 0 48,966,184
Treasury stock (5,531,495) 0
0 0 (5,531,495)
Foreign currency
translation adjustment (252,400) 0
0 0 (252,400)
Retained earnings 9,048,184 1,584,988
1,584,988 <F1> 0 9,048,184
........... ..............
............ ............ ...........
Total equity 52,242,237 2,008,506
2,008,506 0 52,242,237
Total liabilities and equity $61,543,930 $ 7,898,988
$21,751,842 $21,751,842 $71,191,076
........... ..............
............ ............ ...........
........... ..............
............ ............ ...........
<FN>
<F1>
This adjustment records the acquisition of Synrad for cash payments which
includes the payment of Synrad's notes payable and long term debt.
<F2>
To record the borrowings from Bank of New York required for the acquisition
of Synrad.
<F/N>
</TABLE>
<TABLE>
EXCEL TECHNOLOGY, INC. AND SYNRAD
INC.
PROFORMA COMBINED INCOME
STATEMENT
<CAPTION>
For the six For the six
months ended months ended
June 30, 1998 June 30, 1998
Proforma Adjustments Proforma
Excel Tech. Synrad Dr.
Cr. Combined
............ ...........
............. .......... ............
<S> <C> <C> <C>
<C> <C>
Net sales and services $28,674,645 $13,881,477
0 0 $42,556,122
Cost of sales and services 14,639,379 8,126,905
0 0 22,766,284
........... ...........
............ .......... ............
Gross profit 14,035,266 5,754,572
0 0 19,789,838
Operating Expenses:
Selling and marketing 4,571,817 1,377,442
0 0 5,949,259
General and administrative 2,427,479 1,241,984
0 0 3,669,463
Research and development 2,266,417 1,972,179
0 0 4,238,596
Amortization of excess of cost over
fair value of net assets of
businesses acquired 184,852 0
425,000 <F1> 0 609,852
........... ...........
............ .......... ............
Earnings from operations 4,584,701 1,162,967
(425,000) 0 5,322,668
Non operating expenses:
Interest expense 7,903 124,537
125,000 <F2> 0 257,440
Interest income (485,594) 0
390,000 <F2> 0 (95,594)
Other (income)expense, net (15,233) 71,787
0 0 56,554
........... ...........
............ .......... ............
Earnings before provision for taxes 5,077,625 966,643
(940,000) 0 5,104,268
Provision for income taxes 1,789,811 0
328,659 <F3> 0 2,118,470
........... ...........
............ .......... ............
Net earnings available to
common shareholders: $ 3,287,814 $ 966,643
$(1,268,659) $ 0 $ 2,985,798
........... ...........
............ .......... ............
........... ...........
............ .......... ............
Basic earnings per common share
$0.28
......
......
Weighted average common shares
outstanding
10,686,763
............
............
Diluted earnings per common share
$0.26
......
......
Weighted average common and common
equivalent shares outstanding
11,327,086
............
............
<FN>
<F1>
To record the amortization of excess of cost over net assets acquired over
twenty years, as if the acquisition of Synrad took place at the beginning of
the period.
<F2>
To eliminate the interest income earned on cash and investments used and to
include interest expense on borrowings to acquire Synrad.
<F3>
To record the effective tax rate of 34% on Synrad's pre-tax income.
</FN>
</TABLE>
<TABLE>
EXCEL TECHNOLOGY, INC. AND SYNRAD
INC.
PROFORMA COMBINED INCOME
STATEMENT
<CAPTION>
For the year For the year
ended ended
Dec. 31, 1997 Dec. 31, 1997
Proforma Adjustments Proforma
Excel Tech. Synrad
Dr. Cr. Combined
............. .............
............ ........... ............
<S> <C> <C> <C>
<C> <C>
Net sales and services $65,947,896 $27,542,800 $
0 $ 0 $93,490,696
Cost of sales and services 33,245,432 15,435,300
0 0 48,680,732
........... ...........
............ .......... ............
Gross profit 32,702,464 12,107,500
0 0 44,809,964
Operating expenses:
Selling and marketing 10,639,570 2,303,300
0 0 12,942,870
General and administrative 4,805,284 2,548,700
0 0 7,353,984
Research and development 4,860,903 3,220,800
0 0 8,081,703
Amortization of excess of cost over
fair value of net assets of
businesses acquired 369,704 0
850,000 <F1> 0 1,219,704
........... ...........
............ ........... ............
Earnings from operations 12,027,003 4,034,700
(850,000) 0 15,211,703
Non operating expenses:
Interest expense 159,888 211,000
240,000 <F2> 0 610,888
Interest income (872,481) 0
780,000 <F2> 0 (92,481)
Other (income) expense, net 96,814 (33,300)
0 0 63,514
........... ...........
............ ........... ............
Earnings before provision for
income taxes 12,642,782 3,857,000
(1,870,000) 0 14,629,782
Provision for income taxes 4,408,085 0
1,194,800 <F3> 0 5,602,885
........... ...........
............ ........... ............
Net earnings available to common
shareholders: 8,234,697 3,857,000
(3,064,800) 9,026,897
........... ...........
............ ........... ............
........... ...........
............ ........... ............
Basic earnings per common share
$0.84
.....
.....
Weighted average common shares
outstanding
10,686,763
...........
...........
Diluted earnings per common share
$0.80
.....
.....
Weighted average common and common
equivalent shares outstanding
11,327,086
..........
..........
<FN>
<F1>
To record the amortization of excess of cost over net assets acquired over
twenty years, as if the acquisition of Synrad took place at the beginning of
the period.
<F2>
To eliminate the interest income earned on cash and investments used and to
include interest expense on borrowings to acquire Synrad.
<F3>
To record the effective tax rate of 34% on Synrad's pre-tax income.
</FN>
</TABLE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
........................
ASSET PURCHASE AGREEMENT, dated as of August 14, 1998 (this
"Agreement"), by and among EXCEL TECHNOLOGY, INC., a Delaware
corporation, having its principal place of business located at 780 Third
Avenue, New York, New York 10017 ("Excel"), EXCEL PURCHASING CORPORATION,
a Washington corporation, having its principal place of business located
at 780 Third Avenue, New York, New York 10017 ("Purchasing Subsidiary"),
SYNRAD, INC., a Washington corporation having its principal place of
business located at 6500 Harbour Heights Parkway, Mukilteo, Washington
98275 ("Synrad"), THE AMENDED REVOCABLE LIVING TRUST OF PETER LAAKMANN,
dated June 30, 1998 (the "Trust"), and PETER LAAKMANN, residing in The
Highlands, Seattle, Washington ("Laakmann").
W I T N E S S E T H :
WHEREAS, Synrad is engaged in the business of developing,
manufacturing and marketing sealed Carbon Dioxide lasers and related
accessories (hereinafter referred to as the "Business");
WHEREAS, Synrad desires to sell, assign and transfer to Purchasing
Subsidiary, and Purchasing Subsidiary desires to purchase from Synrad,
substantially all of the assets and properties (the "Business Assets") of
Synrad relating to and/or utilized in operating the Business in exchange
for the consideration and upon the terms and conditions set forth herein;
WHEREAS, Laakmann is the trustor, trustee, and a beneficiary of the
Trust, and the Trust is the sole shareholder of Synrad; and
WHEREAS, Excel is the parent corporation of Purchasing Subsidiary;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations, warranties, conditions, and covenants
contained herein, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I.
.........
PURCHASE AND SALE OF BUSINESS ASSETS
....................................
I.01 Purchase and Sale of Business Assets. Subject to the terms
and conditions contained herein, and except for the Retained Assets (as
hereinafter defined), Synrad hereby sells, assigns, transfers, conveys,
and delivers to Purchasing Subsidiary, and Purchasing Subsidiary hereby
purchases, acquires and accepts from Synrad, the Business Assets,
tangible or intangible, and wherever located, including, but not limited
to, the following:
(a) all marketable securities;
(b) all deposits in transit, accounts receivable, other billed
and unbilled amounts due for products sold or services rendered, and,
except as set forth in Section 1.02 (n) hereof, claims against third
parties;
(c) all notes and loans receivable;
(d) all inventory, including, without limitation, all raw
materials, work in process, and finished goods;
(e) all tangible personal property, machinery, equipment, and
supplies (including, but not limited to, furniture and fixtures, computer
equipment, production machinery, research equipment, tools, and all
maintenance and other operating supplies, including small tools and spare
parts and other expendables or non-inventoried items which may not have
been treated as assets for accounting purposes in past years);
(f) all prepaid expenses and rights to insurance refunds;
(g) all rights to proceeds from insurance policies held by
Synrad, except to the extent necessary to cover liabilities retained
hereunder by Synrad or of its officers and directors.
(h) all right, title, and interest in and to (i), except as
set forth in Section 1.02 hereof, all contracts and agreements,
including, without limitation, all service contracts, employment con
tracts (including any Employment Secrecy Agreements and Nondisclosure and
Inventions Agreements signed by employees of Synrad or any of its
affiliated companies who have not signed the Non-Disclosure and
Inventions Agreement referred to in Sections 6.01(f) and 7.03 (a) hereof
in the form presented to such employee by Purchasing Subsidiary),
contracts with suppliers and distributors, and all rights and benefits
accruing to Synrad under such contracts and agreements; (ii) all
trademarks, tradenames, servicemarks, copyrights, patents, and
applications therefor; (iii) all trade secrets, know-how, processes,
procedures, formulae, algorithms and other proprietary knowledge; (iv)
all other intangible assets owned by Synrad and/or used or useful in
connection with the Business, or held for the benefit of Synrad; (v) all
permits, certificates, leases, subleases, licenses, franchises, and
privileges; (vi) all software in development and source codes, flow
charts, notes or outlines relating thereto; (vii) all goodwill associated
with the Business; (viii) the name "Synrad", whether presently owned by
Synrad, the Trust, or Laakmann; and (ix) all causes of action, judgments,
claims, and demands of whatever nature;
(i) all marketing, advertising and promotional materials,
including, without limitation, mailing lists, prospect lists, promotional
letters, catalogues, flyers, reply cards, notes of return, sample mailing
pieces, space advertising, and the like;
(j) all files, books and records, invoices, accounts, and
surveys used or useful in connection with the ownership and/or operation
of the Business, including, without limitation, all current supplier and
customer lists relating to the Business; and
(k) all other interests to which Synrad has any right of
ownership, use or otherwise, or in which Synrad has a conveyable or
assignable interest.
I.02 Business Assets Not Being Purchased and Sold. Notwithstanding
anything contained in Section 1.01 to the contrary, the following assets
(the "Retained Assets") are expressly excluded from the assets being
purchased and sold hereunder:
(a) cash;
(b) account receivable from Lidatek, Inc.;
(c) accounts receivable from Emerald and SI;
(d) investment in Synrad International, Inc. ("SI");
(e) the corporate seal, minute book, stock book and stock
ledger of Synrad;
(f) the shares of capital stock in Synrad Europe Holdings BV
("BV"), a 79% owned subsidiary of Synrad;
(g) the Emerald Laser Ltd. ("Emerald") Research and
Development Agreement signed December 7, 1995 (the "Emerald R&D
Agreement"), except to the extent that Synrad is entitled to the results
of all research and development thereunder;
(h) the oral contract to pay sales commissions to SI;
(i) the consultancy and brokerage fee agreements with Jan
Melles;
(j) the two Bothell leases, and the subleases in respect of
the same.
(k) the lease at Building D, 8229 44th Avenue West, Mukilteo,
WA;
(l) the insurance policies listed on Schedule 1.02 hereof;
(m) the rights to proceeds from insurance policies to the
extent necessary to cover liabilities retained hereunder by Synrad or of
its officers and directors;
(n) claims against third parties to the extent of any
liabilities retained hereunder by Synrad with respect to such third
parties, including, without limitation, counterclaims against Patlex up
to the amount which Synrad is required to pay to Patlex for previously
unpaid royalties;
(o) any agreement with Gyne-Tech Instrument Corporation;
(p) the employment agreement with Ian Dodd;
(q) the Patlex agreement;
(r) Synrad's stock option plan and any agreements thereunder;
(s) any benefit plan of the type described in Section 5.14
hereof, including, without limitation, Synrad's 401(k) Plan; and
(t) rights under this Agreement;
ARTICLE II.
..........
PURCHASE PRICE
..............
In consideration of the sale, assignment, transfer, conveyance and
delivery of the Business Assets by Synrad to Purchasing Subsidiary,
Purchasing Subsidiary is paying to Synrad, by wire transfer to Synrad's
bank account or in accordance with Synrad's instructions, simultaneously
with the execution of this Agreement, the sum of $19,402,964 (the
"Purchase Price"), which sum has been computed as set forth on Schedule
2.01(a) hereto. The asset valuation to be utilized by Purchasing
Corporation and Synrad shall be as set forth on Schedule 2.01(b) hereto.
ARTICLE III.
............
ASSUMPTION OF LIABILITIES AND OBLIGATIONS
.........................................
As additional consideration for the sale, assignment, transfer,
conveyance and delivery of the Business Assets by Synrad to Purchasing
Subsidiary, Purchasing Subsidiary hereby assumes, and agrees to pay,
perform, honor, discharge, or otherwise satisfy in due course, (a) all
liabilities of Synrad, Emerald and SI remaining unpaid which are
reflected on the Balance Sheet (as hereinafter defined) or which have
arisen in the ordinary course of business since the Balance Sheet Date
(as hereinafter defined); and (b) all obligations of Synrad required to
be performed under contracts which are listed on Schedule 5.12 hereto and
those that are not required to be listed on such Schedule, to the extent
effectively assigned to Purchasing Subsidiary; provided, however, that
Synrad shall retain, and under no circumstances shall Purchasing
Subsidiary pay or assume or be or become liable for any of, the following
liabilities and obligations (the "Retained Liabilities and Obligations"):
(a) those liabilities which are not reflected on the Balance
Sheet and which have been incurred or relate to a period of time prior
to the Balance Sheet Date;
(b) bank overdrafts (except to the extent incurred in the
ordinary course of business for the operations of Synrad);
(c) federal, state, or local tax liabilities and obligations
of Synrad (except payroll taxes and any other operating business taxes of
Synrad, Emerald and SI that have been accrued on the Balance Sheet or
have been accrued in the ordinary course of business since the Balance
Sheet Date in accordance with past practice);
(d) royalty payments, if any, due to Patlex (except current
accrued royalties, but not any liability that may exist for royalties on
30VDC power supplies for periods prior to the date hereof);
(e) liabilities with respect to the consultancy agreement with
Jan Melles;
(f) liabilities and obligations of Synrad for brokerage or
other commissions or expenses relative to this Agreement or to the
transactions contemplated hereunder;
(g) liabilities and obligations arising out of any breach by
Synrad at any time on or prior to the date hereof, of any contract or
commitment, including any contract or commitment assumed by Purchasing
Subsidiary on the date hereof;
(h) liabilities and obligations under any benefit plan of the
type described in Section 5.14 hereof, including, without limitation,
Synrad's 401(k) Plan;
(i) liabilities and obligations under Synrad's stock option
plan, including with respect to options to purchase Synrad Common Stock
(as hereinafter defined) and with respect to the purchase, cancellation
or other disposition of such options;
(j) any sales, use or similar tax payable by or collectible
from Purchasing Subsidiary in connection with the sale of the Business
Assets (except as set forth in Section 7.03(d) hereof);
(k) environmental liabilities of Synrad, including any civil
and criminal penalties, and the costs and expenses associated therewith
and to rectify the same;
(l) liabilities and obligations under the Emerald R&D
Agreement;
(m) liabilities and obligations to SI for any sales
commissions;
(n) accounts payable to Emerald and SI;
(o) note payable to Laakmann Family LP;
(p) guarantee of term note payable for Lidatek, Inc.;
(q) the two Bothell leases, and the subleases in respect of
such leases; and
(r) the lease at Building D, 8229 44th Avenue West, Mukilteo,
WA; and
(s) liability, if any, for failure to submit annual reports
for the Bothell facility indicating cessation of dangerous waste
activities at the site;
(t) any liability and obligation to Ian Dodd and/or John W.
Downs in connection with or arising out of the termination of their
employment;
(u) any liability and obligation to Monika Ott in connection
with or arising out of her claim of sexual harassment;
(v) any liability for possible claims by Parris Tolbert as a
result of events existing as of the date hereof;
(w) any product liability claims arising out of sales or
events prior to the date hereof, notwithstanding the fact that the claim
may be made after the date hereof;
(x) any liability arising out of the use by Synrad of
Raytheon's RCRA Identification number as set forth in Schedule 5.07 (5)
hereof;
(y) any liability and obligation in connection with or arising
out of any relationship with Gyne-Tech Instrument Corporation; and
(z) any other liabilities and obligations not specifically
assumed by Purchasing Subsidiary hereunder.
ARTICLE IV.
...........
REPRESENTATIONS AND WARRANTIES OF EXCEL AND PURCHASING SUBSIDIARY
.................................................................
Excel and Purchasing Subsidiary hereby jointly and severally
represent and warrant to Synrad as follows:
IV.01 Corporate Organization; Good Standing. Each of Excel and
Purchasing Subsidiary is a corporation duly organized, validly existing,
and in good standing under the laws of its state of incorporation.
IV. 02 Authority; Validity; Acquired Filings and Consents. Each of
Excel and Purchasing Subsidiary has the requisite corporate power and
authority to execute and deliver this Agreement and to assume and perform
all of its obligations hereunder. The execution and delivery of this
Agreement by Excel and Purchasing Subsidiary and the performance by each
of them of their respective obligations hereunder have been duly
authorized by their respective Board of Directors. There are no
corporate, contractual, statutory, or other restrictions of any kind upon
the power and authority of Excel or Purchasing Subsidiary to execute and
deliver this Agreement and to consummate the transactions contemplated
hereunder, and no permit, consent, approval or authorization of, or
declaration, filing or registration with, or the giving of notice to any
foreign, federal, state, municipal, or other governmental department,
commission, board, bureau, instrumentality, or agency (collectively
"Governmental Authority") is necessary (or, if necessary, has been
obtained or made) in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by each of Excel and Purchasing Subsidiary and constitutes a legal,
valid, and binding obligation of Excel and Purchasing Subsidiary,
enforceable against each of them in accordance with its terms (except as
the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by the principles governing the
availability of equitable remedies).
IV.03 No Conflict. The execution and delivery of this Agreement
and consummation of the transactions contemplated herein do not and will
not (a) conflict with or violate any law, regulation, judgment, order, or
decree binding upon Excel or Purchasing Subsidiary or the provisions of
their respective Certificates of Incorporation or By-laws; or (b)
conflict with or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or result in the creation or
imposition of any lien or charge upon any of the properties or assets of
Excel or Purchasing Subsidiary pursuant to, any contract, agreement,
permit, license, franchise, or other instrument to which Excel or
Purchasing Subsidiary is a party or which is or purports to be binding
upon Excel or Purchasing Subsidiary or any of their properties.
IV.04 Hart-Scott-Rodino Act. For the fiscal year ended December
31, 1997 and for the six month period ended June 30, 1998, Excel's sales
did not equal or exceed $100,000,000, nor did its total assets equal or
exceed $100,000.000. In addition, based on publicly available
information, Excel is the "ultimate beneficial owner" of Purchasing
Subsidiary within the meaning of the Hart-Scott-Rodino Act and its
implementing regulations.
ARTICLE V.
..........
REPRESENTATIONS AND WARRANTIES OF SYNRAD, THE TRUST, AND LAAKMANN
.................................................................
Each of Synrad, the Trust, and Laakmann hereby jointly and severally
represent and warrant to Excel and Purchasing Subsidiary, as follows:
V.01 Corporate Organization; Good Standing; Requisite Authority;
Qualification; Subsidiaries.
(a) Synrad is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Washington, and has
all requisite corporate power and authority to own, operate, and lease
its properties and to carry on its business as the same is now being
conducted. Synrad is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of its properties or the nature of its activities make such
qualification necessary, except where the failure to be so qualified and
in good standing would not have a material adverse effect on its
business, operations, financial condition or prospects (a "Material
Adverse Effect"). A schedule of all such jurisdictions in which Synrad
is qualified to do business as a foreign corporation is attached hereto
as Schedule 5.01. Synrad has no subsidiaries, except for BV (which in
turn has a wholly owned subsidiary, Synrad GmbH ("GmbH"). BV and GmbH
are not operational, have engaged in no material transactions, are not a
party to any contracts or commitments, whether written or oral, do not
have any assets other than a bank account containing $17,797, and do not
have any employees, whether current or former.
(b) The Trust is a trust duly organized and validly existing
under the laws of the State of Washington.
V.02 Capitalization. The Synrad capital stock consists of
2,000,000 shares of common stock, no par value per share (the "Synrad
Common Stock"), of which 1,020,000 shares are issued and outstanding and
owned by the Trust. No shares of Synrad Common Stock are held in the
treasury of Synrad. The Synrad Common Stock is duly authorized, has been
duly and validly issued, is fully paid and non-assessable, and has not
been issued in violation of the preemptive rights of any stockholder.
Except as set forth in Schedule 5.02 hereto, there are no outstanding
subscriptions, options, warrants, calls, commitments, agreements, or
rights of any kind or nature in respect of the authorized but unissued
shares of Synrad Common Stock and none of such shares are reserved for
issuance for any purpose.
V.03 Authority; Validity; Consents. Synrad has the requisite
corporate power and authority and the Trust and Laakmann each have the
legal capacity to execute and deliver this Agreement and to assume and
perform all of their respective obligations hereunder. The execution and
delivery of this Agreement by Synrad and the performance of its
obligations hereunder have been duly authorized by Synrad's Board of
Directors and by its sole shareholder. There are no corporate,
contractual, statutory, or other restrictions of any kind upon the power
and authority of Synrad or the legal capacity of the Trust or Laakmann to
execute and deliver this Agreement and to consummate the transactions
contemplated hereunder, and, assuming the accuracy of Excel's
representation and warranty in Section 4.04, no permit, consent, approval
or authorization of, or declaration, filing or registration with, or the
giving of notice to any Governmental Authority is necessary (or, if
necessary, has been obtained or made) in connection with the execution,
delivery or performance of this Agreement by Synrad, the Trust or
Laakmann or the consummation by Synrad, the Trust or Laakmann of the
transactions contemplated hereby, except as set forth in Schedule 5.03
hereto. This Agreement has been duly executed and delivered by Synrad,
the Trust and Laakmann and constitutes a legal, valid, and binding
obligation of each of them, enforceable against each of them in
accordance with its terms (except to the extent that enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally or by the principles governing the availability of
equitable remedies).
V.04 No Conflict. Except as set forth in Schedule 5.04 hereto, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein do not and will not (a) conflict with or
violate any law, regulation, judgment, order, or decree binding upon
Synrad or the provisions of its Articles of Incorporation or By-laws; (b)
conflict with or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or result in the creation or
imposition of any lien or charge upon any properties or assets of Synrad
pursuant to, any contract, agreement, permit, license, franchise, or
other instrument to which Synrad is a party or which is or purports to be
binding upon Synrad or any of its properties; or (c) result in the loss
of any license, legal privilege, or legal right enjoyed or possessed by
Synrad.
V.05 Financial Statements.
(a) Exhibit A, attached hereto and made a part hereof,
contains Synrad's (i) unaudited combined balance sheet as at December 31,
1997 and the related statement of income for the year then ended, and
(ii) unaudited combined balance sheet (the "Balance Sheet") as at June
30, 1998 (the "Balance Sheet Date") and the related statements of income
for the six-month period then ended. Except as set forth in Schedule
5.05, such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, and
fairly present the combined financial position of Synrad, Emerald and SI
as at such dates and the results of operations for the periods then
ended, subject only to normal and recurring year end adjustments in the
case of the financial statements as at and for the period ending on the
Balance Sheet Date, provided that, except as set forth in Sections
5.06(a) and 5.11, no representation and warranty shall be deemed made
with respect to inventory or accounts receivable. The foregoing
financial statements are capable of being audited so as to allow Excel to
satisfy its reporting requirements pursuant to the Exchange Act.
(a) Exhibit B, attached hereto and made a part hereof,
contains the unaudited balance sheet as at June 30, 1998 and the related
statement of income for the six-month period then ended for each of
Emerald and SI. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, and fairly present the financial position of each of Emerald and
SI as at such date and the results of operations for the period then
ended. Except as set forth in Schedule 5.05(b), since such date there
has been no change in the financial condition, including the net worth,
of either Emerald or SI. Neither Emerald nor SI have any assets which
are not reflected on their respective balance sheet as of June 30, 1998.
V.06 Various Assets.
(a) Accounts Receivable. The accounts receivable shown on the
Balance Sheet are bona fide receivables which arose in the ordinary
course of business and represent valid claims by Synrad.
(b) Fixed Assets. Schedule 5.06(b) hereof sets forth a
complete and accurate list of all items of machinery, equipment,
computers and other tangible personal property comprising the Business
Assets as of the date hereof whose original book value exceeded $1,000.
Except as set forth in Schedule 5.06(b), all of such property is in good
repair and working order and is in the possession of Synrad.
(c) Backlog. As at the Balance Sheet Date, Synrad had a
backlog of $7,122,582 and as of August 11, 1998 such backlog is
$7,371,436. Except as set forth on Schedule 5.06(c) hereto, no orders
have been canceled since the Balance Sheet Date.
(d) Inventory. No representation and warranty, express or
implied will be deemed given as to the condition or usability of the
inventory.
V.07 No Undisclosed Liabilities. Except as set forth in Schedule
5.07 hereof, as of the Balance Sheet Date, Synrad had no debts,
liabilities, or obligations of any kind, whether accrued, absolute,
contingent, or other, and whether due or to become due, including, but
not limited to, liabilities or obligations on account of taxes or other
governmental charges, or penalties, interest, or fines thereon or in
respect thereof, except to the extent set forth on or reserved against or
reflected on the Balance Sheet, and there is no basis for the assertion
against Synrad of any such debt, liability, or obligation. The
liabilities reflected on the Balance Sheet are bona fide liabilities
which arose in the ordinary course of business.
V.08 Absence of Certain Changes and Events. Except as set forth in
Schedule 5.08 hereof, since the Balance Sheet Date there has not been,
with respect to Synrad, (a) any material adverse change in its business,
operations, financial condition, assets, liabilities, prospects, or
regulatory status; (b) any material damage, destruction, or loss (whether
or not covered by insurance) with respect to any of its material assets
or properties; (c) any redemption or other acquisition by it of Synrad
Common Stock or options to purchase Synrad Common Stock or any
declaration or payment of any dividend or other distribution in cash,
stock, or property with respect thereto; (d) any entry into any material
commitment or transaction (including, without limitation, any borrowing
or capital expenditure) other than in the ordinary course of business or
as contemplated by this Agreement; (e) any transfer of, or rights granted
under, any material leases, licenses, agreements, patents, trademarks,
trade names, or copyrights, other than those transferred or granted in
the ordinary course of business and consistent with past practice; (f)
any mortgage, lien, pledge, security interest, claim, charge, or
encumbrance of any nature whatsoever (collectively "Encumbrances")
imposed on any assets or properties, excluding those items set forth in
Section 5.11(a) through (e); (g) any payment of debts, liabilities, or
obligations ("Liabilities") of any kind, other than Liabilities currently
due; (h) any cancellation of any debts or claims or forgiveness of
amounts owed to Synrad; (i) any incurrence of any Liabilities of any
nature, whether accrued, contingent or otherwise, which would have,
individually or in the aggregate, a Material Adverse Effect; (j) any new
employment or consulting agreements entered into, any wages increased or
bonuses paid, or any additional pension, profit sharing, bonus, deferred
compensation, stock purchase, stock option, insurance, severance,
retirement, or other benefit agreement entered into; or (k) any change in
accounting principles or methods, except insofar as may have been
required by a change in generally accepted accounting principles. Except
as otherwise set forth in Schedule 5.08, since the Balance Sheet Date
Synrad has conducted its business only in the ordinary course and in a
manner consistent with past practice, has not made any material change in
the conduct of its business or operations or incurred any expense outside
the ordinary course of business and, with respect to Emerald and SI, has
not (x) made any payments other than for employee wages and related
expenses, or (y) made any commitments on their behalf.
V.09 Trademarks, Patents and Copyrights. Schedule 5.09 attached
hereto sets forth all patents, patent rights, trade names, trademarks,
trademark rights, service marks, material copyrights, material
proprietary rights, licenses, and permits (collectively "Rights") owned
or possessed by Synrad or utilized in its business. Except as set forth
in Schedule 5.09, the use of the Rights by Synrad, in the manner and in
the jurisdictions in which the Rights are currently used by Synrad, does
not and will not conflict with or violate the rights possessed by any
other person, firm, company, partnership, or corporation and, to the best
knowledge of Synrad, no one is infringing the rights of Synrad with
respect to any such Rights. Except as set forth in Schedule 5.09, Synrad
has the sole and exclusive right to use the Rights in the manner and in
the jurisdictions in which the Rights are currently used by Synrad.
Neither Emerald nor SI own any Rights or technology.
V.10 Business Assets. The Business Assets (excluding the Retained
Assets) constitute all of the properties, assets, rights, contracts,
leases, easements, licenses, and real and personal property utilized by
Synrad in the conduct of the Business, and no other assets, whether
tangible or intangible, are required to engage in the Business as
presently conducted by Synrad.
V.11 Title to Property. Except as set forth in Schedule 5.11
attached hereto, Synrad has good and marketable title, or, in the case of
leased property, valid leasehold rights, to all of the Business Assets,
free and clear of all Encumbrances, excluding (a) liens for taxes, fees,
levies, imposts, duties, or governmental charges of any kind which are
not yet delinquent or are being contested in good faith by appropriate
proceedings which suspend the collection thereof; (b) liens for
mechanics, materialmen, laborers, employees, suppliers, or other liens
arising by operation of law for sums which are not yet delinquent or are
being contested in good faith by appropriate proceedings; (c) liens
created in the ordinary course of business in connection with the leasing
or financing of office, computer, and related equipment and supplies; (d)
easements and similar encumbrances ordinarily created for fuller
utilization and enjoyment of property; and (e) liens or defects in title
or leasehold rights that do not and will not have a Material Adverse
Effect.
V.12 Contracts and Commitments.
(a) Except as set forth in Schedule 5.12(a) attached hereto,
except for purchase orders placed by Synrad or sales orders placed with
Synrad in the ordinary course of business, and except for contracts and
commitments involving $5,000 or less (and which, in the aggregate, do not
exceed $25,000), Synrad is not a party to any contract and does not have
any commitment, whether written or oral, which is not cancelable, which
is cancelable upon more than 30 days notice, or which is cancelable on
notice of 30 days or less with penalty, including, without limitation,
any contract or commitment with respect to any (i) advertising and
promotion, (ii) service, (iii) lease (as lessor or lessee), (iv) license,
(v) franchise, (vi) employment or pension, profit sharing, bonus, stock
purchase, retirement, hospitalization, insurance, or other plan or
arrangement involving employee benefits, (vii) inventory or supplies,
(viii) equipment, (ix) financing, and (x) acquisition or disposition of
rights. Each of the contracts and commitments set forth in Schedule
5.12(a) is valid, binding, in full force and effect, and enforceable in
accordance with its terms, and there is no default or claim of default
against Synrad or any notice of termination with respect thereof. Synrad
has complied in all material respects with all requirements of, and
performed all of its obligations under, such contracts and commitments.
In addition, except as set forth in Schedule 5.12(a), no other party to
any such contract or commitment is in material default under or in
material breach of any term or provision thereof, and there exists no
condition or event which, after notice or lapse of time or both, would
constitute a material default by any party to any such contract or
commitment. There are no events or circumstances which would indicate
that any contract or commitment set forth in Schedule 5.12(a) is likely
to be terminated, or unlikely to be renewed, within the next twelve (12)
months. Copies of all the written documents and a synopsis of all oral
contracts and commitments described in Schedule 5.12(a) have heretofore
been delivered to Excel, are true and complete, and include all
amendments and supplements thereto and modifications thereof.
(b) Except as set forth in Schedule 5.12(b) attached hereto,
Synrad is not a party to any oral or written (i) agreement with any
consultant, executive officer, or other key employee, the benefits of
which are contingent upon, or the terms of which are materially altered
upon, the execution and delivery of this Agreement, or (ii) agreement or
plan, including any stock option plan and the like, any of the benefits
of which will be increased, or the vesting of the benefits of which will
be accelerated, upon the execution and delivery of this Agreement.
V.13 Insurance. Schedule 5.13 attached hereto sets forth a list
and brief description of all insurance policies maintained by Synrad on
its properties, assets, business, and personnel and the premiums payable
thereon. Synrad is not in default with respect to any provision
contained in any insurance policy, and has not failed to give any notice
or present any claim under any insurance policy in due and timely
fashion. Such policies are in full force and effect and the premiums
with respect thereto have been paid.
V.14 Employee Benefit Plans. Schedule 5.14 attached hereto sets
forth a list of all material employee welfare benefit plans (as defined
in Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), employee pension benefit plans (as defined in
Section 3(2) of ERISA), and all other bonus, stock option, stock
purchase, benefit, profit sharing, savings, retirement, disability,
insurance, incentive, deferred compensation, and other similar fringe or
employee benefit plans, programs, or arrangements for the benefit of, or
relating to, any employee of, or independent contractor or consultant to,
Synrad (collectively, the "Employee Plans"). Synrad has delivered to
Excel true and complete copies of all Employee Plans, as in effect, as
well as the latest Internal Revenue Service determination letters, if
any, obtained with respect to any Employee Plan qualified under Section
401(a) or 501(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). With respect to each Employee Plan, true and complete copies of
(a) the most recent annual actuarial valuation report, if any, (b) the
last filed Form 5500 together with Schedule A or B thereto or both, (c)
the summary plan description (as defined in ERISA), if any, and all
modifications thereto communicated to employees, and (d) the most recent
annual and periodic accounting of related plan assets, if any, have been,
or will be, delivered to Excel and are, or will be, correct in all
material respects. With respect to any Employee Plan, neither Synrad nor
any of its directors, officers, employees, or agents, nor any "party in
interest" or "disqualified person", as such terms are defined in Section
3 of ERISA and Section 4975 of the Code, has engaged in or has been a
party to any "prohibited transaction", as such term is defined in Section
4975 of the Code or Section 406 of ERISA, which could result in the
imposition of either a penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, in each case
applicable to Synrad, or any Employee Plan. Except as disclosed in
Schedule 5.14, all Employee Plans are in compliance in all material
respects with the applicable requirements prescribed by all statutes,
orders, or governmental rules or regulations currently in effect with
respect to such Employee Plans, including, but not limited to, ERISA and
the Code, and there are no pending or threatened claims, lawsuits, or
arbitrations (other than routine claims for benefits) which have been
asserted or instituted against Synrad, any Employee Plan, or the assets
of any trust for any Employee Plan. Each Employee Plan intended to
qualify under Section 401(a) of the Code does so qualify, and the trusts
created thereunder are exempt from tax under the provisions of Section
501(a) of the Code. No Employee Plan which was intended to qualify under
Section 401(a) of the Code has been terminated by Synrad. All
contributions or payments required to be made or accrued before the date
hereof (as hereinafter defined) under the terms of any Employee Plan will
have been made or accrued by Synrad, as applicable, by the date hereof.
No Employee Plan subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in ERISA), whether or not
waived. Synrad has not incurred, nor does it reasonably expect to incur,
any liability to the Pension Benefit Guaranty Corporation with respect to
any Employee Plan. Synrad has not incurred, nor does it reasonably
expect to incur, any withdrawal liability with respect to any
"multiemployer plan" (as defined in Section 3(37) of ERISA). Synrad does
not have, nor has it had, a defined benefit pension plan.
V.15 Labor Matters; Personnel. Except as disclosed in Schedule
5.15 attached hereto, there are no controversies or claims, pending or
threatened, between Synrad and any of its current or former employees,
which controversies or claims have affected or may reasonably be expected
to affect the business, operations, financial condition, assets,
liabilities, prospects, or regulatory status of Synrad. The policies of
Synrad concerning hours worked by, and payments made to, employees are in
all material respects in compliance with the Fair Labor Standards Act and
all other applicable laws dealing with such matters. There are no
existing or outstanding material obligations of Synrad, whether arising
by operation of law, civil or common, by contract, or by past custom, for
payments to trusts or other funds, to any Governmental Authority, or to
any individual, director, officer, employee, or agent (or his or her
heirs, legatees, or legal representatives), with respect to any contract
for employment, unemployment compensation benefits, profit sharing,
pension, or retirement benefits, including vacation or holiday pay,
bonuses, or other forms of compensation, which are payable to its
directors, officers, employees, or agents, which have not been paid when
due. All payments due from Synrad on account of employee health and
welfare insurance have been paid or accrued as a liability on Synrad's
books. All severance payments which are or were due under the terms of
any agreement, oral or written, have been paid or accrued as a liability
on Synrad's books. Except as set forth on Schedule 5.15 hereto, all
vacation and sick pay accrued and/or owed and bonuses to be paid with
respect to services rendered up to the date hereof, whether in stock or
cash, shall be accrued on the books of Synrad as of the date hereof.
Except as set forth in Schedule 5.15, Synrad is not a party to any
collective bargaining agreement or other labor union contract applicable
to persons employed by Synrad, nor does Synrad know of any activities or
proceedings of any labor union to organize any such employees. Section
5.15 sets forth a list of all officers, directors, and employees of
Synrad and their respective rates of compensation (including the portions
thereof attributable to bonuses), including any other salary, bonus, or
other payment arrangement made with any of them.
V.16 Litigation; Claims; Investigations. Except as set forth in
Schedule 5.16 attached hereto, there are no suits, actions, claims,
investigations, proceedings, or inquiries pending, threatened against,
or, to the best of Synrad's knowledge, affecting, Synrad or any of its
properties, rights, assets, or business, at law or in equity, in any
court or before any Governmental Authority which, if decided adversely to
Synrad, would have a Material Adverse Effect, and Synrad does not know
nor does it have any grounds to know of any basis or grounds for any such
suit, action, claim, investigation, inquiry, or proceeding. There is no
outstanding order, writ, judgment, injunction, or decree of any court,
administrative agency, governmental body, or arbitration tribunal against
or, to the best of Synrad's knowledge, affecting Synrad or any of its
properties, rights, assets, or business.
V.17 Governmental Licenses and Permits. Except as set forth on
Schedule 5.17 hereto, Synrad has all governmental licenses and permits
necessary for the lawful conduct of the Business and to operate its
properties and assets, and such licenses and permits are in full force
and effect. Schedule 5.17 attached hereto sets forth all such licenses
and permits. No violations exist or have any been recorded with respect
to any such licenses or permits; no proceeding is pending or threatened
which contemplates the revocation or limitation of any such license or
permit; and Synrad does not know or have any grounds to know of any basis
or grounds for any such revocation or limitation. Synrad has complied in
all material respects with all laws, rules, regulations, ordinances,
codes, and orders relating to its properties and/or the Business and to
all covenants, terms, and conditions upon or under which any of its
licenses and permits are held. Except as set forth in Schedule 5.17,
such licenses and permits are freely assignable to Purchasing Subsidiary.
V.18 Compliance With Legislation Regulating Environmental Quality.
Except for chemical products and other materials which are used by Synrad
in the ordinary course of its manufacturing and which have been stored,
used, and disposed of in accordance with applicable laws, there are no
toxic wastes or other toxic or hazardous substances or materials
(collectively, "Toxic Substances") being stored or otherwise held in or
on any of the facilities of Synrad. In addition, there are no Toxic
Substances which have migrated from such facilities, whether contained in
ambient air, surface water, groundwater, land surface, or subsurface
strata. Except as set forth in Schedule 5.18 hereto, the facilities of
Synrad have been maintained in material compliance with all federal,
state, and local environmental protection, occupational, health, safety,
and similar laws, ordinances, restrictions, licenses, and regulations,
including, but not limited to, the Federal Water Pollution Control Act
(33 U.S.C. 1251 et seq.), Resource Conservation & Recovery Act (42
U.S.C. 6901 et seq.), Safe Drinking Water Act (21 U.S.C. 349, 42
U.S.C. 201, 300f), Toxic Substances Control Act (15 U.S.C. 2601 et
seq.), Clean Air Act (42 U.S.C. 7401 et seq.), Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. 9601
et seq.) ("CERCLA"), and similar state laws. Synrad has not disposed or
arranged (by contract, agreement, or otherwise), within the meaning of
Section 107(a)(3) of CERCLA, for the disposal of any material or
substance that was generated or used by Synrad at any off-site location
that has been or is listed or proposed for inclusion on the National
Priority List promulgated pursuant to CERCLA or any list promulgated by
any Governmental Authority for the purpose of identifying sites which
pose an imminent danger to health and safety. Synrad has delivered to
Excel true and complete copies of all environmental studies, reports, and
analyses made or prepared in the last five years relating to Synrad
and/or its facilities to the extent they were made by Synrad or are in
Synrad's possession or, in the case of the Mukilteo facility, Synrad has
knowledge thereof.
V.19 Tax Matters.
(a) Synrad has duly and timely filed all tax reports and
returns required to be filed by it, including all federal, state, local,
and foreign tax returns and reports ("Tax Returns"). Except as set forth
in Schedule 5.19 hereto, all Tax Returns were correct and complete in all
material respects when filed. Except as set forth in Schedule 5.19
hereto, Synrad has paid in full all taxes (whether or not shown on a Tax
Return) required to be paid by it before such payment became delinquent,
and has made adequate provision in conformity with generally accepted
accounting principles, consistently applied, for the payment of all
accrued taxes not yet payable. All taxes which Synrad has been required
to collect or withhold have been duly collected or withheld and, to the
extent required when due, have been duly and timely paid to the proper
taxing authority.
(b) The Tax Returns have not been examined by the Internal
Revenue Service for any period during the past five years, nor has any
issue been raised by the Internal Revenue Service in respect of any such
Tax Returns. Except as set forth in Schedule 5.19 hereto, no audits,
inquiries, investigations, or examinations relating to the Tax Returns
are pending or threatened by any Governmental Authority, and no claims
have been or may be asserted relating to any of the Tax Returns filed for
any year which, if determined adversely, would result in the assertion by
any Governmental Authority of any material tax deficiency against Synrad.
There have been no waivers or extensions of statutes of limitations by
Synrad.
V.20 Transactions with Certain Persons. Except as set forth in
Schedule 5.20 attached hereto, neither Synrad, nor any officer, director,
or employee of Synrad (or any member of any such person's immediate
family), is presently a party to any material transaction with Synrad
relating to the business of Synrad, including, without limitation, any
contract, agreement, or other arrangement (a) providing for the
furnishing of material services by, (b) providing for the rental of
material real or personal property from, or (c) otherwise requiring
material payments to (other than for services as officers, directors, or
employees of Synrad), any such person or any corporation, partnership,
trust, or other entity in which any such person has a substantial
interest as a stockholder, officer, director, trustee, or partner.
V.21 Brokers. Except for Photonics Investments B.V. (the fees of
which shall be paid by Synrad), no broker, finder, or investment banker
has acted for Synrad in connection with this Agreement or the
transactions contemplated hereby, or is entitled to any brokerage,
finder's, or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
Synrad.
V.22 Illegal Payments. Synrad has not, directly or indirectly,
paid or delivered any fee, commission, or other sum of money or item or
property, however characterized, to any finder, agent, government
official, or other party, in the United States or any other country,
which is in any manner related to the business or operations of Synrad,
which Synrad knows or has reason to believe to have been illegal under
any federal, state, or local laws of the United States or any other
country having jurisdiction; and Synrad has not participated, directly
or indirectly, in any boycotts or other similar practices affecting any
of its actual or potential customers.
V.23 Adverse Business Conditions. Except as set forth in Schedule
5.23 attached hereto, Synrad has no reasonable cause to believe that any
condition exists with respect to Synrad which has, or may have, a
Material Adverse Effect.
V.24 Material Misstatements or Omissions. No representation,
warranty, or statement made by Synrad in this Agreement, or in any
certificate or document delivered or to be delivered to Excel or
Purchasing Subsidiary pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to be stated in order to make such
representation, warranty, or statement not misleading. All information
relating to Synrad which is known or, on reasonable inquiry, would be
known to Synrad, and which may be material to a purchaser for value of
all of the assets, businesses, and operations of Synrad, has been
disclosed in writing to Excel. The representations and warranties
contained in this Article V shall not be affected or deemed waived by
reason of the fact that Excel or any of its representatives should have
known that any such representation or warranty is or might be inaccurate
in any respect or by any investigation by Excel or its representatives.
V.25 Year 2000 Review. Synrad has reviewed the effect of the Year
2000 issue on the computer software, hardware and firmware systems and
equipment containing embedded microchips owned or operated by or for
Synrad or used or relied upon in the conduct of the Business (including
systems and equipment supplied by others or with which such computer
systems of Synrad interface.) The costs to Synrad of any reprogramming
required as a result of the Year 2000 issue to permit the proper
functioning of such systems and equipment and the proper processing of
data, and the testing of such reprogramming, and of the reasonably
foreseeable consequences of the Year 2000 issue to Synrad (including
reprogramming errors and the failure of systems or equipment supplied by
others) are not reasonably expected to have a Material Adverse Effect.
Excel is active in the electro-optics business generally, and,
accordingly, (a) the representation and warranty contained in each of
Section 5.23 and 5.24 shall not be deemed to extend to general economic
conditions and trends in the electro-optics business or as to the general
regulatory environment (excluding environmental matters), and (b) Excel
acknowledges that revenue forecasts previously provided by Synrad to
Excel were made in good faith and based on Synrad management's reasonable
belief and on assumptions that Synrad's management beliefs are reasonable
but are not intended as guarantees as to future performance and that
there may be variations in performance from the forecasts provided by
Synrad and that those variations may be material. Except as set forth in
Sections 5.06(a) and 5.11, no representation or warranty shall be deemed
made in Sections 5.23 and 5.24 with respect to inventory and accounts
receivable.
ARTICLE V.
...........
CLOSING DOCUMENTS
.................
VI.01 Deliveries by Synrad. Concurrently with the execution and
delivery of this Agreement, Synrad is delivering to Purchasing Subsidiary
the following documents, certificates, instruments and items, in each
case in form and substance reasonably satisfactory to Purchasing
Subsidiary and its counsel:
(a) bill of sale and assignment for the Business Assets;
(b) assignments of patents, patent applications, trademarks
and copyrights, all in recordable form;
(c) a copy of resolutions duly adopted by the Board of
Directors of Synrad authorizing and approving the execution and delivery
of this Agreement by Synrad and the performance of its obligations
hereunder;
(d) a copy of resolutions duly adopted by the sole shareholder
of Synrad authorizing and approving the execution and delivery of this
Agreement by Synrad and the performance of its obligations hereunder;
(e) the opinion, dated as of the date hereof, of Preston Gates
& Ellis, LLP, counsel to Synrad, Laakmann, and the Trust;
(f) Non-disclosure and inventions agreements ("Non-Disclosure
and Inventions Agreements") executed by all employees of Synrad and
Emerald;
(g) all consents, approvals, and filings required in
connection with the consummation of the transactions hereunder,
including, without limitation, those consents set forth on Exhibit C
attached hereto and made a part hereof; and
(h) articles of amendment to the articles of incorporation of
Synrad changing its name to a name bearing no similarity to its present
name.
VI.02 Deliveries by Purchasing Subsidiary. Concurrently with the
execution and delivery of this Agreement, Purchasing Subsidiary is
delivering the following documents, certificates, instruments and items,
in each case in form and substance satisfactory to Synrad and its
counsel:
(a) To Synrad:
(i) A wire transfer of the Purchase Price;
(ii) an Instrument of Assumption of Liabilities and
Obligations;
(iii) a certified copy of resolutions duly adopted by the
respective Board of Directors of Purchasing Subsidiary and Excel
authorizing and approving the execution and delivery of this Agreement
and the performance of its obligations hereunder;
(iv) the opinion, dated as of the date hereof, of Breslow
& Walker, LLP counsel to Excel and Purchasing Subsidiary; and
(v) a resale certificate and manufacturers equipment
exemption; and
(b) To Pacific Northwest Bank, the outstanding indebtedness
assumed pursuant to Article III hereto.
ARTICLE VI.
............
COVENANTS
.........
VII.01 Covenants of Synrad. Synrad covenants and agrees (a) that
immediately after the execution and delivery of this Agreement, it shall
amend its Articles of Incorporation and take such other actions which may
be necessary to change its name to a name bearing no similarity to its
present name and will thereafter cooperate with Purchasing Subsidiary in
making the Synrad corporate name available to Purchasing Subsidiary in
the State of Washington and in each state in which Synrad is licensed to
transact business as a foreign corporation, (b) that from time to time
after the date hereof without further consideration, to execute and
deliver such other instruments of conveyance and transfer and take such
other action as Purchasing Subsidiary reasonably may request to more
effectively convey and transfer to and vest in Purchasing Subsidiary and
to put Purchasing Subsidiary in possession of the Business Assets
transferred hereunder, (c) to pay any sales, use or similar taxes owed by
or imposed on Purchasing Subsidiary as a result of the transactions
consummated pursuant to this Agreement (collectively, the "Sales Tax
Liabilities"), (d) to cooperate fully with Excel and Purchasing
Subsidiary in the audit of the books and records of Synrad by KPMG Peat
Marwick so as to allow Excel to satisfy its reporting requirements
pursuant to the Exchange Act, (e) to report on all applicable federal,
state and local income and other tax returns in accordance with the asset
valuations set forth on Schedule 2.01(b) hereto, and (f) to take or cause
to be taken at its expense, to the extent the expense therefor exceeds
$25,000, such action as is necessary to correct the environmental problem
discussed in item 2 of Schedule 5.07.
VII.02 Covenants of Laakmann. In consideration of the Purchase
Price and the monies to be beneficially received by Laakmann hereunder by
virtue of being a beneficiary of the sole stockholder of Synrad, Synrad,
the Trust and Laakmann, each covenants and agrees that:
(a) for a period of five years from the date hereof (the
"Covenant Period"), he or it will not engage, directly or indirectly, in
any business in which Synrad is presently engaged, or directly or
indirectly own, manage, operate, control, loan money to, or participate
in the ownership, management, operation or control of, or be connected
with as a director, officer, employee, partner, trustee, consultant,
agent, independent contractor or otherwise, or acquiesce in the use of
his or its name in, any other business or organization which engages,
directly or indirectly, in any business in which Synrad is presently
engaged, in any geographical area in which Synrad is now conducting
business or any geographical area in which, to the knowledge of Laakmann,
Synrad or Purchasing Subsidiary plans to conduct business within a six
(6) month period; provided, however, Synrad, the Trust and Laakmann shall
be permitted (i) to own in the aggregate less than a five percent
interest as a shareholder in any company which is listed on any national
securities exchange even though it may be in competition with Purchasing
Subsidiary, and (ii) to own in the aggregate not more than a 45% interest
in, and to make loans to, Auralis, Inc., provided that he or it remains a
passive investor in Auralis, Inc.
(b) during the Covenant Period, he or it will not, directly or
indirectly, either individually or on behalf of any other person or
entity (i) solicit customers, suppliers, or other business relations of
Purchasing Subsidiary for the purpose of interfering with or encouraging
them to terminate their relationship with Purchasing Subsidiary, or (ii)
encourage employees (full-time or part-time) of Purchasing Subsidiary to
terminate their employment with Purchasing Subsidiary;
(c) the restrictions contained in this Section 7.02,
including, without limitation, the time periods and the geographical
areas of the restrictions, are fair and reasonable and do not place any
undue hardship on Synrad, the Trust or Laakmann, and are reasonably
required for the protection of the goodwill, the business, and the
interests of Purchasing Subsidiary and its officers, directors, and
employees;
(d) it is the desire and intent of the parties that the
provisions of this Section 7.02 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any
particular provision of this Section 7.02 shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to
delete therefrom the portion thus adjudicated to be invalid or
unenforceable. Such deletion shall apply only with respect to the
operation of such provisions of this Section 7.02 in the particular
jurisdiction in which such adjudication is made. In addition, if the
scope of any restriction contained in this Section 7.02 is too broad to
permit enforcement thereof to its fullest extent, then such restriction
shall be enforced to the maximum extent permitted by law, and Synrad, the
Trust and Laakmann each hereby consents and agrees that such scope may be
judicially modified in any proceeding brought to enforce such
restriction; and
(e) in the event of a breach or threatened breach by Synrad,
the Trust or Laakmann of the provisions of this Section 7.02, Purchasing
Subsidiary shall be entitled to an injunction and such other equitable
relief as may be necessary or desirable to enforce the restrictions
contained herein. Nothing herein contained shall be construed as
prohibiting Purchasing Subsidiary from pursuing any other remedies
available for such breach or threatened breach or any other breach of
this Agreement.
VII.03 Covenants of Excel and Purchasing Subsidiary. Excel and
Purchasing Subsidiary covenant and agree that:
(a) Purchasing Subsidiary shall offer employment to each of
the current employees of Synrad and Emerald, on terms materially no less
favorable than (and, in any event, with respect to non-management
employees, initially the same cash compensation as) the terms in effect
on the date hereof, and to provide each such employee credit for prior
service at Synrad for purposes of benefits (including, without
limitation, vacation), unless prohibited by law or existing benefit plan
provisions; provided, however, that such employee enters into a Non-
Disclosure and Inventions Agreement with Purchasing Subsidiary in the
form submitted to such Employee by Purchasing Subsidiary; and provided
further, however, that nothing herein shall be construed to assure any
employee of continued employment; and
(b) From time to time after the execution and delivery of this
Agreement, Purchasing Subsidiary shall afford Synrad and Laakmann
reasonable access to the Synrad books and records being acquired
hereunder for the purpose of enabling Synrad to file its 1998 federal
income tax return, for the purpose of dealing with any IRS audits of
Laakmann's tax returns and related proceedings, but only to the extent
they relate to income or other items attributable to Synrad, and for any
other reasonably legitimate purpose involving the assets or liabilities
retained by Synrad; and
(c) Purchasing Corporation shall satisfy Synrad's obligation
pursuant to Section 7.01(c) hereof to pay the Sales Tax Liability; and
(d) Excel and Purchasing Corporation shall report on all
applicable federal, state and local income and other tax returns in
accordance with the asset valuations set forth on Schedule 2.01(b)
hereto.
(e) Purchasing Corporation shall provide medical insurance
COBRA coverage for Laakmann and his wife and dependents for a period of
twelve months from the date hereof, and will not make changes to the
existing plan, or change to a new medical plan, that would cause any of
them to have less coverage (a new waiting period for organ transplants
shall be deemed less coverage) than they have under Synrad's existing
medical plan. Purchasing Corporation shall pay, directly to the medical
insurance carrier, the COBRA premiums; and shall not charge any
administrative fee to Laakman, his wife and his dependents.
ARTICLE VII.
.............
INDEMNIFICATION
...............
VIII.01 Indemnity of Synrad, the Trust, and Laakmann.
(a) Synrad, the Trust, and Laakmann, jointly and severally,
agree to indemnify and hold harmless Excel, Purchasing Subsidiary, and
their respective officers, directors, agents, and employees, from and
against, for and in respect of, and promptly shall reimburse them for,
any and all claims, losses, costs, and expenses (including the cost of
any investigation and reasonable attorneys' fees), damages, lawsuits,
obligations, deficiencies, and liabilities (collectively "Losses") which
arise or result from or are related to (i) the inaccuracy or breach of
any representation or warranty made by Synrad, the Trust, and Laakmann
herein; (ii) any breach or failure of Synrad, the Trust, or Laakmann to
perform any of their covenants or agreements set forth herein; (iii)
federal, state or local tax liabilities or obligations (except payroll
taxes and any other operating business taxes that have been accrued on
the Balance Sheet or have been accrued in the ordinary course of business
since the Balance Sheet Date in accordance with past practice); (iv) any
infringement or alleged infringement of the rights possessed by any other
person, firm, company, partnership or corporation, which infringement or
alleged infringement is by products which were being distributed by
Synrad as of the date hereof, except Losses resulting from (A) any claim
of infringement (1) to the extent that such infringement is caused by any
change made in such products after the date hereof, (2) based upon the
manufacture or sale of such products in any jurisdiction in which such
products were not manufactured or sold prior to or as of the date hereof,
or (3) based upon Purchasing Subsidiary's use or Excel's use of the mark
SYNRAD in Japan, and (B) in the case of claims of patent infringement,
claims made with respect to patents which have been granted or published
after the date hereof; (v) any liability of or claim against Synrad,
whether accrued, absolute, contingent, or otherwise, arising out of or
relating to events occurring on or prior to the date hereof, except to
the extent that such liability or obligation has been expressly assumed
by Purchasing Subsidiary pursuant to Article III hereof; (vi) the failure
by Purchasing Subsidiary to comply with any applicable bulk sales notice
requirements; and (vii) any outstanding options to purchase Synrad Common
Stock or the purchase, cancellation or other disposition thereof.
(b) The amount of any Losses incurred by Purchasing Subsidiary
and/or Excel shall be reduced by the net amount Purchasing Subsidiary
and/or Excel recovers (after deducting all reasonable attorneys' fees,
expenses, and other costs of recovery) from any other party liable for
such Losses and any insurance Purchasing Subsidiary or Excel may have
with respect to such Losses (although Purchasing Subsidiary need not
proceed against such other party or insurance company in order to be able
to collect any Losses from Synrad, the Trust, and/or Laakmann), and the
Purchasing Subsidiary and/or Excel shall use commercially reasonable
efforts to effectuate any such recovery. If Purchasing Subsidiary and/or
Excel recovers all or a portion of any Loss indemnified under Section
8.01(a) and Synrad, the Trust, and/or Laakmann has already paid to
Purchasing Subsidiary and/or Excel all amounts owed with respect to such
Loss, then Purchasing Subsidiary and/or Excel promptly shall reimburse
Synrad, the Trust, and/or Laakmann to the full extent of Losses paid by
them; and
(c) In the event Purchasing Subsidiary and/or Excel takes
steps to mitigate Losses, the costs of such mitigation shall be included
in Losses.
VIII.02 Excel's and Purchasing Subsidiary's Indemnity. Excel and
Purchasing Subsidiary, jointly and severally, agree to indemnify and hold
harmless Synrad and its shareholders, officers, directors, agents, and
employees, from and against, for and in respect of, and shall promptly
reimburse them for, any and all Losses which arise or result from or are
related to (a) the inaccuracy or breach of any representation or warranty
made by Excel or Purchasing Subsidiary herein, or (b) any breach or
failure of Excel or Purchasing Subsidiary to perform any of their
respective covenants or agreements set forth herein.
VIII.03 Third Party Claims Against Excel or Purchasing Subsidiary.
The obligations and liabilities of Synrad, the Trust, and Laakmann, with
respect to Losses resulting from the assertion of liability by third
parties against Excel or Purchasing Subsidiary (a "Third Party Claim")
shall be subject to the following terms and conditions:
(a) Excel or Purchasing Subsidiary, as the case may be, shall
give Synrad, the Trust, and Laakmann prompt notice of any such Third
Party Claim, and Synrad, the Trust, and Laakmann will (and have the right
to) undertake the defense thereof by representatives of their own
choosing and will consult with Excel and Purchasing Subsidiary during the
course thereof (but Excel's or Purchasing Subsidiary's omission to so
notify Synrad, the Trust, and Laakmann shall not relieve them from any
liability they may have to Excel or Purchasing Subsidiary hereunder
unless such omission materially prejudices the ability of Synrad, the
Trust, and Laakmann to defend against such Third Party Claim);
(b) If, within fifteen (15) days after receiving written
notice from Excel and/or Purchasing Subsidiary of any Third Party Claim,
Synrad, the Trust, or Laakmann shall fail to take reasonable actions to
defend, then Excel and/or Purchasing Subsidiary shall (upon further
notice to Synrad, the Trust, or Laakmann) have the right to undertake the
defense, compromise, or settlement of such Third Party Claim on behalf of
and for the account and risk of Synrad, the Trust, and Laakmann; and
(c) Anything herein to the contrary notwithstanding, (i) if
there is a reasonable probability that a Third Party Claim may adversely
affect Excel and/or Purchasing Subsidiary, other than as a result of
money damages or other money payments (i.e., seeks injunctive or similar
relief against Excel and/or Purchasing Subsidiary), Excel and/or
Purchasing Subsidiary shall make reasonable efforts to give notice
thereof to Synrad, the Trust, and Laakmann and, if they are unable to do
so or if Synrad, the Trust, and Laakmann fail to immediately take
reasonable actions to defend such Third Party Claim, then Excel and/or
Purchasing Subsidiary shall have the right, at the reasonable cost and
expense of Synrad, the Trust, and Laakmann, to defend, compromise, or
settle such Third Party Claim (on such prior notice to Synrad, the Trust,
and Laakmann as may be reasonably possible under the circumstances),
which defense, compromise and settlement shall be on a reasonable basis;
and (ii) without Excel's and/or Purchasing Subsidiary's prior written
consent, which consent shall not be unreasonably withheld, Synrad, the
Trust, and Laakmann shall not settle or compromise any Third Party Claim
or consent to the entry of any judgment in respect thereof, unless (A)
Synrad, the Trust, and Laakmann deliver to Excel and/or Purchasing
Subsidiary, in advance, their written agreement in form and substance
satisfactory to Excel and/or Purchasing Subsidiary, which agreement
provides that amounts paid and incurred or to be incurred by Excel and/or
Purchasing Subsidiary in connection with such Third Party Claim shall be
paid simultaneously by Synrad, the Trust, and Laakmann to Excel and/or
Purchasing Subsidiary, and (B) such settlement, compromise, or consent
includes, as an unconditional term thereof, the giving by the claimant or
the plaintiff to Excel and/or Purchasing Subsidiary of a general release
from all liability in respect of all Third Party Claims, reasonably
satisfactory in form and substance to Excel and/or Purchasing Subsidiary.
VIII.04 Third Party Claims Against Synrad. The obligations and
liabilities of Excel and/or Purchasing Subsidiary with respect to Losses
resulting from the assertion of liability by third parties against Synrad
shall be as set forth in Section 8.03 above, except that for purposes of
this Section 8.04 all references (a) to Excel and/or Purchasing
Subsidiary in Section 8.03 above shall be deemed to be references to
Synrad and (b) to Synrad in Section 8.03 above shall be deemed to be
references to Excel and/or Purchasing Subsidiary.
VIII.05 Basket. Notwithstanding anything to the contrary contained
herein, no party shall assert a claim under Section 8.01 or Section 8.02
hereof unless or until the Losses with respect to which such party has
been indemnified exceed $100,000 in the aggregate, at which time all such
claims in excess of $100,000 may be asserted; provided, however, Excel
and Purchasing Subsidiary may assert a claim with respect to any Losses
which may arise against or be incurred by Purchasing Subsidiary or Excel
(a) for any breach of any of the covenants contained in Section 7.01
and/or 7.02, (b) for the failure to comply with any applicable bulk
sales notice requirements, and (c) with respect to Retained Liabilities
and Obligations; and provided further that Synrad, the Trust and Laakmann
may assert a claim with respect to any breach by Purchasing Subsidiary
under the Instrument of Assumption of Liabilities and Obligations as
contemplated by Section 6.02(b) or any breach of any covenants contained
in Section 7.03 (c) and (e); in each instance without regard to the
$100,000 limitation contained herein. Except for Losses which arise or
result from or are related to fraud, the obligations of Synrad, the
Trust, and Laakmann, in the aggregate, pursuant to Section 8.01(a) hereof
shall not exceed $3,000,000.
VIII.06 Cumulative Remedies. All remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of
any other rights or the seeking of any other remedies against the other
parties hereto. Notwithstanding the foregoing, except in the case of
claims for fraud, any effort to recover Losses for matters covered by the
indemnification of Sections 8.01 or 8.02, regardless of how such effort
is made, shall be subject to the third-party claim procedures of Sections
8.03 and 8.04 (if such Losses result from a Third Party Claim), the
thresholds and caps of Section 8.05, and the time limits of Section 8.07.
VIII.07 Survival of Representations and Warranties. The
representations, warranties, covenants, and agreements made by the
parties in this Agreement, or in any certificate or document furnished
pursuant hereto, and the obligation to indemnify hereunder shall survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, notwithstanding any investigation made
by or on behalf of any party; provided, however, no action (other than an
action for fraud) shall be brought by any party hereto against any other
party hereto more than three (3) years after the date hereof.
ARTICLE VIII.
...........
MISCELLANEOUS
.............
IX.01 Agreement Binding. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
IX.02 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
IX.03 Headings. The headings or captions of the Sections of this
Agreement are for convenience or reference only and do not form a part
hereof and do not in any way modify, interpret, or construe the intention
of the parties or affect any of the provisions of this Agreement.
IX.04 Amendment and Waiver. This Agreement constitutes the entire
agreement between the parties pertaining to its subject matter and
supersedes all prior agreements, representations, and understandings of
the parties. This Agreement cannot be altered, amended, changed, waived,
terminated, or modified in any respect or particular unless the same
shall be in writing and signed by or on behalf of the party to be charged
therewith. No waiver by any party of any breach hereunder shall be
deemed a waiver of any other or subsequent breach. No waiver shall be
binding unless executed in writing by the party making the waiver.
IX.05 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally
or mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
(a) if to Excel or Purchasing Subsidiary:
Excel Technology, Inc.
780 Third Avenue
New York, New York 10017
Attention: J. Donald Hill
with copies to:
Breslow & Walker, LLP
100 Jericho Quadrangle
Jericho, New York 11753
Attention: Howard S. Breslow, Esq.
(b) if to Synrad, the Trust or Laakmann:
c/o Peter Laakmann
The Highlands
Seattle, WA 98177-5001
Attention: Peter Laakmann
with a copy to:
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7078
Attention: Stephan H. Coonrod, Esq.
IX.06 Expenses. Excel and Purchasing Subsidiary shall bear all of
their expenses in connection with the purchase of the Business Assets.
In addition thereto, Excel and Purchasing Subsidiary shall be responsible
for the expenses involved in having KPMG Peat Marwick audit the books and
records of Synrad for purposes of Excel satisfying its reporting
requirements pursuant to the Exchange Act. The Trust, as the sole
shareholder of Synrad, shall bear all of Synrad's expenses involved in
connection with the sale of Business Assets.
IX.07 Severability. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by virtue
of any rule of law or public policy, all other conditions and provisions
of this Agreement nevertheless shall remain in full force and effect so
long as the economic or legal substance of the transactions contemplated
hereby is not affected in any material manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal,
or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent
of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the maximum
extent possible.
IX.08 Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes any and all
other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
Except as otherwise expressly provided herein, this Agreement is not
intended to confer upon any other person any rights or remedies
hereunder.
IX.09 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an
original but all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
EXCEL TECHNOLOGY, INC.
By: /s/ J. Donald Hill
.........................
J. Donald Hill,
Chief Executive Officer
EXCEL PURCHASING CORPORATION
By: /s/ J. Donald Hill
..........................
J. Donald Hill,
Chief Executive Officer
SYNRAD, INC.
By: /s/ Peter Laakmann
........................
Peter Laakmann, Chairman
/s/ Peter Laakmann
........................
Peter Laakmann
THE AMENDED REVOCABLE LIVING TRUST OF PETER LAAKMANN, dated June 30, 1998
By: /s/ Peter Laakmann
.........................
Peter Laakmann, Trustee
