UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
PARACELSIAN, INC., a Delaware AFFIDAVIT OF
Corporation, RONALD J. FOLK
Plaintiff,
97-CV-604 (RSP) (GJD)
v.
JOHN G. BABISH,
Defendant.
STATE OF NEW YORK )
)ss:
COUNTY OF NASSAU )
RONALD J. FOLK, being duly sworn, says:
1. I am a registered representatative and was employed by Murphey, Marseilles, Smith & Nammack, Inc., a member of the New York Stock Exchange, until I left for other employment on April 28, 1997. As a registered reprentative, I have followed the stock and progress of Paracelsian since its initial public offering in 1992. I daily monitor the SEC's electronic disclosures on Paracelsian.
2. On or about February 11, 1997, I learned from an SEC filing that John Babish had sold several thousand of his Paracelsian shares during the month of January 1997. I immediately called Keith Rhodes, who was, as I understood, the company's chief executive officer and president. I asked Mr. Rhodes what was going on. Mr. Rhodes told me that Dr. Babish and the company were involved in a contract dispute over the terms of his renewed employment contract. I told Mr. Rhodes that in my opinion Dr. Babish was quite important to the compay's success and that the company should make every effort to retain his services. Mr. Rhodes responded that the company was "working on it." Mr. Rhodes did not seem surprised by my comments about Dr. Babish's stock sales, and I therefore believe he already knew about the sales. I made clear to Mr. Rhodes that, in my opinion, it would be best for the company to come to terms on the employment contract because Dr. Babish's resignation would be detrimental. We specifically discussed the possibility that Dr. Babish might quit if the contract negotiations failed.
3. I had several additional discussions (approximately 4 to 6) with Mr. Rhodes of a similar nature during the month of February. I also spoke with Art Koch, who was chief financial officer of Paracelsian. When I asked Mr. Koch why Dr. Babish was selling his stock, Mr. Koch told me that Dr. Babish had some short term cash needs for which he had to liquidate about 80,000 shares and that Dr. Babish was selling additional shares to get the Board's attention on his employment contract. He said the company was in discussions with Dr. Babish about a renewed employment agreement. I reiterated to Mr. Koch that I thought the company should do everything within reason to retain the services of Dr. Babish.
4. During my conversations with either Mr. Rhodes or Mr. Koch, I
learned that the board of directors would be meeting on March 5, 1997, to negotiate the final terms of a new contract with Dr. Babish. On March 4, 1997, I faxed a letter to Mr. Rhodes (copy submitted as defendant's Exhibit O) stating that in my belief Dr. Babish was the company's "best human asset" and that it would be disastrous for the short and long-term future of the company to lose Dr. Babish.
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