UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] Amendment No. 1 to Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Fiscal Year Ended
December 31, 1996.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to
___________.
Commission File Number 0-16864
GULL LABORATORIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
UTAH 87-0404754
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(State of Incorporation) (IRS Employer Identification Number)
1011 E. Murray Holladay Road
Salt Lake City, UT 84117
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (801) 263 - 3524
Securities registered under Section 12(b) of the Exchange Act:
Common Stock $.001 par value registered on the American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act:
None
Indicate by check/mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the proceeding twelve months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days. [ ] Yes [X] No
Indicate by check/mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation 5K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant as of March 17, 1997 was $21,784,940 based
upon the closing price on such date.
The number of shares of common stock outstanding as of March 17, 1997
was 6,588,696.
Documents Incorporated by reference: None
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The Registrant's Form 10-K for the Fiscal Year ended December 31,
1996 is hereby amended as follows:
Item 10. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Certain information concerning the members of the Board of
Directors is set forth below:
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Has Served
as Director
Name of Director Age Company Position Since
- -------------------------------------------------------------------------
Myron W. Wentz 56 Director 1974
Chairman of the Board
Matthias Schmidt 38 Director 1997
Anne-Marie Ricart 55 Director 1993
Gerd Krick 58 Director 1994
Ulrich Wagner 53 Director 1994
Peter Gladkin 49 Director 1995
George R. Evanega 61 Director 1995
Chief Executive Officer
President
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In 1994, Fresenius AG purchased a controlling interest in the
Company from Gull Holdings Ltd. ("GHL"), an Isle of Man corporation wholly
owned by Dr. Myron W. Wentz, a Director and Chairman of the Company.
In connection with the purchase, Fresenius AG agreed, to the
extent allowed by applicable law and the fiduciary responsibilities of
Fresenius AG, to cause Dr. Wentz to be nominated to the Board of Directors and
to endeavor to cause Dr. Wentz to be elected as Chairman of the Board of
Directors.
GHL agreed that, for a period of seven years commencing on the
date of the sale, GHL and its affiliates would not, without the prior written
consent of Fresenius AG:
(a) make or participate in any solicitation of proxies, or seek
to advise or influence any person with respect to the voting of any securities
of the Company;
(b) form, join or in any way participate in a "group" within the
meaning of section 13(d)(3) of the Securities Exchange Act with respect to the
voting securities of the Company;
(c) induce or attempt to induce or give encouragement to any
other person to initiate any proposal or tender or exchange offer for equity
securities or change of control of the Company; or
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(d) otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or policies of the
Company.
There are no family relationships among any of the members of the
Board of Directors or among such members and the current management of the
Company.
Directors
Myron W. Wentz Myron W. Wentz, Ph.D., has been Chairman and a Director of
the Company since 1974, and continues to serve in those
positions. Until 1992, Dr. Wentz was President of the
Company. He developed the IFA products currently being
manufactured and marketed by the Company. From 1969 to
1973, Dr. Wentz served as Director of Microbiology for
three hospitals in Illinois. Dr. Wentz received a Ph.D.
in microbiology, with a specialty in immunology from the
University of Utah, a M.S. degree in microbiology from the
University of North Dakota and a B.S. degree in biology
from North Central College. Dr. Wentz is also Chairman
and President of USANA, Inc., a publicly-traded company
that manufactures and distributes nutritional products.
Matthias Schmidt Dr. Matthias Schmidt became a director and vice chairman
of the Company in January 1997. Dr. Schmidt has been
Chairman of the Supervisory Board of Fresenius Medical
Care AG ("Fresenius Medical Care"), the world's largest
integrated provider of renal dialysis products and
services, since September 1996. Fresenius AG owns 50.3%
of the outstanding Ordinary Shares of Fresenius Medical
Care, which is listed on the New York Stock Exchange. Dr.
Schmidt has served as president of the Pharmaceuticals
Division of Fresenius AG since September 1986, interim
president of the Intensive Care + Diagnostics Division
(the "I+D Division") of Fresenius AG since November 1996,
and a member of the Management Board of Fresenius AG since
July 1985. Dr. Schmidt is also a director of Hemosol
Inc., a Canadian development stage biopharmaceutical
company listed on the Toronto Stock Exchange and engaged
in development of a human blood substitute and stem cell
research.
Anne-Marie Ricart Anne-Marie Ricart became a Director of the Company in June
1993. Ms. Ricart founded Biolab SA, a subsidiary of the
Company now known as Gull Diagnostics SA, with Dr. J. A.
Engels in 1971, and still serves as a Director of Gull
Diagnostics SA. Previously, Ms. Ricart co-owned and was
Administrateur-Delegue of a private endocrinology
laboratory and held laboratory positions in Belgium and
Salt Lake City, Utah. She studied chemistry for two years
at the Institute Meurice in Belgium.
Gerd Krick Dr. Gerd Krick has been Chairman of the Managing Board and
Chief Executive Officer of Fresenius AG since August 1993
and Chairman of the Managing Board and Chief Executive
Officer of Fresenius Medical Care since September 1996.
Prior to August 1993, he held various positions with
Fresenius AG, including Deputy Chairman of the Managing
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Board and Director of the Medical Systems Division. Dr.
Krick holds a Ph.D. degree in mechanical engineering from
T.H. University, Munich, Germany. He is also Chairman of
the Board of Directors of Fresenius National Medical Care
Holdings, Inc. ("FNMC"), a publicly held subsidiary of
Fresenius Medical Care and Chairman of the Board of
Directors of Fresenius USA, Inc. ("FUSA"), a manufacturer
and distributor of dialysis equipment and related
disposable products (including products manufactured by
Fresenius Medical Care). FUSA was publicly held until
September 1996, when it became a wholly owned subsidiary
of FNMC.
Ulrich Wagner Dr. Ulrich Wagner has been a partner of O'Melveny & Myers
LLP, a law firm which represents Fresenius AG, since 1982.
He served as a director of FUSA from October 1987
through October 1989 and from March 1992 until September
1996. Dr. Wagner received his J.D. degree at the
University of Frankfurt (Germany) and holds L.L.M. and
J.D. degrees from the University of California at
Berkeley.
Peter Gladkin Peter Gladkin was elected to the Board in 1995. He is
President and Chief Operating Officer of Health Data
Sciences Corporation ("HDS"). Prior to joining HDS, he
gained a broad range of senior management experience in
twenty-three years at Hewlett Packard Company's domestic
and European operations. Mr. Gladkin's most recent
position at Hewlett Packard was General Manager of the
Healthcare Information Systems unit. He obtained B.S.
degrees in chemistry and physics from the University of
Illinois and an M.B.A. degree from the Northwestern
Graduate School of Business.
George R. Evanega George R. Evanega, Ph.D. was appointed Chief Executive
Officer, President and a Director of Gull in October 1995.
He came to Gull from Oncor, Inc., where he had served
since 1991 as President, Chief Operating Officer and
Director. He was also President of Oncor Image
Instruments from 1993 until October 1995. Previously Dr.
Evanega was Corporate Vice President and Chief
Administrative Officer and Director with Miles, Inc. He
earned a B.S. degree in chemical engineering from Lehigh
University, and M.S. and Ph.D. degrees in organic
chemistry from Yale University. Dr. Evanega's experience
in the biomedical industry includes positions as Vice
President of research, marketing and sales, as well as a
broad range of management positions with Boehringer
Mannheim, Pfizer Pharmaceutical and Union Carbide.
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The Company has adopted a policy of paying outside Board members
compensation of $8,000 per year for service as a Board member. Total Board
compensation for 1996 was $40,000.
Executive Officers
The executive officers of the Company are as follows:
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Name Age Position with the Company
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Myron W. Wentz 56 Chairman of the
Board of Directors
George R. Evanega 61 Chief Executive Officer
and President
Fred Rachford 55 Senior Vice President
Ernest Sumsion 49 Senior Vice President
Operations
Michael B. Malan 40 Secretary/Treasurer
John Turner 50 European General Manager
and Vice President
Andrew Taylor 54 Vice President
Sales and Marketing
Linxian Wu, Ph.D. 49 Vice President
Research and Development
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Each officer has been elected to hold office until his successor
has been duly elected or he sooner resigns or is removed in accordance with
law and the Company's bylaws.
For biographical information with respect to Dr. Wentz and Dr.
Evanega, see "Directors."
Fred Rachford
Fred Rachford, Ph.D., joined the Company in October 1983. Dr.
Rachford directs the Regulatory Affairs and Quality Assurance departments of
the Company and administers the contracts with the College of American
Pathologists. Prior to joining the Company, he was employed by Baxter-
Travenol Laboratories in Research and Development. Dr. Rachford received his
Ph.D. and M.S.P.H. degrees from the University of North Carolina and a B.A.
degree from Chico State College.
Ernest Sumsion
Mr. Sumsion has been employed by the Company since August 1984 and
has been in charge of Operations since 1993. Mr. Sumsion became a Senior Vice
President of the Company in 1996. He served as Interim President of the
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Company from May to October 1995. He earned a B.S. degree in microbiology
from Brigham Young University and a M.B.A. degree from the University of Utah.
Michael B. Malan
Michael B. Malan, M.B.A., C.P.A., joined the Company as its
Director of Finance in January 1992 and became its Secretary and Treasurer in
February 1992. From 1988 to 1991, Mr. Malan was the Chief Financial Officer
of Professional Lithographers, Inc. in Provo, Utah. From 1981 to 1988, Mr.
Malan was employed with a national accounting firm. Mr. Malan received M.B.A.
and B.A. degrees in accounting and finance from the University of Utah.
John Turner
Mr. Turner joined the Company in January 1997. He previously held
several executive positions with the Diagnostics Division of Beckman
Instrumentation, most recently as the General Manager of its French
operations. Mr. Turner also has sales and marketing experience with Pharmacia
Diagnostics and Technicon International. He earned a degree in biochemistry
from the Bromley School of Technology.
Andrew Taylor
Mr. Taylor joined the Company in 1993. He has twenty-five years
of experience in medical products sales and marketing, holding executive and
management positions with such companies as Mountain Medical Equipment, Becton
Dickinson Immunodiagnostics, United States Surgical, and Pfizer Diagnostics.
Mr. Taylor received a B.S. degree in science education from East Carolina
University.
Linxian Wu, Ph.D.
Dr. Wu obtained his Ph.D. degree in microbiology and infectious
disease from the University of Alberta, Edmonton, Canada, and his B.S. degree
in microbiology from Amoy University, China. He served in several scientific
posts for the governments of China and the United States and performed post-
doctoral work in molecular virology at the Medical College of Pennsylvania.
He joined Gen Trak, Inc., as Senior Scientist and subsequently was named
Director of Research and Development. Dr. Wu joined the Company in May 1994.
An additional, significant employee is Holly Scribner.
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Name Age Position with the Company
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Holly Scribner 40 President and Director
Biodesign, Inc.
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Holly Scribner
Ms. Scribner has been President and a Director of Biodesign since
its inception in 1987. The Company acquired Biodesign in February 1993. She
founded Biodesign and is responsible for the management and daily operations
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of the Company. From 1979 to 1986, she was employed by Ventrex Laboratories
(Hycor) in various marketing and scientific management positions in relation
to diagnostics and biotechnology products. She received her B.S. degree (cum
laude) in biological sciences from the University of Maine. Ms. Scribner also
serves as an advisory board member for the Center for Innovation in Biomedical
Technology, established by the State of Maine to promote the biomedical
industry.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, affiliates and persons who own more than 10%
of the Company's common stock, to file reports of ownership and changes in
ownership with the Securities Exchange Commission. Specific due dates for
these reports have been established and the Company is required to report any
failure to file by such dates. Based solely on review of the copies of such
forms furnished to the Company, the Company believes that during its 1996
fiscal year, all Section 16(a) filings applicable to its officers, directors
and greater than 10% beneficial owners were made as required except that the
forms relating to the issuance of options to purchase an aggregate of 100,000
shares of the Company's common stock were filed late by Dr. Rachford, Mr.
Sumsion, Mr. Malan and Dr. Wu.
Item 11. Executive Compensation
The following table sets forth the compensation of the Company's
chief executive officer for the periods indicated and the only other executive
officer of the Company who received total annual salary and bonus in excess of
$100,000 during the fiscal year ended December 31, 1996 (collectively, the
"Named Executive Officers").
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Summary Compensation
- --------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- --------------------------------------------------------------------------------------------------------------
Other
Annual Restricted Securities All Other
Name/ Compen- Stock Underlying LTIP Compen-
Principal Position Year Salary Bonus sation Awards Options (#) Payouts sation
- --------------------------------------------------------------------------------------------------------------
George Evanega(1) 1996 $180,000 $ -0- -0- $ 9,000 (2)
CEO/President
1995 $ 29,187 $ 50,000 200,000 $50,000 (3)
1994 _______ ______ _______ ______
Andrew Taylor 1996 $107,977 $ 4,750 -0- $ 7,000 (2)
Vice President
Sales/Marketing 1995 $104,446 $ 5,000 _______ $ 7,000 (2)
1994 $ 84,344 -0- _______ $ 7,000 (2)
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</TABLE>
(1) Dr. Evanega joined the Company in October 1995.
(2) Represents an amount paid as a car allowance.
(3) Amount represents allowance for relocation costs of which $5,266
was paid in 1995 and $44,734 was paid in 1996.
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No options were granted to any of the Named Executive Officers in
1996. The following table presents information concerning stock options
exercised during1996 and the value of unexercised stock options held by the
Named Executive Officers at December 31, 1996.
<TABLE>
<S> <C> <C> <C> <C>
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Option Exercises in Last Fiscal Year and
Value of Stock Options at December 31, 1996
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Number of Securities Value of Unexercised
Underlying in-the-Money
Unexercised Options Options at
at December 31, 1996 December 31, 1996 ($)
Shares on
Acquired Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------
George R. Evanega -0- $-0- 150,000/50,000 $881,750/$293,750
Andrew Taylor -0- $-0- 18,750/7,500 $121,875/$48,750
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</TABLE>
Vesting of the options awarded to Dr. Evanega has been accelerated
because the average daily closing price of the Company's common stock exceeded
certain levels for a consecutive thirty calendar day period as provided in his
employment agreement with the Company. In addition, in April 1996, the Board
of Directors voted to reduce the exercise price of the shares covered by the
options awarded to Dr. Evanega to $4.50 per share from $5.625 per share.
All stock options held by Dr. Evanega and Mr. Taylor at December
31, 1996 were "in-the-money."
The Company has an employment agreement with Dr. George Evanega,
its President and Chief Executive Officer and a member of its Board of
Directors. Under the terms of the agreement, Dr. Evanega is paid an annual
salary of $180,000,with cost-of-living adjustments, and, commencing with the
Company's 1996 fiscal year, was eligible to receive an annual "targeted"
performance bonus of up to $50,000. The performance bonus is contingent upon
the achievement of a level of "Net Earnings Before Income Taxes" that has been
agreed upon by the Company's Board of Directors for the fiscal year. The
performance bonus could range from nothing to $50,000 plus $1,000 for every 1%
that the Company's "Net Earnings Before Income Taxes" exceeds the agreed upon
target. Dr. Evanega did not receive a bonus in 1996. Dr. Evanega also
receives a monthly car allowance of $750.
Additionally, in 1995, Dr. Evanega received a $50,000 bonus for
entering into his employment agreement, received a stock option, expiring
October 2005, to purchase 200,000 shares of the Company stock at $4.50, and
became eligible to receive reimbursement for relocation costs of up to
$50,000, of which $5,266 was paid in 1995 and $44,734 was paid in 1996.
Dr. Evanega's employment agreement can be canceled by either party
upon the occurrence of certain events. If the Company terminates the
employment agreement for certain reasons, including for cause, Dr. Evanega
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will not be entitled to any additional compensation. Otherwise, he will be
entitled to the continuation of his base compensation for a one year period
from the date of termination.
The Company has also entered into an employment agreement with
Ernest Sumsion, its Senior Vice President. The term of the agreement is two
years with options to renew annually for additional two year periods. If at
the expiration of the first two year period the Company does not renew Mr.
Sumsion's employment, Mr. Sumsion is entitled to receive severance payments
for nine months. The Company's Chief Executive Officer has the discretion to
extend the severance payments for an additional three months if Mr. Sumsion
has not found employment during the nine month period.
Under the terms of the agreement, Mr. Sumsion is paid an annual
salary of $120,000 per year, a bonus for "targeted" performance, and an annual
car allowance of $6,000. Mr. Sumsion was also granted an option to purchase
30,000 shares of the Company's stock, with vesting to occur at the rate of 25%
per year for the four years following the grant of the option. The Company
has also agreed to grant Mr. Sumsion options to purchase 200,000 shares of the
Company's stock over a ten year period with 20,000 shares vesting per year
with the first option to be granted on January 1, 1998.
The Company has also agreed to terms of a severance agreement with
Michael B. Malan, its Secretary/Treasurer. If Mr. Malan's employment is
terminated, he will be entitled to receive severance payments for nine months.
The Company's Chief Executive Officer has the discretion to extend the
severance payments for an additional three months if Mr. Malan has not found
employment during the nine month period.
The Company does not have employment agreements with any of its
other executive officers. See "Certain Relationships and Related
Transactions" for information regarding a bonus agreement proposed to be
entered into between the Company and Dr. Wentz. The Company does not have
any other compensatory plans or arrangements which would result from the
resignation, retirement or other termination of an executive officer of the
Company due to a change in control of the Company or a change in the executive
officer's responsibilities due to a change in control of the Company.
Compensation Committee Interlocks and Insider Participation
Dr. Wentz, a former President and Chief Executive Officer of the
Company, is a member of the Company's Compensation Committee. Mr. Krammer,
who was a member of the Compensation Committee during 1996, was a member of
the Managing Board of Fresenius AG until December 1996. Dr. Schmidt, who is
currently a member of the Compensation Committee, is currently a member of the
Fresenius AG Managing Board. In 1996, sales by the Company to Fresenius AG
represented 9% of total sales. See "Certain Relationships and Related
Transactions."
Item 12. Security Ownership of Certain Beneficial
Owners and Management
As of the close of business on May 9, 1997, the Company has issued
and outstanding 6,604,446 shares of common stock, par value $.001 per share.
Each share is entitled to one vote on matters brought before the shareholders
of the Company. Shareholders are not allowed to cumulate their shares in
voting for directors.
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The following table sets forth, as of May 9, 1997, the name and
share holdings of any person known by the Company to be the beneficial owner
of more than 5% of the Company's Common Stock and the name and share holdings
of (i) each current director of the Company and each officer named in the
Summary Compensation Table below, and (ii) all officers and directors of the
Company as a group:
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Security Ownership of Certain Beneficial
Owners and Management
- ------------------------------------------------------------------------------
Amount and Nature of Percentage
Name/Address Beneficial Ownership (1)(2) of Class (2)
- ------------------------------------------------------------------------------
Principal Shareholders:
Fresenius AG
Borkenberg 14
61440 Oberursel, Germany 3,610,693 (3)(4) 55%
Anne-Marie Ricart
La Grande Buissiere 25
1380 Ohain
Belgium 852,155 13%
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Officers and Directors:
Myron W. Wentz
Director/Chairman
c/o Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117 10,000 (5) *
Matthias Schmidt
Director
Fresenius AG
Borkenberg 14
61440 Oberursel, Germany -0- *
Gerd Krick
Director
Fresenius AG
Borkenberg 14
61440 Oberursel, Germany -0- *
Anne-Marie Ricart
Director See Above
Ulrich Wagner
Director
O'Melveny & Myers LLP
153 East 53rd Street
New York, NY 10022 -0- *
Peter Gladkin
Director
Health Data Sciences
268 West Hospitality Lane
3rd Floor
San Bernadino, CA 92408 -0- *
George R. Evanega
President/CEO/Director
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117 200,000 (6) 3%
Andrew Taylor
Vice President-Sales/Marketing
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117 10,588 (7) *
- ------------------------------------------------------------------------------
All officers and directors as a
group (13 persons) (8) 1,204,681 17%
- ------------------------------------------------------------------------------
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* Less than 1%.
(1) Except as provided below, each person listed exercises sole voting and
investment power over the shares of common stock listed for such person
in this table.
(2) Number of shares and percentages include shares issuable upon exercise
of all options to purchase common stock exercisable within sixty days of
May 9, 1997 held by each listed person. See "Executive Compensation."
All percentages have been rounded to the nearest whole percentage point.
(3) The share capital of Fresenius AG consists of ordinary shares and
non-voting preference shares ("Fresenius AG Ordinary Shares" and
"Fresenius AG Preference Shares," respectively), both of which are issued
only in bearer form. Accordingly, Fresenius AG has no way of determining
who its shareholders are or how many shares any particular shareholder
owns. However, under the German Securities Exchange Law, holders of
voting securities of a German company listed on a stock exchange within
the European Union are obligated to notify the company of the level of
their holding whenever their holding reaches or exceeds thresholds of 5%,
10%, 25%, 50% and 75%. In addition, under the German Stock Corporation
Law, notification to a company is required upon acquisition of 25% and
50% of the voting securities of that company.
The Else Kroner-Fresenius-Stiftung (the "Foundation") has informed
Fresenius AG that it owns 55.96% of the Fresenius AG Ordinary Shares.
The Foundation serves to promote medical science, primarily in the fields
of research and treatment of illnesses, including the development of
apparatuses and preparations, e.g. artificial kidneys. The Foundation
may promote only those research projects the results of which will be
generally accessible to the public. The Foundation further serves to
promote the education of physicians or of others concerned with the
treatment and care of sick persons, primarily those working in the field
of dialysis, as well as to promote the education of particularly gifted
pupils and students. The administrative board of the Foundation consists
of Mr. Hans Goring, Frankfurt/Main, Professor Dr. Volker Lang, Gauting,
Mr. Hans Kroner, and Dr. Karl Schneider. Pursuant to the terms of the
will of the late Mrs. Else Kroner, under which the Foundation acquired
most of its shares, Mrs. Kroner's executors exercise voting and
dispositive power over the shares held by the Foundation. The executors
under Mrs. Kroner's will are Mr. Kroner, Dr. Schneider, and Dr. Alfred
Stiefenhofer. Mr. Kroner's address is Dipl. Volkswirt Hans Kroner,
Postfach 1852, 61288 Bad Homburg v.d.H., Germany. Dr. Schneider's
address is Werderstrasse 42, 68165 Mannheim, Germany. Dr. Stiefenhofer's
address is Norr, Stiefenhofer & Lutz, Brienner Strasse 28, 80333 Munich,
Germany. Mr. Kroner is the Honorary Chairman of the Fresenius AG
Supervisory Board. Dr. Schneider is a member of the Fresenius AG
Supervisory Board. Dr. Stiefenhofer is Chairman of the Fresenius AG
Supervisory Board. In addition, on March 28, 1995, AW Beteiligungs-GmbH
("AW") informed Fresenius AG that it owns 9% of the Fresenius AG Ordinary
Shares and 15% of the Fresenius AG Preference Shares, and on May 4, 1995,
H.O.F.-Beteiligungs-GmbH ("HOF") informed Fresenius AG that it owns 22.4%
of the Fresenius AG Ordinary Shares. According to published reports, HOF
is 50% owned by Dresdner Bank AG and 50% owned by the Foundation.
Pursuant to a pooling agreement relating to the shares held by the
Foundation, AW and HOF, the Foundation has voting power over the shares
held by AW and HOF. Accordingly, through (i) their dispositive power
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over the shares of Fresenius AG held by the Foundation and (ii) their
power to direct the vote of the shares held by the Foundation (including
the shares subject to the pooling agreement), Dr. Stiefenhofer and Mr.
Kroner may be deemed, under the rules of the Securities and Exchange
Commission (as distinguished from the German concept of beneficial
ownership), to beneficially own 87.36% of the voting shares of Fresenius
AG.
(4) Does not include 1,320,000 shares issuable to Fresenius AG in connection
with the Company's agreement to acquire certain assets of the diagnostics
business unit of the I+D Division of Fresenius AG. See Item 13, "Certain
Relationships and Related Transactions."
(5) Represents 10,000 shares issuable upon exercise of options as described
in note (2) above.
(6) Represents 200,000 shares issuable upon exercise of options as described
in note (2) above.
(7) Represents 10,588 shares issuable upon exercise of options as described
in note (2) above.
(8) Includes all shares subject to exercisable options referred to in note
(2) above, and 95,000 additional shares held or subject to options
exercisable by officers and directors of the Company not named in the
table.
The Company is not aware of any arrangement which may at a subsequent date
result in any change of control of the Company.
Item 13. Certain Relationships and Related Transactions
Fresenius AG, currently the beneficial owner of approximately 55%
of Gull's outstanding Common Stock, distributes certain of the Company's
products in Europe and is a major customer of the Company. During the years
ended December 31, 1996, 1995 and 1994 sales of Company products to Fresenius
totaled $1,535,943, $2,370,977 and $1,106,582, or approximately 9%, 13% and
7%, respectively, of total sales. Dr. Gerd Krick and Dr. Matthias Schmidt,
each of whom is a director of the Company, are the Chairman and a member,
respectively, of the Management Board of Fresenius AG. In January 1995, the
Company sold all of the intangible assets relating to its German operations to
Fresenius AG for approximately $313,500. The intangible assets had no
recorded cost on the Company's financial records. The transaction was
negotiated on an arm's length basis between the Company's management and
representatives from the I+D Division.
On April 21, 1997 Fresenius AG, Gull GmbH, a wholly owned
subsidiary of the Company (the "Purchaser") and the Company entered into an
Asset Purchase Agreement (the "Asset Purchase Agreement"), setting forth their
agreement for the Purchaser's acquisition of certain assets of the diagnostics
business unit (the "Business") of the I+D Division of Fresenius AG. The
Purchaser has assigned all of its rights under the Asset Purchase Agreement to
the Company. After the Closing Date, the Company will contribute the assets
of the Business to the Purchaser in exchange for non-voting stock of the
Purchaser. Under the Asset Purchase Agreement, the Company, through the
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Purchaser, agreed to purchase, and Fresenius AG agreed to sell, all fixed
assets, all inventory stocks, and all rights belonging to the Business as of
the date of the Asset Purchase Agreement ("Assets") as well as certain
industrial property rights, intangible objects and rights of usage related
thereto. "Assets" does not include receivables, checks, cash or credit
balances existing or accrued as of December 31, 1996. The closing date (the
"Closing Date") is presently anticipated to occur after all of the conditions
to closing have been satisfied and, if appropriate, at the end of a fiscal
quarter. Under the Asset Purchase Agreement, the purchase price for the
Business will be $10,942,800, subject to adjustment, as described below. The
purchase price will be payable in shares of the Company Common Stock, with
each share having an agreed value of $8.29, which was the average of closing
sale prices of a share of the Company Common Stock on the American Stock
Exchange for the twenty trading days preceding and the twenty trading days
following the first public announcement of the execution of the letter of
intent on December 13, 1996. The Purchaser has agreed to assume all
liabilities pertaining to the operations of the Business after December 31,
1996 (the "Effective Date"). Fresenius AG has agreed to operate the Business
from the Effective Date to the Closing Date on behalf and for the account of
the Purchaser. Fresenius AG has also agreed that from April 21, 1997 to the
Closing Date, it will conduct the operations, activities, and practices of the
Business in the ordinary course of business, consistent with past practices.
In addition, Fresenius AG has agreed to enter into certain service contracts
with the Purchaser, and to lease to the Purchaser certain real property
currently occupied by the Business.
The consummation of the sale of the Business is subject to receipt
of the following approvals: (a) Fresenius AG Supervisory Board approva, which
approval has been obtained; (b) the Company Board of Directors approval,
including the unanimous approval of the members of the Special Committee of
Independent Directors, which approval has been obtained, (c) approval of a
majority of the non-Fresenius AG shareholders actually voting at the Company
annual meeting, presently scheduled to be held on June 24, 1997; and
(d) approval for listing by the American Stock Exchange of the shares of
Common Stock to be issued to Fresenius AG. Conditions precedent include:
(a) delivery to the Company Board of Directors of a satisfactory opinion of
Vector Securities, in form and substance satisfactory to Fresenius AG, the
Company and the Purchaser, to the effect that the purchase price for the
Business and the other terms and conditions of the Asset Purchase Agreement
are fair, from a financial point of view, to the shareholders of the Company
(other than Fresenius AG), which opinion has been delivered; (b) non-denial of
the asset sale by the German Federal Cartel Office; and (c) execution of a
Registration Rights Agreement, as described below. There can be no assurance
that acquisition of the Business by the Company will be consummated.
Assuming a closing under this Asset Purchase Agreement, Fresenius
AG's beneficial ownership of the Company's Common Stock will increase from
approximately 55% to approximately 62%. Pursuant to a Retransfer of Shares
Agreement by and among Fresenius AG, the Purchaser and the Company, dated
April 21, 1997, the purchase price described above is subject to adjustment
under certain circumstances and could change the number of shares to be issued
to Fresenius AG. The parties agreed that the purchase price would be reduced
by the amount of 33,000 shares of the Company Common Stock if the present
commercial relationship between Fresenius AG and a certain supplier to the
Business (the "Supplier") is entirely terminated ("Entire Termination") on or
before December 31, 1997. If the commercial relationship between Fresenius AG
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and the Supplier relating to certain products of the Supplier is terminated
("Partial Termination") on or before such date, the purchase price would only
be reduced by an amount of 18,721 shares of the Company Common Stock. If
either an Entire Termination or a Partial Termination takes place after
payment of the purchase price, Fresenius AG will be obliged to retransfer the
33,000 or 18,721 shares of Common Stock, as applicable, to the Company.
Likewise, if within two years after Entire Termination or Partial Termination,
the Purchaser, the Company or an affiliate of either enters into a commercial
relationship with the Supplier or a successor to the Supplier, which is in
quality and volume comparable with the terminated commercial relationship
between Fresenius AG and the Supplier, then the Company and the Purchaser
shall transfer the 33,000 or 18,721 shares of Common Stock, as applicable,
back to Fresenius AG.
In connection with the execution of the Asset Purchase Agreement,
Fresenius AG and the Company agreed that at the closing under the Asset
Purchase Agreement, they would enter into a Registration Rights Agreement
pursuant to which Fresenius AG would have the right on two separate occasions
to require that the Company file a registration statement under the securities
Act of 1933, as amended (the "1933 Act") for the registration of shares of
Common Stock issued to Fresenius AG as the consideration for the Business.
The Registration Rights Agreement provides that the Company will bear the
costs of registering such shares, up to a maximum of $20,000. Fresenius AG
would also have the right to include such shares in certain registration
statements filed by the Company under the 1933 Act for its own account or for
the registration of shares of Common Stock held by other persons.
The description of the Asset Purchase Agreement and the Retransfer
of Shares Agreement set forth above are qualified in their entirety by
reference to such agreements, copies of which are on file with the Securities
and Exchange Commission and the American Stock Exchange.
The Board of Directors of the Company and Dr. Wentz have discussed
the terms of a bonus agreement. Under the terms of the proposed bonus
agreement, for a period of seven years from the date of the bonus agreement,
Dr. Wentz would be paid a performance bonus of 2% of the net receipts from
sales of certain new tests for coronary artery disease. Consideration for the
payment of the performance bonus would be based, among other things, upon the
assignment to the Company by Dr. Wentz of all improvements and inventions
hereafter developed by Dr. Wentz and Dr. Wentz's agreement to continue to
provide the Company with the benefit of his experience, knowledge and skill.
Under the bonus agreement, the Company would be required to provide reasonable
support for research, development and testing with respect to these tests
until such time as the Company commences commercial production of products
using the tests or notifies Dr. Wentz that it has abandoned development
thereof. In the latter event, Dr. Wentz would have a first right to acquire
ownership of all related inventions, patents, copyrights, discoveries, etc.,
relating to the tests on terms to be negotiated by Dr. Wentz and the Company.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GULL LABORATORIES, INC.
Date: May 13, 1997 By: /s/ George R. Evanega
----------------------------
George R. Evanega
President and CEO
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Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
/s/ George R. Evanega Date: May 13, 1997
- ---------------------------------------- --------------------
George R. Evanega President and Chief
Executive Officer
(Principal Executive
Officer)
Director
/s/ Michael B. Malan Date: May 13, 1997
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Michael B. Malan Secretary/Treasurer
(Principal Financial &
Accounting Officer)
/s/ Myron W. Wentz Date: May 13, 1997
- ---------------------------------------- --------------------
Myron W. Wentz Chairman of the Board
of Directors
________________________________________ Date: ____________________
Matthias Schmidt Director, Vice
Chairman
________________________________________ Date: ____________________
Gerd Krick Director
________________________________________ Date: ____________________
Ulrich Wagner Director
/s/ Anne-Marie Richart Date: May 13, 1997
- ---------------------------------------- --------------------
Anne-Marie Richart Director
/s/ Peter Gladkin Date: May 13, 1997
- ---------------------------------------- --------------------
Peter Gladkin Director
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EXHIBITS
10.1 Asset Purchase Agreement between the Company, Gull
GmbH, and Fresenius AG (incorporated by reference
to Schedule 13 D/A (Amendment No. 4) filed by
Fresenius AG).
10.2 Retransfer of Shares Agreement between the Company,
Gull GmbH, and Fresenius AG (incorporated by
reference to Schedule 13 D/A (Amendment No. 4)
filed by Fresenius AG).
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