SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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INTERMAGNETICS GENERAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
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LOGO
INTERMAGNETICS GENERAL CORPORATION
Notice of Annual Meeting of Shareholders
November 16, 2004
TO THE SHAREHOLDERS OF
INTERMAGNETICS GENERAL CORPORATION:
Notice is hereby given that the annual meeting of shareholders of
INTERMAGNETICS GENERAL CORPORATION (the "Company") will be held at the Desmond
Hotel and Conference Center, 660 Albany-Shaker Road, Albany, New York 12211, on
November 16, 2004 at 1:00 p.m. local time, for the following purposes:
1. To elect three (3) directors;
2. To approve the reincorporation of the Company in the State of
Delaware;
3. To amend the Company's Certificate of Incorporation to increase the
number of authorized shares of common stock;
4. To amend the Company's Certificate of Incorporation to provide for
election of directors by a plurality of the votes cast.
5. To amend the Company's 2000 Stock Option and Stock Award Plan; and
6. To transact such other business as may properly come before the
meeting or any adjournments thereof.
All Shareholders of record as of the close of business on September 21,
2004 are entitled to notice of the annual meeting and to vote at the annual
meeting and any adjournments thereof.
By order of the Board of Directors,
KATHERINE M. SHEEHAN
Corporate Secretary
Latham, New York
September 27, 2004
REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
TABLE OF CONTENTS
2004 Annual Meeting of Shareholders.......................................... 2
PROPOSAL ONE................................................................. 4
Information Regarding Directors......................................... 5
Director Remuneration................................................... 9
Security Ownership of Certain Beneficial Owners and Management..........11
PROPOSAL TWO.................................................................13
PROPOSAL THREE...............................................................32
PROPOSAL FOUR................................................................33
PROPOSAL FIVE................................................................35
Executive Compensation.......................................................42
Audit Committee Report.......................................................52
Report of Compensation Committee.............................................54
Stock Performance Graph......................................................56
ANNEX A - Form of Agreement and Plan of Merger
ANNEX B - Certificate of Incorporation of Intermagnetics, Inc.
ANNEX C - By-Laws of Intermagnetics, Inc.
ANNEX D - Amended and Restated 2000 Stock Option and Stock Award Plan
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INTERMAGNETICS GENERAL CORPORATION
450 OLD NISKAYUNA ROAD
P.O. BOX 461
LATHAM, NEW YORK 12110
PROXY STATEMENT
2004 ANNUAL MEETING OF SHAREHOLDERS
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Intermagnetics General Corporation (the
"Company", "we", "our" or "us") for use at the 2004 annual meeting of
shareholders, and at any adjournments thereof. The annual meeting is scheduled
to be held at the Desmond Hotel and Conference Center, 660 Albany-Shaker Road,
Albany, New York 12211, on November 16, 2004 at 1:00 p.m. local time. This proxy
statement and the accompanying proxy will be distributed to shareholders on or
about October 8, 2004.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by our
officers and directors and a small number of regular employees who will not be
specially compensated for such services. We may also utilize the services of a
third party firm to assist in the solicitation of proxies for a fee not to
exceed $10,000 plus their costs and expenses. We will also request banks and
brokers to solicit proxies from their customers, where appropriate, and will
reimburse such persons for reasonable expenses incurred in that regard.
Our annual report on Form 10-K (excluding exhibits) for the fiscal year
ended May 30, 2004, was mailed with this proxy statement but does not constitute
a part of this proxy statement.
On February 7, 2000, we appointed PricewaterhouseCoopers LLP as our
independent accountants. The Audit Committee has appointed
PricewaterhouseCoopers to continue to serve as our independent accountants
during the current fiscal year. We have asked that a representative of
PricewaterhouseCoopers attend the 2004 annual meeting of shareholders. This
representative will have an opportunity to make a statement, if he or she
desires, and will be available to respond to appropriate shareholder questions.
VOTING AT THE MEETING
Common Stock holders of record at the close of business on September
21, 2004 are entitled to vote at the meeting. As of September 13, 2004, there
were 27,942,006 shares of Common Stock issued and outstanding.
The Company presently has no other class of stock outstanding and
entitled to be voted at the meeting. The attendance in person or by proxy of
shareholders holding one-third of all votes entitled to be cast will constitute
a quorum.
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Shares cannot be voted at the meeting unless the holder of record is
present in person or by proxy. You may use the enclosed proxy to authorize the
voting of your shares at the meeting. The shares of Common Stock represented by
each properly executed proxy will be voted at the meeting in accordance with
each shareholder's directions. If any other matters are properly presented to
the meeting for action, the proxy holders will vote the proxies (which confer
discretionary authority to vote on such matters) in accordance with their best
judgment.
Three (3) directors will be elected through cumulative voting by a
plurality of the votes cast. Accordingly, you may multiply the number of shares
held by you as of September 21, 2004 by three (3) and cast all votes for a
single director or distribute your votes among the three (3) directors standing
for election. On all other matters to be voted upon by the shareholders, each
share outstanding on September 21, 2004 entitles its holder of record on that
date to one (1) vote.
Under rules promulgated by the Securities and Exchange Commission (the
"SEC"), boxes and a designated blank space are provided on the proxy card for
shareholders to mark if they wish to withhold authority to vote for one or more
nominees for director. Votes withheld in connection with the election of one or
more of the nominees for director will not be counted as votes cast for such
individuals.
Please specify your choice(s) by marking the appropriate boxes on the
enclosed proxy card. If you submit a proxy with no choice specified, the shares
will be voted as recommended by the Board of Directors. Brokerage firms that are
members of the New York Stock Exchange or the American Stock Exchange and hold
shares in street name for customers have the authority under the exchange rules
to vote in their discretion on behalf of their clients on matters which the
exchanges determine to be routine, provided their clients have not furnished
voting instructions within ten (10) days of the shareholders' meeting.
Execution of the accompanying proxy will not affect your right to
attend the meeting and vote in person. You may revoke your proxy by giving
written or oral notice of revocation to our Corporate Secretary, or by
delivering a subsequently executed proxy, at any time before the proxy is voted.
SPECIAL NOTE
Your proxy vote is important. Please complete, sign and return the
accompanying proxy card whether or not you plan to attend the meeting. If you
plan to attend the meeting to vote in person and your shares are registered with
the Company's transfer agent in the name of your broker or bank, you must secure
a legal proxy from your broker or bank assigning voting rights to you for your
shares.
3
PROPOSAL ONE
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ELECTION OF DIRECTORS
Our Board of Directors is divided into two (2) classes having staggered
terms of two (2) years each. The Board of Directors fixes the number of
directors that will serve on the Board through a majority vote of the then
existing directors. The Board currently consists of seven (7) members. On
September 16, 2004, the Board approved a resolution to reduce the size of the
Board to six (6) members effective November 16, 2004.
The Board has nominated the following individuals to serve as directors
for a two-year term ending in 2006: John M. Albertine, Glenn H. Epstein, and
Larry G. Garberding. Messrs. Albertine, Epstein and Garberding currently serve
as directors of the Company. Mr. Epstein is Chairman of the Board.
The nominees have consented to be named and to serve if elected. Unless
otherwise indicated on the proxy card, proxies received will be voted for the
election of the nominees. The Board believes all nominees will be able to serve
as directors. If this should not be the case, however, the proxies may be voted
for a substitute nominee to be designated by the Board of Directors.
Shareholders may vote cumulatively for any or all of the nominees or their
substitutes. It is the Company's intention to have the proxy holders exercise
cumulative voting rights to elect the maximum number of the nominees or their
substitutes.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH
DIRECTOR NOMINEE (PROPOSAL # 1)
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INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
AND REGARDING CONTINUING DIRECTORS
NOMINEES FOR ELECTION FOR TERMS EXPIRING IN 2006
Principal Occupations During Year First
the Past Five Years and Became
Name of Director Age Certain Directorships Director
- ---------------- --- --------------------- --------
John M. Albertine 60 Chairman and CEO of Albertine Enterprises, Inc. 1996
(an economic forecasting and public policy firm)
and Chairman of Albertine Industries (a merchant
banking firm), since 1990; Director of Semco
Energy Inc. and Kadant Inc. (formerly, Thermo
Fibertek, Inc.), Trustee, Virginia Retirement
System.
Glenn H. Epstein 46 Chairman and Chief Executive Officer of the 1998
Company; prior to joining Intermagnetics as
President in 1997, Mr. Epstein worked for Oxford
Instruments Group, plc as President of Nuclear
Measurements Group, Inc. (a wholly-owned
subsidiary of Oxford Instruments, plc).
Larry G. Garberding 65 Executive Vice President, CFO and Director of DTE 2002
Energy Company (1990 - 2001); Director of Plug
Power, Inc. and Intermap Technologies Corporation.
CONTINUING DIRECTORS SERVING TERMS EXPIRING IN 2005
Michael E. Hoffman 45 Friedman, Billings, Ramsey & Co., Inc., Managing 2001
Director, Deputy Director of Research; Credit
Suisse First Boston, Global Head of Value Based
Research Group from 1999-2001 and Director,
Business and Environmental Services from
1993-1999.
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Thomas L. Kempner 77 Chairman and CEO Loeb Partners Corporation; 1988
Director of CCC Information Services Group, Inc.,
Dyax Corp., FuelCell Energy, Inc., IGENE
Biotechnology, Inc., Insight Communications
Company, Inc., Northwest Airlines, Inc.
(Emeritus), and Intersections, Inc..
Sheldon Weinig 76 Adjunct Professor at Columbia University and State 1993
University of New York at Stony Brook, NY;
Director of Insituform Technology Inc.
DIRECTOR QUALIFICATION STANDARDS
Candidates for membership to our Board of Directors should be
individuals who possess the highest personal and professional ethics and
integrity and have demonstrated professional achievement and leadership
capabilities. Each should have knowledge, experience and demonstrated expertise
in an area or areas important to the Company, such as, but not limited to
management, finance, marketing, technology, medicine, human resources, public
policy and law. Candidates must evidence a commitment to devote the substantial
time and energy required of productive board members.
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS, ATTENDANCE AND ITS
COMMITTEES
The Board of Directors held ten (10) meetings in the fiscal year ended
May 30, 2004. Our by-laws provide that the Board, by resolution adopted by a
majority of the entire Board, may designate an Executive Committee or other
committees, each of which shall consist of three (3) or more directors. The
Board of Directors annually elects from its members the Governance,
Compensation, Audit, Nominating and Executive Committees. During the last fiscal
year, each director attended at least 76% of the aggregate of the meetings of
the Board of Directors and the committee or committees on which he served, and
all Directors attended the Company's 2003 Annual Meeting of Shareholders.
Governance Committee. The Governance Committee is presently composed of
Messrs. Garberding, Hoffman, Hyde, Kempner, Weinig and Albertine (Committee
Chairman), all of whom are non-employee directors. The role of the Governance
Committee is to ensure that the Company's Board of Directors, its Certificate of
Incorporation and its By-laws are structured in a way that best serves the
corporation and its shareholders. The Committee also evaluates board performance
and management succession planning. In addition, the committee reviews changes
in legislation, regulations and other developments impacting corporate
governance and makes recommendations to the full Board with respect to these
matters. This Committee met five (5) times during fiscal year 2004.
6
Compensation Committee. The Compensation Committee is presently
composed of Messrs. Garberding, Kempner and Hoffman (Committee Chairman), all of
whom are independent as defined in the applicable rules of the Nasdaq National
Market. The Compensation Committee reviews and approves the recommendations of
the Company's Chief Executive Officer as to the appropriate level of
compensation for the Company's principal executive officers and certain other
key personnel and recommends to the Board of Directors the compensation of the
Chief Executive Officer. The Compensation Committee also oversees the Company's
Incentive Bonus Program and recommends grants under the Company's Stock Option
and Stock Award Plan. (See "Executive Compensation.") This Committee met three
(3) times during fiscal year 2004.
Audit Committee. The Audit Committee is presently composed of Messrs.
Hoffman, Hyde, Kempner, Weinig and Garberding (Committee Chairman), all of whom
are independent as defined in the applicable rules of the SEC and the Nasdaq
National Market. Mr. Garberding is a financial expert and is independent as
those terms are defined in Item 401 of Regulation S-K promulgated under the
Exchange Act. This Committee meets with the Company's independent accountants to
review the scope of auditing procedures and the Company's accounting procedures
and internal controls, and considers any non-audit functions to be performed by
our independent auditors. The Committee also provides general oversight with
respect to the accounting principles employed in the Company's financial
reporting. The Audit Committee met ten (10) times during fiscal year 2004.
Nominating Committee. The Nominating Committee is presently composed of
Messrs. Garberding, Hyde and Weinig (Committee Chairman), all of whom are
independent as defined in the applicable rules of the Nasdaq National Market.
This Committee, in addition to the entire Board of Directors, considers
candidates for director of the Company. The Nominating Committee Charter is
available on the Investor Relations page on Intermagnetics website at
http://www.igc.com. The Nominating Committee also considers nominees recommended
by shareholders. Shareholders desiring to submit the name of, and any pertinent
data with respect to, a nominee should send this information in writing to the
Chairman of the Nominating Committee, in care of the Company's Corporate
Secretary. The Nominating Committee met two (2) times during fiscal year 2004.
Executive Committee. The Executive Committee is presently composed of
Messrs. Albertine, Hoffman, Kempner and Epstein (Committee Chairman). This
Committee meets at the direction of the Board to act on special matters in
accordance with the Bylaws of the Company. The Executive Committee met once
during fiscal year 2004.
DIRECTOR INDEPENDENCE
Under the rules promulgated by the SEC and the Nasdaq National Market
with respect to director independence, the Board has determined that Messrs.
Garberding, Hoffman, Hyde, Kempner and Weinig are independent Directors as
defined in such rules.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship existed during fiscal 2004 between our
Board or Compensation Committee and the board of directors or compensation
committee of any other company.
CODE OF CONDUCT
All of our directors, officers and employees must act ethically,
legally and with integrity at all times and are required to comply with our Code
of Business Conduct and Ethics as well as our other policies and standards of
conduct. Our Code of Business Conduct and Ethics can be obtained through our
website at www.igc.com under the Investor Relations window or may be obtained,
without charge, by written request to our Corporate Secretary at Intermagnetics
General Corporation, P.O. Box 461, Latham, New York 12110.
EXECUTIVE SESSIONS
In accordance with Nasdaq Rules, the Board currently schedules regular
meetings at which only independent directors are present. The executive sessions
are scheduled in conjunction with each Board meeting at which the members of the
Board of Directors meet in person. Executive sessions occurred at every Board
meeting at which the Directors met in person during the fiscal year 2004.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
The Board provides a process for stockholders to send communications to
the Board or any of the directors, including the independent directors. All such
communications must be in writing and shall be addressed to the attention of:
Corporate Secretary, Intermagnetics General Corporation, P.O. Box 461, Latham,
New York 12110-0461. All inquiries will be reviewed by the Secretary who will
forward to the Board a summary of all such correspondence and copies of all
communications that she determines require the attention of the Board or the
individual directors, on a regular basis. The Board has requested that the
Corporate Secretary not forward the following types of communications: general
surveys and mailings to solicit business or advertise products, job applications
or resumes, product inquiries or complaints or new product suggestions or any
material that is threatening, illegal or does not relate to the responsibilities
of the Board. If a shareholder requests that any communication be treated as
confidential and delivered only to one or more of the directors, the
communication can be submitted to the Corporate Secretary in a sealed envelope
with a request that the communication be treated as a confidential matter for
immediate delivery to the intended recipient(s).
REPORTING OF ETHICAL CONCERNS TO THE AUDIT COMMITTEE OF THE BOARD
The Audit Committee of the Board of Directors has established
procedures for employees, stockholders, vendors or others to communicate
concerns about the Company's ethical conduct or business practices, including
accounting, internal controls or financial reporting issues, to the Audit
Committee, which has responsibility for these matters. Matters may be reported
using our Report Line at 1-888-823-2885 - on an identified or anonymous basis.
8
Please visit our website www.igc.com under Investor Relations to review the
Company's Code of Business Ethics and Conduct for additional information.
DIRECTOR REMUNERATION
On April 9, 2003 the Board of Directors adopted a new compensation plan
for non-employee Directors (the "Compensation Plan"). The Board developed the
Compensation Plan with the assistance of a compensation consulting firm. Based
on this consultation and market data obtained by the Board, it concluded that in
order to attract and retain qualified Directors, the Board should seek to
compensate its non-employee Directors at a target level in the range of the 75th
percentile of publicly traded companies with $500,000,000 to $1,000,000,000 in
annual revenue. This target reflects the Company's growth strategy and its
desire to attract directors qualified to serve on boards of companies of this
size. A copy of the Compensation Plan was filed with the Securities and Exchange
Commission in the Company's Annual Report on Form 10-K. Under the Compensation
Plan, which has a five (5) year term, the non-employee Directors received the
following compensation in fiscal year 2004 (all share amounts and per-share
prices have been adjusted to reflect the 50% stock dividend issued by the
Company on August 17, 2004):
Annual Retainer $30,000
Board Meeting Fee $ 2,500 per meeting
Committee Meeting Fee $ 1,500 per meeting
Annual Equity Grant 5,250 shares (based on $10.67 stock price)
Special Restricted Equity Award $25,000
The Annual Retainer is paid quarterly. Committee Meeting fees are paid
for each meeting at which formal committee action is taken, and which is held on
a date other than the date of a regular or special meeting of the full Board or
the day immediately preceding such full Board meeting. The Chairmen of the Audit
and Compensation Committees receive an additional annual fee of $2,500. The
Chairmen of the Nominating and Governance Committees receive an additional
annual fee of $1,500. The Board may change the number of shares received for the
Annual Equity Grant based on fluctuations in the Company's stock price. The
Annual Equity Grant is intended to provide approximately $60,000 in Company
common stock annually. At the time the Compensation Plan was adopted, the number
of shares to be granted was 5,250, based on a $10.67 per share stock price. The
Annual Equity Grant will be reviewed by the Board each year prior to the grant
if the Company's stock price is more than ten percent (10%) above or below
$10.67. In fiscal 2004, the Board determined that it would use the average stock
price for the one year period preceding the grant to determine the Annual Equity
Grant, which was $12.92, resulting in a grant of 4,334 shares. The Special
Restricted Equity Award of $25,000 is delivered as restricted common stock of
the Company. These Awards will be granted annually through 2007 on the last
business day in the month of January following the Annual Meeting. The number of
shares to be granted is determined by dividing $25,000 by the closing price of
the Company's common stock as reported on the Nasdaq National Market on the last
trading day preceding the grant date. Each Special Restricted Equity Award vests
over five (5) years with 10% vesting on each of the first four (4) Annual
Meeting dates following the date of grant and the remainder vesting on the fifth
Annual Meeting date following the date of the grant. Each outstanding Special
Equity Award will become fully vested if the director ceases to be a director as
a result of the director's death or permanent disability, or if a Change in
Control (as defined in the Company's 2000 Stock Option and Stock Award Plan) of
the Company occurs while the director is serving as a member of the Board.
9
Each Director may elect to be paid some or all of his cash compensation
in the form of common stock of the Company for the following Annual Period. The
cash to stock conversion will be made on the day the cash payment would
otherwise be due, based on the closing price of the Company's common stock as
reported on the Nasdaq National Market on the last trading day preceding the day
the cash payment would otherwise be due. If a director is first elected to the
Board at a meeting other than an Annual Meeting, he or she must make the
election to convert cash compensation to stock before his or her election to the
Board.
The Compensation Plan year commences on the day after the Company's
Annual Shareholders meeting and ends on the date of the following Annual
Shareholders meeting. During fiscal year 2004, the Directors received an Annual
Equity Grant of 4,334 shares and a Special Restricted Equity Award of 1,493
shares under the Compensation Plan. Each non-employee Director earned the
following cash compensation during the fiscal year: John M. Albertine ($49,000),
Larry G. Garberding ($51,000), James S. Hyde ($47,000), Michael E. Hoffman
($51,000), Thomas L. Kempner ($45,000) and Sheldon Weinig ($49,000).
REQUIREMENTS FOR ADVANCE NOTIFICATION OF NOMINATIONS
Under the Company's Restated Certificate of Incorporation (Article
SIXTH), a director may not be elected unless the name of the nominee, the
nominee's consent, and information concerning the nominee's present and prior
occupations and transactions with the Company or its subsidiaries are filed with
our Corporate Secretary no later than the time fixed in the by-laws.
Section 2.03(b) of our by-laws provides that any shareholder entitled
to vote for the election of directors at a meeting may nominate a director for
election if written notice of the nomination is received by the Company's
Corporate Secretary not less than fourteen (14) days nor more than fifty (50)
days prior to any meeting of the shareholders called for the election of
directors, with certain exceptions. This section does not apply to nominations
for which proxies are solicited under applicable regulations adopted by the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
notice must contain, or be accompanied by, the following:
(a) the name and address of the shareholder who intends to make the
nomination;
(b) a representation that the shareholder is a holder of record of
the Company's voting stock and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified
in the notice;
(c) such information regarding each nominee as would be required in
a proxy statement filed pursuant to the SEC's proxy rules had
proxies been solicited with respect to the nominee by the
Company's Board of Directors;
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(d) a description of all arrangements or understandings among the
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the shareholder; and
(e) the consent of each nominee to serve as director of the Company
if so elected.
Pursuant to the above requirements, our Corporate Secretary must
receive appropriate notices for nominations of directors for consideration at
the 2004 annual meeting no later than October 29, 2004.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
shares of Common Stock beneficially owned by each director and nominee for
director, by each of the executive officers named in the Summary Compensation
Table, by all directors and executive officers as a group, and by persons to our
knowledge who own 5% or more of our Common Stock. This information has been
provided by each of the directors and executive officers as of September 6,
2004. This information includes shares subject to stock options and similar
rights held by each individual or group to the extent such rights are
exercisable within sixty (60) days of the date as to which information is
provided.
Number of Shares Percentage of
Beneficial Owner Beneficially Owned(1) Class(2)
- ---------------- --------------------- --------
Lord, Abbett & Co. 1,737,857 6.2%
90 Hudson St.
Jersey City, NJ 07302(3)
Glenn H. Epstein(4) 416,499 1.4%
James S. Hyde(5) 215,973 *
Thomas L. Kempner(6) 137,777 *
Leo Blecher(7) 108,779 *
Michael K. Burke (8) 93,588 *
Sheldon Weinig(9) 74,559 *
Philip J. Pellegrino(10) 70,794 *
John M. Albertine(11) 46,044 *
Michael E. Hoffman (12) 24,929 *
Larry G. Garberding(13) 17,783 *
Thomas J. O'Brien(14) 8,000 *
All executive officers and directors as a group 1,390,551 4.9%
(14 persons) (15)
(1) Nature of ownership consists of sole voting and investment power unless
otherwise indicated. All share amounts have been adjusted to reflect the
50% stock dividend issued by the Company on August 17, 2004.
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(2) The percentage for each individual or group is based on the aggregate of
the shares outstanding as of September 13, 2004, which was 27,942,006, and
all shares issuable to such individual or group upon the exercise of
outstanding stock options or similar rights to the extent such rights are
exercisable within sixty (60) days of such date.
(3) Based on information provided on Form 13F filed by the holder on June 30,
2004, which was adjusted to reflect the Company's 50% stock dividend issued
on August 17.
(4) Includes presently exercisable options to purchase 81,421 shares.
(5) Includes presently exercisable options to purchase 27,016 shares.
(6) Mr. Kempner disclaims beneficial ownership as to 27,180 of such shares.
Also includes presently exercisable options to purchase 41,112 shares.
(7) Includes presently exercisable options to purchase 6,801 shares.
(8) Includes presently exercisable options to purchase 39,478 shares.
(9) Includes presently exercisable options to purchase 41,112 shares.
(10) Includes presently exercisable options to purchase 22,500 shares and 750
shares of restricted stock.
(11) Includes presently exercisable options to purchase 24,667 shares.
(12) Includes presently exercisable options to purchase 9,396 shares.
(13) Includes presently exercisable options to purchase 4,698 shares.
(14) Includes presently exercisable options to purchase 5,000 shares.
(15) Includes presently exercisable options to purchase 367,261 shares, and
includes certain shares as to which beneficial ownership is disclaimed.
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PROPOSAL TWO
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APPROVAL OF REINCORPORATION FROM NEW YORK TO DELAWARE
The Board of Directors has unanimously approved and declared advisable
a proposal to change the Company's state of incorporation from New York to
Delaware (the "Reincorporation").
REASONS FOR REINCORPORATION IN DELAWARE
Historically, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are updated and revised
regularly in response to the legal and business needs of corporations organized
under its laws. As a result of these efforts, many corporations initially choose
Delaware for their domicile or subsequently reincorporate there in a manner
similar to that proposed by the Company. The Delaware courts have developed
considerable expertise in dealing with corporate legal issues and have developed
a well-established body of case law construing the Delaware General Corporation
Law (the "Delaware Law" or "DGCL"), providing businesses with a greater measure
of assurance as to the validity and consequences of corporate decisions and
actions than exists in other jurisdictions. The Company believes the
predictability afforded by the well-established principles of corporate
governance under the DGCL will be of benefit to the Company and its shareholders
and should assist the Company in its ability to continue to attract and retain
outstanding directors and officers. The DGCL is generally acknowledged to be the
most advanced and flexible corporate statute in the country.
GENERAL
To effect the Reincorporation, the Company will form a Delaware
corporation, Intermagnetics, Inc. ("Intermagnetics-Delaware"), all of whose
capital stock the Company will own. The Reincorporation will be effected by
merging the Company with and into Intermagnetics-Delaware, with
Intermagnetics-Delaware being the surviving corporation and the Company's
current shareholders receiving shares of common stock of Intermagnetics-Delaware
as consideration (the "Merger"), all in accordance with the terms of an
Agreement and Plan of Merger (the "Merger Agreement"). A copy of the form of
Merger Agreement is attached to this Proxy Statement as Annex A, and statements
herein regarding the Merger Agreement are qualified by reference to the complete
Merger Agreement.
The Reincorporation will effect a change in the legal domicile of the
Company and other changes of a legal nature, the most significant of which are
described below. However, the Reincorporation will not result in any change in
our business, management, location of our headquarters or any of our offices or
facilities, number of employees, assets, liabilities or net worth (other than as
a result of the costs incident to the Reincorporation, which are immaterial).
Our management, including all directors and officers, will remain the same in
connection with the Reincorporation and will assume identical positions with
Intermagnetics-Delaware. None of our subsidiaries will change their respective
states or jurisdictions of incorporation in connection with the Reincorporation.
There will be no new employment agreements for executive officers or other
direct or indirect interest of the current directors or executive officers of
the Company in the Reincorporation.
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Upon consummation of the Merger, pursuant to the Merger Agreement each
outstanding Common Share of the Company (the "New York Common Stock")
automatically will be converted into one share of common stock, par value $0.10
per share, of Intermagnetics-Delaware (the "Delaware Common Stock"), and each
holder of New York Common Stock will be deemed to hold a number of shares of
Delaware Common Stock equal to the number of shares of New York Common Stock
held by such holder immediately prior to the Reincorporation. Upon consummation
of the Merger, the Delaware Common Stock will trade on Nasdaq under the symbol
"IMGC". Intermagnetics-Delaware will also file with the Securities and Exchange
Commission and provide to its stockholders the same types of reports and
information that the Company has previously filed and provided. It will not be
necessary for the Company's shareholders to exchange their existing share
certificates following the Reincorporation. However, after consummation of the
Reincorporation, any shareholder desiring a new form of stock certificate may
submit the existing stock certificate to Intermagnetics-Delaware's transfer
agent for cancellation and obtain a new Delaware form of certificate.
In addition, as soon as the Reincorporation becomes effective, each
outstanding option, right or warrant to acquire shares of New York Common Stock
will be converted into an option, right or warrant to acquire an equal number of
shares of Delaware Common Stock, under the same terms and conditions as the
original option, right or warrant and such options, rights and warrants shall no
longer represent the right to acquire shares of New York Common Stock.
All of the Company's employee benefit plans, including the
Intermagnetics General Corporation 2000 Stock Option and Stock Award Plan (the
"2000 Plan") and the Intermagnetics General Corporation 1990 Stock Option Plan
(the "1990 Plan" and, together with the 2000 Plan, the "Plans"), will be assumed
and continued by Intermagnetics-Delaware following the Reincorporation, and
shares of Delaware Common Stock will be authorized to be issued under the 2000
Plan and 1990 Plan equal to the number of shares of New York Common Stock
currently authorized to be issued under the Plans.
No additional stock options will be granted under the 1990 Plan.
Intermagnetics-Delaware intends to grant stock options and stock awards under
the 2000 Plan, which currently provides for the issuance of a maximum of
3,051,000 shares to employees, consultants and directors, subject to shareholder
approval of the Reincorporation. It will be necessary for the shareholders of
the Company to re-approve the 2000 Plan in connection with the assumption of the
2000 Plan by Intermagnetics-Delaware, in order to comply with applicable tax and
other requirements. Accordingly, we are submitting re-approval of the 2000 Plan
as part of this Proposal #2 for your vote in connection with the
Reincorporation. By voting to approve the Reincorporation, you will also be
voting to reapprove the 2000 Plan, as currently in effect, and, if the amendment
of the 2000 Plan described in Proposal #5 is approved, as so amended. The 2000
Plan, as currently in effect, and as proposed to be amended pursuant to Proposal
#5, is described under Proposal #5 below.
As a result of the Merger, each shareholder of the Company will become
a stockholder of Intermagnetics-Delaware. Your rights as a stockholder will be
governed by the Certificate of Incorporation of Intermagnetics-Delaware, a copy
of the form of which is attached to this Proxy Statement as Annex B (the
"Delaware Charter"), the By-laws of Intermagnetics-Delaware, a copy of the form
of which is attached to this Proxy Statement as Annex C (the "Delaware
By-laws"), and the DGCL.
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NO CHANGE IN TRANSFERABILITY OF SHARES
Shareholders whose shares of New York Common Stock were freely tradable
before consummation of the Reincorporation will own shares of Delaware Common
Stock that are freely tradable after consummation of the Reincorporation.
Shareholders holding pre-Reincorporation shares of New York Common
Stock with transfer restrictions will hold post-Reincorporation shares of
Delaware Common Stock that have the same restrictions. For purposes of Rule 144
under the Securities Act of 1933, stockholders who hold Delaware Common Stock
will be deemed to have acquired those shares on the date they originally
acquired their corresponding shares of New York Common Stock.
EFFECTIVE TIME
The Reincorporation is expected to become effective (the "Effective
Time") as soon as reasonably practicable following the Annual Meeting, assuming
shareholder approval has been obtained and all other conditions to the Merger
have been satisfied or waived. Notwithstanding shareholder approval, the Merger
Agreement and applicable law allow the board of directors to abandon the
Reincorporation prior to the Effective Time.
INTERMAGNETICS-DELAWARE
Prior to the Merger, we intend to form Intermagnetics-Delaware as our
wholly owned subsidiary under the DGCL under the name "Intermagnetics, Inc.,"
exclusively for the purpose of merging with the Company. The address and phone
number of Intermagnetics-Delaware's principal office will be the same as those
of the Company. Prior to the Reincorporation, Intermagnetics-Delaware will have
no material assets or liabilities and will not have carried on any business.
THE MERGER AGREEMENT
The Merger Agreement provides that the Company will merge with and into
Intermagnetics-Delaware, with Intermagnetics-Delaware being the surviving
corporation. Pursuant to the Merger Agreement, Intermagnetics-Delaware will
assume all assets and liabilities of the Company, including obligations under
our outstanding indebtedness and contracts and the 1990 Plan and 2000 Plan
described above. Our existing board of directors and officers will become the
board of directors and officers of Intermagnetics-Delaware for identical terms
of office. Our existing subsidiaries will become the subsidiaries of
Intermagnetics-Delaware.
The Merger Agreement was unanimously approved by the board of directors
of the Company and will be approved by the board of directors of
Intermagnetics-Delaware prior to the Merger.
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REQUIRED VOTE
Under New York law and our Restated Certificate of Incorporation (the
"New York Charter"), the affirmative vote of the holders of at least a majority
of the Company's Common Shares outstanding on September 21, 2004 is required for
approval of the Reincorporation of the Company in Delaware. As a result,
abstentions and broker non-votes will have the same effect as negative votes.
Approval of the Reincorporation will constitute approval of the Merger and the
Merger Agreement. If approved by the shareholders, it is anticipated that the
Reincorporation would be completed as soon as reasonably practicable following
the Annual Meeting. The Reincorporation may be abandoned or postponed or the
Merger Agreement may be amended (with certain exceptions), either before or
after shareholder approval has been obtained, if, in the opinion of the board of
directors, circumstances arise that make such action desirable. If the
Reincorporation proposal fails to obtain the requisite shareholder vote for
approval, the Reincorporation will not be consummated and the Company will
continue to be incorporated in New York.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are presently governed by
the corporate law of New York, the Company's state of incorporation, and by the
New York Charter and the Company's By-laws (the "New York By-laws"), both of
which have been adopted pursuant to New York law. The New York Charter and New
York By-laws were filed with the SEC as exhibits to the Company's Annual Reports
on Form 10-K and are available for inspection during business hours at the
principal executive offices of the Company. In addition, copies may be obtained
by writing to the Company at Intermagnetics General Corporation, 450 Old
Niskayuna Road, Latham, New York 12110 Attn: Cathy Yudzevich, or by calling
Ms. Yudzevich at (518)782-1122.
As described above, if the Reincorporation proposal is approved by the
shareholders and the Merger occurs, the Company will merge with and into
Intermagnetics-Delaware and the Company's shareholders will become stockholders
of Intermagnetics-Delaware. Therefore, following the Merger, issues of corporate
governance and control will be controlled by the DGCL, rather than by the
Business Corporation Law of New York ("New York Law" or "NYBCL"). The New York
Charter and the New York By-laws will be replaced by the Delaware Charter and
the Delaware By-laws. The shareholders' approval of the Reincorporation will
constitute their approval of all of the provisions of the Delaware Charter and
Delaware By-laws, including those provisions relating to the limitation of
director liability and expanded scope of indemnification of directors and
officers under Delaware Law, and including those provisions having
"anti-takeover" implications, which may be significant to the Company and its
shareholders in the future. Accordingly, the differences among these documents
and the New York Charter and the New York By-laws and between Delaware Law and
New York Law are relevant to your decision whether to approve the
Reincorporation proposal.
It might be possible to achieve or approximate some of the results to
be achieved under Delaware Law, the Delaware Charter and the Delaware By-laws by
amending the New York Charter or New York By-laws to the extent permitted by New
York Law. However, the board of directors concluded that this approach would not
be as advantageous to the Company and would not enable the Company to take
advantage of the responsiveness and predictability of Delaware Law. The board of
directors accordingly chose the Reincorporation approach.
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In this description of the reincorporation proposal we summarize a
number of differences between Delaware Law and New York Law and between the
Delaware Charter and Delaware By-laws and the New York Charter and New York
By-laws. The board of directors urges shareholders to read the discussion, the
Merger Agreement, the Delaware Charter and the Delaware By-laws attached to this
Proxy Statement.
In considering the following discussion, it is important to be aware
that a number of changes were made to New York Law, effective February 1998, in
order to conform New York Law more closely with the rules afforded under the
corporate laws of other states, such as Delaware. In many cases, these changes,
although applying automatically to corporations formed after that effective
date, did not also apply automatically to pre-existing corporations (like the
Company). Accordingly, discussions in this Proxy Statement of New York Law are
limited to that law as it currently applies to the Company, even though it
currently applies differently to some other New York corporations and would
apply differently to the Company if the Company were to seek shareholder
approval to implement fully the applicable changes to the New York Charter.
Shareholders are also advised that many provisions of Delaware Law and
New York Law may be subject to differing interpretations, and that those offered
herein may be incomplete in certain respects. The following discussion is not a
substitute for direct reference to the statutes themselves or for professional
interpretation of them. In addition, this discussion is qualified in its
entirety by reference to Delaware Law and New York Law, case law applicable in
Delaware or New York, the Delaware Charter, the Delaware By-laws, the New York
Charter and the New York By-laws.
AMENDMENT OF CHARTER
Under New York Law, except for certain ministerial changes to the
charter which may be implemented by a corporation's board of directors without
shareholder action, and except as otherwise required under a charter, a charter
may be amended only if authorized by the board of directors and by the vote of
the holders of a majority of the shares of stock entitled to vote on such
amendment. Delaware Law allows a board of directors to recommend an amendment
for approval by shareholders, and a majority of the shares entitled to vote at a
shareholders' meeting are normally enough to approve that amendment. Both New
York Law and Delaware Law also require that if a particular class or series of
stock is adversely affected by certain types of amendments, then such class or
series also must authorize such amendment in order for it to become effective.
New York Law and Delaware Law both allow a corporation to require a
higher proportion of votes in order to authorize charter amendments, if so
provided in the charter. The Delaware Charter provides that any amendment to the
Delaware Charter relating to (i) the liability and indemnification of directors
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and officers, (ii) the classification of the board of directors and term of
directorships and the filling of directorship vacancies, (iii) stockholder
action by written consent, and (iv) the matters to be considered by the board of
directors in taking any action, including with respect to a change in control,
can only be effected by the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding voting stock of
Intermagnetics-Delaware. The New York Charter contains no comparable provision.
In cases where the charter provides for so-called "blank check"
preferred stock (that is, preferred stock that is undesignated as to series and
relative rights), New York Law and Delaware Law also would allow the board of
directors to establish one or more series of preferred stock and their relative
rights, by amending the charter (called a certificate of designation in
Delaware) without further shareholder action. Both the Delaware Charter and the
New York Charter allow for "blank check" preferred stock.
AMENDMENT OF BY-LAWS
Under New York Law, a corporation's by-laws may be amended by the vote
of the holders of a majority of the votes cast with respect to such amendment
(rather than a majority of the shares outstanding) or, if permitted under the
corporation's charter or a by-law adopted by the shareholders, by the board of
directors.
The New York Charter provides that the board of directors may adopt,
alter, amend or repeal the New York By-laws to the full extent permitted by law.
The New York By-laws provide that they may be amended by the Board of Directors,
provided the By-laws or any such amendment may be amended or repealed by the
vote of shareholders entitled to vote therein.
Under Delaware Law, the power to adopt, amend or repeal the by-laws is
vested in the stockholders entitled to vote or, if permitted under the
corporation's charter, by the board of directors. The Delaware Charter and
Delaware By-laws provide the board of directors with the authority to alter,
amend or repeal the Delaware By-laws and also provides that any such action
taken by the board can be superseded by vote of at least 66-2/3% of the voting
power of the then outstanding voting stock of Intermagnetics-Delaware entitled
to vote on the matter.
WHO MAY CALL SPECIAL MEETINGS OF SHAREHOLDERS
Under both New York Law and Delaware Law, the board of directors or
anyone authorized in the charter or by-laws may call a special meeting of
shareholders. Currently, the New York By-laws provide that special meetings may
be called by the board of directors. The Delaware By-laws also provide that
special meetings may be called only by the board of directors.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS IN LIEU OF A SHAREHOLDER MEETING
New York Law permits shareholder action in lieu of a meeting by
unanimous written consent of those shareholders who would have been entitled to
vote on a given action at a meeting. Alternatively, if a corporation's
certificate of incorporation so provides, shareholder action may be taken under
New York Law by a consent signed by the holders of outstanding voting stock
having not less than the minimum number of votes that would be necessary to
18
authorize or take such action at a shareholder meeting. Delaware Law, on the
other hand, generally permits shareholders to take action by the written consent
of holders collectively owning at least the minimum number of votes (generally,
a majority) that would be required for action at a shareholders' meeting
assuming the presence of all shareholders entitled to vote thereon.
The Delaware Charter eliminates actions by written consent of
shareholders. Elimination of such shareholders' written consents may lengthen
the amount of time required to take shareholder actions because certain actions
by written consent are not subject to the minimum notice requirement of a
shareholders' meeting. The elimination of shareholders' written consents may
deter hostile takeover attempts because of the lengthened shareholder approval
process. The board of directors believes this provision, like the other
provisions to be included in the Delaware Charter and Delaware By-laws, will
enhance the board of director's opportunity to fully consider and effectively
negotiate in the context of a takeover attempt.
RIGHT OF SHAREHOLDERS TO INSPECT SHAREHOLDER LIST
Under New York Law, a shareholder of record may inspect the list of
record shareholders upon giving at least five days' written demand to do so. The
inspection may be denied if the shareholder refuses to give an affidavit that
such inspection is not desired for a purpose which is in the interest of a
business other than the business of the corporation and that the shareholder has
not been involved in selling or offering to sell any list of shareholders of any
corporation within the preceding five years. Under Delaware Law, any stockholder
may upon making a demand under oath stating the purpose thereof, inspect the
stockholders' list for any purpose reasonably related to the person's interest
as a shareholder. In addition, for at least ten (10) days prior to each
stockholders meeting, a Delaware corporation must make available for examination
a list of stockholders entitled to vote at the meeting.
VOTE REQUIRED FOR CERTAIN TRANSACTIONS
New York Law generally prohibits New York corporations from engaging in
mergers, consolidations and sales of all or substantially all of their assets
without the approval of holders of at least two-thirds of the corporation's
voting stock, unless the charter of a New York corporation specifies that such
transactions can be approved by the holders of a majority of the corporation's
voting stock. The New York Charter permits such transactions to be approved by
the holders of a majority of the Company's voting stock, if they are submitted
to the shareholders with the prior approval of the board of directors.
Under Delaware Law, on the other hand, holders of a majority of the
outstanding stock entitled to vote on such transactions have the power to
approve a merger, consolidation or sale of all or substantially all the assets,
unless the charter provides otherwise. Furthermore, in the case of a merger
under Delaware Law, stockholders of the surviving corporation do not have to
approve the merger at all, unless the charter provides otherwise, if these three
conditions are met:
- - No amendment of the surviving corporation's charter is made by the
merger agreement; and
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- - Each share of the surviving corporation's stock outstanding or in the
treasury immediately prior to the effective date of the merger is to be
an identical outstanding or treasury share of the surviving corporation
after the effective date; and
- - The merger results in no more than a 20% increase in its outstanding
common stock.
QUORUM
Under the Delaware By-Laws, a quorum at a stockholders meeting is the
presence in person or by proxy of the holders of a majority of the shares of
stock entitled to vote at such meeting. Under the New York By-Laws, a quorum at
a stockholders meeting is the presence in person or by proxy of the holders of
one-third of the shares of stock entitled to vote at such meeting, unless an
item of business is to be voted on by the holders of a class or series of the
Company's shares, in which case a majority is required.
PROXIES
Unless the proxy provides for a longer period, a proxy under New York
Law can be voted or acted upon for eleven (11) months, compared with three (3)
years under Delaware Law.
NUMBER OF DIRECTORS; FILLING OF VACANCIES
Under both New York Law and Delaware Law, corporations must have at
least one director. Under New York Law, the exact number of directors is fixed
either in the charter, the by-laws, by the shareholders, or, if authorized in a
shareholder-adopted by-law, by the board of directors. Under Delaware Law, the
exact number of directors is fixed in the charter or in (or in the manner
provided by) the by-laws.
The New York By-laws provide that the number of directors shall be
fixed by resolution adopted by a majority of the board of directors and may not
be less than three. The Delaware Charter states the number of directors shall be
determined by the Delaware By-laws. The Delaware By-laws provide that the number
of directors shall be determined by a majority of the directors then in office.
Under both the New York By-laws and the Delaware By-laws, in most instances
vacancies are filled by the board of directors.
NOMINATIONS OF DIRECTORS; PROPOSALS
Under the Delaware By-laws, a stockholder may nominate persons for
election as directors or make certain other proposals if, subject to certain
exceptions, the stockholder provides notice to the Corporation's Secretary not
less than 90 days nor more than 120 days prior to the first anniversary date of
the annual meeting for the preceding year. Such notice with respect to the
nomination of a person as a director shall include a statement in writing
setting forth (i) the name of the person to be nominated, (ii) the number and
class of all shares of stock of the Corporation the person owns of record and
beneficially, (iii) the information regarding the person required to be included
in a proxy statement, by the rules and regulations of the Securities and
Exchange Commission, for nominees for election as directors, (iv) the person's
20
signed consent to serve as a director of the Corporation if elected, (v) the
stockholder's name and address, the number and class of all shares of stock of
the Corporation the stockholder owns of record and beneficially, and (vi) a
representation that the stockholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice.
Stockholders proposals with respect to matters other than director nominations
have similar information delivery requirements.
Under the New York By-laws, a shareholder may nominate persons for
election as directors if such shareholder provides notice to the Corporation's
Secretary not less than 14 days nor more than 50 days prior to the meeting
called for the election of directors. Such notice shall include a statement in
writing setting forth (i) the name and address of the shareholder, (ii) a
representation that the shareholder is a holder of record of the Corporation's
voting stock and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (iii) the information
regarding the person required to be included in a proxy statement, by the rules
and regulations of the Securities and Exchange Commission, for nominees for
election as directors, (iv) the person's signed consent to serve as a director
of the Corporation if elected, and (v) a description of all arrangements of
understandings among the shareholder and each nominee and any other person or
persons pursuant to which such nomination or nominations are to be made by the
shareholder.
CLASSIFIED BOARD OF DIRECTORS
Both New York Law and Delaware Law permit "classified" boards of
directors, which means the directors have staggered terms that do not all expire
at once. New York Law and Delaware Law require that classified boards of
directors be authorized in the corporation's charter or in a shareholder-adopted
by-law. New York Law allows for as many as four different classes of directors,
all as nearly equal in number as possible, and Delaware Law allows for up to
three different classes of directors. Each of the New York Charter and the
Delaware Charter authorizes a classified board of directors for the Company
consisting of two classes.
VOTE REQUIRED FOR ELECTION OF DIRECTORS
The New York Charter provides for the election of directors by
cumulative voting, meaning that each shareholder is entitled to an aggregate
number of votes equal to the number of votes he or she would be entitled to cast
for the election of directors multiplied by the number of directors to be
elected. The shareholders votes may be cast for a single director or distributed
among any two or more directors considered for election. Proposal #4 below seeks
to amend the New York Charter to provide for the election of directors by a
plurality of the votes cast at a meeting of the shareholders by shareholders
entitled to vote at the meeting. If Proposal #4 is approved by the shareholders,
then the Delaware By-laws will provide for the election of directors by a
plurality of the votes cast. If Proposal #4 is not approved, then the Delaware
By-laws will provide for cumulative voting on substantially the same terms as
are set forth in the New York Charter.
REMOVAL OF DIRECTORS BY SHAREHOLDERS
Under New York Law, directors may be removed by a majority of
shareholders for cause, and may be removed for cause by the directors if the
charter or a shareholder-adopted by-law so provides. Furthermore, if the charter
or a shareholder-adopted by-law so provides, directors may be removed by the
shareholders without cause. Under Delaware Law, directors generally may be
removed, with or without cause, by a majority of the shareholders. The New York
Charter permits directors to be removed for cause by a vote of shareholders. The
Delaware Charter also provides for removal of directors by shareholders for
cause, but only with the vote of stockholders holding not less than 66-2/3% of
the outstanding voting power.
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LIMITATION OF DIRECTORS' LIABILITY
Both states permit the limitation of a director's personal liability
while acting in his or her official capacity, but only if the limitation is
contained in the corporation's charter. Under New York Law, the charter may
contain a provision eliminating or limiting the personal liability of directors
to the corporation or its shareholders for any breach of duty. However, no
provision can eliminate or limit:
- - the liability of any director if a judgment or other final adjudication
adverse to the director establishes that the director acted in bad
faith or engaged in intentional misconduct or a knowing violation of
law, personally gained a financial profit to which the director was not
legally entitled, or violated certain provisions of New York Law; or
- - the liability of any director for any act or omission prior to the
adoption of such provision in the charter.
The New York Charter contains a provision eliminating or limiting the
personal liability of directors.
Delaware Law also requires a charter provision in order to limit or
eliminate a director's liability. However, Delaware Law precludes any limitation
or elimination of liability if the director breaches his or her duty of loyalty
to the corporation or its shareholders, or if his or her acts or omissions are
not in good faith or involve intentional misconduct or a knowing violation of
law or if he or she receives an improper personal benefit from the corporation,
or authorized a dividend or stock repurchase that was forbidden by Delaware Law.
The Delaware Charter limits director liability to the fullest extent permitted
by Delaware Law.
Due to the variations in New York Law and Delaware Law, there may be
circumstances where, despite the inclusion of charter provisions seeking the
maximum director exculpation permitted by applicable law, a director could
remain liable under New York Law for conduct that would not expose him or her to
liability under Delaware Law, or vice versa.
COMMITTEE AUTHORITY
Under the Delaware By-laws, board committees have all powers and
authority of the Board except for (i) approving or adopting, or recommending to
the stockholders, any action or matter expressly required by law to be submitted
to stockholders for approval, or (ii) adopting, amending or repealing the
Delaware By-Laws.
Under the New York By-laws, board committees have all powers and
authority of the Board except for (i) approving or adopting, or recommending to
the stockholders, any action or matter expressly required by law to be submitted
to shareholders for approval, (ii) the filling of vacancies in the Board or any
committee, (iii) the fixing of compensation of the directors, (iv) adopting,
amending or repealing the New York By-Laws or (v) the amendment or repeal of any
resolution of the Board which by its terms is not so amendable or repealable.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE
With some variations, both New York Law and Delaware Law allow a
corporation to "indemnify" (that is, to make whole) any person who is or was a
director or officer of the corporation if that person is held liable for
something he or she did or failed to do in an official capacity. Besides
covering court judgments, out-of-court settlements, fines and penalties, both
New York Law and Delaware Law also allow the corporation to advance certain
reasonable expenses the person will incur or to reimburse those person's
expenses after they are incurred, even if liability is not actually proven. The
right to indemnification under both New York Law and Delaware Law does not
normally exclude other rights of recovery the indemnified person may have.
Additionally, each of the two laws permits a corporation to purchase
insurance for its directors and officers against some or all of the costs of
such indemnification or against liabilities arising from actions and omissions
of the insured person, even though the corporation may not have power to
indemnify the person against such liabilities. New York Law, however, restricts
the kinds of claims that may be made under such insurance.
The New York Charter contains a provision providing for the right of
the Company to indemnify the Company's directors and officers subject to certain
limitations. The New York By-laws provided that the Company may indemnify a
director or officer of the Company if the director or officer is not adjudged to
have acted in bad faith or with active and deliberate dishonesty or to have
gained personally a financial profit or other advantage to which the director or
officer was not legally entitled.
However, neither New York Law nor Delaware Law permits indemnification
of a director or officer if a court finds the person liable to the corporation
itself, unless the court determines otherwise. Furthermore, both laws generally
require that the person to be indemnified must have acted in good faith and in a
manner he or she reasonably believed was consistent with (or, in Delaware only,
not opposed to) the best interests of the corporation.
If the Reincorporation is approved by the Company's shareholders, the
Delaware Charter and the Delaware By-laws will permit the Company to indemnify
directors and officers as fully as Delaware Law allows and will provide the
Company with the authority to obtain insurance on behalf of the directors and
officers as fully as Delaware Law allows.
LOANS TO, AND GUARANTEES OF OBLIGATIONS OF, DIRECTORS
Under New York Law, a corporation may not lend money to, or guarantee
the obligation of, a director unless the disinterested shareholders of such
corporation approve the transaction. For purposes of the shareholder approval,
the holders of a majority of the votes of the shares entitled to vote constitute
a quorum, but shares held by directors who are benefited by the loan or
guarantee are not included in the quorum. Moreover, under New York law, a
guarantee may not be given by a New York corporation, if not in furtherance of
its corporate purposes, unless it is authorized by two-thirds of the votes of
all outstanding shares entitled to vote.
Under Delaware Law, a board of directors may authorize loans by the
corporation to, and guarantees by the corporation of any obligations of, any
director of the corporation who is also an officer or other employee of the
23
corporation whenever, in the judgment of the board of directors, such loan or
guarantee may reasonably be expected to benefit the corporation.
Notwithstanding Delaware Law, the Company has not made and does not
intend to make any personal loans to, or guarantees for the benefit of, any of
its directors or officers in violation of Section 13(k) of the Securities
Exchange Act of 1934.
TRANSACTIONS WITH INTERESTED DIRECTORS
Under New York Law, a corporation may establish the validity of
transactions between it and its interested directors through one of several
methods, including the approval of a majority of the disinterested directors who
are not involved in the transaction. Delaware Law provides that no transaction
between a corporation and an interested director is void or voidable solely
because that director is present at or participates in the meeting where such
transaction is considered or because that director's votes are counted if the
material facts of that director's interest are known to the board of directors
and the board of directors in good faith authorizes the transaction by a vote of
a majority of the disinterested directors, or if that director's interest is
disclosed to the stockholders and the stockholders in good faith approve the
transaction.
CONSIDERATION FOR SHARES
Under New York Law, consideration for the issue of shares may consist
of money or other property, tangible or intangible, labor or services actually
received by or performed for the corporation, a binding obligation to pay the
purchase price or a binding obligation to perform services, or some combination
of the above. Stock certificates may not be issued until the amount of the
consideration determined to be stated capital has been paid in cash (or certain
other approved forms), and the consideration for the balance above stated
capital, if any, which may include the above-referenced binding obligation, is
provided for. Under Delaware Law, consideration may consist of cash, services
rendered, personal or real property, leases of real property or any combination
of these as payment in full or in part for the shares. However, the portion of
the purchase price above the amount allocable to stated capital also can be
issued (in whole or in part) upon receipt of the purchaser's binding obligation
to pay such portion.
DIVIDENDS; REDEMPTION OF STOCK
Subject to its charter provisions, under both New York Law and Delaware
Law a corporation may generally pay dividends, redeem shares of its stock or
make other distributions to shareholders if the corporation is solvent and would
not become insolvent because of the dividend, redemption or distribution. The
assets applied to such a distribution may not be greater than the corporation's
"surplus."
Under New York Law, dividends may be paid or distributions made out of
surplus only, so that the net assets of the corporation remaining after such
payment or distribution shall be at least equal to the amount of its stated
capital. New York Law defines surplus as the excess of net assets over stated
capital and permits the board of directors to adjust stated capital. Delaware
Law defines surplus as the excess of net assets over stated capital and lets the
board of directors adjust capital. If there is no surplus, Delaware Law allows a
corporation to apply net profits from the current or preceding fiscal year, or
both, with certain exceptions. In general, with certain restrictions, New York
24
Law permits a corporation to provide in its charter for redemption (at the
option of the corporation of the shareholder or in certain other circumstances)
of one or more classes or series of its shares. One such restriction provides
that common stock may be issued or redeemed, with certain exceptions, only when
the corporation has an outstanding class of common shares that is not subject to
redemption. Delaware Law permits redemptions only when the corporation has
outstanding one or more shares of one or more classes or series of stock, which
share or shares have full voting powers.
APPRAISAL RIGHTS
The NYBCL generally provides that a dissenting shareholder has the
right to receive the fair value of his shares if he complies with certain
procedures and objects to (i) certain mergers and consolidations, (ii) certain
dispositions of assets requiring shareholder approval, (iii) certain share
exchanges, or (iv) certain amendments to the charter which adversely affect the
rights of such shareholder. The DGCL provides such appraisal rights only in the
case of shareholders objecting to certain mergers or consolidations (which class
of mergers or consolidations is somewhat narrower than the class giving rise to
appraisal rights under the NYBCL), unless additional appraisal rights are
provided in the charter. The Delaware Charter does not provide any such
additional appraisal rights.
The NYBCL provides that dissenting shareholders have no appraisal
rights if their shares are listed on a national securities exchange or
designated as a market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. Appraisal rights may also be
unavailable under the NYBCL in a merger between a parent corporation and its
subsidiary where only one of them is a New York corporation, or in a merger
between a parent and subsidiary where both are New York corporations, and the
parent owns at least 90% of the subsidiary. Also, appraisal rights are available
to shareholders who are not allowed to vote on a merger or consolidation and
whose shares will be canceled or exchanged for cash or something else of value
other than shares of the surviving corporation or another corporation. When
appraisal rights are available, the shareholder may have to request the
appraisal and follow other required procedures.
Similarly, under the DGCL, appraisal rights are not available to a
shareholder if the corporation's shares are listed on a national securities
exchange or held by more than 2,000 shareholders of record, or if the
corporation will be the surviving corporation in a merger which does not require
the approval of the surviving corporation's shareholders. But, regardless of
listing on an exchange, a dissenting shareholder in a merger or consolidation
has appraisal rights under the DGCL if the transaction requires him or her to
exchange shares for anything of value other than one or more of (a) shares of
stock of the surviving corporation or of a new corporation which results from
the merger or consolidation, (b) shares of another corporation which will be
listed on a national securities exchange or held by more than 2,000 shareholders
of record after the merger or consolidation occurs, or (c) cash instead of
fractional shares of the surviving corporation or another corporation.
25
PREEMPTIVE RIGHTS
In New York, shareholders are generally entitled to preemptive rights
in connection with certain types of stock issuances by the corporation, unless
the charter expressly limits or eliminates preemptive rights. The New York
Charter eliminates preemptive rights.
In Delaware, the issuance of shares does not result in preemptive
rights of shareholders unless the charter expressly provides them. The Delaware
Charter does not expressly provide shareholders with preemptive rights.
Therefore, stockholders of Intermagnetics-Delaware will have no statutory
preemptive rights.
CAPITALIZATION
The Company's capital stock currently consists of 40,000,000 authorized
common shares, par value $.10 per share, of which 27,942,006 shares were issued
and outstanding as of September 13, 2004, and 2,000,000 authorized shares of
preferred stock, par value $.10 per share, of which none are currently
outstanding. In addition, as of September 14, 2004, the Company had granted
restricted stock awards and options to purchase a total of 2,499,426 common
shares and held such number of shares in reserve for issuance upon the lapsing
of such restrictions and the exercise of such options. The board of directors
has determined that it is necessary to increase the number of authorized shares
of the Company. Accordingly, it is proposed that the capital stock of the
Company will be increased to 80,000,000 authorized shares of common stock, par
value $.10 per share as more fully described in Proposal #3 below. The
capitalization of Intermagnetics-Delaware will be the same as the capitalization
approved for the Company by the shareholders. Therefore, if Proposal #3 is
approved, Intermagnetics-Delaware will have 80,000,000 authorized shares of
common stock, par value $.10 per share, and 2,000,000 authorized shares of
preferred stock, par value $.10 per share.
Under the Delaware Charter, the board of directors has the authority to
determine or alter the rights, preferences, privileges and restrictions to be
granted to or imposed upon any wholly unissued series of preferred stock and to
fix the number of shares constituting any such series and to determine the
designation thereof. The board of directors may also authorize the issuance of
preferred stock in connection with various corporate transactions.
After the Reincorporation, Intermagnetics-Delaware will retain the
rights currently available to the Company under New York Law to issue shares of
its authorized but unissued capital stock. As the Company could currently do
under New York Law, following the effectiveness of the proposed Reincorporation,
shares of authorized and unissued common stock and preferred stock of
Intermagnetics-Delaware could (within the limits imposed by applicable law) be
issued in one or more transactions, or preferred stock could be issued with
terms, provisions and rights which would make more difficult and, therefore,
less likely, a takeover of Intermagnetics-Delaware. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of existing shares of common stock and preferred stock, and
such additional shares could be used to dilute the stock ownership of persons
seeking to obtain control of Intermagnetics-Delaware.
26
It should be noted that, as with the voting rights to be accorded to
any unissued series of preferred stock of the Company ("New York Preferred
Stock") by the board of directors of the Company, the voting rights to be
accorded to any unissued series of preferred stock of Intermagnetics-Delaware
("Delaware Preferred Stock") remain to be fixed by the board of directors of
Intermagnetics-Delaware. Accordingly, if the board of directors of
Intermagnetics-Delaware so authorizes, the holders of Delaware Preferred Stock
may be entitled to vote separately as a class in connection with approval of
certain extraordinary corporate transactions in circumstances where Delaware law
does not ordinarily require such a class vote, or might be given a
disproportionately large number of votes. Such Delaware Preferred Stock could
also be convertible into a large number of shares of Delaware Common Stock under
certain circumstances or have other terms which might make acquisition of a
controlling interest in Intermagnetics-Delaware more difficult or more costly,
including the right to elect additional directors to the board of directors of
Intermagnetics-Delaware. As is presently the case with the New York Preferred
Stock with respect to the Company, the Delaware Preferred Stock could
potentially be used to create voting impediments or to frustrate persons seeking
to effect a merger or otherwise to gain control of Intermagnetics-Delaware.
If the Reincorporation is approved, it is not the present intention of
the board of directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Provisions in both New York Law and Delaware Law may help to prevent or
delay changes of corporate control. In particular, both New York Law and
Delaware Law restrict or prohibit an "interested stockholder" from entering into
certain types of "business combinations" unless the board of directors approves
the transaction in advance. The two laws define these two terms differently.
Under New York Law, an interested shareholder is generally prohibited
from entering into certain types of business combinations with a New York
corporation for a period of five years after becoming an interested shareholder,
unless before such date the board of directors approves either the business
combination or the acquisition of stock by the interested shareholder before the
interested shareholder acquires his or her shares. An "interested shareholder"
under New York Law is generally a beneficial owner of at least 20% of the
corporation's outstanding voting stock. "Business combinations" under New York
Law include mergers and consolidations between corporations or with an
interested shareholder or its affiliate or associate; sales, leases, mortgages,
pledges, transfers or other dispositions to an interested shareholder of assets
with an aggregate market value which either equals 10% or more of the
corporation's consolidated assets or outstanding stock, or represents 10% or
more of the consolidated earning power or net income of the corporation; issues
and transfers to an interested shareholder of stock with an aggregate market
value of at least 5% of the aggregate market value of the outstanding stock of
the corporation; liquidation or dissolution of the corporation proposed by or in
connection with an interested shareholder; reclassification or recapitalization
of stock that would increase the proportionate stock ownership of an interested
shareholder; and the receipt by an interested shareholder of any benefit from
loans, guarantees, advances, pledges or other financial assistance or tax
benefits provided by the corporation.
27
After a five-year period, New York Law allows such business combination
if it is approved by a majority of the voting stock not owned by the interested
shareholder or by an affiliate or associate of the interested shareholder.
Business combinations are also permitted when certain statutory "fair price"
requirements are met and in certain other circumstances.
One section of Delaware Law, Section 203, generally prohibits an
interested stockholder from entering into certain types of business combinations
with a Delaware corporation for three years after becoming an interested
stockholder. An "interested stockholder" under Delaware Law is any person other
than the corporation and its majority-owned subsidiaries who owns at least 15%
of the outstanding voting stock, or who is an affiliate or associate of a
corporation and who owned at least 15% of the outstanding voting stock within
the preceding three years. Briefly described, the prohibited combinations
include:
(i) Mergers or consolidations.
(ii) Sales, leases, exchanges or other dispositions of 10% or more of (1)
the aggregate market value of all assets of the corporation or (2) the
aggregate market value of all the outstanding stock of the corporation.
(iii) Issuance or transfers by the corporation or a majority-owned subsidiary
of its stock except in limited instances.
(iv) Receipt by the interested stockholder of the benefit of loans,
advances, guarantees, pledges or other financial benefits provided by
the corporation.
(v) Any other transaction, with certain exceptions, that increases the
proportionate share of the stock owned by the interested stockholder.
A Delaware corporation may choose not to have Section 203 of the
Delaware Law apply. The Company has chosen, however, to accept the protections
of Section 203, and therefore the Delaware Charter will not waive those
protections. Nevertheless, Section 203 does not apply in the following cases:
(i) If, before the stockholder became an interested stockholder, the board
of directors approved the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder.
(ii) If, after the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced, subject to technical calculation rules.
(iii) If, on or after the time the interested stockholder became an
interested stockholder, the board of directors approved the business
combination, and at least two-thirds of the outstanding voting stock
that is not owned by the interested stockholder also ratified the
business combination at a stockholders' meeting.
ANTI-TAKEOVER PROVISIONS IN INTERMAGNETICS-DELAWARE'S CHARTER
Through the Delaware Charter and By-laws, the Company proposes to adopt
certain measures designed to make hostile takeovers of Intermagnetics-Delaware
more difficult. These measures include, among others, specific requirements
described above relating to amendments to the Delaware Charter, calling special
28
meetings of shareholders, the choice not to "opt out" of the provisions of
Section 203 of the DGCL, the vote required for certain transactions as
prescribed by Section 203 of the DGCL, eliminating the ability of shareholders
to act by written consent, providing for the classification of
Intermagnetics-Delaware's board of directors, procedures relating to the
nomination of directors and the ability of the board of directors to make,
alter, amend or repeal the Delaware By-laws. The Company's board of directors
believes that adoption of these measures will facilitate the ability of the
board of directors to consider fully any proposed takeover attempt and to
negotiate terms that maximize the benefit to Intermagnetics-Delaware and its
shareholders.
A hostile takeover attempt may have a positive or a negative effect on
Intermagnetics-Delaware and its stockholders, depending on the circumstances
surrounding a particular takeover attempt. Takeover attempts that have not been
negotiated or approved by the board of directors of a corporation can seriously
disrupt the business and management of a corporation and generally present to
the stockholders the risk of terms that may be less than favorable to all of the
shareholders than would be available in a board-approved transaction. Board of
director-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its stockholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The Company's board of directors recognizes that hostile takeover
attempts do not always have the unfavorable consequences or effects described
above and may frequently be beneficial to the shareholders, providing all of the
shareholders with considerable value for their shares. However, the board of
directors believes that the potential disadvantages of takeover attempts which
are not approved by the board of directors are sufficiently great so that
prudent steps to reduce the likelihood of such takeover attempts are in the best
interests of Intermagnetics-Delaware and its stockholders. Accordingly, the
Reincorporation proposal includes certain elements that may have the effect of
discouraging or deterring hostile takeover attempts.
Notwithstanding the belief of the board of directors as to the benefits
to shareholders of the changes, shareholders should recognize that one of the
effects of such changes may be to discourage a future attempt to acquire control
of Intermagnetics-Delaware which is not presented to and approved by the board
of directors, but which a substantial number and perhaps even a majority of
shareholders might believe to be in their best interests or in which
shareholders might receive a substantial premium for their shares over the
current market price. As a result, shareholders who might desire to participate
in such a transaction may not have an opportunity to do so.
In considering the Reincorporation proposal, shareholders should be
aware that the overall effect of certain of the proposed changes is to make it
more difficult for holders of a majority of the outstanding shares of common
stock to change the composition of the board of directors and to remove existing
management in circumstances where a majority of the shareholders may be
dissatisfied with the performance of the incumbent directors or otherwise desire
to make changes.
29
The provisions in Intermagnetics-Delaware's charter and by-law
documents could make a proxy contest a less effective means of removing or
replacing existing directors or could make it more difficult to effect a change
in control of Intermagnetics-Delaware which is opposed by the board of
directors. This strengthened tenure and authority of the board of directors
could enable the board of directors to resist change. Because these provisions
may have the effect of continuing the tenure of the current board of directors,
the board of directors has recognized that the individual directors have a
personal interest in these provisions that may differ from those of the
shareholders. However, the board of directors believes that these provisions'
primary purpose is to ensure that the board of directors will have sufficient
time to consider fully any proposed takeover attempt in light of the short- and
long-term benefits and other opportunities available to Intermagnetics-Delaware
and, to the extent the board of directors determines to proceed with the
takeover, to effectively negotiate terms that would maximize the benefits to
Intermagnetics-Delaware and its shareholders.
The Company's board of directors has considered the potential
disadvantages and believes that the potential benefits of the provisions
included in the Delaware Charter and the Delaware Charter outweigh the possible
disadvantages. In particular, the board of directors believes that the benefits
associated with enabling the board of directors to fully consider and negotiate
proposed takeover attempts, as well as the greater sophistication, breadth and
certainty of Delaware law, make the proposed Reincorporation beneficial to the
Company, its management and its shareholders.
The proposal to include these anti-takeover provisions in the proposed
Reincorporation is not in response to any presently proposed takeover or other
attempt to acquire control of the Company. From time-to-time, the Company
receives proposals regarding transactions that could result in a takeover or
change of control of the Company; however, no such transactions are currently
anticipated.
MODIFICATION OR ABANDONMENT
Additional considerations may become evident to the Company in the
course of completing the planning and implementation of the Reincorporation.
Accordingly, the board of directors has determined that it is advisable and in
the best interests of the Company and its shareholders for the board to reserve
the power to modify, abandon or postpone the plan regarding the Reincorporation
in whole or in part after it has been approved by the shareholders of the
Company, provided that any such modification, abandonment or postponement does
not have any material adverse effect on individual shareholders or on the
Company's financial condition or operations. Management of the Company does not
presently anticipate that the abandonment, postponement or material modification
of the Reincorporation plan will prove to be necessary or desirable.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a general summary of the material federal
income tax consequences of the Merger to holders of New York Common Stock and to
the Company and Intermagnetics-Delaware. This discussion is limited to holders
of New York Common Stock who are individual citizens or residents of the United
States or that are United States corporations and that in each case hold their
New York Common Stock as a capital asset for United States federal income tax
30
purposes (generally, assets held for investment). This discussion does not
address all of the tax consequences of the Merger that may be relevant to a
particular holder of New York Common Stock or to a holder of New York Common
Stock that is subject to special treatment under United States federal income
tax laws. Also, this discussion does not address the tax consequences to holders
who acquired their New York Common Stock through stock option or stock purchase
programs or in other compensatory transactions. In addition, the following
discussion does not address the tax consequences of transactions effected prior
to or after the Merger (whether or not such transactions are in connection with
the Merger). Finally, no foreign, state or local tax or non-income tax
considerations are addressed herein. Accordingly, the Company's shareholders are
urged to consult their own tax advisors as to the specific tax consequences to
them of the Merger, including the applicable federal, state, local and foreign
tax consequences to them of the Merger.
The following discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury regulations, judicial authority and
administrative rulings and practice, all as of the date hereof. No assurance can
be given that the Internal Revenue Service (the "IRS") will not assert, or that
a court will not sustain, a position contrary to any of the tax consequences set
forth below. In addition, there can be no assurance that future legislative,
judicial or administrative changes or interpretations will not adversely affect
the accuracy of the statements and conclusions set forth herein. Any such
changes or interpretations could be applied retroactively and could affect the
tax consequences of the Merger to the Company, Intermagnetics-Delaware and the
Company's shareholders.
The Company intends the Merger to be a tax free "reorganization" within
the meaning of the Code. If the Merger qualifies as a reorganization, then,
subject to the limitations and qualifications referred to herein, the material
federal income tax consequences of the Merger will be as follows:
- - No gain or loss will be recognized by holders of New York Common Stock
on the exchange of New York Common Stock for Delaware Common Stock;
- - The aggregate tax basis of the Delaware Common Stock received by each
holder of New York Common Stock in the Merger will be equal to the
aggregate tax basis of the New York Common Stock surrendered in
exchange therefor;
- - The holding period of the Delaware Common Stock received by each holder
of New York Common Stock will include the holding period that such
holder had in the New York Common Stock surrendered in exchange
therefor; and
- - No gain or loss will be recognized by the Company or
Intermagnetics-Delaware as a result of the Merger.
The Company has not requested a ruling from the IRS with respect to the
federal income tax consequences of the Merger. A successful IRS challenge to the
status of the Merger as a reorganization could result in a shareholder
recognizing gain or loss with respect to each share of New York Common Stock
exchanged in the Merger in an amount equal to the difference between the fair
market value, as of the time of the Merger, of the Delaware Common Stock
received in the exchange and the shareholder's basis in the New York Common
Stock surrendered.
31
The holders of New York Common Stock will be required to attach a
statement to their tax returns for the year of the Merger that contains the
information listed in Treasury Regulation Section 1.368-3(b). This statement
must include the holder's tax basis in the holder's New York Common Stock and a
description of the Delaware Common Stock received.
ACCOUNTING TREATMENT OF THE MERGER
In accordance with generally accepted accounting principles, the
Company expects that the Merger will be accounted for as a reorganization of
entities under common control. Accordingly, the historical financial statements
of the Company, which previously had been reported to the Commission on Form
10-K and 10-Q, among others, as of and for all periods through the date of this
Proxy Statement, will be treated as the financial statements of
Intermagnetics-Delaware.
REGULATORY APPROVAL
To the Company's knowledge, the only required regulatory or
governmental approval or filing necessary in connection with the consummation of
the Reincorporation will be the filings of the Certificate of Merger with the
Department of State of New York and with the Secretary of State of Delaware.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
REINCORPORATION PROPOSAL (PROPOSAL # 2)
PROPOSAL THREE
--------------
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
PROPOSED AMENDMENT
The Board of Directors is seeking shareholder approval of a proposal to
amend the Certificate of Incorporation of the Company to increase the number of
shares of Common Stock authorized to be issued by the Company from forty million
(40,000,000) to eighty million (80,000,000). The proposed amendment is set forth
in the following resolution to change Article THIRD of the Company's Certificate
of Incorporation:
RESOLVED: That Article THIRD of the Restated Certificate of
Incorporation be amended to read:
"THIRD: The corporation shall have the authority to issue eighty
million (80,000,000) Common Shares, par value $.10 per share."
The Board of Directors approved the amendment to the Certificate of
Incorporation on September 16, 2004.
The Board of Directors believes that the increase in the number of
authorized shares of Common Stock is desirable so that such shares of Common
Stock would be available for issuance from time to time, without further action
or authorization by the shareholders, except as required by law, if needed for
32
such proper corporate purposes as may be determined by the Board of Directors.
Such corporate purposes might include the acquisition of additional capital
funds through public offerings of shares of Common Stock or equity or debt
securities convertible into shares of Common Stock, the acquisition by the
Company of other companies through the issuance of shares of its Common Stock,
and the declaration of stock splits or stock dividends.
The Company has no immediate plans nor are there any existing or
proposed agreements or understandings to issue any of the additional forty
million (40,000,000) shares of Common Stock which are the subject of this
Proposal. However, the Board of Directors believes that having the additional
shares of Common Stock available would enable the Board to act promptly and with
flexibility, and without the expense and delay of a special meeting of
shareholders, when issuance of such shares is warranted.
VOTE REQUIRED FOR APPROVAL
The vote of a majority of the shares of Common Stock issued and
outstanding as of the record date is required to approve this amendment. An
abstention or broker non-vote has the effect of a vote against the amendment. If
the proposed amendment is approved, the Certificate of Incorporation of the
Company shall be amended and restated in its entirety to incorporate such
amendment, subject to such changes in the language of the amendment as may be
required by the New York State Department of State upon filing of such restated
Certificate of Incorporation therewith, provided that if Proposal #2 is also
approved, the amendments will be reflected only in the Delaware Charter.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENT TO THE COMPANY'S CHARTER (PROPOSAL # 3)
PROPOSAL FOUR
-------------
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
ELIMINATE CUMULATIVE VOTING FOR THE ELECTION OF DIRECTORS
PROPOSED AMENDMENT
The Board of Directors is seeking shareholder approval of a proposal to
amend the Certificate of Incorporation of the Company to eliminate cumulative
voting with respect to the election of directors and to provide that directors
shall be elected by plurality vote. The proposed amendment is set forth in the
following resolution to change paragraph (d) of Article FOURTH of the Company's
Certificate of Incorporation:
RESOLVED: That paragraph (d) of Article FOURTH of the Restated
Certificate of Incorporation be amended to read:
"(d) Election of Directors. Subject to the provisions of any rights of
the holders of any series of preferred stock of the Corporation, in all
elections of directors of this Corporation, (i) each shareholder shall be
entitled to one vote for each share of stock of the Corporation registered in
the name of such shareholder upon the books of the Corporation and (ii)
directors shall be elected by a plurality of the votes cast at a meeting of
shareholders by the shareholders entitled to vote in the election."
The Board of Directors approved the amendment to the Certificate of
Incorporation on September 16, 2004.
In accordance with the cumulative voting provisions currently included
in the Corporation's Certificate of Incorporation, each shareholder is entitled
to an aggregate number of votes equal to the number of votes he or she would be
entitled to cast for the election of directors multiplied by the number of
directors to be elected. The shareholders' votes may be cast for a single
director or distributed among any two or more directors considered for election.
The Board of Directors believes that the elimination of cumulative voting is
desirable because it believes that the benefits of cumulative voting are much
less relevant today than they were when cumulative voting was originally
included in the New York Certificate of Incorporation. At that time, minority
shareholders had few remedies to protect them from overreaching by majority
shareholders and, therefore, had a greater need for board representation. Today,
the Board believes that the disadvantages of cumulative voting outweigh the
advantages for large, widely held companies. The Corporation believes that, for
the Board of Directors to work effectively for all of the shareholders, each
director should feel a responsibility to the shareholders as a whole and not to
any special group of minority shareholders. Cumulative voting may allow a
minority of shareholders to obtain representation on the Board against the
wishes of the majority of shareholders. The views of such directors elected by
the minority shareholders could diverge significantly from those of the other
directors and could prove to be disruptive to the operation of the Board as a
whole. Accordingly, if Proposal #4 is passed and cumulative voting is
eliminated, directors will be elected by a plurality of the votes cast at a
meeting of shareholders.
33
VOTE REQUIRED FOR APPROVAL
The vote of a majority of the shares of Common Stock issued and
outstanding as of the record date is required to approve this amendment. An
abstention or broker non-vote has the effect of a vote against the amendment. If
the proposed amendment is approved, the Certificate of Incorporation of the
Company shall be amended and restated in its entirety to incorporate such
amendment, subject to such changes in the language of the amendment as may be
required by the New York State Department of State upon filing of such restated
Certificate of Incorporation therewith. In addition, Section 2.02 of the Bylaws
of the Corporation will be amended to delete the reference therein to cumulative
voting. If Proposal #2 is also approved, the amendments will be reflected only
in the Delaware Charter. If Proposal #2 is approved, but this Proposal #4 is not
approved, the Delaware Charter will contain provisions with respect to the
election of directors that provide for the election of directors by cumulative
voting on the same terms as those set forth in the New York Certificate of
Incorporation.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENT TO THE COMPANY'S CHARTER (PROPOSAL #4)
PROPOSAL FIVE
-------------
TO AMEND THE COMPANY'S 2000 STOCK OPTION AND STOCK AWARD PLAN
PROPOSED AMENDMENTS
During fiscal year 2003, the Board created a performance-based equity
program for senior management, as permitted under the Company's 2000 Stock
Option and Stock Award Plan (the "2000 Plan"). Under the program, certain
members of senior management received restricted stock unit awards that vest
only if established performance targets are met. The program is weighted toward
achieving 15% compound growth in pre-tax earnings by the end of fiscal year
2007, although some units will vest if growth targets are met in fiscal years
2005 and 2006. If performance targets are not met by the end of fiscal year
2007, the grant terminates and no vesting will occur. A total of 1,155,900
restricted stock award units are outstanding under the 2000 Plan (all numbers
herein have been adjusted to reflect the 50% stock dividend issued by the
Company on August 17, 2004). Although the Board did not anticipate granting
additional equity (either options or restricted stock) to those participating in
the performance-based program until the program terminates in our fiscal year
2007, the Compensation Committee has begun to consider the design of multi-year
performance requirements to provide incentive growth targets for 2008 and
beyond. Assuming success, the current performance-based equity program will vest
in 2007, and the Compensation Committee is pro-actively anticipating the need
for a program that will induce senior executives to continue to grow the
Company.
In addition to retention of current participants, our continuing growth
requires that we develop a new equity program as we continue to hire additional
managers.
On November 13, 2000, our shareholders approved the 2000 Plan. It
provides our employees, consultants and non-employee directors with the
opportunity to receive grants of stock options and stock awards.
The 2000 Plan replaced the Company's 1990 Stock Option Plan, which
expired on December 14, 2000. Approximately 206,589 shares remain outstanding
under the 1990 Plan, but no new options may be granted.
At our 2002 and 2003 Annual Meetings, shareholders approved and
ratified amendments to the 2000 Plan increasing the number of shares of Common
Stock of the Company available for issuance under the 2000 Plan. A total of
3,051,000 shares are now authorized for issuance under the 2000 Plan, after
taking into account our August, 2004 stock dividend. Approximately 2,293,000
shares are outstanding under the 2000 Plan, and approximately 581,000 shares are
available for additional grants.
The proposed amendment will increase the number of shares authorized
for issuance under the 2000 Plan by an additional 1,500,000 shares, but these
additional shares may be issued only for performance-based stock awards granted
on or after November 16, 2004. Performance-based stock awards are stock awards
that are subject to vesting or payment based on attainment of performance goals
and such other criteria as the Compensation Committee determines. The
Compensation Committee may provide for full or partial vesting or payment of
performance-based stock awards upon a change in control or other circumstances
as the Compensation Committee deems appropriate. Performance-based stock awards
include, but are not limited to, grants of qualified performance-based
compensation under Section 162(m) of the Internal Revenue Code, as described
below. If any performance-based stock awards from the 1,500,000 aggregate number
lapse, are forfeited or terminate for any reason, the shares covered by such
grants may again be granted as performance-based stock awards.
Under the amended 2000 Plan, the Compensation Committee may not reprice
options, nor may the Board amend the Plan to permit repricing of options, unless
the shareholders of the Corporation provide prior approval for such repricing.
34
Under the 2000 Plan, the maximum number of shares for which an
individual may receive grants of options and stock awards under the Plan during
any calendar year is 750,000 shares, and the maximum number of shares for which
an individual may receive stock awards designated as qualified performance-based
compensation under Section 162(m) of the Internal Revenue Code for any calendar
year is 520,000 shares. The amended Plan makes these limits consistent, so that
the maximum number of shares for which an individual may receive grants of stock
awards designated as qualified performance-based compensation under Section
162(m) of the Internal Revenue Code for any calendar year is 750,000 shares.
The 2000 Plan provides for automatic option grants to our non-employee
directors, unless the Board determines otherwise. In fiscal year 2003, the Board
suspended the automatic grants when it adopted its 2003 Director Compensation
Plan. As a result, we have removed the automatic option grant provisions from
the 2000 Plan. The Compensation Committee has discretion to grant options to
non-employee directors as it deems appropriate, as described below under
"Description of the 2000 Plan."
Upon the effective date of the reincorporation described in Proposal #2
above, Intermagnetics-Delaware will maintain the 2000 Plan for the benefit of
key employees, consultants and directors. As a result of the reincorporation,
each outstanding option and stock award will be converted into an option or
stock award, as applicable, with respect to an equal number of shares of common
stock of Intermagnetics-Delaware, and upon the same terms and conditions, as the
original grant.
The Board of Directors believe this amendment and restatement of the
2000 Plan is critical for the Company to attract qualified executives, and to
attract and retain qualified managers and key technical personnel.
VOTE REQUIRED FOR APPROVAL
The vote of a majority of the shares of the Common Stock represented at
the annual meeting and entitled to vote, in person or by proxy, is required to
approve the amendment and restatement of the 2000 Plan. Abstentions may be
specified on the proposal and will be considered present at the meeting, but
will not be counted as votes for or against approval.
DESCRIPTION OF THE 2000 PLAN
A copy of the amended and restated 2000 Plan is attached to this Proxy
Statement as Annex D. The number of shares of Common Stock authorized for
issuance under the 2000 Plan is currently 3,051,000 shares. Shares subject to
options or stock awards granted under the 2000 Plan that expire or are canceled,
surrendered or terminated for any reason are available for new grants under the
2000 Plan. The 2000 Plan limits the aggregate number of shares for which options
or stock awards may be granted to any person during any calendar year to 750,000
shares.
The Compensation Committee may adjust these limits, as well as the
number of shares covered by outstanding grants, and the price per share of
outstanding grants if there is any change in the number or class of our shares
because of a stock dividend, stock split, merger, reclassification, or other
similar changes in the stock. As of the effective date of the reincorporation of
the Company, as described in Proposal #2 above, the shares authorized for
issuance under the 2000 Plan will be common stock of Intermagnetics-Delaware.
Employees and consultants of the Company and our subsidiaries,
including employees who are officers or members of our Board, and our
non-employee directors are eligible to receive grants under the 2000 Plan. As of
the effective date of the reincorporation as described above under Proposal #2,
the Company will mean Intermagnetics-Delaware. There are approximately 1,000
employees (including eight executive officers) and five non-employee directors
eligible to receive grants under the Plan.
35
The Compensation Committee administers the 2000 Plan. The 2000 Plan
gives the Compensation Committee the authority to interpret the 2000 Plan, to
prescribe, amend and rescind rules and regulations relating to the 2000 Plan, to
determine the terms and provisions of grant instruments under the 2000 Plan and
to make all other determinations necessary or advisable for the administration
of the 2000 Plan. The 2000 Plan confers discretion on the Compensation Committee
to select employees, consultants and non-employee directors to receive options
and stock awards and to determine the amounts of such options and stock awards.
The 2000 Plan permits grants of incentive stock options, nonqualified
stock options and stock awards. Incentive stock options may be granted only to
employees. Nonqualified stock options may be granted to employees, consultants
and non-employee directors. The Compensation Committee will determine the
exercise price underlying each option. The exercise price for nonqualified stock
options may not be less than 85% of the fair market value of our shares on the
date of grant. The exercise price for incentive stock options may not be less
than 100% of the fair market value of our shares on the date of grant, and the
exercise price of an incentive stock option granted to a 10% shareholder may not
be less than 110% of the fair market value of our shares on the date of grant.
The exercise price of an option granted to a non-employee director will equal
the fair market value of the shares on the date of grant.
Options will become exercisable according to the number of installments
and the installment dates determined by the Compensation Committee and specified
in the grant instrument. The Compensation Committee determines the term of each
option, up to a maximum ten-year term. The term of an incentive stock option
granted to an employee who owns more than 10% of our stock may not exceed five
years from the date of grant. Options may be exercised while the grantee is an
employee, consultant or non-employee director or within a specified period after
the grantee's termination of employment or service.
Grantees may pay the exercise price of an option (i) in cash, (ii) if
permitted in the grant instrument, by surrender of mature shares of our stock
owned by the grantee, or (iii) by payment through a broker pursuant to
procedures permitted by Regulation T of the Federal Reserve Board and Section
402 of the Sarbanes-Oxley Act of 2002.
The Compensation Committee may issue shares of our stock as stock
awards to employees, consultants and non-employee directors, subject to
restrictions or no restrictions. Unless the Compensation Committee determines
otherwise, during the restriction period, grantees will have the right to vote
shares of stock awards and to receive dividends or other distributions paid on
the shares. Unless the Compensation Committee determines otherwise, if a
grantee's employment or service terminates during the restriction period or if
any other conditions are not met, the stock awards will terminate as to all
shares on which restrictions are still applicable, and the shares must be
immediately returned to us. Stock awards may also be granted as restricted stock
units. To date, 1,399,578 stock awards, in the form of restricted stock units or
shares of restricted stock, have been granted to directors and executives and
subject to restrictions. The Compensation Committee determined that, during the
restriction period for all such grants, grantees will not have the right to vote
the shares or receive dividends paid on the shares subject to the restrictions.
36
The Compensation Committee may determine that stock awards granted to
an employee will be considered qualified performance-based compensation for
purposes of Section 162(m) of the Internal Revenue Code (see "Tax Deductibility
under Section 162(m)" below). If an employee is granted a stock award that is
intended to be qualified performance-based compensation, the grant or vesting of
the stock award will be contingent on our achieving performance goals designated
by the Compensation Committee.
For stock awards that are granted as qualified performance-based
compensation, the Compensation Committee will establish the performance goals,
the performance period during which the goals must be met, the threshold, target
and maximum amounts that may be paid if the performance goals are met, and any
other conditions the Compensation Committee deems appropriate. The performance
goals will be established in writing at the beginning of the performance period
and will be based on one or more of the following objective criteria: stock
price, earnings per share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share or strategic business criteria consisting of one or more objectives
based on meeting specified revenue goals, market penetration goals, geographic
business expansion goals, cost targets or goals relating to acquisitions or
divestitures.
The performance goals for qualified performance-based compensation may
relate to the grantee's business unit or the performance of Intermagnetics and
our subsidiaries as a whole, or any combination. If the performance goals for a
performance period are not met, the grants subject to the performance goals will
not be made or will be forfeited. The Compensation Committee may provide for the
accelerated vesting or grant of stock awards in the event of death, disability,
or other circumstances.
All options granted under the 2000 Plan become fully exercisable upon a
"change in control." The 2000 Plan defines change in control to mean the
occurrence of any of the following: (i) any person is or becomes a beneficial
owner, directly or indirectly, of securities representing 30% or more of the
voting power of our then outstanding securities; (ii) during any period of two
(2) consecutive calendar years, there is a change of 25% or more in the
composition of our Board in office at the beginning of the period, except for
changes approved by at least two-thirds of the directors then in office who were
directors at the beginning of the period; or (iii) our shareholders approve a
merger or consolidation with another corporation (other than a merger with a
subsidiary or a merger in which we survive and our outstanding voting stock is
not converted or our shareholders have substantially the same proportionate
interest in the voting stock of the surviving corporation or its parent as they
did immediately prior to the merger), a disposition of substantially all of our
assets, or a liquidation or dissolution. As long as a change in control within
the meaning of clause (ii) has not occurred, the Board may determine, by a
two-thirds vote of the continuing directors, that an event described in items
(i) or (iii) shall not constitute a change in control.
37
Grants under the 2000 Plan may not be transferred except upon the
grantee's death, or, in the case of a nonqualified stock option, to a grantee's
family members or to a trust that benefits the grantee's family members.
The Board may amend or terminate the 2000 Plan at any time. However,
the Board may not make any amendment without shareholder approval if approval is
required under the applicable provisions of the Internal Revenue Code or other
applicable laws or regulations. If stock awards are designated as qualified
performance-based compensation under Section 162(m) of the Internal Revenue
Code, the shareholders must re-approve the 2000 Plan not later than the first
shareholders meeting following the fourth anniversary of the most recent
shareholders' approval of the 2000 Plan.
The 2000 Plan has a ten year term and will terminate on July 26, 2010,
unless the Board terminates the 2000 Plan earlier.
FEDERAL INCOME TAX CONSEQUENCES
The current federal income tax consequences of grants under the 2000
Plan are generally described below. This description of tax consequences is
based on the Internal Revenue Code as presently in effect, which is subject to
change, and does not purport to be a complete description of the federal income
tax aspects of the options and stock awards under the 2000 Plan.
Incentive Stock Options. An optionee who receives incentive stock
options generally incurs no federal income tax liability at the time of the
grant or upon the exercise of the options. However, the difference between the
value of our stock at the date of exercise and the exercise price will be an
item of tax preference that may give rise to alternative minimum tax liability
at the time of exercise. If the optionee does not dispose of the shares before
the date that is two years from the date of grant and one year from the date of
exercise, the difference between the exercise price and the amount realized upon
disposition of the shares will constitute long term capital gain or loss, as the
case may be. Assuming both holding periods are satisfied, no deduction will be
allowable to us for federal income tax purposes in connection with the option.
If, within two years from the date of grant or within one year from the date of
exercise, the holder of shares acquired upon exercise of an incentive stock
option disposes of the shares, the optionee will generally realize ordinary
compensation income at the time of the disposition equal to the difference
between the exercise price and lesser of the fair market value of the shares on
the date of exercise or the amount realized on the disposition. The amount
realized upon such a disposition will generally be deductible by us for federal
income tax purposes.
Nonqualified Stock Options. An optionee will not be subject to federal
income tax upon the grant of a nonqualified stock option. Upon the exercise of a
nonqualified stock option, the optionee will recognize ordinary compensation
income in an amount equal to the excess, if any, of the then fair market value
of the shares acquired over the exercise price. We will generally be able to
take a deduction with respect to this compensation income for federal income tax
purposes. The optionee's tax basis in the shares acquired will equal the
exercise price plus the amount taxable as compensation to the optionee. Upon a
sale of the shares acquired upon exercise, any gain or loss is generally
long-term or short-term capital gain or loss, depending on how long the shares
are held. The required holding period for long-term capital gain is presently
more than one year. The optionee's holding period for shares acquired upon
exercise will begin on the date of exercise.
38
Stock Awards. If stock awards are granted as restricted stock units,
the grantee will recognize compensation income when the stock units convert into
stock and are paid to the recipient. We will generally be entitled to a
corresponding tax deduction.
If a grantee receives an unrestricted stock award, in the form of a
distribution of shares, the grantee will recognize compensation income upon the
grant of the stock award. If a grantee receives a restricted stock award, in the
form of a distribution of shares, the grantee normally will not recognize
taxable income until the stock is transferable by the grantee or no longer
subject to a substantial risk of forfeiture, whichever occurs earlier. When the
stock is either transferable or no longer subject to a substantial risk of
forfeiture, the grantee will recognize compensation income in an amount equal to
the fair market value of the shares (less any amount paid for such shares) at
that time. A grantee may, however, elect to recognize ordinary compensation
income in the year a restricted stock award is granted in an amount equal to the
fair market value of the shares (less any amount paid for the shares) at that
time, determined without regard to the restrictions. We will generally be
entitled to a corresponding deduction at the same time, and in the same amount,
as the grantee recognizes compensation income with respect to the stock award.
Any gain or loss recognized by the grantee upon the subsequent disposition of
the shares will be capital gain or loss.
Tax Deductibility Under Section 162(m). Section 162(m) of the Internal
Revenue Code disallows a public company's deductions for employee compensation
exceeding $1,000,000 per year for the chief executive officer and the four other
most highly compensated executive officers. Section 162(m) contains an exception
for qualified performance-based compensation that meets specific requirements.
The 2000 Plan is intended to permit stock options granted under the Plan, and
stock awards that are designated as qualified performance-based compensation, to
meet the requirements of qualified performance-based compensation and be exempt
from the $1,000,000 deduction limit.
Withholding. We have the right to deduct from all grants paid in cash
or other compensation any taxes required to be withheld with respect to grants
to employees under the 2000 Plan, or we may require that the grantee make other
provisions to satisfy our withholding obligation. An employee may elect to have
withheld from the shares issuable with respect to an option or stock award,
shares with a value equal to the minimum required withholding amount, or may
elect to tender previously owned shares with a value equal to the required tax
withholding amount.
ACCOUNTING CONSEQUENCES
With respect to accounting considerations, under current accounting
practices, there is generally no charge to earnings in connection with the grant
of an option to an employee or a non-employee director if the exercise price of
the option is at least equal to the fair market value of the shares at the date
of the grant and other requirements are met. If, however, the exercise price of
the option is less than the fair market value of the shares on the date of grant
or if the grant is variable, there will be a charge to earnings as the option
becomes exercisable. Generally, the acceleration of option vesting, grants of
stock awards and grants of performance-based stock compensation will result in
39
charges to earnings. There are charges to earnings in connection with the grant
of an option or stock award to a consultant. The Company reviews its accounting
treatment of options and stock awards regularly and will comply with any changes
that may be required by law or U.S. generally accepted accounting principles.
The Financial Accounting Standards Board has proposed changes to the
accounting treatment of equity compensation. The changes, which could become
effective in 2005, would require charges to earnings for financial accounting
purposes in connection with substantially all options and stock awards granted
to employees and directors.
The calculation of fully diluted earnings per share will be affected by
options granted under the 2000 Plan as a result of the increase in the number of
outstanding shares of our stock. This calculation reflects the potential
dilutive effect, using the treasury stock method, of outstanding stock options
even though the stock options have not yet been exercised. It is expected that
in the current year, a portion of the restricted stock unit awards granted will
be considered dilutive as it appears probable that the performance criteria for
fiscal year 2005 will be met. The Company will record expenses for the
restricted stock units as management determines it will be probable that the
performance targets will be met. At that time, the expense will be recorded and
treated as variable through the date that the restrictions lapse.
GRANTS UNDER THE PLAN
Since the 2000 Plan was adopted by the Company, the following persons
and groups have received the following grants under the 2000 Plan: Glenn H.
Epstein (Chairman and Chief Executive Officer; 113,251 options and 420,000
performance-based restricted stock units); Michael K. Burke (Executive Vice
President and Chief Financial Officer; 112,501 options, 105,000
performance-based restricted stock units and 6,000 shares of restricted stock);
Leo Blecher (Sector President, MRI Segment; 45,300 options and 105,000
performance-based restricted stock units); Philip J. Pellegrino (Sector
President, Energy Technology Segment; 37,500 options, 37,500 performance-based
restricted stock units and 1,500 shares of restricted stock); Thomas J. O'Brien
(Executive Vice President, Corporate Development and Acting Sector President -
Medical Devices) 105,000 performance-based restricted stock units and 15,000
shares of restricted stock; all outside directors as a group (133,912 options;
20,802 restricted stock award and 54,876 shares as an Equity Grant); John M.
Albertine (director nominee; 28,192 options; 3,467 restricted stock award and
9,146 shares as an Equity Award) and Larry G. Garberding (director nominee;
7,048 options, 3,467 restricted stock award and 9,146 shares as an Equity
Award); and all other employees as a group (716,381 options, 521,400
performance-based restricted stock units and 22,500 shares of restricted stock).
No options have been granted to associates of any directors, executive officers
or nominees, nor have any other persons received five percent of such options.
As of September 13, 2004, the last reported price of our stock as
reported on the Nasdaq National Market was $23.69. The information in the table
below is as of May 30, 2004.
40
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
remaining available for
Number of securities to be Weighted-average future issuance under
issued upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights. warrants and rights. reflected in column (a))
--------------------------- ------------------- ---------------------------
Plan Category (a) (b) (c)
- ------------------------------------------- --------------------------- ------------------- ---------------------------
Equity compensation plans
approved by shareholders..... 2,949,856 $ 7.229 651,890
Equity compensation plans not approved by shareholders.....
New Hire Incentive Plan 138,000 none none
The New Hire Incentive Plan is designed to attract highly competent
employees for key positions within the company. As such, this plan is not for
general use but for selected critical positions. Therefore, no specific shares
have been allocated for this purpose. Rather shares will be issued from the
authorized shares of the Company's Common Stock and approved by the company's
Board of Directors on an applicant by applicant basis.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENTS TO THE 2000 STOCK OPTION AND STOCK AWARD PLAN
(PROPOSAL # 5)
41
EXECUTIVE COMPENSATION
The following table summarizes for the past three (3) years the annual
and long-term compensation of those persons who were, on May 30, 2004, the
Company's Chief Executive Officer and the other four (4) most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
----------------------------------------------------------------------------------------------------
Annual Extraordinary Restricted Stock Securities
Incentive Incentive Awards Underlying All Other
Position Fiscal Bonus Bonus ($)(2) Options Compensation
Year Salary ($) ($)(1) ($) (#)* ($)
- -------------------------------------------------------------------------------------------------------------------------------
GLENN H. EPSTEIN 2004 $ 485,264 $360,000 $387,235(3) - - $ 79,765(6)
Chairman and 2003 439,423 362,040 233,356(3) $ 5,838,000(4) *(5) 71,820(6)
Chief Executive 2002 410,171 422,000 526,831(3) - 75,000 68,524(6)
Officer
MICHAEL K. BURKE 2004 $ 247,536 $ 93,413 $ 85,802(7) - - $ 21,941(10)
Chief Financial 2003 223,215 94,380 10,625(7) $ 1,188,600(8) *(9) 100,680(10)
Officer and Executive 2002(11) 94,551 64,501 - 101,120(8) 112,500 17,172(10)
Vice President
LEO BLECHER 2004 $ 246,846 $ 95,176 $ 62,842(12) - - $ 24,869(15)
Sector President, 2003 226,425 84,025 42,142(12) $ 1,188,600(13) *(14) 23,381(15)
MRI Segment 2002 211,030 118,125 132,776(12) - 30,000 20,519(15)
PHILIP J. PELLEGRINO 2004 $ 226,590 $ 70,875 $ 10,000(16) - - $ 47,509(19)
Sector President, 2003 204,147 69,825 - $ 424,500(17) *(18) 30,544(19)
Energy Technology Segment 2002(20) 130,152 30,625 - 28,300(17) 37,500 1,362(19)
THOMAS J. O'BRIEN 2004(21) $ 198,894 $ 92,813 $ 100,000(22) $ 1,400,700(23) 15,000 $ 111,301(25)
*(24)
Executive Vice President, 2003 - - - - - -
Corporate Development 2002 - - - - - -
* The share amounts have been adjusted to reflect the 50% stock dividend issued
by the Company on August 17, 2004.
(1) All bonuses were earned by the Executives as incentive compensation
bonuses for fiscal years 2004, 2003 and 2002 performance, respectively,
and paid in fiscal years 2005, 2004 and 2003, respectively.
(2) Fiscal year 2003 and 2004 Restricted Stock Unit Grants are based on
achievement of performance goals. While the program targets growth at
the end of fiscal year 2007 certain units may vest in fiscal years 2005
and 2006 if performance targets are achieved. Vesting is tied to
compound growth in pre-tax earnings over the performance period, which
ends on May 27, 2007. If the minimum performance target of 8% compound
growth is not met, no units vest and the grant will terminate.
42
(3) For fiscal year 2004, consists of payment of $237,235 from Mr.
Epstein's bonus bank earned in fiscal years 2002 and 2001 respectively
under the company's Incentive Bonus Program and a bonus of $150,000
paid in connection with the acquisition of Invivo Corporation. Fiscal
year 2003, consists of payment of $233,356 from Mr. Epstein's bonus
bank earned in fiscal years 2002 and 2001 respectively under the
Company's Incentive Bonus Program. For fiscal year 2002 includes
$150,000 and $220,000 paid in connection with the divestitures of
IGC-Advanced Superconductors and IGC-APD Cryogenics Inc., respectively,
and payment of $156,831 from Mr. Epstein's bonus bank earned in fiscal
year 2001 under the Company's Incentive Bonus Program. Mr. Epstein's
total remaining bank under the program is $74,639 payable over the next
fiscal year subject to certain conditions.
(4) In fiscal year 2003, Mr. Epstein received a performance-based
Restricted Stock Unit Award with vesting tied to compound growth in
pre-tax earnings over the performance period: 150,000 shares vest at 8%
compound growth; 330,000 vest at 11% compound growth; 420,000 vest at
15% compound growth (with scaling for performance between the defined
thresholds). Below 8% growth, no shares vest and the grant will
terminate. While the program targets growth at the end of fiscal year
2007, up to 15% of the units could vest at end of fiscal year 2005, and
up to 20% could vest at end of fiscal year 2006, provided performance
targets are met.
(5) In fiscal year 2003, Mr. Epstein was granted a non-qualified stock
option to purchase 240,000 shares of SuperPower stock under the
SuperPower 2002 Equity Compensation Plan, with a term of ten (10)
years, and to be exercisable in five (5) equal annual installments
beginning on April 12, 2003. The exercise price of the option was equal
to the fair market value of the shares on the date of the grant.
(6) Includes the Company's share of contributions on behalf of Mr. Epstein
to the IGC Savings Plan (401(k)) in the amount of $10,739, $10,586, and
$9,308 for fiscal years 2004, 2003, and 2002, respectively, and
payments of $4,926, $4,534, and $3,216 by the Company for a life
insurance policy for the benefit of Mr. Epstein in fiscal years 2004,
2003 and 2002, respectively. Also includes $65,100, $56,700 and $56,000
paid to Mr. Epstein in fiscal years 2004, 2003 and 2002, respectively,
for which the intent is to compensate for caps imposed by U.S.
Government tax regulations on the Company's qualified retirement and
savings programs and which is paid in lieu of inclusion in any other of
the Company's non-qualified retirement programs.
(7) For fiscal year 2004, consists of payment of $10,802 from Mr. Burke's
bonus bank earned in fiscal year 2002 under the company's Incentive
Bonus Program and a bonus of $75,000 paid in connection with the
acquisition of Invivo Corporation. In fiscal year 2003, consists of a
payment of $10,625 from Mr. Burke's bonus bank earned in fiscal year
2002 under the Incentive Bonus Program. Mr. Burke's total remaining
bank under the program is $10,801 payable over the next fiscal year
subject to certain conditions.
(8) For fiscal year 2003, Mr. Burke received a performance-based Restricted
Stock Unit Award of 70,000 shares with vesting tied to compound growth
in pre-tax earnings over the performance period: 37,500 shares vest at
8% compound growth; 82,500 shares vest at 11% compound growth; 105,000
shares vest at 15% compound growth (with scaling for performance
between the defined thresholds). Below 8% growth, no shares vest and
the grant will terminate. While the program targets growth at the end
of fiscal year 2007, up to 15% of the units could vest at end of fiscal
year 2005, and up to 20% could vest at end of fiscal year 2006,
provided performance targets are met. Upon his employment with the
Company, Mr. Burke received a restricted stock grant of 6,000 shares
that vests over three (3) years according to the following schedule:
750 shares on December 14, 2002; 2,250 shares on December 14, 2003; and
3,000 shares on December 14, 2004.
43
(9) In fiscal year 2003, Mr. Burke was granted a non-qualified stock option
to purchase 80,000 shares of SuperPower stock under the SuperPower 2002
Equity Compensation Plan, with a term of ten (10) years, and to be
exercisable in five (5) equal annual installments beginning on April
12, 2003. The exercise price of the option was equal to the fair market
value of the shares on the date of the grant.
(10) Includes the Company's share of contributions on behalf of Mr. Burke to
the IGC Savings Plan (401(k)) in the amount of $11,941 and $6,292 for
fiscal years 2004 and 2003, respectively, and payment of a supplemental
retirement contribution of $10,000 and $8,000 to the IGC Deferred
Compensation Plan in fiscal years 2004 and 2003, respectively. Also
includes relocation reimbursements of $86,388 and $17,172 paid in
fiscal years 2003 and 2002 respectively.
(11) Mr. Burke joined the Company on December 14, 2001. Therefore, he
received compensation from the Company for approximately five (5)
months in fiscal year 2002.
(12) For fiscal year 2004, consists of payments of $42,842 from Mr.
Blecher's bonus bank earned in fiscal years 2002 and 2001,
respectively, under the company's Incentive Bonus Program and bonus of
$20,000 in connection with the acquisition of Invivo Corporation.
Fiscal year 2003 consists of a payment of $42,142 from Mr. Blecher's
bonus bank earned in fiscal years 2002 and 2001 respectively under the
Company's Incentive Bonus Program. In fiscal year 2002, includes
extraordinary bonuses of $60,000 and $50,000 paid in connection with
the divestitures of IGC-Advanced Superconductors and IGC-APD Cryogenics
Inc., respectively. Mr. Blecher's total remaining bank under the
program is $18,915, payable over the next fiscal year subject to
certain conditions.
(13) For fiscal year 2003, Mr. Blecher received a performance-based
Restricted Stock Unit Award of 105,000 shares with vesting tied to
compound growth in pre-tax earnings over the performance period: 37,500
shares vest at 8% compound growth; 82,500 shares vest at 11% compound
growth; 105,000 shares vest at 15% compound growth (with scaling for
performance between the defined thresholds). Below 8% growth, no shares
vest and the grant will terminate. While the program targets growth at
the end of fiscal year 2007, up to 15% of the units could vest at end
of fiscal year 2005, and up to 20% could vest at end of fiscal year
2006, provided performance targets are met.
(14) In fiscal year 2003, Mr. Blecher was granted a non-qualified stock
option to purchase 40,000 shares of SuperPower stock under the
SuperPower 2002 Equity Compensation Plan, with a term of ten (10)
years, and to be exercisable in five (5) equal annual installments
beginning on April 12, 2004. The exercise price of the option was equal
to the fair market value of the shares on the date of the grant.
(15) Includes the Company's share of contributions on behalf of Mr. Blecher
to the IGC Savings Plan (401(k)) in the amounts of $10,012, $10,524 and
$7,662 for fiscal years 2004, 2003 and 2002, respectively, payment of a
supplemental frozen pension contribution of $4,857 in each of fiscal
years 2004, 2003 and 2002 and a supplemental retirement contribution of
$10,000 to the IGC Deferred Compensation Plan in fiscal year 2004,
$8,000 to the IGC Deferred Compensation Plan in each of fiscal years
2003 and 2002.
44
(16) For fiscal year 2004, consists of bonus of $10,000 paid in connection
with the acquisition of Invivo Corporation.
(17) For fiscal 2003, Mr. Pellegrino received a performance-based Restricted
Stock Unit Award of 37,500 shares with vesting tied to compound growth
in pre-tax earnings over the performance period: 13,500 shares vest at
8% compound growth; 30,000 shares vest at 11% compound growth; 37,500
shares vest at 15% compound growth (with scaling for performance
between the defined thresholds). Below 8% growth, no shares vest and
the grant will terminate. While the program targets growth at the end
of fiscal year 2007, up to 15% of the units could vest at end of fiscal
year 2005, and up to 20% could vest at end of fiscal year 2006,
provided performance targets are met. Upon his employment with the
Company, Mr. Pellegrino received a restricted stock grant of 1,500
shares that vests over two (2) years according to the following
schedule: 750 shares on October 18, 2003 and 750 shares on October 18,
2004.
(18) In fiscal year 2003, Mr. Pellegrino was granted a non-qualified stock
option to purchase 400,000 shares of SuperPower stock under the
SuperPower 2002 Equity Compensation Plan, with a term of ten (10)
years, and to be exercisable in five (5) equal annual installments
beginning on April 12, 2003. The exercise price of the option was equal
to the fair market value of the shares on the date of the grant.
(19) Includes the Company's share of contributions on behalf of Mr.
Pellegrino to the IGC Savings Plan (401(k)) of $11,509, $8,579 and
$1,362 for fiscal years 2004, 2003 and 2002, and payment of a
supplemental retirement contribution of $10,000 and $8,000 to the IGC
Deferred Compensation Plan in fiscal years 2004 and 2003 respectively.
Also includes payments of $26,000 and $24,000 in fiscal years 2004 and
2003, respectively, as living expenses payable under the terms of Mr.
Pellegrino's employment agreement.
(20) Mr. Pellegrino joined the Company on October 18, 2001. Therefore, he
received compensation from the Company for approximately seven (7)
months in fiscal year 2002. His salary in 2002 includes $2,000 per
month in living expenses to which he is entitled under the terms of his
employment agreement.
(21) Mr. O'Brien joined the Company on August 4, 2003. Therefore, he
received compensation from the Company for approximately ten (10)
months in fiscal year 2004.
(22) Consists of bonus of $100,000 paid in connection with the acquisition
of Invivo Corporation.
(23) Mr. O'Brien received a performance-based Restricted Stock Unit Award of
105,000 shares with vesting tied to compound growth in pre-tax earnings
over the performance period: 37,500 shares vest at 8% compound growth;
82,500 shares vest at 11% compound growth; 105,000 shares vest at 15%
compound growth (with scaling for performance between the defined
thresholds). Below 8% growth, no shares vest and the grant will
terminate. While the program targets growth at the end of fiscal year
2007, up to 15% of the units could vest at end of fiscal year 2005, and
up to 20% could vest at end of fiscal year 2006 provided performance
targets are met.
(24) In addition to receiving an option to purchase 15,000 shares of
Intermagnetics stock under the 2000 Stock Option and Stock Award Plan,
Mr. O'Brien was granted a non-qualified stock option to purchase 40,000
shares of SuperPower stock under the SuperPower 2002 Equity
Compensation Plan, with a term of ten (10) years, and to be exercisable
in five (5) equal annual installments beginning on August 4, 2004. The
exercise price of the option was equal to the fair market value of the
shares on the date of the grant.
45
(25) Includes the Company's share of contributions on behalf of Mr. O'Brien
to the IGC Savings Plan (401(k)) of $2,672 and relocation
reimbursements of $108,629.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table summarizes the Restricted Stock Unit Awards granted
during the fiscal year ended May 30, 2004 to the persons named in the Summary
Compensation Table. No stock appreciation rights have been granted by the
Company nor is the grant of such rights currently provided for in the Company's
2000 Stock Option and Stock Award Plan.
Estimated Future Payouts Under Non-Stock
Price-Based Plans
-------------------------------------------
Performance or
Number of Shares, Other Period
Units or Other Until Maturities Threshold Target Maximum ($
Name Rights (#) or Payout(1) ($ or #)(2) ($ or #)(3) or #)(4)
- ---- -------------------------------------------------------------------------------
Glenn H. Epstein - - - - -
Michael K. Burke - - - - -
Leo Blecher - - - - -
Philip J. Pellegrino - - - - -
Thomas J. O'Brien 105,000 08/04/2007 37,500 82,500 105,000
(1) While the program targets growth at the end of fiscal year 2007 certain
units can vest in fiscal years 2005 and 2006 based on achieving
performance targets. Vesting is tied to compound growth in pre-tax
earnings over the performance period, which ends on May 27, 2007.
(2) Compound growth in pre-tax earnings of 8%.
(3) Compound growth in pre-tax earnings of 11%.
(4) Compound growth in pre-tax earnings of 15%.
(5) Vesting of units for fiscal year 2005 at 8% compound growth is 5,625
shares; at 11% compound growth is 12,375 shares; at 15% compound growth
is 15,750 shares. In fiscal year 2006 the vesting schedule is: 8%
compound growth 7,500 shares; 11% compound growth 16,500 shares; at 15%
compound growth 21,000 shares.
46
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock options granted during the fiscal
year ended May 30, 2004 to the persons named in the Summary Compensation Table.
No stock appreciation rights have been granted by the Company nor is the grant
of such rights currently provided for in the Company's 2000 Stock Option and
Stock Award Plan.
Individual Grants
-----------------
| Potential Realizable Value at
| Assumed Annual Rates of Stock
Number of Percentage of | Price Appreciation for Option
Shares Total Options | Term(1)
Underlying Granted to Exercise |
Options Employees in Price |
Name Granted Fiscal 2004 (per share) Expiration Date | 5% 10%
- ---------------------------------------------------------------------------------------------------------------------
Glenn H. Epstein - - - - - -
Michael K. Burke - - - - - -
Leo Blecher - - - - - -
Philip J. Pellegrino - - - - - -
Thomas J. O'Brien 15,000(2) 7.3% $13.34 8/04/2013 $125,842 $318,908
(1) Potential Realizable Values are based on an assumption that the stock
price of the Common Stock starts equal to the exercise price shown for
each particular option grant and appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the
option term. These amounts are reported net of the option exercise
price (which may be paid by delivery of already-owned shares of Common
Stock), but before any taxes associated with the exercise or subsequent
sale of the underlying stock. The actual value, if any, an optionholder
may realize will be a function of the extent to which the stock price
exceeds the exercise price on the date the option is exercised and also
will depend on the optionholder's continued employment through the
vesting period. The actual value to be realized by the optionholder may
be greater or less than the values estimated in this table.
(2) Options vest in three (3) equal annual installments beginning on first
anniversary date. Options were granted on August 4, 2003 as an
inducement to hire Mr. O'Brien.
47
SUPERPOWER, INC. OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock options granted during the fiscal
year ended May 30, 2004 to the persons named in the Summary Compensation Table.
These options were granted under the SuperPower 2003 Equity Compensation Plan
(the "SuperPower Plan"). SuperPower, Inc. is a wholly-owned subsidiary of
Intermagnetics. There currently is no market for trading shares in SuperPower,
Inc. No stock appreciation rights have been granted by the Company nor is the
grant of such rights currently provided for in the SuperPower Plan.
Individual Grants
---------------------------
Number of Percentage of
Shares Total Options
Underlying Granted to Exercise Grant Date
Options Employees in Price Expiration Present
Name Granted Fiscal 2003 (per share) Date Value
- ---- ------------ ------------- ------------ ---------- ----------
Glenn H. Epstein - - - - -
Michael K. Burke - - - - -
Leo Blecher - - - - -
Philip J. Pellegrino - - - - -
Thomas J. O'Brien(2) 40,000 100% $ 1.00 8/04/2013 $ 5,600
(1) Because the stock is not publicly traded the value of the stock has
been determined by an independent consultant skilled in these types of
valuations. As such, the Company has chosen to disclose the present
value of this grant at grant date (August, 2003) instead of the
potential realizable value. We believe this is a more accurate
portrayal of the underlying value of an option in this security. To
arrive at this value the Company used a present value calculation with
the following assumptions: there is no expected volatility of the
market price of this security; the risk-free interest rate for fiscal
2004 was 3.0%; the expected average term of the grant for fiscal 2004
was 5.0 years; there is no expected dividend yield for fiscal 2004
(2) Options vest in five (5) equal installments beginning August 4, 2004.
48
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes option exercises during the fiscal year
ended May 30, 2004, and the value of vested and unvested options, for the
persons named in the Summary Compensation Table at May 30, 2004.
| Value of Unexercised
| Number of Unexercised | In-the-Money Options at
| Options at May 30, 2004 | May 30, 2004(1)
Shares Value | |
Acquired on Realized | Exercisable Unexercisable | Exercisable Unexercisable
Name Exercise $ | # # | $ $
- ---------------------------------------------------------------------------------------------------------------
Glenn H. Epstein 346,139 $3,405,579 393,772 31,830 $5,024,483 $141,593
Michael K. Burke - - 39,478 73,023 110,803 204,954
Leo Blecher 133,761 1,148,401 24,333 73,023 152,117 190,240
Philip J. Pellegrino - - 15,000 22,500 11,899 17,849
Thomas J. O'Brien - - - 15,000 - 94,800
(1) Based on the closing price of the Common Stock as reported on Nasdaq on
May 28, 2004 ($19.66), net of the option exercise price.
BENEFIT PLANS
Pension Plan. In fiscal 1999 the Company froze all pension benefits
under its qualified, defined benefit pension plan (the "Pension Plan") as of
December 31, 1998 (with the exception of approximately fifty (50) bargaining
unit members at a former subsidiary, IGC-APD Cryogenics Inc.). Therefore, no
additional benefits were accrued after that date. Prior to freezing the Pension
Plan, all employees 21 years of age and older who had completed one (1) year of
credited service participated in the Pension Plan. Participating employees
received certain defined benefits under the Pension Plan upon their normal or
early retirement from the Company's employ or upon death.
The Company terminated the Pension Plan in accordance with statutory
requirements in fiscal year 2001. As a result of freezing the Pension Plan, the
Company makes a supplemental frozen pension plan contribution to participants in
the Pension Plan for whom the projected lump sum value of his or her accrued
benefit determined at December 1, 1997 under the Pension Plan would exceed his
or her projected benefit derived from the Company's 2% non-elective contribution
under the IGC Savings Plan (401(k)), as determined in the sole discretion of the
Pension Plan Administrator using certain assumptions. Mr. Blecher received such
a contribution as disclosed in the notes to the Summary Compensation Table.
49
Supplemental Retirement Plan. The Company's Supplemental Retirement
Plan, adopted in 1985, provides additional retirement benefits to selected
executives of the Company. Under the plan, on retirement at age 65, the
participant will receive additional retirement benefits payable in equal monthly
installments over 180 months. For a participant who elects to retire after age
55 but before age 65, the amount of the retirement benefits are actuarially
reduced.
No current executives participate in this plan.
Enhanced Benefit Plan. On January 26, 2000, the Board of Directors
approved the Intermagnetics General Corporation Enhanced Benefit Plan (the
"Enhanced Benefit Plan") aimed at attracting, motivating and retaining certain
top level Executives. Currently, only individuals with the title "Sector
President" "Executive Vice President" or "Vice President" (the "Participants")
participate in the Enhanced Benefit Plan. Under the Enhanced Benefit Plan,
Participants are entitled to (a) life insurance benefits equal to two (2) times
their base salary and (b) a contribution made by the Company on Participant's
behalf to the Company's Deferred Compensation Plan. The contribution level is
set each year by the Compensation Committee of the Board of Directors and placed
in a separate retirement account for each Participant within the Deferred
Compensation Plan. The contribution level for fiscal years 2004 and 2003 (paid
in fiscal years 2005 and 2004) has been set at $10,000 for each Participant. The
contribution level was $8,000 per Participant for fiscal year 2002 (paid in
fiscal year 2003). This account vests only upon Participant's retirement or upon
a change in control (as those terms are defined in the Deferred Compensation
Plan). In addition, the Enhanced Benefit Plan provides a lump sum severance
equal to between six (6) months and eighteen (18) months of Participant's salary
upon (a) termination without "cause" (as that term is defined in the Enhanced
Benefit Plan), or (b) Participant's resignation under certain circumstances
after a change in control. The amount of severance is tied to years of service.
Messrs. Blecher, Burke, Pellegrino and O'Brien are participants in the Plan.
50
CERTAIN EMPLOYMENT ARRANGEMENTS
o Epstein Agreement
Effective June 1, 2002, the Company amended and restated its employment
agreement with Mr. Epstein. Under the 2002 Agreement, Mr. Epstein has agreed to
serve as the Company's Chief Executive Officer through at least May 31, 2007. In
addition, if neither party provides written notice to the other party prior to
June 1, 2003 of its or his desire to terminate Mr. Epstein's employment, the
2002 Agreement shall be extended automatically for one additional year, until
May 31, 2008. On each successive June 1st following June 1, 2003 (the
"Anniversary Date"), the employment term will be automatically extended from
year to year for an additional one (1) year period (for example, on June 1,
2004, the term was extended to May 31, 2009), unless either party provides
written notice to the other prior to the Anniversary Date of its or his desire
to terminate Mr. Epstein's employment. The 2002 Agreement provided for a base
salary in fiscal year 2004 of $450,000. Under the terms of the 2002 Agreement,
Mr. Epstein's base salary is adjusted annually. The 2002 Agreement also provides
that Mr. Epstein may participate in the Company's Incentive Bonus Program
("IBP") at a target level bonus of 100% of base salary, with actual bonus earned
pursuant to the overall terms of the Company's IBP. For fiscal year 2005, the
target level bonus is 110% of base salary under the IBP. In addition, the
Company provides Mr. Epstein with a lump sum payment (adjusted annually) to be
used by Mr. Epstein to select either a non-qualified Supplemental Executive
Benefit Plan or other similar program for which the intent is to compensate for
caps imposed by US Government tax regulations on the Company's qualified
retirement and savings programs. This lump sum is paid in lieu of Mr. Epstein's
inclusion in any of the Company's non-qualified retirement programs. If Mr.
Epstein is terminated without cause or resigns for good reason (as defined in
the 2002 Agreement) during term of the 2002 Agreement, or any renewal thereof,
or if the Board provides notice that it will not extend the term, he would be
entitled to receive an amount equal to his then-base annual salary multiplied by
the number of months remaining on the term of the 2002 Agreement. The 2002
Agreement also provides that if Mr. Epstein is terminated or resigns as an
employee under certain circumstances after a change in control event (as
described in the Epstein Agreement), he would be entitled to receive an amount
equal to the sum of three (3) times his annual salary and certain other
extraordinary payments.
o Pellegrino Agreement
The Company entered into a three (3) year employment agreement with
Philip J. Pellegrino, Sector President of the Energy Technology Segment (the
"Pellegrino Agreement"). On October 14, 2004, the Pellegrino Agreement
automatically extended for an additional two (2) years pursuant to its terms and
will renew annually thereafter unless otherwise terminated upon notice. The
Pellegrino Agreement incorporates the terms of the Enhanced Benefit Plan, but
also provides that Mr. Pellegrino will have a base salary of not less than
$200,000. In addition to the stock option and restricted stock awards described
in the Summary Compensation Table, Mr. Pellegrino is also eligible to receive 5%
of the equity in SuperPower, Inc., a wholly-owned subsidiary of Intermagnetics
that currently is not publicly traded. This equity has been provided in the form
of stock options that were priced at fair market value on the date of the grant.
If Mr. Pellegrino is terminated without cause or resigns for good cause during
term of the Pellegrino Agreement, he will be entitled to twelve (12) months of
severance and his outstanding options will automatically vest. If he is
terminated or resigns under certain circumstances after a change in control
event (as described in the Agreement), his severance would equal two (2) times
his salary and bonus for the prior year.
51
TRANSACTIONS WITH MANAGEMENT
In fiscal year 2000, we adopted Stock Ownership Guidelines for our
executive officers and certain top-level management employees. Executive
officers and certain key employees that report directly to the Chief Executive
Officer are expected to own between one and two times their base salary in
Common Stock. Top-level management employees are expected to own not less than
two-thirds of their base salary in Common Stock.
In order to assist and encourage individuals to reach the ownership
guidelines as soon as possible, we created the 1999 Executive Stock Purchase
Plan. Under this plan, which was approved by our shareholders in November 2000,
the Company may provide loans directly to participants, or may arrange for a
participant to obtain a loan from a bank, for the purpose of purchasing Common
Stock on the open market. Interest on the loan is charged annually at the
Company's base rate of borrowing under its line of credit, or at the rate
charged by the bank if the loan is secured through a bank. The term of the loan
is five (5) years after which it must be repaid in full. Employees are expected
to retain two-thirds of the stock purchased with loan proceeds for the entire
term of the loan and are expected to retain ownership levels within the Stock
Ownership Guidelines during the term of the 1999 Executive Stock Purchase Plan.
As a result of the Sarbanes-Oxley Act adopted in July 2002, new loans will no
longer be issued to executive officers under this plan.
Messrs. Epstein, Burke, Blecher and Pellegrino have secured loans
totaling $800,000, $430,000, $220,000 and $400,000, respectively, to
purchase Common Stock. All other participant loans currently outstanding total
$1,750,720.
AUDIT COMMITTEE AND INDEPENDENCE OF AUDITORS
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Committee") is
comprised of five (5) Directors. All members of the Committee are independent as
defined by the applicable rules of the SEC and the Nasdaq National Market. The
Committee has adopted a written charter, which is attached as Annex E. This
charter was approved by the Board of Directors. The Committee has reviewed and
discussed the Company's audited financial statements with management, which has
primary responsibility for the financial statements. PricewaterhouseCoopers,
LLP, the Company's independent auditor for fiscal year 2004, is responsible for
expressing an opinion on the conformity of the Company's audited financial
statements with U.S. generally accepted accounting principles. The Committee has
discussed with PricewaterhouseCoopers the matters that are required to be
discussed by the Statement on Auditing Standards No. 61 (Communication with
Audit Committees). PricewaterhouseCoopers has provided the Committee with the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed the firm's independence with PricewaterhouseCoopers. The
Committee also considered whether PricewaterhouseCoopers' provision of non-audit
services to the Company, as disclosed below in the section entitled "Independent
Auditors Fees", is compatible with the firm's independence.
52
Based on the considerations referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for fiscal year 2004. The
Committee appointed PricewaterhouseCoopers to continue as the Company's
independent auditors for fiscal year 2005.
AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS OF INTERMAGNETICS
GENERAL CORPORATION
Larry G. Garberding (Chairman)
Michael E. Hoffman
James S. Hyde
Thomas L. Kempner
Sheldon Weinig
INDEPENDENT AUDITORS FEES
The following is a summary of the fees billed to Intermagnetics by
PricewaterhouseCoopers, LLP for professional services with respect to Audit Fees
billed for and other listed services billed during the fiscal year ended May 30,
2004 and May 25, 2003:
Fee Category May 30, 2004 May 25, 2003
- ------------------------------------------------------------------ ------------------ -------------------
Audit Fees $ 334,500 $ 159,000
Audit-Related Fees $ 308,105 $ 122,000
Tax Fees $ 208,592 $ 134,000
All Other Fees - -
Total Fees $ 851,197 $ 415,000
Audit Fees: This category includes fees for the audit of our annual
financial statements, review of the financial statements included in our
quarterly reports on Form 10-Q, and services normally provided by the
independent auditor such as statutory audits, consents and assistance with and
review of documents filed with the Securities and Exchange Commission.
Audit-Related Fees: Audit-related fees paid to PricewaterhouseCoopers
principally cover fees related to the acquisition and mergers of Invivo
Corporation and MRI Devices Corporation, as well as the benefit plan audit.
Tax fees. Services included in this category consist of tax return
preparation, technical tax advice and tax compliance.
All Other Fees: No services in this category were rendered or billed in
either fiscal year 2004 or fiscal year 2003.
53
PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
The Audit Committee is responsible for reviewing and pre-approving any
non-audit services to be performed by the Company's outside accountants. The
Audit Committee may delegate its pre-approval authority to the Chairman of the
Audit Committee to act between meetings of the Audit Committee. Any pre-approval
given by the Chairman of the Audit Committee pursuant to this delegation is
presented to the full Audit Committee at its next regularly scheduled meeting.
The Audit Committee or Chairman of the Audit Committee reviews, and if
appropriate, approves all non-audit service engagements, taking into account the
proposed scope of the non-audit services, the proposed fees for the non-audit
services, whether the non-audit services are permissible under applicable law or
regulation, and the likely impact of the non-audit services on the principal
accountant's independence.
The Audit Committee pre-approved each engagement of the Company's
registered independent public accounting firm to perform non-audit related
services during fiscal year 2004.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence
and believes the provision of the services referenced above is compatible.
REPORT OF COMPENSATION COMMITTEE
THE FOLLOWING REPORT SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY
ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT INTERMAGNETICS GENERAL CORPORATION SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
The Compensation Committee of the Board of Directors sets the
compensation policies for the executive officers of the Company, recommends the
annual base salary, annual incentive compensation and grant of long-term
incentive compensation for the Company's chief executive officer, and approves
the annual base salary, annual incentive compensation and grant of long-term
incentive compensation for all other executive officers of the Company. In
fulfilling this duty, the Compensation Committee has sought to establish a
policy that enables the Company to attract, retain and reward executive officers
who contribute substantially to the success of the Company, and aligns executive
compensation with the creation of long-term value for the Company's
shareholders.
The Compensation Committee views executive compensation as comprised of
three (3) essential components: long-term incentive compensation, annual base
salary and annual incentive compensation.
54
Long-Term Incentive Compensation. The Compensation Committee views
long-term incentive compensation as the cornerstone of executive compensation.
The Compensation Committee believes that long-term executive compensation should
be linked closely to the creation of shareholder value. In fiscal year 2003,
after reviewing market data and engaging the services of an outside compensation
consultant, the Committee adopted a performance-based restricted stock unit
program under the Company's 2000 Stock Option and Award Plan designed to focus
the attention of the Company's executives on the important task of creating
long-term shareholder value. In awarding these restricted stock units, the
Compensation Committee considered a variety of factors, including the potential
impact of the executive officer on shareholder value, and industry practice.
These awards will vest only if the performance targets established by the
Committee are achieved. The program is based on growth in pre-tax earnings per
share with final vesting in fiscal year 2007 if the growth targets are met. In
fiscal year 2005, we expect to begin the process of designing a
performance-based long term incentive program for fiscal years 2008 and beyond.
Annual Base Salary. In establishing executive annual base salaries, the
Compensation Committee has established a policy of setting payments
competitively. In determining the competitiveness of individual salaries, the
Compensation Committee periodically gathers information regarding the base
salaries paid to other individuals with comparable responsibilities in related
industries, particularly those with a focus on technology. In connection with
establishing base salaries in light of the competitive ranges, the Compensation
Committee weighs the allocation of responsibilities among the executive officers
within the Company and the relevant experience of each such executive officer.
Annual Incentive Compensation. The Compensation Committee believes that
an important component of annual compensation is incentive compensation. In July
1999, the Compensation Committee established a new annual incentive compensation
program (the "Incentive Bonus Program") pursuant to which cash bonuses are
earned by officers and employees of the Company. The size and availability of a
cash award under the Program is linked to quantitative and qualitative goals
that are established for each eligible participant at the beginning of the
Company's fiscal year. The Board of Directors sets the quantitative goals for
the financial performance of the Company and its subsidiaries and divisions. The
Compensation Committee sets qualitative goals for the Chief Executive Officer.
Qualitative goals for other officers and employees are approved by the executive
officer to whom he or she reports. Under the program, bonuses earned in any
fiscal year are paid to executives and eligible employees in the first quarter
of the following fiscal year.
Participants in the Incentive Bonus Program are eligible to earn a
bonus equal to a set percentage of their base salary (their "Bonus Target").
Employees can achieve a bonus above their Bonus Target if they exceed their
quantitative and/or qualitative goals. The program provides for "banking" of
bonuses earned in excess of 150% of the participant's target. This "bank" is
paid out over a three (3) year period, subject to certain provisions. The total
amount earned in any year (including any banked portion) by all participants
under the Program does not typically exceed 10% of consolidated operating income
(as adjusted for significant non-recurring items including gains or losses from
Board approved restructuring activities and approved increases in the Company's
ongoing investment in Energy Technology Sector). This program will continue to
apply to the officers and employees of the Company for fiscal year 2005
performance.
55
Section 162(m) Considerations. The Company expects that the salary and
bonus compensation paid to executive officers will qualify for income tax
deductibility under the limits of Section 162(m) of the Internal Revenue Code.
In addition, we have awarded Intermagnetics' stock options and restricted stock
units to executive officers only pursuant to plans that we believe will satisfy
the requirements for exclusion from the Section 162(m) limit. However, there may
be other awards or compensation granted, the deduction of which could be subject
to the 162(m) limit.
The Compensation Committee believes that the compensation earned by
each of the five (5) highest paid executive officers of the Company for its
fiscal year 2004 was reasonable in view of the Company's consolidated
performance and the contribution of those officers to that performance.
In particular, the Compensation Committee believes that Mr. Epstein's
compensation during fiscal year 2004 reflected his very strong contribution to
the Company's strategic goals and overall financial and operational performance.
Consistent with the requirements of the Epstein Agreement, Mr. Epstein received
a base salary of $450,000. Mr. Epstein was also paid an annual bonus of $360,000
for fiscal year 2004 performance in accordance with our Incentive Bonus Program.
In addition, Mr. Epstein received a portion of his "banked" bonus in the amount
of $237,235. His current "bank" consists of $74,639 of additional bonus amounts
for which he will be eligible over the next fiscal year. Mr. Epstein's target
bonus for fiscal year 2005 will be 110% of his base salary and the target
bonuses for all other executive officers will range from 35-60% of base salary.
Mr. Epstein's base salary for fiscal year 2005 has been increased to
$500,000. The Compensation Committee notes that Mr. Epstein's salary falls
within competitive ranges established for the position of Chief Executive
Officer for technology companies with similar characteristics such as size,
growth and profitability.
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS OF INTERMAGNETICS
GENERAL CORPORATION
Michael E. Hoffman (Committee Chairman)
Larry G. Garberding
Thomas L. Kempner
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock for the past five (5) fiscal years with similar
returns for (i) the Nasdaq composite index and (ii) a peer group of companies we
selected for purposes of the comparison and described more fully below (the
"Peer Group"). Dividend reinvestment has been assumed and, with respect to
companies in the Peer Group, the returns of each such company have been weighted
at each measurement point to reflect relative stock market capitalization. There
can be no assurance that the performance of the Company's Common Stock will
continue in a manner similar to the trend depicted on the graph.
56
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG INTERMAGNETICS GENERAL CORPORATION, NASDAQ
STOCK MARKET INDEX AND PEER GROUP*
[GRAPH OMITTED]
Cumulative Total Return
-------------------------------------------------------------------
5/30/99 5/28/00 5/27/01 5/26/02 5/25/03 5/30/04
INTERMAGNETICS GENERAL CORPORATION 100.00 139.19 392.55 326.64 215.16 405.19
NASDAQ STOCK MARKET (U.S.) 100.00 161.64 83.42 68.28 60.58 82.80
NEW PEER GROUP 100.00 152.14 162.19 121.39 94.77 108.91
FORMER PEER GROUP 100.00 151.96 182.89 141.30 98.16 149.53
* Assumes $100 invested on May 30, 1999 in stock or index - including
reinvestment of dividends
The selection of a peer group posed some difficulty because we do not
believe there are any publicly traded companies devoted exclusively or even
substantially to all of the same markets in which we compete. We believe that
many of our strongest competitors are either not publicly traded in the U.S., or
consist of subsidiaries or divisions of large corporations. Hence, we selected a
peer group consisting of publicly-traded high technology companies (including
those in the development stage) that (a) have less than $500 million in annual
revenues, and (b) either compete against the Company in one or more of our
several markets or otherwise participate in one or more of our several markets.
With respect to the medical diagnostic imaging market, we focused on selecting
other companies that, like Intermagnetics, design and sell systems and
components to medical products companies.
The companies in the Peer Group that compete against us in one or more
of our markets consist of Helix Technology Corporation which participates in the
instrumentation market; American Superconductor Corporation, a development stage
company working with high temperature superconductors in the energy technology
market; CTI Molecular Imaging Inc., Analogic Corporation and Datascope, Inc.
that participate in the medical technology market.
In light of the Company's recent acquisitions, a reassessment of our
Peer Group determined that the following companies be removed since they are not
aligned in the same market in which the Company participates; Chart Industries,
Inc.; Hologic, Inc. and SatCon Technology Corp. These companies as well as
American Superconductor Corp, Analogic Corp and Helix Technology Corp. make up
the Former Peer Group.
In providing the foregoing graph for informational purposes, the
Company notes that as a general rule, development stage companies do not have
meaningful revenues relative to their substantial product development expenses.
Hence, unlike the Company's Common Stock, the value of equity securities of
development stage companies are based primarily on speculation regarding the
potential success of such companies in bringing a novel product to market
successfully.
57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SuperPower, Inc., a wholly-owned subsidiary of the Company, retained
Albertine Enterprises, Inc. to perform certain government relations activities
for which fees and expenses were paid in the amount of $100,557 in fiscal year
2002. John M. Albertine is a Director of the Company and serves as Chairman and
Chief Executive Officer of Albertine Enterprises.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING AND OTHER MATTERS
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than ten percent of a registered class of our
equity securities, to file initial reports of ownership and reports of changes
in ownership of our Common Stock and other equity securities with the Securities
and Exchange Commission. Officers, directors and greater than ten percent (10%)
shareholders must furnish us with copies of all Section 16(a) forms they file.
To the best of our knowledge, based solely on a review of the copies of
Section 16(a) reports furnished to us and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to our
officers, directors and more than ten-percent (10%) beneficial owners were
complied with during the fiscal year ended May 30, 2004.
The Board of Directors is not aware of any matters other than those
discussed in this Proxy Statement that may come before the meeting. If, however,
further business properly comes before the meeting, the persons named in the
proxies will vote the shares represented thereby in accordance with their
judgment.
SHAREHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for
shareholder action at annual meetings in accordance with regulations adopted by
the Securities and Exchange Commission. Under those regulations, shareholders
who intend to submit proposals for the 2005 Annual Meeting must ensure that our
Corporate Secretary receives such proposals not later than May 30, 2005 in order
to be considered for inclusion in the proxy statement and form of proxy relating
to the 2005 Annual Meeting.
ANNUAL REPORT
Our annual report on Form 10-K for the fiscal year ended May 30, 2004,
including the financial statements and schedules, but excluding exhibits, was
mailed with this Proxy statement. Upon written request of a shareholder, we will
furnish any exhibit to Form 10-K.
By order of the Board of Directors,
KATHERINE M. SHEEHAN
Corporate Secretary
58
ANNEX A
FORM OF AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
of November [ ], 2004, by and between Intermagnetics General Corp., a New York
corporation ("IGC-NY" or the "Non-Surviving Company"), and Intermagnetics, Inc.,
a Delaware corporation ("Intermagnetics-DE" or the "Surviving Company").
WHEREAS, IGC-NY owns all of the issued and outstanding shares of
capital stock of Intermagnetics-DE; and
WHEREAS, IGC-NY desires to reincorporate in the State of Delaware by
merging with and into Intermagnetics-DE with Intermagnetics-DE continuing as the
surviving corporation in such merger upon the terms and subject to the
conditions herein set forth and in accordance with the laws of the State of New
York and the State of Delaware.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto have agreed as follows:
1. THE MERGER.
(a) The Merger. Subject to the terms and conditions of this Agreement
and pursuant to the provisions of the New York Business Corporate Law (the
"NYBCL") including, without limitation, Sections 905 and 907 thereof, and the
Delaware General Corporation Law (the "DGCL"), including, without limitation,
Section 253, thereof at the Effective Time (as such term is defined in Section
1(b)) hereof), IGC-NY shall be merged with and into Intermagnetics-DE (the
"Merger"), the separate corporate existence of IGC-NY shall cease and
Intermagnetics-DE shall continue as the Surviving Company under the laws of the
State of Delaware under the name "Intermagnetics, Inc."
(b) The Effective Time of the Merger. IGC-NY shall file a duly executed
Certificate of Merger with the New York Department of State (the "NY Certificate
of Merger"). Intermagnetics-DE shall file a duly executed Certificate of
Ownership and Merger with the Delaware Secretary of State (the "DE Certificate
of Merger"). The "Effective Time" of the Merger shall be the later of: (i) the
date and time of acceptance for filing with the New York Secretary of State of
the NY Certificate of Merger, (ii) the date and time of acceptance for filing
with the Delaware Secretary of State of the DE Certificate of Merger, or (iii)
such other time as shall be agreed to by the parties and set forth in the DE
Certificate of Merger and the NY Certificate of Merger, as applicable.
(c) Effect of the Merger. At the Effective Time, the Surviving Company
shall thereupon and thereafter possess all of the rights, privileges, powers,
immunities and franchises, both of a public and private nature, of each of
IGC-NY and Intermagnetics-DE, and shall be subject to all of the restrictions,
disabilities and duties of each of IGC-NY and Intermagnetics-DE; and all of the
rights, privileges, powers, immunities and franchises of each of IGC-NY and
Intermagnetics-DE, and all property (real, personal and mixed), and all debts
due to either of IGC-NY or Intermagnetics-DE on whatever account, for stock
subscriptions as well as all other things in action, causes of action, and every
other asset or belonging to or of each of IGC-NY or Intermagnetics-DE, shall be
vested in the Surviving Company; and all property, rights, privileges, powers,
immunities and franchises and all and every other interest shall thereafter be
the property of the Surviving Company as they were of IGC-NY and
Intermagnetics-DE; but all rights of creditors and all liens upon any property
of either IGC-NY or Intermagnetics-DE shall be preserved unimpaired, and all
debts, liabilities and duties of each of IGC-NY and Intermagnetics-DE shall
thenceforth attach to the Surviving Company, and may be enforced against it to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Company.
(d) Designation and Outstanding Shares. As to IGC-NY and
Intermagnetics-DE, the designation and number of outstanding shares of each
class and series and the voting rights thereof are as follows:
- -------------------------------------------------------------------------------------------------------------------
Name of Corporation Designation and Number of shares Class or series Shares entitled
number of shares in owned by the of shares to vote as a
each class or series surviving entitled to vote class or series
outstanding(1) corporation
- -------------------------------------------------------------------------------------------------------------------
INTERMAGNETICS GENERAL CORP. 29,811,341 COMMON NONE COMMON COMMON
- -------------------------------------------------------------------------------------------------------------------
INTERMAGNETICS, INC. 100 COMMON NONE COMMON COMMON
- -------------------------------------------------------------------------------------------------------------------
(e) Certificate of Incorporation of the Surviving Company. The
Certificate of Incorporation of Intermagnetics-DE in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Company from and after the Effective Time and shall continue in full force and
effect until otherwise changed, altered, amended or repealed as therein provided
and in the manner prescribed in the DGCL.
(f) Bylaws of the Surviving Company. The Bylaws of Intermagnetics-DE in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Company from and after the Effective Time and shall continue in full
force and effect until otherwise changed, altered, amended or repealed as
therein provided and in the manner prescribed in the DGCL.
(g) Board of Directors and Officers of the Surviving Company. The Board
of Directors and officers of IGC-NY in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected or
appointed, as applicable, shall serve as the Board of Directors and officers of
the Surviving Company from and after the Effective Time in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Company and their
respective terms of office shall not be changed as a result of the Merger.
(h) Tax Treatment of the Merger. The parties hereto intend that the
Merger shall be treated as a tax-free a reorganization in accordance with the
United States Internal Revenue Code of 1986, as amended, and each party shall
file all tax returns, and take all other actions for tax purposes, in a manner
consistent therewith.
(i) In connection with and as part of the consummation of the Merger,
Intermagnetics-DE shall change its name to Intermagnetics General Corporation.
- --------
(1) Share numbers to be updated at the time the Merger is effected. Following
such update and immediately prior to the Effective Time, the following
sentence will be inserted "The number of such shares is not subject to
change prior to the Effective Time of the Merger."
2
2. CONVERSION OF SHARES.
(a) Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof:
(i) All shares of the common stock, par value $.10 per share,
of Intermagnetics-DE ("Delaware Common Stock") issued and outstanding
immediately prior to the Effective Time shall no longer be outstanding
and shall automatically be canceled and retired without any
consideration being paid or issued therefore and shall cease to exist.
(ii) Each common share, par value $.10 per share, of IGC-NY
("New York Common Stock") issued and outstanding immediately prior to
the Effective Time shall be automatically converted on a
share-for-share basis into and represent and become one validly issued,
fully paid and non-assessable share of Delaware Common Stock and shall
constitute the only outstanding shares of the Surviving Corporation.
(b) Exchange of Certificates. At the Effective Time, each stock
certificate representing New York Common Stock will automatically represent an
equal amount of Delaware Common Stock. At any time on or after the Effective
Time of the Merger, each holder of New York Common Stock will be entitled, upon
request, and surrender of such certificates, to the Surviving Corporation, to
receive in exchange therefor one or more new stock certificates evidencing
ownership of the same number of full shares of Delaware Common Stock as was
represented by the certificate or certificates surrendered by such holder
representing the New York Common Stock. If any certificate representing shares
of Delaware Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate or other writing so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Surviving
Corporation or its transfer agent any transfer or other taxes required by reason
of the issuance of a certificate representing shares of Delaware Common Stock in
any name other than that of the registered holder of the certificate
surrendered, or otherwise required, or shall establish to the satisfaction of
the transfer agent that such tax has been paid or is not payable.
(c) Lost and Stolen Certificates. In the event that any stock
certificate representing New York Common Stock shall have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
such stock certificate to be lost, stolen, or destroyed, Intermagnetics-DE shall
issue or cause to be issued in exchange for such lost, stolen, or destroyed
stock certificate the number of shares of Delaware Common Stock into which such
shares are converted in the Merger in accordance with this Section 2. When
authorizing such issuance in exchange therefor, the Board of Directors of
Intermagnetics-DE may, in its sole discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate to deliver a bond to Intermagnetics-DE (in such form and amount as
the Board of Directors of Intermagnetics-DE may direct) as an indemnity against
any claim that may be made against Intermagnetics-DE with respect to the
Certificate alleged to have been lost, stolen, or destroyed.
3
(d) Stock Options, Warrants, Debentures, Preferred Stock and other
Agreements. As of the Effective Time, any stock options, warrants, convertible
securities or other contractual commitments or agreements of any kind to
purchase or issue shares of New York Common Stock that are outstanding
immediately prior to the Effective Time (whether or not contingent or otherwise
requiring further shareholder approval) shall be converted into a stock option,
warrant, convertible security or other contractual commitment or agreement to
purchase or issue shares of Delaware Common Stock on the same terms as prior to
the Effective Time, except that any rights or obligations therein relating to
shares of New York Common Stock shall be converted to rights or obligations
relating to shares of Delaware Common Stock. Without limiting the foregoing,
each outstanding option, right, stock award or warrant with respect to shares of
New York Common Stock will be converted into an option, right, stock award or
warrant with respect to an equal number of shares of Delaware Common Stock,
under the same terms and conditions as the original option, right, stock award
or warrant. All of IGC-NY's employee benefit plans, including the Intermagnetics
General Corporation 2000 Stock Option and Stock Award Plan (the "2000 Plan") and
the Intermagnetics General Corporation 1990 Stock Option Plan (the "1990 Plan"),
will be assumed and continued by Intermagnetics-DE following the Effective Time,
and shares of Delaware Common Stock will be authorized to be issued under the
2000 Plan and 1990 Plan equal to the number of shares of New York Common Stock
authorized to be issued under the Plans prior to the Effective Time.
(e) Closing of Transfer Books. At the Effective Time, the stock
transfer books of IGC-NY shall be closed and no transfer of shares of New York
Common Stock shall thereafter be made. If, after the Effective Time,
certificates representing shares of New York Common Stock are presented to the
Surviving Company, they shall be canceled and exchanged for certificates
representing shares of Delaware Common Stock in accordance with the terms
hereof. At and after the Effective Time, the holders of shares of New York
Common Stock to be exchanged for shares of Delaware Common Stock pursuant to
this Agreement shall cease to have any rights as shareholders of IGC-NY except
for the right to surrender such stock certificates in exchange for shares of
Intermagnetics-DE Common Stock as provided hereunder.
3. MISCELLANEOUS.
(a) Fees and Expenses. Whether or not the Merger is consummated, each
party hereto shall pay its own costs and expenses incident to the preparation of
this Agreement, the consummation of the Merger, and the performance of and
compliance with all of the agreements and conditions contained herein.
(b) Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed by overnight delivery service or by first class mail postage prepaid,
or sent by telecopier, to the parties at the following address (or at such other
address of a party as shall be specified by like notice): c/o Intermagnetics
General Corp., 450 Old Niskayuna Road, P.O. Box 461, Latham, NY 12110-0461,
Attn: Katherine Sheehan.
(c) Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
4
(d) Amendment, Modification and Termination. Notwithstanding the
approval and adoption of this Agreement by the Boards of Directors of IGC-NY and
Intermagnetics-DE and/or the shareholders of IGC-NY, and subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, or terminated and abandoned by the Boards of Directors of IGC-NY or
Intermagnetics-DE or both, in part or in its entirety, or the consummation of
the Merger may be postponed ,without any action of the stockholders of IGC-NY or
Intermagnetics-DE, at any time prior to the filing of any required Merger
documents with the Secretary of State of either the State of New York or the
State of Delaware.
(e) Section Headings. The Section headings contained in this Agreement
are inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(f) Applicable Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware without regard to the conflict of laws principles or rules
thereof.
(g) Integration. This Agreement sets forth and is intended to be an
integration of all of the promises, agreements, conditions, understandings,
covenants, warranties and representations among the parties with respect to the
Merger and there are no promises, agreements, conditions, understandings,
covenants, warranties or representations, oral or written, express or implied,
among the parties with respect to the transactions contemplated other than as
set forth herein. Any and all prior agreements among the parties with respect to
the Merger are hereby revoked.
(h) Further Actions. Each of IGC-NY and Intermagnetics-DE will use its
commercially reasonable efforts to cause to be executed and filed and recorded
any document or documents prescribed by the laws of the State of New York and
the State of Delaware (including, without limitation, a Certificate of Merger
and a Certificate of Ownership and Merger, as applicable), and to be performed
within the State of New York and the State of Delaware and elsewhere all acts
necessary to effectuate the Merger.
(i) The Boards of Directors and the proper officers of IGC-NY and the
Surviving Corporation are hereby authorized, empowered and directed, acting
alone, in the name and on behalf of IGC-NY and the Surviving Corporation, as
applicable, to do and perform all such further acts and things (including, but
not limited to, obtaining any consent which may be deemed necessary, appropriate
or desirable), to execute and deliver in the name and on behalf of IGC-NY and
the Surviving Corporation, as applicable, and, if requested or required, under
its corporate seal duly attested by its Secretary and, where necessary or
appropriate, to file with the appropriate governmental authorities, all such
further certificates, instruments or other documents, and to make all such
payments as in their judgment, or in the judgment of any one of them, shall be
deemed necessary or advisable in order to carry out, comply with and effectuate
the intent and purposes of this Agreement and any or all of the transactions
contemplated therein or thereby, the authority thereof to be conclusively
evidenced by the taking of such action or the execution and delivery of such
documents.
5
IN WITNESS WHEREOF, the parties hereto have executed this Merger
Agreement effective as of the date first above written.
INTERMAGNETICS GENERAL CORP.,
a New York corporation
By: _____________________________
Name:
Title:
INTERMAGNETICS, INC.
a Delaware corporation
By: _____________________________
Name:
Title:
6
ANNEX B
CERTIFICATE OF INCORPORATION
OF
INTERMAGNETICS, INC.
The undersigned incorporator, for the purpose of incorporating or
organizing a corporation under the General Corporation Law of the State of
Delaware, certifies:
FIRST: The name of the Corporation is
INTERMAGNETICS, INC.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is [82,000,000]/[42,000,000],
consisting of 2,000,000 shares of Preferred Stock, par value $0.10 per share
(the "Preferred Stock"), and [80,000,000]/[40,000,000] shares of Common Stock,
par value $0.10 per share (the "Common Stock").
Section 1. Preferred Stock. The designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of the Preferred Stock are as follows:
The Board of Directors is expressly authorized, by resolution or
resolutions, to provide, out of the unissued shares of the Preferred Stock, for
series of the Preferred Stock. Before any shares of any such series are issued,
the Board of Directors shall fix, and is expressly empowered to fix, by
resolution or resolutions, the following provisions of the shares thereof:
(a) the designation of such series, the number of shares that
constitute such series and the stated value thereof if different from
the par value thereof;
(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights (which may be special voting rights),
whether the shares of such series shall have one vote per share or more
or less than one vote per share, whether the holders of such series
shall be entitled to vote on certain matters as a separate class (which
for such purpose may be comprised solely of such series or of such
series and one or more other series or classes of stock of the
Corporation), whether all the shares of such series entitled to vote on
a particular matter shall be deemed to be voted on such matter in the
manner that a specified portion of the voting power of the shares of
such series or separate class are voted and the preference or relation
which such voting rights shall bear to the voting rights of any other
class or any other series of this class;
(c) the annual dividend rate (or method of determining such
rate), if any, payable on such series, the basis on which such holders
shall be entitled to receive dividends (which may include, without
limitation, a right to receive such dividends or distributions as may
be declared on the shares of such series by the board of directors of
the Corporation, a right to receive such dividends or distributions, or
any portion or multiple thereof, as may be declared on the Common Stock
or any other class of stock or, in addition to or in lieu of any other
right to receive dividends, a right to receive dividends at a
particular rate or at a rate determined by a particular method, in
which case such rate or method of determining such rate may be set
forth), the form of such dividend, the conditions and the dates upon
which such dividends shall be payable, and the preference or relation
which such dividends shall bear to the dividends payable on any other
class or any other series of this class;
(d) whether dividends on the shares of such series shall be
cumulative and, in the case of shares of a series having cumulative
dividend rights, the date or dates (or method of determining the date
or dates) from which dividends on the shares of such series shall be
cumulative;
(e) whether the shares of such series shall be subject to
redemption in whole or in part, at the option of the Corporation or at
the option of the holder or holders thereof or upon the happening of a
specified event or events and, if so, the times, the prices therefor
(in cash, securities or other property or a combination thereof) and
any other terms and conditions of such redemption;
(f) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation
and the relative rights of priority, if any, of payment of the shares
of such series;
(g) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to
which and the manner in which any such retirement or sinking fund shall
be applied to the purchase or redemption of the shares of such series
for retirement or other corporate purposes and the terms and provisions
relative to the operation thereof, including the price or prices (in
cash, securities or other property or a combination thereof), the
period or periods within which and any other terms and conditions upon
which the shares of such series shall be redeemed or purchased, in
whole or in part, pursuant to the operation of such retirement or
sinking find;
(h) whether the shares of such series shall be convertible
into, or exchangeable for, at the option of the holder or the
Corporation or upon the happening of a specified event, shares of stock
of any other class or of any other series of this class or any other
securities or property of the Corporation or any other entity, and, if
so, the price or prices (in cash, securities or other property or a
combination thereof) or the rate or rates of conversion or exchange and
the method, if any, of adjusting the same;
-2-
(i) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the
Common Stock, any other series of the Preferred Stock or any other
class of capital stock;
(j) the conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of the Preferred Stock or of any other class of capital stock;
and
(k) any other powers, preferences or rights, or any
qualifications, limitations or restrictions thereof.
Except as otherwise provided by such resolution or resolutions, all
shares of the Preferred Stock shall be of equal rank. All shares of any one
series of the Preferred Stock shall be identical in all respects with all other
shares of such series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereon shall be
cumulative.
Except as otherwise provided by such resolution or resolutions, all
shares of Preferred Stock that are converted, redeemed, repurchased, exchanged
or otherwise acquired by the Corporation shall be cancelled and retired and
shall not be reissued.
For all purposes, this Certificate of Incorporation shall include each
certificate of designations (if any) setting forth the terms of a series of
Preferred Stock.
Subject to the rights, if any, of the holders of any series of
Preferred Stock set forth in a certificate of designations, an amendment of this
Certificate of Incorporation to increase or decrease the number of authorized
shares of any series of Preferred Stock (but not below the number of shares
thereof then outstanding) may be adopted by resolution of the Board of Directors
of the Corporation and approved by the affirmative vote of the holders of a
majority of the voting power of all outstanding shares of stock of the
Corporation entitled to vote thereon irrespective of the provisions of Section
242(b)(2) of the Delaware General Corporation Law or any similar provision
hereafter enacted, with such outstanding shares of stock considered for this
purpose as a single class, and no vote of the holders of any series of Preferred
Stock, voting as a separate class, shall be required therefor.
-3-
Except as otherwise required by law or provided in the certificate of
designations for the relevant series, holders of Common Stock, as such, shall
not be entitled to vote on any amendment of this Certificate of Incorporation
that alters or changes the powers, preferences, rights or other terms of one or
more outstanding series of Preferred Stock if the holders of such affected
series are entitled, either separately or together with the holders of one or
more other series of Preferred Stock, to vote thereon as a separate class
pursuant to this Certificate of Incorporation or pursuant to the Delaware
General Corporation Law as then in effect.
Section 2. Options, Warrants and Other Rights. The Board of Directors
of the Corporation is authorized to create and issue options, warrants and other
rights from time to time entitling the holders thereof to purchase securities or
other property of the Corporation or of any other entity, including any class or
series of stock of the Corporation or of any other entity and whether or not in
connection with the issuance or sale of any securities or other property of the
Corporation, for such consideration (if any), at such times and upon such other
terms and conditions as may be determined or authorized by the Board of
Directors and set forth in one or more agreements or instruments. Among other
things and without limitation, such terms and conditions may provide for the
following:
(i) adjusting the number or exercise price of such options,
warrants or other rights or the amount or nature of the securities or
other property receivable upon exercise thereof in the event of a
subdivision or combination of any securities, or a recapitalization, of
the Corporation, the acquisition by any person of beneficial ownership
of securities representing more than a designated percentage of the
voting power of any outstanding series, class or classes of securities,
a change in ownership of the Corporation's securities or a merger,
statutory share exchange, consolidation, reorganization, sale of assets
or other occurrence relating to the Corporation or any of its
securities, and restricting the ability of the Corporation to enter
into an agreement with respect to any such transaction absent an
assumption by another party or parties thereto of the obligations of
the Corporation under such options, warrants or other rights;
(ii) restricting, precluding or limiting the exercise,
transfer or receipt of such options, warrants or other rights by any
person that becomes the beneficial owner of a designated percentage of
the voting power of any outstanding series, class or classes of
securities of the Corporation or any direct or indirect transferee of
such a person, or invalidating or voiding such options, warrants or
other rights held by any such person or transferee; and
(iii) permitting the Board of Directors (or certain directors
specified or qualified by the terms of the governing instruments of
such options, warrants or other rights) to redeem, repurchase,
terminate or exchange such options, warrants or other rights.
This paragraph shall not be construed in any way to limit the power of
the board of directors of the Corporation to create and issue options, warrants
or other rights.
FIFTH: Elections of directors need not be by ballot unless the By-Laws
of the Corporation shall so provide.
SIXTH: The Board of Directors of the Corporation may make By-Laws and
from time to time may alter, amend or repeal By-Laws.
-4-
SEVENTH: The directors of the Corporation shall be divided into two
classes, which shall be as nearly equal in number as possible. The number of
directors of the Corporation and the number of directors in each class of
directors shall be fixed only by resolution of the board of directors of the
Corporation from time to time. The initial term of office of the first such
class of directors shall expire at the annual meeting of stockholders in 2005,
and the initial term of office of the second such class of directors shall
expire at the annual meeting of stockholders in 2006, with each such class of
directors to hold office until their successors have been duly elected and
qualified. At each annual meeting of stockholders, directors elected to succeed
the directors whose terms expire at such annual meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders in the second
year following the year of their election and until their successors have been
duly elected and qualified. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes in such manner as the board
of directors of the Corporation shall determine, but no decrease in the number
of directors may shorten the term of any incumbent director.
No director who is part of any such class of directors may be removed
except both for cause and with the affirmative vote of the holders of not less
than 66-2/3% of the voting power of all outstanding shares of stock of the
Corporation entitled to vote generally in the election of directors, considered
for this purpose as a single class.
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors or from any other cause (other than
vacancies and newly created directorships which the holders of any class or
classes of stock or series thereof are expressly entitled by this Certificate of
Incorporation to fill) shall be filled by, and only by, a majority of the
directors then in office, although less than a quorum, or by the sole remaining
director. Any director appointed to fill a vacancy or a newly created
directorship shall hold office until the next election of the class of directors
of the director which such director replaced or the class of directors to which
such director was appointed, and until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Notwithstanding the foregoing, in the event that the holders of any
class or series of Preferred Stock of the Corporation shall be entitled, voting
separately as a class, to elect any directors of the Corporation, then the
number of directors that may be elected by such holders voting separately as a
class shall be in addition to the number otherwise fixed pursuant to resolution
of the board of directors of the Corporation. Except as otherwise provided in
the terms of such class or series, (i) the terms of the directors elected by
such holders voting separately as a class shall expire at the annual meeting of
stockholders next succeeding their election without regard to the classification
of other directors and (ii) any director or directors elected by such holders
voting separately as a class may be removed, with or without cause, by the
holders of a majority of the voting power of all outstanding shares of stock of
the Corporation entitled to vote separately as a class in an election of such
directors.
[TO BE DELETED IF PROPOSAL #4 IS APPROVED: In all elections of
directors, each stockholder shall be entitled to as many votes as shall equal
the number of votes which (except for this provision) he would be entitled to
cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected, and he may cast all such
votes for a single director or may distribute them among the number to be voted
for, or to any two or more of them, as he may see fit.]
EIGHTH: In taking any action, including action that may involve or
relate to a change or potential change in the control of the Corporation, a
director of the Corporation may consider, among other things, both the long-term
and short-term interests of the Corporation and its stockholders and the effects
that the Corporation's actions may have in the short term or long term upon any
one or more of the following matters:
(i) the prospects for potential growth, development,
productivity and profitability of the Corporation;
(ii) the Corporation's current employees;
-5-
(iii) the Corporation's employees and other beneficiaries
receiving or entitled to receive retirement, welfare or similar
benefits from or pursuant to any plan sponsored, or agreement entered
into, by the Corporation;
(iv) the Corporation's customers and creditors;
(v) the ability of the Corporation to provide, as a going
concern, goods, services, employment opportunities and employment
benefits and otherwise to contribute to the communities in which it
does business; and
(vi) such other additional factors as a director may consider
appropriate in such circumstances.
Nothing in this Article EIGHTH shall create any duty owed by any
director of the Corporation to any person or entity to consider, or afford any
particular weight to, any of the foregoing matters or to limit his or her
consideration to the foregoing matters. No such employee, former employee,
beneficiary, customer, creditor or community or member thereof shall have any
right against any director of the Corporation or the Corporation under this
Article EIGHTH.
NINTH: No action of stockholders of the Corporation required or
permitted to be taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting of stockholders, without prior notice
and without a vote, and the power of stockholders of the Corporation to consent
in writing to the taking of any action without a meeting is specifically denied.
Notwithstanding this Article NINTH, the holders of any series of Preferred Stock
of the Corporation shall be entitled to take action by written consent to such
extent, if any, as may be provided in the provisions of such series.
TENTH. No provision of Article SEVENTH, EIGHTH, NINTH or ELEVENTH or of
this Article TENTH shall be amended, modified or repealed, and no provision
inconsistent with any such provision shall become part of this Certificate of
Incorporation, unless such matter is approved by the affirmative vote of the
holders of not less than 80% of the voting power of all outstanding shares of
Common Stock of the Corporation and all other outstanding shares of stock of the
Corporation entitled to vote on such matter, with such outstanding shares of
Common Stock and other stock considered for this purpose as a single class. Any
vote of stockholders required by this Article TENTH shall be in addition to any
other vote of the stockholders that may be required by law, this Certificate of
Incorporation, the by-laws of the Corporation, any agreement with a national
securities exchange or otherwise.
ELEVENTH: Section 1. A director of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that an exemption from such
liability or limitation thereof is not permitted under the Delaware General
Corporation Law as currently in effect or as the same may hereafter be amended.
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Section 2. The Corporation shall, to the fullest extent from time to
time permitted by law, indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that the person is or was or has agreed to become a director
or officer of the Corporation, or is or was serving or has agreed at the request
of the Corporation to serve as a director, officer, partner, manager, trustee or
in any other capacity for another corporation, partnership, joint venture,
limited liability company, trust, employee benefit plan or other enterprise, or
by reason of any action alleged to have been taken or omitted in such capacity,
and may indemnify any person who was or is a party or is threatened to be made a
party to such an action, suit or proceeding by reason of the fact that he or she
is or was or has agreed to become an employee or agent of the Corporation, or is
or was serving or has agreed to serve at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, limited
liability company, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person or on his or her
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
The right to be indemnified hereunder shall include, without
limitation, the right of a director or officer to be paid expenses in advance of
the final disposition of any proceedings, upon receipt of an undertaking to
repay such amount, unless it shall ultimately be determined that he or she is
entitled to be indemnified hereunder.
A person entitled to indemnification hereunder shall also be paid
reasonable costs, expenses and attorneys' fees in connection with the
enforcement of rights to the indemnification granted hereunder.
The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled.
The Board of Directors may take such action as it deems necessary or
desirable to carry out these indemnification provisions, including without
limitation adopting procedures for determining and enforcing the rights
guaranteed hereunder, and purchasing insurance policies; and the Board of
Directors is expressly empowered to adopt, approve and amend from time to time
such By-Laws, resolutions, policies and contracts implementing, interpreting and
conditioning such provisions or adopting such further and additional
indemnification arrangements as may be permitted by law.
-7-
Section 3. Neither the amendment, alternation or repeal of this Article
Eleventh, nor the adoption of any provision of this Certificate of Incorporation
or of the By-Laws of the Corporation that is inconsistent with this Article,
shall adversely affect any right or protection of a director of the Corporation
existing at the time of such amendment, alteration, repeal or adoption with
respect to acts or omissions occurring prior to such amendment, alteration,
repeal or adoption.
IN WITNESS WHEREOF, I have signed this certificate of incorporation
this ___ day of _________, 2004.
_________________________
[Name]
[Title]
-8-
ANNEX C
BY-LAWS
OF
INTERMAGNETICS, INC.
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as may be designated by the Board of Directors,
for the purpose of electing directors and for the transaction of such other
business as may be properly brought before the meeting. The Board of Directors
may determine that an annual meeting shall not be held at any place, but shall
instead be held solely by means of remote communication.
SECTION 2. Special Meetings. Except as otherwise provided in the Certificate of
Incorporation, a special meeting of stockholders of the Corporation may be
called at any time by the Board of Directors. Any special meeting of
stockholders shall be held on such date, at such time and at such place within
or without the State of Delaware as the Board of Directors shall designate. The
Board of Directors may determine that any special meeting of stockholders shall
not be held at any special place, but shall instead be held solely by means of
remote communication. Except as provided in Section 11 of this Article I, at a
special meeting of stockholders, no business shall be transacted and no
corporate action shall be taken other than that stated in the notice of the
meeting.
SECTION 3. Notice of Meetings. Except as otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws, a written notice of each
meeting of the stockholders shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder of the
Corporation entitled to vote at such meeting at the stockholder's address as it
appears on the records of the Corporation or by a form of electronic
transmission to which the stockholder has consented. The notice shall state the
place, date and hour of the meeting or the means of remote communications, if
any, by which stockholders and proxy holders may be deemed to be present in
person and may vote at such meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of stockholders, the holders of a majority in
number of the total outstanding shares of stock of the Corporation entitled to
vote at such meeting, present in person or represented by proxy, shall
constitute a quorum of the stockholders for all purposes, unless the
representation of a different number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum.
Notwithstanding the previous sentence, at any meeting of stockholders at which
the holders of any class of stock of the Corporation shall be entitled to vote
separately as a class, the holders of a majority in number of the total
outstanding shares of such class, present in person or represented by proxy,
shall constitute a quorum for purposes of such class vote unless the
representation of a different number of shares of such class shall be required
by law, by the Certificate of Incorporation or by these By-Laws.
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present in
person or represented at any meeting of stockholders, the chairman of the
meeting may adjourn such meeting from time to time. When a meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and the place, if any, thereof, or the means of remote communications,
if any, by which stockholders and proxy holders may be deemed to be present in
person and may vote at such adjourned meeting, are announced at the meeting at
which the adjournment is taken or are publicly announced or disclosed. At the
adjourned meeting the stockholders or the holders of any class of stock entitled
to vote separately as a class, as the case may be, may transact any business
which might have been transacted by them at the original meeting.
The Board of Directors may postpone any meeting of stockholders or cancel any
special meeting of stockholders by public announcement or disclosure prior to
the time scheduled for the meeting.
SECTION 6. Organization. The Chief Executive Officer or, in the absence of the
Chief Executive Officer, the Chairman of the Board shall call all meetings of
the stockholders to order, and shall act as chairman of such meetings. In the
absence of the Chief Executive Officer and the chairman of the Board, the
members of the Board of Directors who are present shall elect a chairman of the
meeting.
The Secretary of the Corporation shall act as secretary of all meetings of the
stockholders; and in the absence of the Secretary, the chairman of the meeting
may appoint any person to act as secretary of the meeting. It shall be the duty
of the Secretary of the Corporation to prepare and make, at least ten days
before every meeting of stockholders, a complete list of stockholders entitled
to vote at such meeting, arranged in alphabetical order and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder.
SECTION 7. Voting. Except as otherwise provided by law or by the Certificate of
Incorporation, each stockholder shall be entitled to one vote for each share of
the stock of the Corporation registered in the name of such stockholder upon the
books of the Corporation. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. When directed by the
presiding officer or upon the demand of any stockholder, the vote upon any
matter before a meeting of stockholders shall be by ballot. Subject to the
rights of the holders of any series of preferred stock of the Corporation,
directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the stockholders entitled to vote in the election. Except as
otherwise provided by law or by the Certificate of Incorporation, whenever any
corporate action, other than the election of directors, is to be taken at a
meeting of stockholders, it shall be authorized by the affirmative vote of a
majority of the shares present in person or represented by proxy and entitled to
vote thereon.
-2-
Shares of the stock of the Corporation belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
SECTION 8. Voting Procedures and Inspectors. The Corporation shall, in advance
of any meeting of stockholders, appoint one or more inspectors of election to
act at the meeting and make a written report thereof. Each inspector, before
entering upon the discharge of the duties of inspector, shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality and
according to the best of such person's ability. The inspectors shall ascertain
the number of shares outstanding and the voting power of each; determine the
shares represented at the meeting and the validity of proxies and ballots; count
all votes and ballots; determine and retain for a reasonable period a record of
the disposition of any challenges made to any determination by them; and certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballots, proxies or votes, nor any
revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls.
SECTION 9. Consent of Stockholders in Lieu of Meeting. Any action required or
permitted to be taken by the holders of the Common Stock of the Corporation must
be effected at an annual or special meeting of such stockholders and may not be
effected by any consent in writing. Unless otherwise provided in the Certificate
of Incorporation, any action required to be taken or which may be taken at any
meeting of holders of any other class of stock of the Corporation, or a series
thereof, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing (which may be a telegram, cablegram or other
electronic transmission), setting forth the action so taken, shall be dated and
shall be signed by the holders of the outstanding stock of such class, or the
relevant series thereof, having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. To be written, signed
and dated for the purpose of these By-Laws, a telegram, cablegram or other
electronic transmission shall set forth or be delivered with information from
which the Corporation can determine (i) that it was transmitted by a stockholder
or proxy holder or a person authorized to act for a stockholder or proxy holder,
and (ii) the date on which it was transmitted, such date being deemed the date
on which the consent was signed. Prompt notice of the taking of any corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
SECTION 10. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
as the case may be, the Board of Directors shall fix, in advance, a record date,
which shall not be (i) more than sixty (60) nor less than ten (10) days before
the date of such meeting, or (ii) in the case of corporate action to be taken by
consent in writing without a meeting, not more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, or (iii) more than sixty (60) days prior to any other action.
-3-
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held; and the record date for determining stockholders
for any other purpose (except corporate action to be taken by consent in
writing) shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
If a holder of record of any class of stock of the Corporation, or a series
thereof, the holders of which may act by a consent in writing, wishes to have
those stockholders authorize or take corporate action by written consent, such
stockholder shall, by written notice to the Secretary of the Corporation,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within ten (10) days after the date on which
such a request is received, adopt a resolution fixing the record date. If no
record date is fixed by the Board within such ten (10) day period, the record
date for determining stockholders entitled to consent to corporate action, when
no prior action by the Board of Directors is required by applicable law, shall
be the first date on which a signed consent setting forth the action taken or
proposed to be taken is delivered to the Corporation at its registered office in
the State of Delaware or to its principal place of business to the attention of
the Secretary of the Corporation. Delivery made to the registered office of the
Corporation for this purpose shall be by hand or by certified or registered mail
with return receipt requested. If no record date is so fixed by the Board of
Directors and prior action by the Board of Directors is required by applicable
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the date on which the Board of Directors adopts the resolution taking such
prior action.
SECTION 11. Advance Notice of Stockholder Nominees for Director and Other
Stockholder Proposals. The matters to be considered and brought before any
meeting of stockholders of the Corporation, including the nomination and
election of directors, shall be limited to only those matters that are brought
properly before the meeting in compliance with the procedures set forth in this
Section 11.
In order to be properly brought before any annual meeting of stockholders, a
matter must be (i) specified in the notice of annual meeting given by or at the
direction of the Board of Directors, (ii) otherwise brought before the annual
meeting by or at the direction of the Board of Directors or (iii) brought before
the annual meeting in the manner specified in this Section 11 by a stockholder
who holds of record stock of the Corporation entitled to vote at the annual
meeting on such matter (including any election of directors) or by a person who
holds such stock through a nominee or "street name" holder of record of such
stock and can demonstrate to the Corporation such indirect ownership of, and
such person's right to vote, such stock.
-4-
In addition to any other requirements under applicable law, the Certificate of
Incorporation and these By-Laws, persons nominated by stockholders for election
as directors of the Corporation and any other proposals by stockholders shall be
properly brought before an annual meeting of stockholders only if notice of any
such matter to be presented by a stockholder at such meeting (a "Stockholder
Notice") is delivered to the Secretary at the principal executive office of the
Corporation not less than ninety (90) nor more than one hundred and twenty (120)
days prior to the first anniversary date of the annual meeting for the preceding
year. If (and only if) an annual meeting of stockholders is not scheduled to be
held within a period that commences thirty (30) days before and ends thirty (30)
days after such an anniversary date (an annual meeting date outside such period
being referred to herein as an "Other Meeting Date"), the Stockholder Notice
shall be given in the manner provided in these By-Laws by the later of (i) the
close of business on the ninetieth (90th) day prior to such Other Meeting Date
or (ii) the close of business on the tenth (10th) day following the date on
which such Other Meeting Date is first publicly announced or disclosed by the
Corporation.
Any stockholder who wishes to nominate a person for election as a director of
the Corporation at an annual meeting of stockholders shall deliver, as part of
the Stockholder Notice, a statement in writing setting forth the name of the
person to be nominated, the number and class of all shares of stock of the
Corporation the person owns of record and beneficially, as reported to the
stockholder by the person, the information regarding the person required to be
included in a proxy statement, by the rules and regulations of the Securities
and Exchange Commission, for nominees for election as directors, the person's
signed consent to serve as a director of the Corporation if elected, the
stockholder's name and address, the number and class of all shares of stock of
the Corporation the stockholder owns of record and beneficially and, in the case
of a person who holds the stock through a nominee or "street name" holder of
record, evidence establishing the person's indirect ownership of the stock and
right to vote the stock for the election of directors at the meeting and a
representation that the stockholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice.
Any stockholder who gives a Stockholder Notice of any matter (other than a
nomination for director) proposed to be brought before an annual meeting of
stockholders shall deliver, as part of the Stockholder Notice, the text of the
proposal to be presented and a brief written statement of the reasons why the
stockholder favors the proposal and setting forth the stockholder's name and
address, the number and class of all shares of stock of the Corporation the
stockholder owns of record and beneficially, any material interest of such
stockholder in the matter proposed (other than as a stockholder), if applicable
and, in the case of a person who holds stock through a nominee or "street name"
holder of record, evidence establishing the person's indirect ownership of the
stock and right to vote the stock on the matter proposed at the annual meeting.
As used in these By-Laws, shares "beneficially owned" shall mean all shares
which a person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934. If a stockholder is entitled to vote
only for a specific class or category of directors at an annual or special
meeting of stockholders, the stockholder's right to nominate a person for
election as a director at the meeting shall be limited to such class or category
of directors.
-5-
Notwithstanding any provision of this Section 11 to the contrary, in the event
that the number of directors to be elected to the Board of Directors of the
Corporation at the next annual meeting of stockholders is increased by virtue of
an increase in the size of the Board of Directors and either all of the nominees
for director at the next annual meeting of stockholders or the size of the
increased Board of Directors is not publicly announced or disclosed by the
Corporation at least one hundred (100) days prior to the first anniversary of
the preceding year's annual meeting, a Stockholder Notice shall also be
considered timely hereunder, but only with respect to nominees to stand for
election at the next annual meeting as the result of any new positions created
by such increase, if it is delivered to the Secretary at the principal place of
business of the Corporation not later than the close of business on the tenth
(10th) day following the first day on which all such nominees or the size of the
increased Board of Directors shall have been publicly announced or disclosed by
the Corporation.
Except as provided in the immediately following sentence, no matter shall be
properly brought before a special meeting of stockholders unless the matter
shall have been brought before the meeting pursuant to the Corporation's notice
of such meeting. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing a director to the Board of Directors,
any stockholder entitled to vote for the election of such director at such
meeting may nominate a person for election to such position as is specified in
the notice of such meeting, but only if the Stockholder Notice required by this
Section hereof shall be delivered to the Secretary of the Corporation at the
principal place of business of the Corporation not later than the close of
business on the tenth (10th) day following the first day on which the date of
the special meeting and either the names of all nominees proposed by the Board
of Directors to be elected at such meeting or the number of directors to be
elected shall have been publicly announced or disclosed.
For purposes of this Section 11, a matter shall be deemed to have been "publicly
announced or disclosed" if the matter is disclosed in a press release reported
by the Dow Jones News Service, the Associated Press or a comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission.
In no event shall the adjournment of an annual meeting or a special meeting of
stockholders, or any announcement thereof, commence a new period for the giving
of notice as provided in this Section 11. This Section shall not apply to (i)
any stockholder proposal made pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, or (ii) any nomination of a director in an election in
which only the holders of a particular class of stock of the Corporation (the
holders of which may vote by written consent under the Certificate of
Incorporation), or a series thereof, are entitled to vote (unless otherwise
provided in the terms of such stock).
The chairman of any meeting of stockholders, in addition to making any other
determinations that may be appropriate to the conduct of the meeting, shall have
the power and duty to determine whether notice of nominees and other matters
proposed to be brought before a meeting have been duly given in the manner
provided in this Section 11 and, if not so given, shall direct and declare at
the meeting that such nominees and other matters shall not be considered.
-6-
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors,
none of whom need be stockholders of the Corporation. The number of Directors
constituting the Board of Directors shall be fixed from time to time by
resolution passed by a majority of the Board of Directors. The directors shall,
except as hereinafter otherwise provided for filling vacancies, be elected at
the annual meeting of stockholders, and shall hold office until their respective
successors are elected and qualified or until their earlier resignation or
removal.
SECTION 2. Removal, Vacancies and Additional Directors. No director may be
removed except both for cause and with the affirmative vote of the holders of
not less than 66-2/3% of the voting power of all outstanding shares of stock of
the Corporation entitled to vote generally in the election of directors,
considered for this purpose as a single class. Notwithstanding the previous
sentence, whenever any director shall have been elected by the holders of any
class of stock of the Corporation voting separately as a class under the
provisions of the Certificate of Incorporation, such director may be removed and
the vacancy filled only by the holders of 66-2/3% of the voting power of that
class of stock voting separately as a class. Except as provided in the
Certificate of Incorporation, vacancies caused by any such removal or any
vacancy caused by the death or resignation of any director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of directors, may be filled by, and only by, the affirmative
vote of a majority of the directors then in office, although less than a quorum,
and any director so elected to fill any such vacancy or newly created
directorship shall hold office until the director's successor is elected and
qualified or until the director's earlier resignation or removal.
When one or more directors shall resign effective at a future date, a majority
of the directors then in office, including those who have so resigned, alone
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective, and each
director so chosen shall hold office as herein provided in connection with the
filling of other vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its meetings in
such place or places in the State of Delaware or outside the State of Delaware
as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors shall be
held at such times and places as the Board from time to time by resolution shall
determine. No notice shall be required for any regular meeting of the Board of
Directors; but a copy of every resolution fixing or changing the time or place
of regular meetings shall be sent to every director by mail at least five (5)
days, or by telecopy, telegram, cablegram or other electronic transmission or
overnight courier at least two (2) days, before the first meeting held in
pursuance thereof.
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SECTION 5. Special Meetings. Special meetings of the Board of Directors shall be
held whenever called by direction of the Chairman of the Board, the Chief
Executive Officer or by any two of the directors then in office.
Notice of the day, hour and place of holding of each special meeting shall be
given by mailing the same at least five (5) days before the meeting or by
causing the same to be transmitted by telephone, telecopy, telegram, cablegram
or other electronic transmission or overnight courier at least two (2) days
before the meeting to each director. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at any special meeting.
SECTION 6. Quorum. Subject to the provisions of Section 2 of this Article II, a
majority of the members of the Board of Directors in office (but, unless the
Board shall consist solely of one director, in no case less than one-third of
the total number of directors nor less than two directors) shall constitute a
quorum for the transaction of business and a vote of a majority of the directors
present at any meeting of the Board of Directors at which a quorum is present
shall be an act of the Board of Directors. If at any meeting of the Board there
is less than a quorum present, a majority of those present may adjourn the
meeting from time to time.
SECTION 7. Organization. The Chairman of the Board or, in the absence of the
Chairman of the Board, the Chief Executive Officer shall preside at all meetings
of the Board of Directors. In the absence of the Chairman of the Board and the
Chief Executive Officer, a Chairman shall be elected from among the Directors
present. The Secretary of the Corporation shall act as secretary of all meetings
of the directors. In the absence of the Secretary of the Corporation, the
Chairman may appoint any person to act as secretary of the meeting.
SECTION 8. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in a resolution of the Board, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and the affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have power or authority in reference to (i)
approving or adopting, or recommending to the stockholders, any action or matter
expressly required by law to be submitted to stockholders for approval, or (ii)
adopting, amending or repealing these By-Laws.
Unless otherwise provided in the Certificate of Incorporation, in these By-Laws
or in the resolution of the Board of Directors designating a committee, a
committee may create one or more subcommittees, each subcommittee to consist of
one or more members of the committee, and delegate to the subcommittee any or
all of the powers and authority of the committee.
SECTION 9. Conference Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation or by these By-Laws, the members of the Board of
Directors or any committee designated by the Board, may participate in a meeting
of the Board or such committee, as the case may be, by means of conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
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SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or by these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing or by electronic transmission, and the writing or writings or the
electronic transmission or transmissions are filed with the minutes of
proceedings of the Board or committee, as the case may be.
SECTION 11. Chairman and Vice Chairmen of the Board. The Board of Directors may
elect a Chairman of the Board from among its members. The Chairman of the Board
shall preside at all meetings of the Board of Directors and shall have all
powers and shall perform all duties incident to the office of Chairman of the
Board which may be required by law and shall have such other powers and perform
such other duties as may from time to time be assigned by these By-Laws or by
the Board of Directors. The Board of Directors also may elect one or more
Vice-Chairmen to act in the place of the Chairman upon his or her absence or
inability to act.
ARTICLE III
OFFICERS
SECTION 1. Officers. The officers of the Corporation may include a Chairman of
the Board, one or more Vice Chairmen of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such additional officers, if any, as
shall be elected by the Board of Directors. Each officer shall hold office until
his or her successor is elected and qualified or until his or her earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. Officers may, but need not, be directors. Unless the
Certificate of Incorporation otherwise provides, any number of offices may be
held by the same person. All officers, agents and employees shall be subject to
removal, with or without cause, at any time by the Board of Directors. The
removal of an officer without cause shall be without prejudice to his or her
contract rights, if any. The election or appointment of an officer shall not of
itself create contract rights.
In addition to the powers and duties of the officers of the Corporation as set
forth in these By-Laws, the officers shall have such authority and shall perform
such duties as from time to time may be determined by the Board of Directors.
SECTION 2. Chief Executive Officer. The Board of Directors shall designate one
of the officers of the Corporation to be the Chief Executive Officer of the
Corporation. Subject to the control of the Board of Directors, the Chief
Executive Officer shall have general charge and control of all the business and
affairs of the Corporation and shall have all powers and shall perform all
duties incident to the position of Chief Executive Officer which may be required
by law and such other duties as are required by the Board of Directors. The
Chief Executive Officer shall make reports to the Board of Directors and to the
stockholders, and shall see that all orders and resolutions of the Board of
Directors and of any committee thereof are carried into effect. The Chief
Executive Officer shall preside at all meetings of the stockholders and shall
have such other powers and perform such other duties as may from time to time be
assigned by these By-Laws or by resolution of the Board of Directors.
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SECTION 3. Chief Operating Officer. The Board of Directors may designate one of
the officers of the Corporation to be the Chief Operating Officer of the
Corporation. Subject to the control of the Board of Directors and the Chief
Executive Officer, the Chief Operating Officer shall have general charge and
control of all the operations of the Corporation and shall have all powers and
shall perform all duties incident to the position of Chief Operating Officer.
The Chief Operating Officer shall act in a general executive capacity and assist
the Chief Executive Officer in the administration and operation of the
Corporation's business and general supervision of its policies and affairs. The
Chief Operating Officer shall have such other powers and perform such other
duties as may from time to time be assigned by these By-Laws or by the Board of
Directors or the Chief Executive Officer.
SECTION 4. Chief Financial Officer. The Board of Directors may designate one of
the officers of the Corporation to be the Chief Financial Officer of the
Corporation. Subject to the control of the Board of Directors and the Chief
Executive Officer, the Chief Financial Officer shall have general charge and
control of the financial affairs of the Corporation and shall have all powers
and shall perform all duties incident to the position of Chief Financial
Officer. The Chief Financial Officer shall act in a general executive capacity
and assist the Chief Executive Officer in the administration and operation of
the Corporation's financial affairs. The Chief Financial Officer shall have such
other powers and perform such other duties as may from time to time be assigned
by these By-Laws or by the Board of Directors or the Chief Executive Officer.
SECTION 5. The President and Vice Presidents. The Board of Directors may elect a
President and one or more Vice Presidents of the Corporation. Subject to the
control of the Board of Directors and the Chief Executive Officer, the President
and each Vice President shall have all powers and shall perform all duties
incident to their respective offices which may be required by law and shall have
such other powers and perform such other duties as may from time to time be
assigned by these By-Laws or by the Board of Directors or the Chief Executive
Officer.
SECTION 6. The Secretary. The Board of Directors shall elect a Secretary of the
Corporation. The Secretary shall keep the minutes of all meetings of the Board
of Directors and the minutes of all meetings of the stockholders in books
provided for that purpose. The Secretary shall attend to the giving or serving
of all notices of the Corporation; shall have custody of the corporate seal of
the Corporation and shall affix the same to such documents and other papers as
the Board of Directors or the Chief Executive Officer shall authorize and
direct; shall have charge of the stock certificate books, transfer books and
stock ledgers and such other books and papers as the Board of Directors or the
Chief Executive Officer shall direct, all of which shall at all reasonable times
be open to the examination of any director, upon application, at the principal
place of business of the Corporation during normal business hours; and whenever
required by the Board of Directors or Chief Executive Officer shall render
statements of such accounts. The Secretary shall have all powers and shall
perform all duties incident to the office of Secretary and shall also have such
other powers and shall perform such other duties as may from time to time be
assigned by these By-Laws or by the Board of Directors or the Chief Executive
Officer.
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SECTION 7. The Treasurer. The Board of Directors shall elect a Treasurer of the
Corporation who shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times during normal
business hours be open to inspection by any director. The Treasurer shall
deposit, or cause to be deposited, all money and other valuables in the name and
to the credit of the Corporation with such depositories as may be designated by
the Board of Directors. The Treasurer shall disburse, or cause to be disbursed,
the funds of the Corporation as may be ordered by the Board of Directors, the
Chief Executive Officer or the Chief Financial Officer. The Treasurer shall
render to the Board of Directors, to the Chief Executive Officer or to the Chief
Financial Officer, whenever requested, an account of all of his or her
transactions as treasurer and of the financial condition of the Corporation, and
the Treasurer shall have all powers and shall perform all duties incident to the
position of Treasurer which may be required by law and shall have such other
powers and perform such other duties as may from time to time be assigned by
these By-Laws or by the Board of Directors, the Chief Executive Officer or the
Chief Financial Officer.
SECTION 8. Additional Officers. The Board of Directors may from time to time
elect such other officers, including a Controller and one or more Assistant
Secretaries, Assistant Treasurers and Assistant Controllers, as the Board may
deem advisable and such officers shall have such authority and shall perform
such duties as may from time to time be assigned to them by the Board of
Directors or the Chief Executive Officer.
The Board of Directors, the Chief Executive Officer or the Secretary of the
Corporation may from time to time delegate to any Assistant Secretary or
Assistant Secretaries any of the powers or duties assigned to the Secretary of
the Corporation; and the Board of Directors, the Chief Executive Officer or the
Chief Financial Officer may similarly delegate to the Treasurer, the Controller
or any Assistant Treasurer or Assistant Controller any of the powers or duties
assigned to the Chief Financial Officer.
SECTION 9. Giving of Bond by Officers. All officers of the Corporation, if
required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such amounts and
with such conditions and security as the Board shall require.
SECTION 10. Voting Upon Securities. Unless otherwise ordered by the Board of
Directors, each of the Chairman of the Board, any Vice Chairman of the Board,
the President, any Vice President, the Secretary, the Treasurer, the Controller,
any Assistant Secretary, any Assistant Treasurer and any Assistant Controller
shall have full power and authority on behalf of the Corporation to give a
consent in writing or to attend and to act and to vote, or in the name of the
Corporation to execute proxies to vote, at any meeting of holders of interests
in any corporation, partnership, joint venture, limited liability company,
trust, employee benefit plan or other enterprise in which the Corporation may
hold an interest, and at any such meeting shall possess and may exercise, in
person or by proxy, any and all rights, powers and privileges incident to the
ownership of such interests. The Board of Directors may from time to time, by
resolution, confer like powers upon any other person or persons.
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SECTION 11. Compensation of Officers. The officers of the Corporation shall be
entitled to receive such compensation for their services as shall from time to
time be determined by the Board of Directors.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Nature of Indemnity. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that the person is or was or has agreed
to become a director or officer of the Corporation, or is or was serving or has
agreed at the request of the Corporation to serve as a director, officer,
partner, manager, trustee or in any other capacity for another corporation,
partnership, joint venture, limited liability company, trust, employee benefit
plan or other enterprise, or by reason of any action alleged to have been taken
or omitted in such capacity, and may indemnify any person who was or is a party
or is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he or she is or was or has agreed to become an employee
or agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, limited liability company, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person or on his or her behalf in connection with such action, suit or
proceeding and any appeal therefrom, if the person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful;
except that in the case of an action or suit by or in the right of the
Corporation to procure a judgment in its favor (1) such indemnification shall be
limited to expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, and (2) no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
SECTION 2. Successful Defense. To the extent that a present or former director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
1 of this Article IV or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
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SECTION 3. Determination that Indemnification is Proper. Any indemnification of
a present or former director or officer of the Corporation under Section 1 of
this Article IV (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the person is not proper
in the circumstances because he or she has not met the applicable standard of
conduct set forth in Section 1. Any indemnification of a present or former
employee or agent of the Corporation under Section 1 (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made with respect to a person who is a director or officer at the time
of the determination (1) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
SECTION 4. Advance Payment of Expenses. Unless the Board of Directors otherwise
determines in a specific case, expenses (including attorneys' fees) incurred by
a person who is a director or officer at the time in defending a civil or
criminal administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article IV. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the Corporation deems appropriate. The Board of
Directors may authorize the Corporation's legal counsel to represent a present
or former director, officer, employee or agent in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
SECTION 5. Survival; Preservation of Other Rights. The foregoing indemnification
provisions shall be deemed to be a contract between the Corporation and each
director, officer, employee and agent who serves in any such capacity at any
time while these provisions as well as the relevant provisions of the Delaware
General Corporation Law are in effect and any repeal or modification thereof
shall not affect any right or obligation then existing with respect to any state
of facts then or previously existing or any action, suit, or proceeding
previously or thereafter brought or threatened based in whole or in part upon
any such state of facts. Such a contract right may not be modified retroactively
without the consent of such director, officer, employee or agent.
The rights to indemnification and advancement of expenses provided by this
Article IV shall not be deemed exclusive of any other rights to which a person
seeking indemnification or advancement of expenses may be entitled under any
By-Law, agreement, insurance policy, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person. The Corporation may enter into an agreement with any of its directors,
officers, employees or agents providing for indemnification and advancement of
expenses, including attorneys fees, that may change, enhance, qualify or limit
any right to indemnification or advancement of expenses created by this Article
IV.
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SECTION 6. Severability. If this Article IV or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each present or former director or
officer and may indemnify each employee or agent of the Corporation as to costs,
charges and expenses (including attorneys' fees), judgment, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
SECTION 7. Subrogation. In the event of payment of indemnification to a person
described in Section 1 of this Article IV, the Corporation shall be subrogated
to the extent of such payment to any right of recovery such person may have and
such person, as a condition of receiving indemnification from the Corporation,
shall execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
SECTION 8. No Duplication of Payments. The Corporation shall not be liable under
this Article IV to make any payment in connection with any claim made against a
person described in Section 1 of this Article IV to the extent such person has
otherwise received payment (under any insurance policy, By-Law, agreement or
otherwise) of the amounts otherwise payable as indemnity hereunder.
ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. Stock Certificates. The shares of stock of the Corporation shall be
represented by certificates unless the Board of Directors provides, by
resolution, that some or all shares of any or all classes or series of stock
shall be uncertificated shares. Certificates for shares of stock of the
Corporation shall be in such form, not inconsistent with the Certificate of
Incorporation, as shall be approved by the Board of Directors. All certificates
shall be signed by the Chairman of the Board, the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and shall not be valid unless so signed. Any such signature may be a
facsimile.
In case any officer or officers who shall have signed any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation, removal or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
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All certificates for shares of stock shall be consecutively numbered as the same
are issued. The name of the person owning the shares represented thereby with
the number of such shares and the date of issue thereof shall be entered on the
books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the Corporation
for transfer shall be canceled, and no new certificates shall be issued until
former certificates for the same number of shares have been surrendered and
canceled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person owning a
certificate for shares of stock of the Corporation alleges that it has been
lost, stolen or destroyed, he or she shall file in the office of the Corporation
an affidavit setting forth, to the best of his or her knowledge and belief, the
time, place and circumstances of the loss, theft or destruction, and, if
required by the Corporation, a bond of indemnity or other indemnification
sufficient, in the opinion of the Corporation, to indemnify the Corporation and
its agents against any claim that may be made against it or them on account of
the alleged loss, theft or destruction of any such certificate or the issuance
of a new certificate in replacement therefor. Thereupon the Corporation may
cause to be issued to such person a new certificate in replacement for the
certificate alleged to have been lost, stolen or destroyed. Upon the stub of
every new certificate so issued shall be noted the fact of such issue and the
number, date and the name of the registered owner of the lost, stolen or
destroyed certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof, in person or
by his attorney duly authorized in writing, upon surrender and cancellation of
certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article V.
SECTION 4. Regulations. The Board of Directors shall have power and authority to
make such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation, any dividends
declared upon the stock of the Corporation shall be payable on such date or
dates as the Board of Directors shall determine. If the date fixed for the
payment of any dividend shall in any year fall upon a legal holiday, then the
dividend payable on such date shall be paid on the next day not a legal holiday.
SECTION 6. Corporate Seal. The Board of Directors shall provide a suitable seal,
containing the name of the Corporation, which seal shall be kept in the custody
of the Secretary. A duplicate of the seal may be kept and be used by the
Chairman of the Board, the President or any other officer of the Corporation
designated by the Board of Directors.
SECTION 7. Fiscal Year. The fiscal year of the Corporation shall be such fiscal
year as the Board of Directors from time to time by resolution shall determine.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and other persons as the Board of Directors from
time to time shall designate. Checks, drafts, bills of exchange, acceptances,
notes, obligations and orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation with a
duly authorized depository by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Secretary, the Controller, any Assistant
Controller and such other officers or persons, if any, as the Board of Directors
from time to time may designate.
SECTION 2. Loans. No loans and no renewals of any loans shall be contracted on
behalf of the Corporation except as authorized by the Board of Directors. When
authorized so to do, any officer or agent of the Corporation may effect loans
and advances for the Corporation from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. When authorized so to do, any
officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. Contracts. Except as otherwise provided by law or in these By-Laws or
as otherwise directed by the Board of Directors, the Chairman of the Board, any
Vice Chairman of the Board, the President, any Vice President or the Treasurer
shall be authorized to execute and deliver, in the name and on behalf of the
Corporation, all agreements, bonds, contracts, deeds, mortgages, security
agreements and other instruments, either for the Corporation's own account or in
a fiduciary or other capacity, and the seal of the Corporation, if appropriate,
shall be affixed thereto by any of such officers or the Secretary or an
Assistant Secretary. The Board of Directors, the Chairman of the Board, any Vice
Chairman, the President or any Vice President designated by the Board of
Directors may authorize any other officer, employee or agent to execute and
deliver, in the name and on behalf of the Corporation, agreements, bonds,
contracts, deeds, mortgages, security agreements and other instruments, either
for the Corporation's own account or in a fiduciary or other capacity, and, if
appropriate, to affix the seal of the Corporation thereto. The grant of such
authority by the Board or any such officer may be general or confined to
specific instances.
SECTION 4. Waivers of Notice. Whenever any notice whatever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws to any
person or persons, a waiver thereof in writing or by electronic transmission by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
SECTION 5. Offices Outside of Delaware. Except as otherwise required by the laws
of the State of Delaware, the Corporation may have an office or offices and keep
its books, documents and papers outside of the State of Delaware at such place
or places as from time to time may be determined by the Board of Directors or
the Chief Executive Officer.
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ARTICLE VII
AMENDMENTS
These By-Laws and any amendment thereof may be altered, amended or repealed, or
new By-Laws may be adopted, by the Board of Directors; but these By-Laws and any
amendment thereof may be altered, amended or repealed or new By-Laws may be
adopted by the holders of not less than 66-2/3% of the outstanding stock of the
Corporation entitled to vote at any annual meeting or at any special meeting,
provided, in the case of any special meeting, that notice of such proposed
alteration, amendment, repeal or adoption is included in the notice of the
meeting.
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ANNEX D
INTERMAGNETICS GENERAL CORPORATION
2000 STOCK OPTION AND STOCK AWARD PLAN
(as Amended and Restated as of November 16, 2004)
Section 1. Purpose
The Plan authorizes the Board to motivate and reward superior
performance by providing key Employees and Consultants of the Corporation and
its Subsidiaries, and Non-Employee Directors of the Corporation, who are in a
position to contribute materially to the long-term success of the Corporation,
with options and stock awards with respect to Common Stock of the Corporation.
The Corporation believes that this incentive program will cause those persons to
increase their interest in the Corporation's welfare, and aid in attracting and
retaining Employees, Directors and Consultants of outstanding ability.
Intermagnetics General Corporation, a New York corporation (the "Prior
Corporation"), adopted the Plan as of July 26, 2000. The Prior Corporation will
be reincorporated into a Delaware corporation, subject to stockholder approval
of the reincorporation. As a result of the reincorporation, the Corporation will
be the successor by merger to the Prior Corporation, and the Corporation will
maintain the Plan for the benefit of key Employees, Consultants and Non-Employee
Directors. As of the effective date of the reincorporation, each outstanding
Option and Stock Award of the Prior Corporation will be converted into an Option
or Stock Award, as applicable, with respect to an equal number of shares of
common stock of the Corporation, and upon the same terms and conditions, as the
original grant.
Section 2. Definitions
Unless the context clearly indicates otherwise, the following terms,
when used in this Plan, shall have the meanings set forth in this Section:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean the occurrence of any of the
following: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30% or more of the voting power of the then outstanding
securities of the Corporation; (ii) during any period of two consecutive
calendar years there is a change of 25% or more in the composition of the Board
of the Corporation in office at the beginning of the period except for changes
approved by at least two-thirds of the Directors then in office who were
Directors at the beginning of the period; (iii) the stockholders of the
Corporation approve a merger or consolidation of the Corporation with or into
another corporation (other than a Subsidiary or merger in which the Corporation
survives and its outstanding voting stock is not converted or its stockholders
have substantially the same proportionate interest in the voting stock of the
surviving corporation or its Parent as they did immediately prior to such
merger), the disposition of substantially all the assets of the Corporation, or
a liquidation or dissolution of the Corporation. So long as there has not been a
Change in Control within the meaning of clause (ii), the Board may adopt by
two-thirds vote of the "continuing directors" a resolution to the effect that an
event described in clauses (i) or (iii) shall not constitute a "Change in
Control." For purposes of this clause, "continuing directors" means those
members of the Board who either were directors at the beginning of any period of
two consecutive calendar years, or were elected by, or on the nomination or
recommendation of, at least two-thirds of the then existing "continuing
directors."
(c) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.
(d) "Committee" shall mean any Committee appointed by the Board to
administer the Plan, which may consist of two persons who are non-employee
directors (as defined in Rule 16b-3(b)(3) under the Exchange Act) and outside
directors (as defined in Section 162(m) of the Code).
(e) "Consultant" shall mean any consultant of the Corporation or its
Subsidiaries.
(f) "Control Person" shall mean any person who, as of the date of grant
of an Option, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent of the total combined voting power or value of
all classes of stock of the Corporation or of any Parent or Subsidiary.
(g) "Corporation" shall mean Intermagnetics General Corporation, a
Delaware corporation.
(h) "Director" shall mean any member of the Board.
(i) "Employee" shall mean any employee of the Corporation or its
Subsidiaries, including Directors who are otherwise employed by the Corporation.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934 as it
may be amended from time to time.
(k) "Fair Market Value" shall mean, for any day, the closing price of
the Stock on the consolidated market as reported in the Wall Street Journal or
such other publication selected by the Board, or, if no sales of Stock have
taken place on such date, the closing price of the Stock on the most recent date
on which selling prices were quoted, the determination to be made in the
discretion of the Board.
(l) "Grantee" shall mean a person granted an Option under the Plan.
(m) "ISO" shall mean an Option granted pursuant to the Plan to purchase
shares of the Stock and intended to qualify as an incentive stock option under
Section 422 of the Code, as now or hereafter constituted.
(n) "Non-Employee Director" shall mean a Director of the Corporation
who is not an Employee.
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(o) "NQSO" shall mean an Option granted pursuant to the Plan to
purchase shares of the Stock that is not an ISO.
(p) "Options" shall refer collectively to NQSOs and ISOs subject to the
Plan.
(q) "Parent" shall mean any parent corporation as defined in Section
424 of the Code.
(r) "Performance-Based Stock Awards" shall mean Stock Awards that are
subject to vesting or payment based on attainment of performance goals and such
other criteria as the Board determines, as described in Section 9(g) below.
(s) "Plan" shall mean this 2000 Stock Option Plan as set forth herein
and as amended from time to time.
(t) "Stock" shall mean shares of the Common Stock of the Corporation.
(u) "Stock Award" shall mean an award of restricted or unrestricted
Stock pursuant to Section 9 of the Plan.
(v) "Subsidiary" shall mean any subsidiary corporation as defined in
Section 424 of the Code.
Section 3. Shares of Stock Subject to the Plan
Subject to the provisions of Section 11, the Stock which may be issued
or transferred pursuant to Options and Stock Awards granted under the Plan shall
not exceed:
(a) 3,051,000 shares in the aggregate, which may be issued or
transferred pursuant to Options and Stock Awards, plus
(b) An additional 1,500,000 shares in the aggregate, which may be
issued or transferred only pursuant to Performance-Based Stock Awards granted on
or after November 16, 2004.
Stock issuable upon the exercise of any Option or grant of a Stock
Award may be authorized but unissued shares or reacquired shares of Stock. If
any unexercised Options or Stock Awards lapse, are forfeited or terminate for
any reason, the Stock covered thereby may again be granted under the Plan. If
any Performance-Based Stock Awards from the aggregate number described in
subsection (b) above lapse, are forfeited or terminate for any reason, the Stock
covered thereby may again be granted as Performance-Based Stock Awards under
subsection (b) above.
More than one Option or Stock Award may be granted to one person.
Subject to the provisions of Section 11, the maximum number of shares for which
an individual may receive grants under the Plan during any calendar year is
750,000 shares.
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Section 4. Administration of the Plan
The Plan shall be administered by the Board or (as described below) by
the Committee. To the extent the Board has designated a Committee to administer
the Plan, references herein to the "Board" shall be deemed to refer to such
Committee. Subject to the express provisions of the Plan, the Board shall have
the authority to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of stock
option agreements thereunder and to make all other determinations necessary or
advisable for the administration of the Plan and all decisions and
determinations of the Board shall be final, conclusive and binding on all
persons for all purposes. Any controversy or claim arising out of or related to
this Plan or the Options or Stock Awards granted thereunder shall be determined
unilaterally by, and at the sole discretion of, the Board. The Board's decisions
and determinations under the Plan need not be uniform and may be made
selectively among Grantees, whether or not such Grantees are similarly situated.
Section 5. Types of Options
Options granted under the Plan may be of two types: ISOs and NQSOs. The
Board shall have the authority and discretion to grant to an eligible Employee
either ISOs, NQSOs or both, but shall clearly designate the nature of each
Option at the time of grant. Consultants and Non-Employee Directors shall only
receive NQSOs.
Section 6. Grant of Options to Employees and Consultants
(a) Key Employees and Consultants of the Corporation and its
Subsidiaries shall be eligible to receive Options under the Plan.
(b) The exercise price per share of Stock subject to an Option granted
to an Employee or Consultant shall be determined by the Board, provided,
however, (i) that the exercise price of each share subject to an ISO shall be
not less than 100% of the Fair Market Value of a share of the Stock on the date
such ISO is granted, (ii) that such exercise price shall not be less than 110%
of such Fair Market Value for any ISO granted to a Control Person, and (iii)
that the exercise price of each share subject to an NQSO shall be not less than
85% of the Fair Market Value of a share of the Stock on the date such NQSO is
granted.
(c) The term of each Option granted to an Employee or Consultant shall
be determined by the Board, provided that no Option shall be exercisable more
than ten years from the date such Option is granted, and provided further that
no ISO granted to a Control Person shall be exercisable more than five years
from the date of Option grant.
(d) The Board shall determine and designate from time to time the
Employees and Consultants who are to be granted Options, the nature of each
Option granted and the number of shares of Stock subject to each such Option.
(e) Notwithstanding any other provisions hereof, the aggregate Fair
Market Value (determined at the time the ISO is granted) of the Stock with
respect to which ISOs are exercisable for the first time by any Employee during
any calendar year under all plans of the Corporation and any Parent or
Subsidiary corporation shall not exceed $100,000.
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(f) The Board, in its sole discretion, shall determine whether any
Option granted to an Employee or Consultant shall become exercisable in one or
more installments and specify the installment dates. The Board may also make
such other provisions, not inconsistent with the terms of this Plan, as it may
deem desirable, including such provisions as it may deem necessary to qualify
any ISO under the provisions of Section 422 of the Code. Notwithstanding any
determination by the Board regarding the exercise period of any Option granted
to an Employee or Consultant, all outstanding Options shall immediately become
exercisable upon a Change in Control of the Corporation.
(g) The Board may, at any time, grant new or additional Options to any
eligible Employee or Consultant who has received Options previously under this
Plan, or options under other plans, whether such prior Options or other options
are still outstanding, have been exercised in whole or in part, or have been
canceled. The exercise price of such new or additional Options may be
established by the Board, subject to Section 6(b) hereof, without regard to such
previously granted Options or other options. Notwithstanding anything in the
Plan to the contrary, however, the Board may not reprice Options, nor may the
Board amend the Plan to permit repricing of Options, unless the stockholders of
the Corporation provide prior approval for such repricing.
(h) Notwithstanding the foregoing, Options granted to persons who are
non-exempt employees under the Fair Labor Standards Act of 1938, as amended,
shall have an exercise price not less than 85% of the Fair Market Value of the
Company Stock on the date of grant, and may not be exercisable for at least six
months after the date of grant (except that such Options may become exercisable,
as determined by the Board, upon the Grantee's death, disability or retirement,
or upon a Change in Control or other circumstances permitted by applicable
regulations).
Section 7. Grants of Options to Non-Employee Directors
(a) Subject to any requirements of applicable law, the Board may make
grants of Options to Non-Employee Directors with such terms consistent with
Section 6 as the Board deems appropriate.
(b) The exercise price of each share of Stock subject to an Option
granted to a Non-Employee Director shall equal the Fair Market Value of a share
of Stock on the date such Option is granted. Payment of the exercise price for
the shares being purchased may be made (i) in cash, (ii) by the surrender of
shares of Stock (at then Fair Market Value) owned by the Non-Employee Director
or (iii) through a broker pursuant to procedures permitted by Regulation T of
the Federal Reserve Board. Shares used to pay the exercise price of an Option
shall have been held for the requisite period of time to avoid adverse
accounting consequences to the Corporation.
(c) Notwithstanding the exercise period of any Option granted to a
Non-Employee Director, all such outstanding Options shall immediately become
exercisable upon a Change in Control of the Corporation.
-5-
Section 8. Exercise of Options
(a) Upon the exercise of any Option, the Grantee shall pay the exercise
price for the shares being purchased in (i) cash, (ii) by surrender of shares of
Stock (at their Fair Market Value) owned by the Grantee, if permitted by such
stock option agreement, or (iii) through a broker pursuant to procedures
permitted by Regulation T of the Federal Reserve Board. Shares used to pay the
exercise price of an Option shall have been held for the requisite period of
time to avoid adverse accounting consequences to the Corporation.
(b) The number of shares which are issued pursuant to the exercise of
an Option shall be charged against the maximum limitation on shares set forth in
Section 3 hereof.
(c) Except as provided in Section 12, no Option granted to an Employee
or Consultant shall be exercised unless at the time of such exercise the Grantee
is then an Employee or Consultant.
(d) Except as provided in Section 12, no Option granted to a
Non-Employee Director shall be exercised unless at the time of such exercise the
Grantee is then a Non-Employee Director.
(e) Before the Company issues Stock to a Grantee pursuant to the
exercise of an NQSO or the grant or vesting of a Stock Award, the Corporation
shall have the right to require that the Grantee make such provision, or furnish
the Corporation such authorization, necessary or desirable so that the
Corporation may satisfy its obligation, under applicable tax laws, to withhold
for income or other taxes due upon or incident to such exercise, grant or
vesting. Grantees may elect (hereinafter a "Withholding Election") either:
(i) to have the Corporation withhold, from the Stock to be
issued pursuant to such exercise, grant or vesting, such number of such
shares of Stock which, or
(ii) to surrender to the Corporation such number of shares of
Stock already owned by the Grantee which,
(iii) at their Fair Market Value on the date as of which the
Option exercise or the grant or vesting of Stock Awards is taxable for
federal income tax purposes (the "Tax Date"), shall be sufficient to
satisfy the Corporation's withholding obligation with respect to the
Option exercise or the grant or vesting of Stock Awards.
Notwithstanding the foregoing, the amount of Shares that may be
withheld may not exceed the Corporation's minimum federal (including
FICA), state and local withholding tax obligation with respect to the
Option exercise or the grant or vesting of Stock Awards. A Withholding
Election may be made applicable with respect to a particular Option
exercise or the grant or vesting of particular Stock Awards, to all
previously granted Options and Stock Awards or to all Options or Stock
Awards to be granted in the future. A Withholding Election may be made
continuing until revoked by the Grantee.
The Board may adopt such rules, forms and procedures as it considers necessary
or desirable to implement this Section 8, which rules, forms and procedures
shall be binding upon all Grantees, and which shall be applied uniformly to all
Grantees similarly situated.
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Section 9. Stock Awards
The Board may issue or transfer shares of Stock to an Employee,
Non-Employee Director or Consultant under a Stock Award, upon such terms as the
Board deems appropriate. The following provisions are applicable to Stock
Awards:
(a) The Board shall determine the number of shares of Stock to be
issued or transferred pursuant to a Stock Award. Shares of Stock issued or
transferred pursuant to Stock Awards may be issued or transferred for
consideration or for no consideration, and subject to restrictions or no
restrictions, as determined by the Board. The Board may, but shall not be
required to, establish conditions under which restrictions on Stock Awards shall
lapse over a period of time or according to such other criteria as the Board
deems appropriate, including, without limitation, restrictions based upon the
achievement of specific performance goals. The period of time during which the
Stock Awards will remain subject to restrictions will be designated in the grant
instrument as the restriction period.
(b) If the Grantee ceases to be employed by, or provide service to, the
Company during a period designated in the grant instrument as the restriction
period, or if other specified conditions are not met, the Stock Award shall
terminate as to all shares covered by the grant as to which the restrictions
have not lapsed, and those shares of Stock must be immediately returned to the
Corporation. The Board may, however, provide for complete or partial exceptions
to this requirement as it deems appropriate.
(c) During the restriction period, a Grantee may not sell, assign,
transfer, pledge or otherwise dispose of the shares of a Stock Award except to a
successor upon death. Each certificate for a share of a Stock Award shall
contain a legend giving appropriate notice of the restrictions in the grant
agreement. The Grantee shall be entitled to have the legend removed from the
stock certificate covering the shares subject to restrictions when all
restrictions on such shares have lapsed. The Board may determine that the
Corporation will not issue certificates for Stock Awards until all restrictions
on such shares have lapsed, or that the Corporation will retain possession of
certificates for shares of Stock Awards until all restrictions on such shares
have lapsed.
(d) Unless the Board determines otherwise, during the restriction
period, the Grantee shall have the right to vote shares of Stock Awards and to
receive any dividends or other distributions paid on such shares, subject to any
restrictions deemed appropriate by the Board.
(e) All restrictions imposed on Stock Awards shall lapse upon the
expiration of the applicable restriction period and the satisfaction of all
conditions imposed by the Board. The Board may determine, as to any or all Stock
Awards, that the restrictions shall lapse without regard to any restriction
period.
(f) The Board may issue a Stock Award in the form of "Restricted Units"
that convert into Stock upon the lapsing of restrictions set by the Board.
Unless the Board determines otherwise, the Grantee shall not have the right to
vote Restricted Units, but Restricted Units shall otherwise be treated as Stock
Awards pursuant to the terms of this Plan.
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(g) The Board may grant Performance-Based Stock Awards, which are Stock
Awards that are subject to vesting or payment based on attainment of performance
goals and such other criteria as the Board determines, including (but not
limited to) grants of "qualified performance-based compensation" as described in
Section 10 below. Performance-Based Stock Awards shall have such terms as the
Board determines and may provide for full or partial vesting or payment upon a
Change in Control or other circumstances as the Board deems appropriate.
Section 10. Qualified Performance-Based Compensation
(a) The Board may determine that Stock Awards granted to an Employee
shall be considered "qualified performance-based compensation" under section
162(m) of the Code. The provisions of this Section 10 shall apply to grants of
Stock Awards that are to be considered "qualified performance-based
compensation" under section 162(m) of the Code. Stock Awards that are designated
as "qualified performance-based compensation" must be granted by a Committee
consisting of "outside directors" under section 162(m) of the Code.
(b) When Stock Awards that are to be considered "qualified
performance-based compensation" are granted, the Committee shall establish in
writing (i) the objective performance goals that must be met, (ii) the
performance period during which the performance goals must be met, (iii) the
threshold, target and maximum amounts that may be paid if the performance goals
are met, and (iv) any other conditions that the Committee deems appropriate and
consistent with the Plan and section 162(m) of the Code. The performance goals
may relate to the Employee's business unit or the performance of the Corporation
and its Subsidiaries as a whole, or any combination of the foregoing. The
Committee shall use objectively determinable performance goals based on one or
more of the following criteria: stock price, earnings per share, net earnings,
operating earnings, return on assets, shareholder return, return on equity,
growth in assets, unit volume, sales, market share, or strategic business
criteria consisting of one or more objectives based on meeting specified revenue
goals, market penetration goals, geographic business expansion goals, cost
targets or goals relating to acquisitions or divestitures.
(c) The Committee shall establish the performance goals in writing
either before the beginning of the performance period or during a period ending
no later than the earlier of (i) 90 days after the beginning of the performance
period or (ii) the date on which 25% of the performance period has been
completed, or such other date as may be required or permitted under applicable
regulations under section 162(m) of the Code. The performance goals shall
satisfy the requirements for "qualified performance-based compensation,"
including the requirement that the achievement of the goals be substantially
uncertain at the time they are established and that the goals be established in
such a way that a third party with knowledge of the relevant facts could
determine whether and to what extent the performance goals have been met. The
Committee shall not have discretion to increase the amount of compensation that
is payable upon achievement of the designated performance goals.
(d) If Stock Awards are granted under this Section 10, not more than
750,000 shares of Stock may be granted to an Employee under the Stock Awards for
any calendar year in the performance period.
(e) The Committee shall certify and announce the results for each
performance period to all Grantees immediately following the announcement of the
Corporation's financial results for the performance period. If and to the extent
that the Committee does not certify that the performance goals have been met,
the grants of Stock Awards for the performance period shall be forfeited or
shall not be made, as applicable.
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(f) The Committee may provide that Stock Awards shall be granted or
restrictions on Stock Awards shall lapse, in whole or in part, in the event of
the Grantee's death or disability during the performance period, or under other
circumstances consistent with the Treasury regulations and rulings under section
162(m).
Section 11. Adjustment Upon Changes in Capitalization
In the event of any reclassification, recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or reverse stock
split, combination or exchange of shares, repurchase of shares or any other
change in corporate structure which in the judgment of the Board materially
affects the value of shares, the Board may determine the appropriate adjustments
if any, to the number and class of shares authorized to be issued or transferred
under the Plan and the number and class of shares and exercise price per share
set forth in any Option or Stock Award theretofore granted, provided that no
such adjustments shall be made to any ISO without the Grantee's consent, if such
adjustment would cause such ISO to fail to qualify as such.
Section 12. Termination of Relationship with the Corporation
(a) Upon the termination of an Employee's employment or a Consultant's
consulting relationship with the Corporation for any reason (except as otherwise
set forth in this Section 12(a)), such Grantee's Options shall cease vesting as
of the date of termination and shall terminate 90 days after such termination of
employment or service (or after such other period as the Board shall determine).
Unless the Board determines otherwise, upon termination of an Employee's
employment as a result of retirement (at or after age 55 and five years of
service), disability or death, such Grantee or his or her legal representative
may exercise any outstanding and then exercisable installments of his or her
Options for a period not to exceed: (i) one year from the date of such
termination in the case of death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code), and (ii) six months from the date of
such termination in the case of retirement or other disability (as determined by
the Board), provided, however, that in no event shall the period extend beyond
the expiration of the Option term. Unless the Board determines otherwise, in no
event shall any Option be exercisable for more than the maximum number of shares
that the Grantee was entitled to purchase at the date of termination,
retirement, disability, or death, as the case may be. In the case of an Employee
or Consultant, a transfer among the Corporation and its Subsidiaries shall not
be deemed to be a termination of the employment or consulting relationship.
Unless the Board determines otherwise, if a Grantee changes from the status of
an Employee to a Consultant, or from a Consultant to an Employee, the Grantee's
outstanding Options will cease vesting, but the Grantee may retain his or her
then exercisable Options during the Grantee's employment or service with the
Corporation and its Subsidiaries (but not later than the expiration of the
Option term). When the Grantee subsequently ceases to be an Employee or
Consultant, the foregoing provisions of this subsection (a) shall apply.
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(b) Upon a Non-Employee Director ceasing to be a Non-Employee Director
of the Corporation for any reason (except as otherwise set forth in this Section
12(b)), such Grantee's Options shall cease vesting as of the date of termination
and shall terminate 90 days after such termination of service. Unless the Board
determines otherwise, upon the Grantee ceasing to be a Non-Employee Director as
a result of retirement (at or after age 70 or after five consecutive terms as a
Non-Employee Director), disability (as determined by the Board) or death, the
Non-Employee Director's outstanding Options shall become fully exercisable, and
the period during which such Grantee may exercise his or her outstanding Options
shall not exceed: (i) one year from the date of death or disability, and (ii)
two years from the date of retirement, provided, however, that in no event shall
the period extend beyond the expiration of the Option term. Unless the Board
determines otherwise, if a Non-Employee Director becomes an Employee or
Consultant, the Non-Employee Director's outstanding Options shall continue to
vest during his or her employment or service with the Corporation and its
Subsidiaries and the change in status shall not be considered a termination of
the Non-Employee Director's service with the Company. When the Grantee
subsequently ceases to be an Employee or Consultant, the provisions of Section
12(a) shall govern. Unless the Board determines otherwise, and except as
provided above, in no event shall any Option be exercisable for more than the
maximum number of shares that the Grantee was entitled to purchase at the date
of termination, retirement, disability or death, as the case may be.
(c) Subject to the foregoing, in the event of death, Options may be
exercised by a Grantee's legal representative.
Section 13. General Provisions
(a) Each grant shall be evidenced by a written stock option or stock
award agreement. ISOs and NQSOs may be granted to Employees simultaneously and
subject to a single stock option agreement, provided, however, that in no event
shall a NQSO be granted in tandem with an ISO such that the exercise of one
affects the right to exercise the other. The terms and provisions of such stock
option or stock award agreements (including the exercise price specified
therein) may vary among Grantees and among different Options or Stock Awards
granted to the same Grantee.
(b) The grant of an Option or Stock Award in any year shall not give
the Grantee any right to similar grants in future years or any right to continue
such Grantee's employment or consultant relationship with the Corporation or its
Subsidiaries. All Grantees shall remain subject to discharge to the same extent
as if the Plan were not in effect.
(c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee shall have any right, title or interest by reason of any
Option or Stock Award to any particular assets of the Corporation or its
Subsidiaries, or any shares of Stock allocated or reserved for the purposes of
the Plan or subject to any Option or Stock Award except as set forth herein. The
Corporation shall not be required to establish any fund or make any other
segregation of assets to assure the payment of any Option or Stock Award.
(d) No Option, Stock Award or other right under the Plan shall be
subject to anticipation, sale, assignment, pledge, encumbrance, or charge except
by will or the laws of descent and distribution, and an Option shall be
exercisable during the Grantee's lifetime only by the Grantee. Notwithstanding
the foregoing, a Grantee may transfer a NQSO to his or her family members or to
a trust for family members for estate planning purposes, provided the Grantee
gives the Corporation advance written notice of the transfer and subject to the
completion of any required forms.
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(e) Notwithstanding any other provision of this Plan or stock option or
stock award agreements made pursuant thereto, the Corporation shall not be
required to issue or deliver any certificate or certificates for shares of Stock
under this Plan prior to fulfillment of all of the following conditions:
(1) The listing, or approval for listing upon notice of
issuance, of such shares on any securities exchange on which the Stock
may then be traded;
(2) Any registration or other qualification of such shares
under any state or federal law or regulation, or other qualification
which the Board shall, in its absolute discretion and upon the advice
of counsel, deem necessary or advisable;
(3) The obtaining of any other consent, approval or permit
from any state or federal governmental agency which the Board shall, in
its absolute discretion and upon the advice of counsel, determine to be
necessary or advisable; and
(4) The execution by the Grantee (or the Grantee's legal
representative) of such written representation that the Board may in
its sole discretion deem necessary or advisable to the effect that the
shares then being purchased are being purchased for investment with no
present intention of reselling or otherwise disposing of such shares in
any manner which may result in a violation of the Securities Act of
1933, as amended, and the placement upon certificates for such shares
of an appropriate legend in connection therewith.
(f) The issuance of shares of Stock to Grantees or to their legal
representatives shall be subject to any applicable taxes and other laws or
regulations of the United States or of any state having jurisdiction thereof.
(g) In the case of a grant of an Option or Stock Award to any Employee
or Consultant of a Subsidiary, the Corporation may, if the Board so directs,
issue or transfer the shares covered by the Option or Stock Award to the
Subsidiary, for such lawful consideration as the Board may specify, upon the
condition or understanding that the Subsidiary will transfer the shares to the
Employee or Consultant in accordance with the terms of the Plan and the stock
option agreement relating to such Option.
Section 14. Amendment or Termination
(a) The Board may, at any time, alter, amend, suspend, discontinue or
terminate this Plan; provided, however, that no such action shall adversely
affect the rights of Grantees to Options or Stock Awards previously granted
hereunder and, provided further, however, that any shareholder approval
necessary or desirable in order to comply with section 422 or 162(m) of the Code
(or other applicable law or regulation) shall be obtained in the manner required
therein.
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(b) If Stock Awards are granted as "qualified performance-based
compensation" under Section 10 above, the Plan must be reapproved by the
shareholders no later than the first shareholders meeting that occurs in the
fifth year following the year in which the shareholders previously approved the
provisions of Section 10, if required by section 162(m) of the Code or the
regulations thereunder.
Section 15. Duration of Plan
This Plan was originally effective as of July 26, 2001. The Plan as
adopted by the Corporation pursuant to the reincorporation is effective as of
November 16, 2004. The Plan shall terminate on July 26, 2010, which is ten years
from the date of board approval of the adoption of the Plan by the Prior
Corporation, and no Option or Stock Award may be granted under the Plan
thereafter, but such termination shall not affect any Options or Stock Awards
theretofore granted.
-12-
ANNEX E
AUDIT COMMITTEE CHARTER
1. MISSION STATEMENT
The audit committee (the "Committee") will assist the Board of Directors
(the "Board") of Intermagnetics General Corporation (the "Company") in
fulfilling the Board's general oversight and monitoring of the independent
auditor's participation in the Company's financial reporting process, the
Company's process for financial reporting, its system of internal control,
audit process, and process for monitoring compliance with legal and
regulatory requirements. In performing its duties, the Committee will
maintain effective working relationships with the Board, management and the
Company's auditors. The primary objective of the Committee in fulfilling
its responsibilities is to promote and preserve the integrity of the
Company's financial statements and the independence and performance of the
Company's external auditors.
2. ORGANIZATION
2.1. Committee Composition: The Committee shall consist of not less than
three (3) members who shall be appointed annually by the Board. The
Board shall designate one (1) member of the Committee to serve as
Chair.
2.2. Member Qualifications: Each member should make a unique and valuable
contribution to the Committee. Members must have the ability to:
recognize the significance of the Committee; dedicate the time and
energy necessary to accomplish the Committee's role; understand the
Company's business, risks and controls; read and understand
fundamental financial statements; and offer new and different
perspectives and constructive suggestions. At least one member of the
Committee shall have accounting or related financial management
expertise. In addition, Committee members will satisfy the
qualification requirements for audit committee members set forth in
any rules, regulations or laws applicable to the Company.
Compensation of the members shall be as determined by the Board of
Directors. No member of the Committee may receive any compensation
from the Company other than director's fees.
2.3. Independence of Members: Members of the Committee shall be
independent. A member shall be considered independent if he or she has
no relationship with the Company that may interfere with his or her
independence from management, or if he or she is an "independent
director" as that term may be defined by applicable rules, regulations
or laws.
2.4. Meetings: The Committee shall schedule and hold regular meetings with
sufficient frequency to carry out its responsibilities. Whenever
possible, Committee meetings will be scheduled in conjunction with
meetings of the full Board. Committee meetings shall, when
appropriate, include the Company's external auditors and appropriate
management representatives (e.g., President, CFO).
3. AUDIT COMMITTEE ACTIVITIES
The principal activities of the Audit Committee will generally include the
following:
3.1. Review of Charter: Review and reassess the adequacy of this Charter
annually and submit it to the Board for approval along with any
recommended changes.
3.2. Internal Control: The Committee shall review and evaluate corporate
policies and controls and ensure that the Company's external auditors
keep the Committee informed about fraud, illegal acts, deficiencies in
internal controls and other matters related to the Company's financial
processes.
3.3. Financial Reporting:
3.3.1. The Committee shall review the Company's audited financial
statements and annual audit process. Generally, the Committee
shall:
o review the overall audit plan with the independent auditor
and management responsible for maintaining the Company's
accounts and preparing the Company's financial statements
(the "Senior Accounting Executive").
o review and discuss with management and the independent
auditor:
(i) the Company's annual audited financial statements,
including any significant reporting issues that arose in
connection with the preparation of the statements;
(ii) the adequacy of the Company's internal financial
reporting controls; and
(iii) major changes in, and questions regarding,
accounting and auditing principles and procedures.
o review and discuss with the independent auditor (outside the
presence of management) how the independent auditor plans to
handle its responsibilities under the Private Securities
Litigation Reform Act of 1995.
o review and discuss with the independent auditor (outside the
presence of management) any problems or difficulties the
auditor may have with management or others including any
management letter provided by the auditor and the Company's
response to that letter. This review shall include any
difficulties encountered by the auditors in the course of
performing its audit, including any restrictions on the
scope of its activities or access to information.
o review and discuss any major changes to the Company's
auditing and accounting principles and practices as may be
suggested by the independent auditor or management
-2-
o discuss with the independent auditor issues that may be
brought to the Committee's attention pursuant to any
applicable Statement on Auditing Standards (e.g. SAS No.
61).
o based on the Committee's review and discussions with
management and the independent auditors of the matters
outlined above, make a recommendation to the Board as to
whether the Company's audited financial statements should be
included in the Company's annual report on Form 10-K.
o prepare the Audit Committee Report required by Item 306 of
Schedule 14A of the Securities Exchange Act of 1934 (or any
successor provision) to be included in the Company's annual
proxy statement.
3.3.2. The Committee shall review and discuss with management and
the independent auditor the Company's quarterly financial
statements. Such review shall include discussions between
the Chair of the Committee, or the full Committee and the
independent auditor of such issues as may be brought to
their attention pursuant to Statement on Auditing Standards
No. 71.
3.4. Selection, Performance and Independence of Independent Auditors:
The Committee shall:
3.4.1. have the sole authority and responsibility for the
appointment and termination of the Company's independent
auditors, as well as being responsible for setting the
compensation and retention terms for, and overseeing and
evaluating the performance of.
3.4.2 request that the independent auditor provide the Committee
with the written disclosures and letter required by
Independence Standards Board Standard No. 1, and review and
discuss the independence of the auditor with the Committee
and the independent auditor. The Committee shall recommend
that the Board take appropriate action, if necessary, to
ensure the independence of the auditor.
3.5. Investigations: The Board may request that the Committee review or
investigate on behalf of the Board activities of the Company or of
its employees, including compliance with applicable laws,
regulations or Company policy.
3.6. Procedures for Complaints: The Audit Committee will establish
procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters; and (ii) the
confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
-3-
3.7. Other Oversight Functions: The Committee will perform such other
oversight functions as may be requested by the Board.
4. SCOPE OF RESPONSIBILITIES
4.1. In performing its responsibilities, the Committee shall be
entitled to rely upon advice and information it receives in its
discussions and communications with management and the independent
auditors. The Committee shall have the authority to retain special
legal, accounting or other professional advisors to the Committee.
The Committee shall also have the authority to request that any
Company officer or employee, outside legal counsel, independent
auditor or other professional retained by the Company to render
advice, attend meetings of the Committee or cooperate with any
investigation conducted by the Committee. The Committee has
authority to cause the Company to pay the compensation of such
advisors, without further action by the Board.
4.2. Notwithstanding the powers and responsibilities of the Committee
as set forth in this Charter, the Committee does not have the
responsibility of planning or conducting audits of the Company's
financial statements or determining whether the Company's
financial statements are complete, accurate and in accordance with
generally accepted accounting principles. Such responsibilities
are the duty of management and the independent auditor (to the
extent consistent with the independent auditor's scope of review).
It is also not the duty of the Committee to resolve disagreements,
if any, between management and the independent auditors or to
ensure compliance with laws, regulations or Company policies.
-4-
INTERMAGNETICS GENERAL CORPORATION
Proxy for Annual Meeting of Shareholders, November 16, 2004
The undersigned hereby appoints Glenn H. Epstein and Michael K. Burke or any one of them acting singly with
full power of substitution, the proxy or proxies of the undersigned to attend the Annual Meeting of Shareholders of
Intermagnetics General Corporation to be held on November 16, 2004, and any adjournments thereof, to vote all
shares of stock that the undersigned would be entitled to vote if personally present in the manner indicated below
and on the reverse side and on any other matters properly brought before the meeting or any adjournments thereof,
all as set forth in the September 27, 2004 proxy statement.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
INTERMAGNETICS GENERAL CORPORATION
PLEASE MARK YOUR CHOICE LIKE THIS |X| IN BLUE OR BLACK INK
I PLAN TO ATTEND MEETING |_|
YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THIS CARD
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES AND FOR THE AMENDMENTS TO REINCORPORATE THE
COMPANY TO DELAWARE; THE CERTIFICATE OF INCORPORATION; AND TO THE 2000 STOCK OPTION AND AWARD PLAN.
1. Election of the following nominees as directors (voting cumulatively as set forth in the September 27, 2004
proxy statement): John M. Albertine, Glenn H. Epstein, and Larry G. Garberding.
For all Withhold for Withhold for the following only: To cumulate votes for individual
nominees all nominees (Write the name of the nominee(s) directors, fill in the name of the
in the space below) nominee(s) below and indicate such votes:
|_| |_| _________________________________ ________________________________________
2. To approve the reincorporation of the Company in the State of Delaware; including the merger of the Company
with and into a wholly owned Delaware subsidy of the Company pursuant to the Merger Agreement.
For Against Abstain
|_| |_| |_|
3. To approve the amendment of the Certificate of Incorporation of the Company to increase the number of shares
of Common Stock authorized to be issued by the Company from forty million (40,000,000) to eighty million
(80,000,000).
For Against Abstain
|_| |_| |_|
4. To amend the Company's Certificate of Incorporation to provide for election of directors by a plurality of
the votes cast.
For Against Abstain
|_| |_| |_|
5. To approve certain amendments to, and to restate the 2000 Stock Option and Stock Award Plan (the "2000 Plan")
which increases by 1,500,000 the number of shares of Common Stock of the Company available for issuance
solely for performance-based stock awards under the 2000 Plan.
For Against Abstain
|_| |_| |_|
Your signature on the proxy is your acknowledgement of receipt of the Notice of Meeting and Proxy Statement, both
dated September 27, 2004
(SIGNATURE SHOULD BE EXACTLY AS NAME OR NAMES APPEAR ON THIS PROXY.
IF STOCK IS HELD JOINTLY, EACH HOLDER SHOULD SIGN. IF SIGNING IS BY
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE.)
Date
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Signature
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Signature
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED FOR ALL OF THE
ABOVE MATTERS UNLESS OTHERWISE INDICATED, AND IN THE DISCRETION OF
THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE
MEETING.