SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. _____)
|X| Filed by the Registrant
|_| Filed by a Party other than the Registrant
Check the appropriate box: |_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant
to ss. 240.14a-11(c) or ss. 240.14a-12
GULL LABORATORIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing: (Check the appropriate box)
|_| No fee required
|X| Fee computed on table below per Exchanage Act
Rules 14a-6(i)(1) and O-11
(1) Title of each class of securities to which transaction applies:
Common stock, $001 par value per share
--------------------------------------
(2) Aggregate number of securities to which transaction applies: 8,016,012
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount of which the filing fee is
calculated and state how it was determined):
$2.25 per share; determined after arms' length negotiation between
unaffiliated parties
(4) Proposed maximum aggregate value of transaction: $18,036,027
(5) Total fee paid: $3,607.21
|X| Fee paid previously with preliminary materials
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid: $3,607.21
(2) Form, schedule or registration statement no.: Preliminary Proxy Statement
(3) Filing party: Registrant
(4) Date filed: September 23, 1998
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GULL LABORATORIES, INC.
Notice of Special Meeting of Shareholders
to be held November 5, 1998
To the Shareholders:
A Special Meeting of Shareholders of Gull Laboratories, Inc.
(the "Company") will be held at the 53rd Floor Conference Center at the offices
of O'Melveny & Myers LLP, Citicorp Center, 153 East 53rd Street, New York, NY
10022, on Thursday, November 5, 1998, at 10:00 a.m. for the following
purposes:
1. To approve the Merger Agreement among the Company,
Meridian, Diagnostics, Inc., Fresenius AG, and Meridian Acquisition Co., dated
as of September 15, 1998 (the "Agreement"), and the merger of Meridian
Acquisition Co. into the Company.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Information regarding the matters to be acted upon at the
meeting is contained in the Proxy Statement attached to this Notice. The Company
is also enclosing a copy of its Form 10-K for the year ended December 31, 1997,
and a copy of its Form 10-Q for the quarter ended June 30, 1998. The text of the
Agreement is contained in Appendix "A" to the Proxy Statement. Only shareholders
of record at the close of business on September 15, 1998, will be entitled to
notice of and to vote at the meeting or any adjournment thereof.
Your vote is important. Please sign and date the enclosed
Proxy and return it promptly in the enclosed return envelope whether or not you
expect to attend the meeting. The envelope requires no postage if mailed in the
United States. You may revoke your Proxy and vote in person should you decide to
attend the meeting.
By Order of the Board of Directors
Silke Humberg, Ph.D.
Chief Executive Officer and President
Salt Lake City, Utah
October 5, 1998
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PROXY STATEMENT
Special Meeting of Shareholders
of
Gull Laboratories, Inc.
GENERAL
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Gull Laboratories, Inc., a
Utah corporation ("Gull" or the "Company"), to be used at the Special Meeting of
Shareholders of the Company to be held at 10:00 a.m. Eastern Standard Time on
November 5, 1998 at the 53rd Floor Conference Center at the offices of
O'Melveny & Myers LLP, Citicorp Center, 153 East 53rd Street, New York, New York
10022 (telephone number (212) 326-2000) and at any adjournment or postponement
thereof.
The purpose of the Special Meeting is to consider and vote
upon a proposal to approve a Merger Agreement, dated as of September 15, 1998
(the "Merger Agreement"), by and among Gull, Meridian Diagnostics, Inc., an Ohio
corporation ("Meridian"), Fresenius AG, a German stock corporation
("Fresenius"), and Meridian Acquisition Co., a Utah corporation and a
wholly-owned subsidiary of Meridian ("Acquisition"), and the transactions
contemplated by the Merger Agreement and such other business as lawfully may
come before the Special Meeting.
Pursuant to the Merger Agreement, Acquisition will merge into
and with Gull (the "Merger"), with Gull remaining as the surviving corporation.
As more fully described herein under "The Merger Agreement," the result of the
Merger will be that Gull will become a wholly-owned subsidiary of Meridian and
each issued and outstanding share of common stock of Gull, par value $0.001 per
share (the "Common Stock"), other than dissenters' shares, will be converted
into the right to receive a cash payment of $2.25, without interest (the "Merger
Consideration").
THE BOARD AND THE COMMITTEE OF INDEPENDENT DIRECTORS (THE
"INDEPENDENT COMMITTEE") BOTH RECOMMEND THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
The close of business on September 15, 1998 (the "Record
Date") has been fixed as the record date for the determination of the
shareholders entitled to notice of, and
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to vote at, the Special Meeting (the "Shareholders"). On such date there were
outstanding and entitled to vote 8,016,012 shares of Common Stock. Each share of
Common Stock is entitled to one vote on each matter to be considered at the
meeting. The affirmative vote of the holders of a majority of the Common Stock
outstanding on the Record Date is required for approval of the Merger Agreement.
Fresenius, the holder of 62% of the shares of Common Stock, has covenanted in
the Merger Agreement to vote its shares of Common Stock for approval of the
Merger Agreement.
You are requested to sign and date the accompanying proxy card
and promptly return it to Gull in the enclosed postage-paid, addressed envelope,
even if you plan to attend the Special Meeting.
DO NOT FORWARD ANY STOCK CERTIFICATES AT THIS TIME. YOU WILL
RECEIVE INSTRUCTIONS REGARDING EXCHANGING YOUR COMMON STOCK FOR THE
MERGER CONSIDERATION AFTER THE SPECIAL MEETING.
The enclosed proxy card, the accompanying Notice of Special
Meeting of Shareholders and this Proxy Statement are being mailed to
shareholders of Gull on or about October 5, 1998.
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<TABLE>
<CAPTION>
Table of Contents
Page
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GENERAL...........................................................................................................i
SUMMARY...........................................................................................................1
General Information........................................................................................1
The Parties................................................................................................1
Date and Place of the Special Meeting......................................................................1
Record Date; Required Vote.................................................................................2
Appraisal or Dissenters' Rights............................................................................2
The Merger.................................................................................................2
Exchange of Certificates...................................................................................3
Recommendations for the Merger.............................................................................3
Opinion of Financial Advisor...............................................................................4
Purposes and Reasons for the Merger........................................................................4
Interests of Certain Persons in the Merger.................................................................4
Accounting Treatment of the Merger.........................................................................5
Federal Income Tax Consequences............................................................................5
Price Range of Company Common Stock and Dividend History...................................................5
SPECIAL MEETING...................................................................................................6
General....................................................................................................6
Record Date; Voting........................................................................................7
Vote Required to Approve the Merger........................................................................7
Proxy Information; Revocation..............................................................................7
Appraisal Rights and Right to Dissent......................................................................7
Proxy Solicitation.........................................................................................8
SPECIAL FACTORS...................................................................................................8
The Merger.................................................................................................8
Background of Merger and Fresenius's Decision to Divest its Interests in Gull..............................9
Negotiations Regarding the Merger.........................................................................12
Recommendation of the Board of Directors; the Company's Purpose
and Reasons for and Belief as to the Fairness of the Merger...............................................16
Recommendation.....................................................................................16
The Company's Purpose and Reasons for the Merger
and the Timing of the Merger.................................................................16
Fairness...........................................................................................17
Market Test........................................................................................17
Liquidation Value..................................................................................17
Status Quo.........................................................................................18
Fairness Opinion...................................................................................18
Opinion of Financial Advisor Delivered in Connection with the Merger Agreement............................18
Analysis of Market Multiples of Selected Comparable Public Companies...............................21
Discounted Cash Flow Analysis......................................................................23
Selected Comparable Transactions Analysis..........................................................24
Comparison of Gull's Financial Performance with the Industry.......................................25
Analysis of Gull's Recent Stock Performance........................................................26
Prior Contacts with Meridian..............................................................................26
CERTAIN EFFECTS OF THE MERGER....................................................................................28
</TABLE>
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<TABLE>
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Federal Income Tax Consequences...........................................................................28
General............................................................................................28
Federal Income Tax Consequences to Meridian, Acquisition and Gull..................................29
Federal Income Tax Consequences to Gull's Shareholders.............................................29
Accounting Treatment of the Merger........................................................................29
Regulatory Approvals......................................................................................30
Expenses of the Merger....................................................................................30
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF..................................................................30
MERGER AGREEMENT................................................................................................33
Description of the Agreement..............................................................................33
Terms of the Merger.......................................................................................33
Conditions to the Merger..................................................................................34
Representations and Warranties............................................................................35
Conduct of Business Pending Merger........................................................................35
Additional Agreements.....................................................................................36
Additional Agreements of Fresenius........................................................................36
Indemnification...........................................................................................37
Fees and Expenses.........................................................................................38
Modification and Waiver...................................................................................38
Termination of the Merger Agreement.......................................................................38
Exchange of Certificates..................................................................................39
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY..............................................................40
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................................................41
Market Information........................................................................................41
Security Holders..........................................................................................42
Dividends.................................................................................................42
RECOMMENDATION OF THE BOARD OF DIRECTORS AND VOTE REQUIRED.......................................................42
INTEREST OF CERTAIN PERSONS IN THE MERGER........................................................................43
SOLICITATION AND VOTE OF PROXIES.................................................................................44
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................45
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.........................................................................45
SHAREHOLDER PROPOSALS............................................................................................44
MISCELLANEOUS....................................................................................................45
Availability of Information...............................................................................45
</TABLE>
Appendix A Merger Agreement dated as of September 15, 1998, by and
among Gull, Meridian, Fresenius, and Acquisition (without
exhibits)
Appendix B Fairness Opinion of Houlihan Valuation Advisors
Appendix C Dissenters' Rights Notice
Appendix D Section 16-10a-1301 et seq. of the Utah Revised Business
Corporation Act
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SUMMARY
The following is a brief summary of information included
elsewhere in this Proxy Statement. The summary is necessarily incomplete and is
qualified in its entirety by the more detailed information in this Proxy
Statement, its Appendices and the documents incorporated by reference and
referred to in this Proxy Statement. Capitalized terms used and not defined in
the summary have the meanings as defined elsewhere in this Proxy Statement.
YOU SHOULD READ THE ENTIRE PROXY STATEMENT, THE APPENDICES,
AND THE INCORPORATED DOCUMENTS PRIOR TO TAKING ANY ACTION WITH
RESPECT TO THE MERGER PROPOSAL.
General Information
This Proxy Statement relates to the proposed merger of
Acquisition with and into Gull pursuant to the Merger Agreement by and among
Gull, Meridian, Fresenius, and Acquisition. The result of the Merger will be
that each holder of Common Stock will receive $2.25 per share in exchange for
each share of such Common Stock.
The Parties
Gull Laboratories, Inc., a Utah corporation (Gull or the
"Company"), is engaged in the development, manufacture and marketing of
high-quality diagnostic test kits for the detection of infectious diseases and
autoimmune disorders. Gull also offers a line of instrumentation for laboratory
automation and products for blood grouping and HLA tissue typing for
transplantation. The mailing address of the Company's principal executive
officer is 1011 East Murray-Holladay Road, Salt Lake City, UT 84117.
Fresenius AG, a German stock company and the majority
shareholder of the Company ("Fresenius"), is an international operating company
based in Bad Homburg, Germany, which develops, manufactures and distributes
pharmaceutical and medical system products. The mailing address of Fresenius is
Else-Kroner-Strasse 1, D-61352 Bad Homburg, Germany.
Meridian Diagnostics, Inc., an Ohio corporation ("Meridian")
is a fully integrated medical diagnostic company that develops, manufactures,
and markets a broad range of innovative diagnostic test kits, purified reagents
and related products. Using a variety of technologies, these products provide
accuracy, simplicity and speed and enable early diagnosis and treatment of
common medical conditions such as gastrointestinal, urinary tract and
respiratory infections. Meridian Acquisition Co., a Utah corporation
("Acquisition"), has been organized as a wholly-owned subsidiary of Meridian for
the purpose of effecting the Merger and has engaged in no other business
activities other than those related to the acquisition of the Company. The
mailing address of both Meridian and Acquisition is 3471 River Hills Drive,
Cincinnati, OH 45244. See, "Certain Information Pertaining to Meridian and
Acquisition."
Date and Place of the Special Meeting
The Special Meeting is to be held at the 53rd Floor Conference
Center at the offices of O'Melveny & Myers LLP, Citicorp Center, 153 East 53rd
Street, New York, New York 10022, on Thursday, November 5, 1998, at 10:00
a.m., Eastern Standard Time. At the Special Meeting and at any adjournment or
postponement thereof, the Shareholders of
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the Company will be asked to consider and vote upon the proposal to approve the
Merger Agreement and the transactions contemplated thereby.
Record Date; Required Vote
As of September 15, 1998, the Record Date, 8,016,012 shares of
Common Stock were issued and outstanding, each of which is entitled to one vote
on each matter to be acted upon at the Special Meeting. Only Shareholders of
record at the close of business on the Record Date will be entitled to notice of
and to vote at the Special Meeting. The presence of a majority of the
outstanding shares of Common Stock will constitute a quorum for purposes of the
Special Meeting. The affirmative vote of the holders of a majority of the Common
Stock outstanding on the Record Date is required for approval of the Merger
Agreement. Fresenius, the holder of 62% of the shares of Common Stock, has
covenanted in the Merger Agreement to vote its shares of Common Stock for
approval of the Merger Agreement.
The failure to return a properly executed proxy card, to vote
in person at the Special Meeting or, with respect to shares held of record by a
broker or other nominee, to provide such broker or nominee with voting
instructions (resulting in a broker non-vote) or abstaining from voting, will
have the same effect as a vote against the Merger. Proxies may be revoked,
subject to the procedures described herein, at any time up to and including the
date of the Special Meeting. See, "THE SPECIAL MEETING -- Vote Required to
Approve the Merger."
Appraisal or Dissenters' Rights
Because the Merger must be approved by the Gull Shareholders,
the Shareholders are entitled, under Sections 16-10a-1301 et seq. of the Utah
Revised Business Corporation Act, to dissent from the proposed Merger and obtain
payment for the fair value of their shares in the event the Merger is approved.
Fair value of the shares is defined as the value of the Shares immediately
before the effective date of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger. A Notice of Dissenters' Rights is
being submitted to Shareholders with this Notice of Special Shareholders'
Meeting and Proxy Statement. A Shareholder who wishes to assert dissenters'
rights must (I) deliver to the Company, prior to the voting on the Merger at the
meeting, written notice of the Shareholder's intent to demand payment for the
Shareholder's shares if the proposed Merger is effected and (ii) not vote for
the Merger. Within ten (10) days after the effective date of approval of the
Merger by Shareholders, notice will be sent to dissenting Shareholders stating
when and where written demand for payment must be sent and when certificates for
shares must be deposited by the Shareholders to effectuate the purchase of the
Share from the dissenting Shareholders. See, "SPECIAL MEETING -- Appraisal
Rights and Right to Dissent."
The Merger
Gull, Meridian, Fresenius and Acquisition have entered into
the Merger Agreement whereby Acquisition will merge with and into Gull. Gull
will remain as the surviving corporation. The result of the Merger will be that
Gull will become a wholly-owned subsidiary of Meridian. Each share of Common
Stock, other than dissenters' shares, will be canceled and converted into the
right to receive the Merger Consideration. Each issued and outstanding share of
Acquisition will be converted into one share of Common Stock of Gull at the
Effective Time (as defined below), the separate corporate
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existence of Acquisition will cease and the name of Gull will remain "Gull
Laboratories, Inc."
A condition to the closing of the Merger is that each
outstanding option to purchase shares of Common Stock of the Company be
canceled. Meridian has agreed to bear the cost of such option cancellations. All
of Gull's stock option plans will be terminated as of the Effective Time.
The effectiveness of the Merger is conditioned upon the
satisfaction or waiver of certain conditions including, without limitation,
approval of the Merger by the holders of a majority of the outstanding Common
Stock, which is being sought pursuant to this Proxy Statement. If the Merger is
approved by the requisite vote of Gull's Shareholders, and all remaining
conditions are satisfied or waived, the Merger will become effective upon the
filing of the Articles of Merger with the Utah Division of Corporations and
Commercial Code or at such later time as the parties may specify in such
Articles of Merger (the "Effective Time"). If the Merger is approved, Gull and
Meridian expect to file the Articles of Merger on or shortly after the date of
the Special Meeting. Fresenius, the holder of 62% of the shares of Common Stock,
has covenanted in the Merger Agreement to vote its shares of Common Stock for
approval of the Merger Agreement, thereby assuring the Merger will be approved.
See, "THE MERGER AGREEMENT -- Description of the Merger Agreement."
Exchange of Certificates
Upon consummation of the Merger, each share of Common Stock
owned by the Shareholders of Gull other than shares owned by Shareholders
exercising their dissenters' rights, will be canceled and converted into the
right to receive the Merger Consideration. See, "THE MERGER AGREEMENT" and
Appendix A. If the Merger is consummated, the Shareholders of Gull will be
required to surrender their stock certificates in proper form as a condition to
receipt of payment. STOCK CERTIFICATES SHOULD NOT BE SURRENDERED WITH THE
PROXIES. Promptly after the Merger occurs, a transmittal letter with
instructions will be sent to Shareholders to be used by them to surrender their
share certificates. See, "THE MERGER AGREEMENT -- Exchange of Certificates."
Recommendations for the Merger
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE MEMBERS OF THE
INDEPENDENT COMMITTEE, RECOMMEND THAT THE SHAREHOLDERS VOTE FOR THE MERGER. The
Board and the Independent Committee base their recommendation on the following
factors: (i) the terms and conditions of the Merger Agreement that were
determined primarily by negotiations between Meridian, the Company, and
Fresenius, and reviewed by the Independent Committee; (ii) the assets,
obligations, operations, earnings and prospects of Gull and the status of the
medical diagnostic products industry generally; (iii) the results of market
solicitation over an eight month period by Fresenius to determine whether there
were other parties interested in acquiring Gull; (iv) a review of possible
alternatives to the sale of Gull; and (v) the written opinion of Houlihan
Valuation Advisors to the effect that, as of September 15, 1998, the Merger is
fair from a financial point of view. See, "SPECIAL FACTORS." The negotiation of
the Merger Agreement did not include participation on behalf of the Company by a
representative of the minority Shareholders, as such, although Anne-Marie
Ricart, a director and a substantial minority shareholder in Gull, is a member
of the Independent Committee. The Independent Committee consists of
disinterested directors who at all times have been represented by
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counsel, and have been advised with respect to certain financial matters by
Houlihan Valuation Advisors. Because the members of the Independent Committee
have no relationship with Meridian, or Acquisition, and are not employees of
Gull, the Independent Committee believes that it had no conflicts of interest
that would interfere with its ability to protect the interests of Gull's
Shareholders.
Opinion of Financial Advisor
Houlihan Valuation Advisors, the financial advisor to the
Independent Committee, rendered a written opinion (the "Fairness Opinion") dated
September 15, 1998 to the Independent Committee to the effect that, as of the
date of such opinion, the Merger is fair from a financial point of view, to the
public Shareholders of Gull (other than Fresenius and its affiliates). The full
text of the Fairness Opinion, which sets forth the assumptions made, procedures
followed, matters considered and limitations on the review undertaken, is
attached as Appendix B to this Proxy Statement.
Purposes and Reasons for the Merger
The Company's purpose and reason for the Merger are to allow
the Shareholders of the Company to sell their shares in Gull at a price that the
Independent Committee and Board believe is fair to and in the best interest of
the Shareholders. The timing of the Merger has been determined based on the time
required to review various alternatives to enhance shareholder value for Gull,
to solicit indications from persons who might be interested in acquiring Gull,
to negotiate the terms of the Merger Agreement, and to obtain the requisite
Shareholder and other approvals.
Meridian believes that its acquisition of Gull offers
substantial growth opportunities for Meridian in products and distribution
channels not now being served by Meridian and will enhance Meridian's
shareholder value.
Interests of Certain Persons in the Merger
All current officers and directors of Gull will resign as part
of the closing of the Merger. Certain officers or employees of Gull may be
entitled to severance payments upon the termination of their employment. Gull
has been informed by Meridian that Meridian intends to enter into employment
agreements with Dr. Fred Rachford and John Turner, both current executive
officers of Gull, and a consulting agreement with Holly Scribner, formerly an
executive officer of and currently a consultant to Gull. The execution of such
agreements is a condition to Meridian's obligation to consummate the Merger. All
current directors of Gull will be entitled to certain indemnification rights
under the Merger Agreement. Consequently, the interests of Messrs. Rachford and
Turner, by virtue of their employment agreements, and Ms. Scribner, by virtue of
her consulting agreement and the interests of all of the Company's directors, by
virtue of their indemnification rights, may be deemed to be separate from or
adverse to the interests of the remaining Shareholders. Fresenius has also
agreed to indemnify the directors of Gull, and has entered into indemnification
agreements with the members of the Independent Committee relating to their
service on that Committee. As of the Record Date, Messrs. Rachford and Turner
and Ms. Scribner held of record or beneficially (excluding 138,500 shares
underlying options) 33,017 (30,217 shares owned by Dr. Rachford and 2,800 shares
owned by Ms. Scribner) shares of Common Stock or less than 1% of the issued and
outstanding Common Stock. It is expected that the shares of Common Stock owned
by Dr. Rachford and Ms. Scribner will be voted in favor of the Merger, that
Messrs. Rachford and Turner and Ms. Scribner will surrender their options to
purchase Gull Common Stock, and that their compensation
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arrangements under their employment or consulting agreements with Meridian will
include options to purchase Meridian common stock. See, "INFORMATION PERTAINING
TO MERIDIAN AND ACQUISITION," "THE MERGER AGREEMENT," and "INTEREST OF CERTAIN
PERSONS IN THE MERGER."
In the Merger Agreement, Fresenius has agreed, subject to
certain limitations, to indemnify Meridian for losses arising out of breaches of
the Company's representations and warranties, non-performance of the Company's
obligations, shareholder lawsuits, and certain specified contingencies disclosed
by Gull to Meridian. Fresenius has also agreed to contribute certain obligations
due from Gull to Gull's capital and that amounts due from the Company to
Fresenius (approximately $5,000,000 at September 30, 1998, comprising payments
by Fresenius to vendors on behalf of the Company and other advances and fees)
will be reduced by an amount equal to the decrease in the stockholders' equity
of the Company from December 31, 1997 to the Closing Date. Any net amount due to
Fresenius will be evidenced by a promissory note of Meridian bearing interest at
7 1/2% per annum and payable in two equal installments on June 15, 1999 and
December 31, 1999 and certain additional amounts may be set off against such
note. Fresenius has also agreed to continue the lease of certain property in Bad
Homburg, Germany and to continue providing certain services, which it has
previously provided and currently does provide to Gull. Fresenius will also
enter into an agreement with Meridian to make available facilities for the
manufacture of certain Gull products at Fresenius's facility for a period not to
exceed two years.
Accounting Treatment of the Merger
The Merger will be treated, for financial reporting purposes,
as a sale by Gull's shareholders to Meridian for cash. Accordingly, no gain or
loss will be recognized by Gull as a result of the Merger. As part of the
Merger, Fresenius will contribute an obligation of Gull in the amount of DM
856,281.18 and other amounts to Gull's capital. The Merger will be accounted for
by Meridian as a purchase.
Federal Income Tax Consequences
The receipt of cash by a Shareholder of Gull pursuant to the
Merger Agreement will be a taxable transaction to such Shareholder for federal
income tax purposes and may also be a taxable transaction under applicable
state, local or other laws. Each Shareholder is urged to consult his or her own
tax advisor as to the particular tax consequences to such Shareholder. See,
"SPECIAL FACTORS -- Federal Income Tax Consequences."
Price Range of Company Common Stock and Dividend History
The shares of Common Stock are traded on the American Stock
Exchange under the symbol "GUL." The following table sets forth, for the period
indicated, the prices of Gull's common stock, based on the closing sale
quotation without markup, markdown, commissions or adjustments.
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Price Range of Company
Common Stock and Dividend History
High Low
1996 First Quarter 5.500 3.625
Second Quarter 5.500 4.250
Third Quarter 7.125 4.125
Fourth Quarter 12.500 5.875
1997 First Quarter 11.125 8.625
Second Quarter 11.750 9.563
Third Quarter 13.375 9.625
Fourth Quarter 11.750 10.00
1998 First Quarter 11.750 9.875
Second Quarter 11.875 3.250
Third Quarter 5.625 1.938
On July 10, 1998, the last trading day prior to Gull's public
announcement that it was engaged in merger negotiations, the high and low sales
prices of the Common Stock on the American Stock Exchange were $4.500 and
$4.438, respectively. On September 15, 1998, the date the Merger Agreement was
executed, the closing price of the Common Stock on the American Stock Exchange
was $2.125.
Gull has never paid any cash dividends on its shares of Common
Stock. See, "Price Range of Company Common Stock and Dividend History."
SPECIAL MEETING
General
This Proxy Statement is being furnished to holders of Gull's
Common Stock in connection with the solicitation of proxies by the Company's
Board of Directors for use at the Special Meeting to be held at the 53rd Floor
Conference Center at the offices of O'Melveny & Myers LLP, Citicorp Center, 153
East 53rd Street, New York, New York 10022, on Thursday, November 5, 1998, at
10:00 a.m., Eastern Standard Time, and at any adjournment or postponement
thereof.
At the Special Meeting, holders of Gull's Common Stock will
consider and vote upon a proposal to merge Acquisition with and into the Company
pursuant to the Merger Agreement. The result of the Merger will be that each
holder of Common Stock, other than holders exercising dissenters' rights, will
receive $2.25 per share in exchange for such Common Stock.
Information contained in this Proxy Statement with respect to
Meridian, Acquisition and plans for Gull after the consummation of the Merger
has been provided by Meridian. All other information contained herein has been
provided by Gull or Fresenius.
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Record Date; Voting
The Record Date for determination of Gull's Shareholders
entitled to notice of and to vote at the Special Meeting has been fixed as the
close of business on September 15, 1998. Accordingly, only holders of record of
shares of Common Stock on the Record Date will be entitled to notice of and to
vote at the Special Meeting. As of the Record Date, the outstanding voting
securities of Gull consisted of 8,016,012 shares of Common Stock. Each
Shareholder of record as of the Record Date is entitled to one vote on each
matter for each share then held. The holders of a majority of the issued and
outstanding shares of Common Stock attending the meeting in person or by proxy
will constitute a quorum for the conduct of business at the Special Meeting, and
all adjournments and postponements thereof, notwithstanding that less than a
quorum may remain after commencement of the Special Meeting.
Vote Required to Approve the Merger
The affirmative vote of the holders of a majority of the
Common Stock outstanding on the Record Date is required for approval of the
Merger Agreement. Fresenius, which owns more than a majority of the Common Stock
outstanding on the Record Date, has covenanted in the Merger Agreement to vote
for approval of the Merger Agreement. Accordingly, the Merger Agreement will be
approved.
Proxy Information; Revocation
Any Shareholder has the power to revoke his or her proxy
before its exercise at the Special Meeting or any adjournment or postponement
by: (i) giving written notice of such revocation to Gull's Secretary, Michael B.
Malan, 1011 East Murray-Holladay Road, Salt Lake City, UT 84117, prior to the
Special Meeting; (ii) giving written notice of such revocation to Gull's
Secretary at the Special Meeting; or (iii) signing and delivering a proxy
bearing a later date. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed. The mere presence at the Special Meeting of
a shareholder who has executed and delivered a valid proxy will not revoke such
proxy. The powers of the proxy holders with respect to the shares of a
particular Shareholder will be suspended if the Shareholder executing the proxy
is present at the Special Meeting and elects to vote in person. Subject to such
revocation or suspension, each properly executed proxy received by the proxy
holders will be voted at the Special Meeting (whether or not instructions are
specified thereon). If instructions are specified thereon, such proxy will be
voted in accordance therewith; and if no specifications are made, such proxy
will be voted FOR the Merger Agreement.
Appraisal Rights and Right to Dissent
The transactions contemplated by the Merger Agreement require
a shareholder vote. Under ss.ss. 16-10a-1301 et seq of the Utah Revised Business
Corporation Act, Gull's shareholders are entitled to dissent from the proposed
Merger, and obtain payment of the fair value of their shares in the event the
Merger is approved. Fair value of the shares means the value of the shares
immediately before the effective date of the Merger, excluding any appreciation
or depreciation in anticipation of the Merger. The transaction is expected to be
consummated on or about November 6, 1998. The high and low sales prices of
Gull's Common Stock on July 10, 1998, the day prior to the press release
announcing that Fresenius and Gull were engaged in negotiations with an unnamed
third party regarding the merger of Gull, were $4.500 and $4.438 per share,
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respectively. On September 15, 1998, the date the Merger Agreement was executed,
the closing price of the Common Stock on the American Stock Exchange was $2.125.
The fair value of Gull's Common Stock immediately prior to the consummation of
the Merger may or may not reflect these prices. Gull will determine the value of
Gull's Common Stock by considering all relevant factors. Gull does not expect
that the value of the Common Stock will exceed $2.25 per share. Notice of
Dissenters' Rights is annexed as Appendix C to this Notice of Special
Shareholders' Meeting and Proxy Statement. A Shareholder who wishes to assert
dissenters' rights must (i) deliver to Gull, prior to the voting on the Merger
Agreement, written notice of the Shareholder's intent to demand payment for the
Shareholder's shares if the proposed Merger is effected and (ii) not vote for
the Merger.
Within ten (10) days after the effective date of the approval
of the Merger Agreement by Shareholders, notice will be sent to dissenting
Shareholders stating when and where written demand for payment must be sent and
when certificates for shares must be deposited by the Shareholder to effectuate
the purchase of shares from the dissenting Shareholder. The rights of the
dissenter to demand payment are lost if the dissenter fails to give timely
written notice of intent to demand payment, or fails to timely make written
demand for payment after receiving Gull's notice. A COPY OF A DISSENTERS' RIGHTS
NOTICE IS ATTACHED HERETO AS APPENDIX C. The foregoing information and the
statements in the Dissenters' Rights Notice are each qualified in their entirety
by the provisions of Sections 16-10a-1301 through 16-10a-1331 of the Utah
Revised Business Corporation Act, a copy of which is annexed as Appendix D.
Proxy Solicitation
The cost of soliciting proxies will be borne by Gull. Gull may
request brokers, fiduciaries, custodians and nominees to send proxies, proxy
statements and other material to their principals at its expense. In addition,
directors, officers or other employees of Gull may, without additional
compensation therefor, solicit proxies in person or by telephone.
SPECIAL FACTORS
The Merger
Gull has entered into the Merger Agreement, a copy (without
the exhibits thereto) of which is attached as Appendix A, to this Proxy
Statement, with Fresenius, Meridian and Acquisition. Pursuant to the terms of
the Merger Agreement, Acquisition will merge with and into Gull with Gull
continuing as the surviving corporation. Upon consummation of the Merger, each
outstanding share of Common Stock will be converted into the right to receive,
upon surrender of such share of Common Stock, the Merger Consideration.
Shareholders have appraisal or dissenters' rights under Utah law. See, "SPECIAL
MEETING -- Appraisal Rights and Right to Dissent" and "The Merger Agreement,"
and Appendices C and D. At the same time, each share of the outstanding Common
Stock of Acquisition, all of which is owned by Meridian, will be converted into
one share of Common Stock of Gull. Thus, after the Merger, all of the then
outstanding Common Stock of Gull will be owned by Meridian.
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Background of Merger and Fresenius's
Decision to Divest its Interests in Gull
Fresenius's decision to divest its interest in Gull resulted
from changes in the competitive environment in the healthcare industry,
including the diagnostics business, and Fresenius's determination that a
relatively small participation in the diagnostics business through Gull is no
longer consistent with Fresenius's long-term plans. The discussion below
contains a brief description of these developments and Fresenius's responses,
and their relationship to Fresenius's investment in Gull.
Until 1992, Fresenius conducted its healthcare business
through two primary divisions -- medical systems (primarily dialysis products),
and pharmaceuticals. Fresenius also conducted a projects business engaged in the
planning and construction of hospitals and pharmaceuticals plants. In 1993,
Fresenius reorganized its operations into four divisions -- Dialysis,
Pharma, Intensive Care and Diagnostics, ("I+D") and Project Business. The I+D
Division included Fresenius's extra-corporal blood treatment business, including
blood cell separator machines and infusion pumps, and a diagnostics products
business -- Fresenius Diagnostik -- that was also a European distributor of Gull
products. In 1993 (the first year of this reorganization), I+D Division sales
represented approximately 7%, of Fresenius's total sales.
Fresenius made its initial investment in Gull in 1994 when it
purchased 3,492,739 shares of Gull Common Stock from Dr. Myron Wentz, Gull's
founder and former President, for $22,702,803. Shortly after that initial
investment, Fresenius purchased 117,954 additional shares for $766,701 in
satisfaction of certain obligations to the sellers originally undertaken by Dr.
Wentz. As the result of these purchases, Fresenius acquired 55.3% of Gull's
outstanding stock for a total investment of $23,469,504. The initial investment
in Gull in 1994 was consistent with Fresenius's then-current strategy to invest
internationally through acquisitions in selected biomedical markets. It was also
expected to be a factor in the growth of the new I+D Division.
Subsequent to Fresenius's initial investment in 1994, the
healthcare industry underwent rapid change. Significant declines in government
reimbursement rates and the growth of managed care necessitated extensive
efforts to contain costs. These cost- containment pressures resulted in
increased focus in the industry on core competencies, and also produced a
significant number of mergers and acquisitions, as companies sought methods to
function better in this new environment. In its Dialysis Division, Fresenius
responded to these industry trends by combining its worldwide products business
with National Medical Care to form Fresenius Medical Care AG, the world's
largest vertically integrated dialysis company, in September 1996. In June 1998,
Fresenius announced that it had signed an agreement to acquire the international
infusion-nutrition business of Pharmacia & Upjohn, outside of Germany, thereby
adding to one of the core elements of its Pharma Division.
These trends in health care were evident in the diagnostics
industry as well. Government agencies and private payers decreased or eliminated
reimbursements for laboratory tests deemed to be discretionary or non-essential.
Laboratories have responded by consolidation to achieve larger volumes, shifts
to less expensive, automated tests and demands for price concessions. These and
other pressures from diagnostic industry customers, in all key markets, to
increase quality and develop new products, provide a consistent operational
platform, and offer a "one-stop shopping platform," have prompted rapid
consolidation and concentration of resources within the industry.
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In August 1997 Gull acquired Fresenius Diagnostik, the
diagnostics business unit of Fresenius's I+D Division, in exchange for 1,320,000
shares of Gull Common Stock. Gull believed that the acquisition of Fresenius
Diagnostik would enable it to eliminate overlapping functions and costs,
coordinate and centralize its marketing efforts in Europe, and provide the
Company with sales and marketing expertise that would assist the Company in
developing its European markets. Based on a value of $8.29 per share stipulated
in the purchase agreement, the transfer of Fresenius Diagnostik to the Company
represented an additional investment by Fresenius in the Company of $10,942,800,
raising its total equity investment in the Company's Common Stock to
approximately $34.4 million. Gull's acquisition of Fresenius Diagnostic through
the issuance of additional common stock to Fresenius enabled Gull to complete
the acquisition while maintaining its cash for operations.
Subsequent to Gull's acquisition of Fresenius Diagnostik,
Fresenius has restructured its I+D Division (which has been renamed the
Intensive Care and Hemotechnology -- "I+H" -- Division) to focus more strongly
on its core competencies in hemotherapy with transfusion and adsorber
technology, immune therapy, and infusion technology. The restructuring was aimed
at increasing competitiveness in order to achieve a leading position in its core
fields of activity -- an approach consistent with the responses of its other
divisions to competitive changes. Although, at the time of the Fresenius
Diagnostik acquisition, Fresenius and Gull believed that the acquisition was an
appropriate response by Gull to trends in the diagnostics industry, considerable
additional investment would be required to support Gull's emerging technologies
and to help it compete effectively against its newly consolidated, larger
competitors. Fresenius believes that the additional investments in the
diagnostics industry required by Gull would be inconsistent with the overall
strategy of the I+H Division, and that the future of Gull and the effective
execution of Gull's business plan would be best served by finding the Company a
partner focused on the diagnostics industry.
To implement this decision, Fresenius management decided that
the options available to it for its investment in Gull should be explored.
Following meetings with several investment banking firms, Wasserstein Perella &
Co., Inc. ("WP&Co.") was selected to represent Fresenius in these efforts and an
engagement letter with WP&Co. was signed on September 24, 1997. Following its
engagement by Fresenius, WP&Co. held discussions with several members of Gull
senior management to gain familiarity with Gull and its business prospects. On
October 23, 1997, Gull and Fresenius issued separate press releases, each
stating that Fresenius had retained WP&Co. to evaluate the alternatives
available to Fresenius with respect to its interest in Gull. In a subsequent
filing with the SEC, Fresenius noted that potential transactions to be explored
by WP&Co. might include a sale or exchange of capital stock or a merger,
consolidation or other business combinations, and that any transaction involving
Fresenius's interest in Gull could be consummated as part of a series of
transactions involving the sale to one or more third parties of all or part of
the ownership interest in Gull not held by Fresenius. In conjunction with Gull
and Fresenius representatives, WP&Co. compiled a list of potential strategic
partners for Gull. Following issuance of the press releases, WP&Co. transmitted
the Gull press release to these parties.
Interested parties were informed that information describing
Gull would be available in approximately two to three weeks. In that time,
WP&Co., in conjunction with Gull management, compiled a package of publicly
available information that would be sent to interested parties. The public
information package consisted of (i) an introductory letter describing potential
transaction alternatives, (ii) a confidentiality agreement that, when signed and
returned, would enable the potential partner to receive non-public information
regarding Gull, (iii) publicly available information including SEC filings,
technical papers, and
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product brochures, and (iv) a brief summary of Gull and its products prepared by
WP&Co. in conjunction with Gull management. A small number of firms not on the
primary contact list also contacted WP&Co., Gull, or Fresenius expressing
interest.
On October 23, 1997, Meridian President and Chief Operating
Officer John Kraeutler contacted WP&Co. to express interest in a possible
transaction with Gull. WP&Co. sent Meridian a public information package on
November 7, 1997. Meanwhile, WP&Co. sent public information packages to
approximately 30 other potential partners during the period October through
November 1997. During that time 14 parties signed the confidentiality agreement,
including Meridian, who signed and returned its confidentiality agreement the
week of November 18, 1997. Meridian and the other interested parties were sent a
confidential information package consisting of (i) new product development time
lines, (ii) a discussion of past events and trends, (iii) financial projections
for 1998-2000, (iv) current staffing levels and plans, and (v) an overview of
key information items regarding Gull. Following further conversations with these
parties, WP&Co. requested that they submit a nonbinding indication of interest
by December 22, 1997, stating their expected value for the Company, sources of
financing, and other information relevant to any possible transactions. Those
who submitted acceptable indications would be permitted to visit Gull's
facilities, participate in a management presentation in which Gull's management
described the operations and finances of the Company, and permitted access to
selected documents regarding Gull's operations and finances.
By the December 22, 1997 deadline, no indications were
submitted to WP&Co regarding an interest in acquiring Fresenius's Gull shares or
any of the publicly-held shares of Gull. Preliminary interest was expressed in
certain assets of Gull, however, these interests were not pursued as Fresenius
remained interested in selling its ownership position rather than selling
individual pieces of Gull. Meridian declined to submit an indication letter due
to a desire to acquire only the domestic portion of the business. Further
discussions with potential buyers indicated that several concerns about the
Company existed, including concerns related to valuation, ownership structure,
recent and future financial performance, market position of new and existing
products, and technical capabilities of new and existing products. Although no
formal bids were received, discussions with potential bidders indicated that a
significant disparity existed between the valuation placed on Gull by potential
partners and the market value of Gull Common Stock. Bidders generally indicated
that they attributed a value to Gull equal to approximately its then current
sales levels -- $21.7 million for 1997 -- as opposed to the then current market
value of Gull Common Stock of approximately $83 million. This indicated value
for Gull based on sales was also considerably less than Fresenius's $34.4
million total equity investment for its 62% interest in the Company.
For the remainder of December 1997 and during the month of
January 1998, WP&Co. contacted interested parties to tell them that management
and facility visits and review of selected company documents could be achieved
without submitting an indication letter. Following this procedural modification,
six companies visited the Company during January through May 1998. Following
these visits, follow-up conversations were conducted with the potential
partners. Despite Fresenius's willingness to receive a price equal to its
investment cost, which was below the then-current market value of Fresenius's
Gull shares (approximately $49.9 million at March 31, 1998), none of the
companies that had proceeded with their investigation of Gull submitted
indications of interest. The reasons cited were the same concerns regarding
value and other issues raised in December 1997.
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Following these unsuccessful efforts to seek potential
partners at or above Fresenius's investment cost in Gull, WP&Co.'s contact with
potential bidders ceased for approximately one month. During this time, the Gull
stock price on the American Stock Exchange declined by more than 50%. The
Company attributes this decline to, among other matters, lower than anticipated
results of operations for 1997 and the first quarter of 1998 and selling
pressure in the thin market for Gull Common Stock from short selling and the
exercise of stock options (including options exercised by certain former members
of Gull's senior management whose employment was terminated), followed by the
sale of the option shares. After a 56% decline from $8.00 on May 27, 1998 to
$3.50 on June 2, 1998, during the month of June 1998, Gull traded at an average
price of $3.66 as opposed to a trading average during the period from May 1
through May 27, 1998 of $8.66. At that time, Fresenius determined that it was
willing to accept a value of Gull below Fresenius's investment cost and
instructed WP&Co. to renew contacts with potential bidders with revised price
expectations. With price expectations determined by reference to the now lower
market price, several companies expressed interest in exploring Gull further.
In April 1998, Mr. William Motto, Chairman of Meridian,
contacted Gull Chief Executive Officer Silke Humberg to renew discussions
regarding a possible transaction with Gull. Further meetings between
representatives of Fresenius, Gull, Meridian, WP&Co., and Meridian's financial
advisor followed during the month of June, including visits by Meridian to Gull
facilities in Salt Lake City, Maine, and Germany. Following these visits and
continuous discussions between the companies' management and research and
development teams, Meridian indicated that it hoped to complete a preliminary
definitive agreement by June 30. During these discussions, Meridian indicated to
Fresenius that it was interested only in a transaction in which it would acquire
100% of the Company, and did not wish to acquire only Fresenius's interest.
Meanwhile, Gull, Fresenius, and WP&Co. continued discussions with other
interested parties. After comparing the initial bids, suggested transaction
structures, and overall compatibility with Gull offered by other potential
partners, Fresenius ultimately decided to negotiate a definitive agreement with
Meridian.
On July 2, 1998, at a Special Meeting of the Board, Fresenius
informed the Gull Board that Fresenius was negotiating the terms of a letter of
intent with Meridian providing for a merger between Gull and Meridian or a
subsidiary of Meridian at a merger price of $3.00 per share, in cash.
On July 13, 1998 Gull issued a press release stating that
Gull and Fresenius were in negotiations with an unnamed potential merger partner
for a cash merger of Gull at $3.00 per share. On July 27, 1998 Gull issued a
press release announcing the execution of agreements in principle with Fresenius
and Meridian providing for a merger of Gull with Meridian for cash consideration
of $3.00 per share, subject to the execution of a definitive agreement and
various consents and approvals including receipt of a fairness opinion from an
investment bank selected by the independent committee of the Company.
Negotiations Regarding the Merger
At the meeting on July 2, 1998 at which Fresenius disclosed
the merger negotiations with Meridian to the Gull Board, the Gull Board
discussed the specific terms of the transaction with a representative of
Fresenius for an extended period of time. The Fresenius representative noted
that as of June 30, 1998 Fresenius had advanced approximately $5,012,450 to the
Company in the form of loans and payment of amounts owed to the Company's
vendors. The Fresenius representative advised the Board that the terms of the
transaction being negotiated with Meridian would require that Fresenius continue
to finance the
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Company's operations until consummation of a merger. He stated that although
Fresenius was willing to continue such financing to enable the Company to
complete a merger, Fresenius had made a strategic decision to withdraw from the
diagnostic testing business, and it was unlikely that Fresenius would continue
to finance Gull to continue its operations in the absence of a merger. He
indicated that Fresenius anticipated signing the letter of intent within the
next 24 to 48 hours.
The Board then appointed a committee of independent directors,
Dr. Myron Wentz, Peter Gladkin, and Anne-Marie Ricart (the "Independent
Committee") to review the transaction and assure that the transaction was fair
to all of the Shareholders. The Fresenius representative stated that the letter
of intent would provide that the transaction must be approved unanimously by the
Independent Committee and would require that the Independent Committee receive a
fairness opinion from an investment banking firm. The Independent Committee was
authorized to take all actions necessary to perform its designated functions,
including engaging a reputable investment banking firm and retention of counsel
to represent the interests of the minority Shareholders in the negotiation of
the transaction. In connection with the appointment of the Independent
Committee, Fresenius AG entered into indemnification agreements with each member
of the Independent Committee. Dr. Wentz was appointed as chairman of the
Independent Committee.
Copies of the letter of intent were distributed to the
directors, each of whom reviewed the letter of intent and provided comments.
At a regular board meeting held on July 9, 1998, Gull's
president, Dr. Silke Humberg, reported that Fresenius and Meridian had signed
the letter of intent on July 7, 1998 and that Gull had received the first due
diligence request from Meridian. She also reported that Fresenius and Meridian
were scheduled to meet in Germany during the week of July 20 to negotiate the
terms of a merger agreement. It was understood by the Gull Board that Fresenius,
rather than Gull, would be the primary party conducting the merger negotiations
with Meridian since Fresenius, as the Company's majority shareholder, would have
a major economic stake in the outcome of the negotiations and the determinative
vote with respect to any transaction. It was also noted that unlike other
shareholders, Fresenius would effectively retain a substantial financial
interest in the company following the Merger because Meridian would require that
Fresenius provide the primary indemnities and other financial assurances under
the Merger Agreement. However, Gull's directors, through the Independent
Committee, retained control over approval of the outcome of the negotiations.
Copies of drafts of the Merger Agreement were provided to each member of the
Independent Committee. The members reviewed each draft and received advice from
Gull's legal counsel as to the terms and conditions of the Merger Agreement and
other legal matters.
The Independent Committee solicited indications of interest
from investment banking firms. After carefully reviewing and discussing each
proposal, the Independent Committee selected Houlihan Valuation Advisors to
provide the fairness opinion. On July 23, 1998, Houlihan Valuation Advisors
began its evaluation of Gull for purposes of preparing the fairness opinion.
On August 7, 1998, Houlihan Valuation Advisors issued its
opinion to the Independent Committee that the Merger was fair to, from a
financial point of view, the public Shareholders of Gull. At the time Houlihan
Valuation Advisors delivered this opinion, the Merger Consideration was $3.00
per share. A copy of the fairness opinion was delivered to each member of the
Independent Committee.
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On August 12, 1998, the Independent Committee met to discuss
the fairness opinion. Each member had carefully reviewed the fairness opinion
and a thorough and exhaustive discussion was had. After careful and due
consideration and in reliance on the fairness opinion, the Independent Committee
unanimously determined that the terms of the Merger were fair to, and in the
best interests of, Gull's Shareholders and recommended that the Shareholders
approve and adopt the Merger Agreement and the Merger.
A Board meeting was also held on August 12, 1998, in which,
among other things, the Independent Committee reported on its recommendations.
The Board reviewed the status of the negotiations and discussed certain issues
in the Merger Agreement. After a discussion of the recommendation of the
Independent Committee, the Board unanimously determined that the terms of the
Merger were fair to, and in the best interests of, Gull's Shareholders and
recommended that Gull's Shareholders approve and adopt the Merger Agreement and
the Merger.
The negotiation of the Merger Agreement continued following
the Company's board meeting, with several drafts of the Merger Agreement being
exchanged. Meridian continued its due diligence of the Company.
On August 13, 1998, while the negotiation of the Merger
Agreement was pending, the Company extended the maturity date of its bank line
of credit and obtained waivers of the Company's failure to comply with certain
financial covenants in its long-term debt with two of its banks. As a condition
to the banks' agreement to such extensions and waivers, Fresenius guaranteed the
Company's obligations to the banks. The line of credit matures and Fresenius'
guarantees terminate upon the earlier to occur of November 15, 1998 or the
Closing of the Merger with one bank and upon the earlier to occur of December 1,
1998 or the closing of the Merger for the other bank.
On August 14, 1998, the Company filed its Form 10-Q for the
quarter ended June 30, 1998, in which the Company reported a larger than
anticipated loss, primarily as a result of decreased gross profit margins in
Gull's European business and significant severance payments and other charges
resulting from the termination of two Gull senior executives. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Form 10-Q delivered to the Shareholders with this Proxy Statement.
Subsequent to Gull's release of its second quarter results,
Meridian expressed concern to Fresenius that the then-proposed Merger
Consideration of $3.00 per share was excessive in light of the Company's second
quarter results and Meridian's view of the Company's prospects. At Fresenius's
request, Gull prepared an analysis of the fluctuations in its gross profit
margins for the first six months of 1998, including Gull's assessment of which
factors affecting gross margins appeared to be one-time events and which factors
appeared to be likely to have continuing impact. Gull also provided Meridian the
five-year forecast that had been provided to Houlihan Valuation Advisors in
connection with Houlihan Valuation Advisors' preparation of its original
fairness opinion. At a meeting of the board of directors of Meridian held on
August 26, 1998, Meridian determined that after reviewing the Company's second
quarter results, and the additional information provided to Meridian by the
Company, as well as additional information obtained by Meridian in its due
diligence investigation, Meridian was unwilling to consummate a merger at the
previously discussed merger price of $3.00 per share. Meridian communicated that
determination to Fresenius. On August 28, 1998, Gull issued a press release
announcing that Meridian was unwilling to effect a merger at the
previously-announced price of $3.00 per share, but that Meridian was still
committed to a merger with Gull and was continuing
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to negotiate with Fresenius and Gull. On August 28, 1998, the closing price of
the Common Stock was $2.375 per share.
In their discussions, Meridian advised Fresenius that while it
continued to believe that a merger with Gull was in the best interest of both
Gull and Meridian, the Meridian board had limited the merger consideration to be
offered to $2.00 per share. Fresenius advised Meridian that Fresenius believed
that price to be inadequate, and the parties continued to negotiate the terms of
a definitive merger agreement, other than the price. Representatives of Gull and
Fresenius traveled to Cincinnati, Ohio on the weekend of August 29-30 to
negotiate in person. In those meetings, Meridian provided to Fresenius and Gull
Meridian's own financial analysis for the Merger. Meridian also reviewed with
Fresenius and Gull its analysis of Gull's year-to-date results for 1998 and how
Gull's lower- than-anticipated results had adversely impacted the assumptions
underlying Meridian's merger analysis. Representatives of Gull, Fresenius, and
Meridian continued to negotiate and on September 1, 1998, Meridian revised the
proposed Merger Consideration to $2.25 per share. On September 2, 1998,
Fresenius accepted Meridian's offer of $2.25 per share, subject to the unanimous
approval of the Gull Independent Committee, receipt of a fairness opinion with
respect to the Merger, and completion of the definitive Merger Agreement.
Houlihan Valuation Advisors delivered an updated fairness
opinion on September 2, 1998 that the revised Merger was fair from a financial
point of view, the public Shareholders of Gull. A copy of the fairness opinion
was delivered to each member of the Independent Committee.
On September 3, 1998, the Independent Committee met to discuss
the revised offer and the fairness opinion. Each member of the Independent
Committee had carefully reviewed the fairness opinion. The Independent Committee
discussed the revised offer, the reasons for the revised offer, the results of
operations and financial condition of the Company, and the fairness opinion. The
Independent Committee determined that prior to voting on the revised Merger
terms, it would be appropriate to conduct direct discussions with Fresenius. The
Independent Committee met with representatives of Fresenius and Gull in the
afternoon of September 3. In that meeting, the Committee discussed in detail
with Fresenius the negotiations with Meridian, including whether Fresenius
believed a higher price could be obtained from Meridian. The Independent
Committee also discussed with Fresenius the activities of WP&Co. on behalf of
Fresenius and Fresenius's belief as to the likelihood that another company would
be willing to acquire Gull at a higher price. Fresenius confirmed to the
Independent Committee that the Meridian proposal was the best available offer.
The Independent Committee also inquired as to Fresenius's and Gull's outlook for
the Company's prospects in the event the Company did not consummate a merger or
similar transaction with Meridian or any other party. Fresenius and Gull
responded that they believed that Gull would need a significant capital infusion
to continue in its operations as currently conducted. Fresenius indicated that
it had agreed to finance Gull until December 31, 1998 in order to avoid a bank
default and to facilitate a merger or similar transaction but was unwilling to
provide any additional financing after that date. After consideration of its
discussions with Fresenius and after careful and exhaustive consideration and in
reliance on the fairness opinion, the Independent Committee unanimously
determined that the revised terms of the Merger were fair to, and in the best
interests of, Gull's Shareholders and recommended that the Shareholders approve
and adopt the Merger Agreement and the Merger.
A board meeting was also held on September 3, 1998, in which,
among other things, the Independent Committee reported on its recommendations.
The board received a status report on the Merger Agreement and discussed the
revised offer and the recommendation of the Independent Committee. After a
thorough discussion of the
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recommendation of the Independent Committee, the board unanimously determined
that the terms of the Merger were fair to, and in the best interests of, Gull's
Shareholders and recommended that Gull's Shareholders approve the adopt the
Merger Agreement and the Merger.
Following this Board meeting, representatives of the Company,
Fresenius and Meridian continued to negotiate terms of the definitive Merger
Agreement. Negotiations and Meridian's due diligence continued through September
15, 1998. These negotiations primarily involved certain matters disclosed by
Meridian's due diligence and related indemnities requested by Meridian from
Fresenius and, for the reasons described above, were conducted primarily by
Fresenius. Houlihan Valuation Advisors delivered a revised fairness opinion with
respect to the Merger, reflecting their review of drafts of the Merger Agreement
and other matters through September 15, 1998. The definitive Merger Agreement
was signed on September 15, 1998.
Recommendation of the Board of Directors; the
Company's Purpose and Reasons for and Belief
as to the Fairness of the Merger
A. Recommendation
The Independent Committee and the Board of Gull have
considered the terms and structure of the Merger, have reviewed the financial
and legal aspects of the Merger with financial and legal advisors, have
considered the financial and operational considerations related to the Merger,
and believe that the Merger is fair to and in the best interest of Gull's
Shareholders and recommend that Shareholders vote for the proposal to approve
the Merger Agreement. Ms. Ricart, the only director to own any shares of Common
Stock on the Record Date, has advised Gull that she intends to vote her shares
in favor of the adoption of the Merger Agreement at the Special Meeting of
Shareholders. She owns 852,155 shares.
B. The Company's Purpose and Reasons for
the Merger and the Timing of the Merger
The Company's purpose and reason for the Merger are to permit
the Shareholders to receive a price for their shares believed by the Board to be
the best available price. Gull has been relying on loans from Fresenius to fund
its operations. Gull has also had to utilize other credit support provided by
Fresenius, including guarantees of Gull's bank line of credit and long-term
debt. Fresenius has made a strategic decision to focus on health care markets
other than the diagnostic testing market and, if the Merger is not completed
does not intend to continue to finance Gull's operations. Without the loans and
other credit support from Fresenius, Gull could not continue its operations at
current levels and would be required to reduce the extent of its operations in
order to avoid the necessity to seek relief under Federal and European
bankruptcy laws. The anticipated reductions in funds for research and
development in the event of continued operations without support from Fresenius
would seriously hinder Gull's ability to retain qualified employees and to
develop new technologies and products for the market. Competition has increased
and governmentally mandated health care cost containment measures have become
more prevalent, emphasizing the importance of new products. The Board also
believes that Gull's access to additional capital will be severely restricted,
making continued operations more and more difficult. The timing of the Merger
has been determined by the time required to review various alternatives to
enhance shareholder
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value for Gull, to solicit indications from persons who might be interested in
acquiring Gull, to negotiate the terms of the Merger Agreement, and to obtain
the requisite Shareholders and other approvals.
C. Fairness
After considering all of the factors described below, the
Board and the Independent Committee determined that the Merger was fair to and
in the best interest of Gull's Shareholders who would receive the Merger
Consideration.
D. Market Test
WP&Co. conducted extensive testing of the market to determine
whether there were buyers for Gull. For a description of the efforts of WP&Co.
on behalf of Fresenius, see "SPECIAL FACTORS -- Background of Merger and
Fresenius' Decision to Divest its Interests in Gull." Based on the
market-testing activities conducted by WP&Co., Fresenius has informed the Board
and the Independent Committee that Fresenius believes that the Merger represents
the best transaction that would be available for Gull in the foreseeable future.
The Board, the Independent Committee and Houlihan Valuation Advisors have
reviewed the activities of WP&Co. and the Board and the Independent Committee
believe the market test was conducted fairly and thoroughly. The marketplace was
aware that Fresenius and Gull would be receptive to offers for more than ten
months prior to the execution of the Merger Agreement, and Fresenius, through
WP&Co., initially provided information to thirty (30) potential partners for the
Company. Fourteen of such companies executed confidentiality agreements
entitling them to receive additional, non-public information concerning the
Company, and six companies conducted on-site visits and met members of the
Company's management. Subsequent to the public announcement of the negotiations
with Meridian, Fresenius and the Company received indications of interest from
parties in addition to Meridian. None of such indications of interest included a
definitive acquisition proposal and all were conditioned on the conduct of
extensive due diligence by the parties indicating an interest. After considering
the indications of interest and taking into account: (i) the time that would be
required for such parties to conduct due diligence; (ii) the uncertainty as to
whether any of such parties would ultimately present a proposal to the Company
and, if presented, whether any such proposal would be superior to the Merger;
(iii) the erosion of the Company's gross margins, as discussed in the Company's
Annual Report on Form 10-K for 1997 and its Quarterly Report on Form 10-Q for
the six months ended June 30, 1998, each of which accompanies this Proxy
Statement, and other indicia of the deterioration of the Company's financial
condition, (iv) the unfavorable prospects for the Company without continued
financial support from Fresenius; and (v) the other factors discussed herein in
support of the Board's recommendation, the Independent Committee and the Board
concluded that the Merger represents the best opportunity to complete a
transaction at a price that is fair to the Shareholders of the Company.
E. Liquidation Value
The Independent Committee did not believe that Gull's
Shareholders would receive an amount per share exceeding the Merger
Consideration if Gull were liquidated. The Independent Committee determined that
liquidation would be less favorable to Gull's Shareholders than the Merger
Consideration because of taxes that would be payable at the Company level before
distributions to Shareholders could be paid and the fact that the Company's
assets were not separately as valuable as the Company as a going concern.
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F. Status Quo
The Independent Committee considered continuing to operate
Gull without any specific transaction and determined that a transaction for the
Merger Consideration was advisable. The medical diagnostic market is extremely
competitive and without a significant infusion of cash, the Independent
Committee does not believe Gull can continue operations at present levels for
the long term. Gull does not presently have any commitments for or likely
sources of any such cash infusion, as a result of which its continued operations
would require significant reductions in Gull's operations, including reductions
in research and development, without any assurance that such restructuring would
eventually produce a return to profitable operations.
G. Fairness Opinion
On September 15, 1998 Houlihan Valuation Advisors delivered
its opinion to the effect that, as of the date of such opinion, the Merger was
fair, from a financial point of view, to the Company's public shareholders.
Houlihan Valuation Advisors' confirmation of the opinion at the closing is a
condition to the closing of the Merger.
The Independent Committee and the Board of Directors have not
assigned relative weights to the factors described above.
Opinion of Financial Advisor Delivered in
Connection with the Merger Agreement
The full text of the opinion of Houlihan Valuation Advisors
dated September 15, 1998, which sets forth the assumptions made, procedures
followed, matters considered and limitations on the review undertaken, is
attached as Appendix B to this Proxy Statement. Houlihan Valuation Advisors has
consented to the inclusion of the opinion in this Proxy Statement. Shareholders
of the Company are urged to read such opinion carefully in its entirety. The
summary of the Houlihan Valuation Advisors opinion set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of the
opinion.
Houlihan Valuation Advisors has delivered to the Independent
Committee its written opinion to the effect that, as of September 15, 1998, and
based on its review and assumptions and subject to the limitations summarized
below, that the Merger is fair from a financial point of view to the public
shareholders of Gull.
The complete text of the opinion, which sets forth certain
assumptions made, factors considered and limits on the review undertaken by
Houlihan Valuation Advisors is attached to this Proxy Statement as Appendix B
and is incorporated herein by reference. The summary of the opinion set forth in
this Proxy Statement is qualified in its entirety by reference to the full text
of the opinion. The Company's Shareholders are urged to read such opinion
carefully and in its entirety. The opinion of Houlihan Valuation Advisors was
directed to the Company's Independent Committee in connection with and for the
purpose of their evaluation of the Merger and does not constitute a
recommendation to the Board of Directors with respect to the approval of the
Merger nor does it constitute a recommendation to any Shareholder of the Company
as to how such Shareholder should vote with respect to the Merger.
In arriving at its opinion, Houlihan Valuation Advisors
completed, among other things:
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(a) Reviewed the draft Merger Agreement among Gull, Meridian,
Fresenius and Acquisition, revised as of September 15, 1998;
(b) Reviewed the annual reports of Gull for the years of
1993-1995;
(c) Reviewed the Proxy Statement for the 1997 Annual Meeting
of Shareholders of Gull;
(d) Reviewed various Securities and Exchange Commission
filings of Gull, including Forms 10-K for years ended December 31, 1996 and
1997, Forms 10-Q for Gull for quarters ended June 10, 1996, September 30, 1996,
March 31, 1997, June 30, 1997, September 30, 1997, March 31, 1998, and June 30,
1998;
(e) Reviewed Gull's unaudited draft financial statements for
the three months ending June 30, 1998;
(f) Reviewed Gull's projected income statements for continuing
operations for calendar years ending December 31, 1998 through 2003;
(g) Reviewed the reported market prices and trading activity
for Gull Common Stock for the period of January 1996 through July 1998;
(h) Reviewed transaction premium data prepared by Houlihan
Lokey Howard & Zukin as presented in Mergerstat Review 1998;
(i) Discussed the financial condition, results of operations,
business and prospects of Gull with Company management;
(j) Compared the results of operations and financial condition
of Gull with those of certain other publicly-traded medical diagnostic product
firms that Houlihan Valuation Advisors deemed to be reasonably comparable to
Gull; and
(k) Reviewed Company product information and the status of new
product development.
In addition to a review of the above-described documents, the
following analytical procedures were conducted by Houlihan Valuation Advisors in
arriving at the fairness opinion:
(a) Houlihan Valuation Advisors met with representatives of
the Company at the Company's headquarters in Salt Lake City, Utah and conducted
discussions regarding matters pertinent to its analysis. Inquiries were made
with certain officers of the Company who have senior responsibility for
operating matters regarding: (i) the operations, financial condition, future
prospects and projected operations and performance of the Company; (ii) whether
management is aware of any events or conditions which might cause any of the
assumptions set forth in the fairness opinion to be incorrect; and (iii) whether
management is aware of any material change in the Company's assets, financial
condition or business outlook since June 30, 1998 (the date of the Company's
most recent unaudited financial statement);
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(b) Certain financial forecasts and accompanying assumptions
prepared by Company management for the calendar years ending December 31, 1998
through December 31, 2003 were reviewed, and the assumptions underlying such
forecasts were discussed with Company management;
(c) Generally recognized financial analysis and valuation
procedures were undertaken to ascertain the financial condition of the Company
as well as to estimate its fair market value;
(d) Discussed valuation of the Company, efforts to solicit
bids, and negotiations regarding offering price with representatives of WP&Co.,
investment bankers retained by Fresenius to advise Fresenius as to strategic
alternatives regarding the Company; and
(e) Performed such other analyses and reviewed and analyzed
such other information as it deemed appropriate.
In connection with its opinion, Houlihan Valuation Advisors
neither attempted independently to verify nor assumed any responsibility for
independent verification of any information publicly available or supplied or
otherwise made available to it regarding the Company and Houlihan Valuation
Advisors assumed and relied on such information being accurate and complete in
all respects. Houlihan Valuation Advisors has not made or obtained, or assumed
any responsibility for making or obtaining, any independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company
other than evaluations of Gull's headquarters in Salt Lake City, Utah nor has
Houlihan Valuation Advisors been furnished with any such evaluations or
appraisals. With respect to the financial projections of the Company referred to
above, Houlihan Valuation Advisors assumed that they have been reasonably
prepared on bases reflecting the best available estimates and judgments of the
management of the Company as to the future financial performance of the Company
and that the Company will perform substantially in accordance with such
projections. Houlihan Valuation Advisors is unaware of and has not received any
information which would lead it to believe that it was unreasonable to utilize
the aforementioned projections as part of its analysis related to the opinion.
Houlihan Valuation Advisors, however, assumes no responsibility for and
expresses no view as to such forecasts or the assumptions under which they were
prepared.
Houlihan Valuation Advisors has assumed that there has been no
material change in Gull's assets, financial condition, results of operations,
business or prospects since June 30, 1998. Houlihan Valuation Advisors'
conclusions and opinion are necessarily based upon economic, market and other
conditions and the information made available to Houlihan Valuation Advisors as
of the date of this opinion. Houlihan Valuation Advisors expresses no opinion on
matters of legal, regulatory, tax or accounting nature related to the Merger.
Houlihan Valuation Advisors has not been requested to, and did
not solicit, third party indications of interest in acquiring all or any part of
the Common Stock of the Company. Furthermore, it has not negotiated the terms of
the Merger nor advised Gull with respect to alternatives to it, at Gull's
request.
The summary set forth in this section does not purport to be a
complete description of the analyses performed by Houlihan Valuation Advisors in
arriving at its opinion. The preparation of a fairness opinion is a complex
process that involves various determinations as to the most appropriate and
relevant methods of financial and
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comparative analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Houlihan
Valuation Advisors considered the results of all analyses taken as a whole.
Furthermore, in arriving at its opinion, Houlihan Valuation Advisors did not
attribute any particular weight to any analysis or factor considered by it, but
rather made its determination on the basis of qualitative judgments as to the
significance and relevance of each analysis and factor taken as a whole.
Accordingly, Houlihan Valuation Advisors believes that considering any portions
of such analyses and the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying its opinion. With respect to the comparable publicly traded company
analysis and comparable transaction analysis summarized below, no public company
or transaction utilized as a comparison is identical to the Company or to the
Merger and such analyses necessarily involve complex considerations and
judgments concerning the differences in financial and operating characteristics
of the companies and other factors and could affect the acquisition or public
trading values of the companies concerned. In its analyses, Houlihan Valuation
Advisors made numerous assumptions with respect to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of the Company and involve the application of
complex methodologies and judgments. Any estimates and financial projections
used in these analyses are inherently uncertain and are, therefore, not
necessarily indicative of actual value or predictive of future results or
values, which may be significantly more or less favorable than suggested by such
analyses. Accordingly, because such estimates are inherently subject to
uncertainty, being based on numerous factors and events beyond the control of
the Company or Houlihan Valuation Advisors, Houlihan Valuation Advisors assumes
no responsibility for their accuracy. The analyses were prepared solely for
purposes of Houlihan Valuation Advisors providing its opinion to the Company's
Board of Directors and the Independent Committee and do not purport to be
appraisals or to reflect the prices at which the businesses or securities
actually may be sold. As described above, Houlihan Valuation Advisors' opinion
to the Company's Board of Directors was one of many factors considered by the
Company's Board of Directors and the Independent Committee in making their
determination to approve the Merger. Although Houlihan Valuation Advisors
evaluated the fairness of the Merger, the actual amount of the Merger
Consideration was determined by negotiations between the Company, Fresenius and
Meridian. Houlihan Valuation Advisors neither determined nor recommended to the
Independent Committee the amount of the Merger Consideration.
The following is a summary of the material financial and
comparative analyses performed by Houlihan Valuation Advisors in arriving at its
fairness opinion.
A. Analysis of Market Multiples of
Selected Comparable Public Companies
Houlihan Valuation Advisors examined Gull's market valuation
as compared to the valuation in the public market of other selected publicly
traded medical diagnostic product companies, Houlihan Valuation Advisors
compared certain financial information relating to Gull to certain corresponding
information from a group ("Sample Group") of seven (7) publicly traded medical
diagnostic product companies (consisting of Biopool International, Inc.;
Diagnostic Products Corporation; Gamma Biologicals, Inc.; Hycor Biomedical,
Inc.; Immucor, Inc.; Meridian Diagnostics, Inc.; and Quidel Corporation). Such
financial information included, among other things common equity valuation,
capitalization ratios, operating performance, and ratios of common equity prices
per share to earnings, sales and book value per share. The financial information
used in connection with the
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multiples with respect to Gull and the Sample Group was based on the latest
reported twelve (12) month period as derived from publicly available
information.
Houlihan Valuation Advisors compared financial information of
the Sample Group based on public market valuation with the corresponding
financial multiples for the Merger based on the Merger Consideration to be
received of $2.25 per share. The analysis was based on Gull's reported book
value as of June 30, 1998 (the latest available financial information for the
Company) and trailing twelve (12) month period ended June 30, 1998.
Application of price to earnings and price to
earnings-before-interest-and- taxes ("EBIT") multiples to Gull's financial
results was not meaningful. For the trailing twelve (12) month period, the
Company had a loss of $2.8 million (13.7% of sales) compared to the industry
median net margin of $1.9 million (5.2%) of sales. The Company's EBIT was also
negative for the trailing twelve (12) month period.
Based on a proposed transaction price of $2.25 per share,
Houlihan Valuation Advisors determined that Gull's price to sales multiple of
.9 times is lower than the Sample Group median of 1.5 times. However, Houlihan
Valuation Advisors noted that all of the Sample Group companies except one had
positive net income, with a median net income of 5% of sales. With the
elimination of the one company in the Sample Group that did not report net
income, the median net income for the Sample Group of the remaining six (6)
companies was 6.1% of revenue. It was also noted by Houlihan Valuation Advisors
that the Sample Group of companies experienced an average increase in sales of
11.1% over the past three (3) years compared to a decline in sales for Gull
between 1995 and June 30, 1998. Houlihan Valuation Advisors state that when
compared to the Sample Group, Gull's declining sales and lack of profitability
justify a significant discount from the price to revenue ratio of the Sample
Group. The 40% discount represented by the difference between a price to revenue
ratio of 1.5 times for the Sample Group and .9 times for Gull based on a per
share sale price of $2.25 is, in Houlihan Valuation Advisors' opinion,
reasonable. It is noted that the one company in the Sample Group that did not
report positive earnings had a price to revenue multiple of only 0.7 times,
indicating that the market significantly discounts the price to revenue ratio of
unprofitable companies. It was also noted by Houlihan Valuation Advisors that
Gull does not project to be profitable until 1999, with profits in that year
projected to be only 1.3% of sales. In addition, Gull is projecting a decrease
in sales in 1998 of 5.8% from 1997. Both of these factors would further
substantiate a substantial discount of the price to revenue multiple from the
Sample Group multiples applicable to Gull.
Gull's price to book multiple of 5.2 based on the proposed
$2.25 per share transaction price is substantially greater than the median price
to book multiple for the Sample Group of 1.9 times. Gull's equity as a percent
of total assets is 19.3% compared to the median equity as a percent of total
assets of the Sample Group of 75.2%. Houlihan Valuation Advisors stated that
Gull's financial risk is substantially greater than the Sample Group median by
virtue of its much greater leverage.
Houlihan Valuation Advisors also examined Gull's market
valuation as compared to the valuation in the public market of a broader range
of larger publicly traded companies in the medical diagnostic product industry.
Houlihan Valuation Advisors compared certain financial information relating to
Gull to certain corresponding information from a group ("Supplemental Sample
Group") of nine (9) publicly traded medical diagnostic product companies
(consisting of Acuson Corporation; Bio-Rad Laboratories, Inc.; Coherent, Inc.;
Diagnostic Products Corporation; Esterline Technologies; Meridian Diagnostics,
Inc.; MTS Systems Corporation; Quidel Corporation; and Tektronis, Inc.). Such
financial
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information included, among other things, common equity valuation,
capitalization ratios, operating performance, and ratios of common equity prices
per share to earnings, sales and book value per share. The financial information
used in connection with the multiples with respect to Gull and the Supplemental
Sample Group was based on the latest reported twelve (12) month period as
derived from publicly available information.
Based on a proposed transaction price of $2.25 per share,
Gull's price to sales multiple of 0.9 times was the same as the Sample Group
median. All of the Supplemental Sample Group companies had positive net income,
with a median net income 6.6% of sales compared to Gull's substantial loss.
Houlihan Valuation Advisors stated that although the proposed transaction price
is representative of a controlling interest value compared to the Supplemental
Sample Group, which represents minority interests, Houlihan Valuation Advisors
noted that Gull is a substantially smaller company, generated substantial losses
in 1997 and the first half of 1998, and has experienced declines in sales over
the past three and a half (3 1/2) years. These factors indicate that a
substantial discount is applicable to Gull compared to the Supplemental Sample
Group for valuation or comparable purposes (i.e., minority and/or control).
Gull's price to book multiple of 5.2 based on the proposed
$2.25 per share transaction price is substantially greater than the median price
to book multiple for the Supplemental Sample Group of 1.9 times. Gull's proposed
transaction price to the projected 1999 earnings multiple of 60.8 is
substantially greater than the median of the Supplemental Sample Group of 12.7
times projected 1999 earnings. Also, Gull's proposed transaction price to
projected 1999 EBIT multiple of 17.2 is substantially greater than the
Supplemental Sample Group price to projected 1999 EBIT median multiple of 9.8.
Houlihan Valuation Advisors' analysis of selected comparable
company multiples indicates that the proposed transaction price of $2.25 per
share for the Common Stock of Gull is fair from a financial point of view to the
minority shareholders of Gull.
B. Discounted Cash Flow Analysis
Houlihan Valuation Advisors performed a discounted cash flow
analysis for Gull. The discounted cash flow approach values a business based on
the current value of the future cash flow that the business will generate plus
the estimated value of the business at some future date. To establish a current
value under this approach, future cash flow must be estimated and an appropriate
discount rate determined. Houlihan Valuation Advisors used estimates of
projected financial performance for Gull for the years ending December 31, 1998
through 2003 prepared by Gull management. Management's projections were prepared
assuming that Gull was a stand-alone entity, reliant upon internally generated
cash flow to fund its on-going activities. Management also assumed that the
current bank debt of the Company would be refinanced on terms that would allow
the Company to continue as an economically viable entity. Houlihan Valuation
Advisors aggregated the present value of the leveraged cash flows through 2003
with the present value of the terminal value. The terminal value was computed
based on projected net income in the calendar year 2004, to which a terminal
capitalization rate was applied. Houlihan Valuation Advisors discounted these
cash flows using a variety of discount rates to reflect both minority and
controlling interest required rates of return. Houlihan Valuation Advisors
arrived at such discount and capitalization rates based on its judgment of the
estimated cost of equity capital of Gull, which included consideration of
historical rates of return for publicly held common stock, risks inherent in the
industry and specific risks associated with the continuing operations of the
Company on a stand-along basis. Houlihan Valuation Advisors noted that its
analysis, which was based on projections
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prepared by Company management, indicated a value estimate in the range of $1.73
per share on a minority interest basis as of July 31, 1998.
C. Selected Comparable Transactions Analysis
Houlihan Valuation Advisors reviewed eight (8) recent merger
and acquisition transactions occurring since 1988 involving diagnostic companies
considered by Houlihan Valuation Advisors to be reasonably comparable to the
Company and for which information was publicly available. The following
transactions were included by Houlihan Valuation Advisors in the analysis: Imes
Medical Systems, Inc./Thermo Electron Corp.; Nellcor Puritan Bennett,
Inc./Mallinckrodt, Inc.; Fiat SpA (INCSTAR Corp.)/American Standard Cos. Inc.;
Medex, Inc./Furon Co.; Ventrex Laboratories, Inc./Hycor Biomedical, Inc.;
Bioteck Research Laboratories/Cambridge BioScience Corp.; INCSTAR Corp./Fiat
SpA; and Electro Nucleonics, Inc/Pharmacia AB. For each of the comparable
transactions, Houlihan Valuation Advisors calculated, among other things, total
transaction value as a multiple of sales, book value and earnings; analyzed
premiums paid for acquisition of controlling interests over the market price of
minority interests prior to the announcement of the sale of the subject company;
analyzed those transactions of companies in the comparable transaction group
that were unprofitable at the time of the transaction; and adjusted the
indicated transaction multiples for valuation on a minority interest basis.
On a controlling interest basis, multiples of transaction
price to revenue ranged from 0.8 times to 2.45 times with median multiples of
transaction price to revenue ranging from 1.58 times for all companies in the
comparable group to 0.94 times for unprofitable companies. On a minority
interest basis, the median transaction price to revenue multiple was 1.15 times
for all companies of the comparable group and 0.8 times for the unprofitable
segment of the comparable group.
On a controlling interest basis, multiples of transaction
price to book value ranged from 1.0 times to 8.2 times for all companies in the
comparable group with median multiples of transaction price to book value of
2.56 times for all companies in the comparable group and 2.3 times for the
unprofitable segment of the group. On a minority interest basis, the median
transaction price to book value was 1.86 times for all companies in the group
and 1.97 times for the unprofitable companies in the comparable group.
The multiples derived from this analysis were applied to
similar financial data for the Company to determine a range of implied equity
values for Gull on both a controlling and a minority interest basis. The
analysis of comparable transactions yielded a range of implied equity values for
the Company of $6.4 million to $23.62 million or from $0.80 per share to $2.95
per share on a minority interest basis, based on 8,016,012 shares issued and
outstanding as of the date of the Opinion. The indicated minority interest value
of Gull based on the price to revenue multiple derived from the unprofitable
companies in the sample group was $2.06 per share. The indicated minority
interest value of Gull based on the price to book multiple derived from the
unprofitable companies in the sample group was $0.86 per share.
Houlihan Valuation Advisors noted, however, that the reasons
for and the circumstances surrounding the comparable transactions were specific
to each transaction. Because of the inherent differences between the business,
operations and prospects of the Company and the businesses, operations and
prospects of the companies in the comparable transactions group, it is Houlihan
Valuation Advisors' opinion that it was inappropriate to rely solely on the
quantitative results on the analysis. Accordingly, Houlihan Valuation Advisors
also made qualitative judgments concerning differences
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between the characteristics of the comparable transactions and the Merger that
would affect the acquisition values of the Company and such acquired companies.
As previously discussed, Houlihan Valuation Advisors stated that Gull's
declining sales, financial risk, and substantial operating losses warrant the
application of significant discounts to comparable company multiples.
D. Comparison of Gull's Financial
Performance with the Industry
To help Houlihan Valuation Advisors better understand Gull's
1997 performance, Gull's record was compared with the average experience of
other medical diagnostic product companies. Houlihan Valuation Advisors included
data for the following companies ("Sample Group") in its analysis: Biopool
International, Inc.; Diagnostic Products Corporation; Gamma Biologicals, Inc.;
Hycor Biomedical, Inc.; Immucor, Inc.; Meridian Diagnostics, Inc.; and Quidel
Corporation. Although the activities of the companies in the Sample Group may
not be totally consistent with those of Gull, Houlihan Valuation Advisors
considered the information to be representative of firms engaged in the same
types of activities as the Company. As such, the data provided a reasonable
backdrop for a comparative analysis of the Company's performance.
Gull is a somewhat smaller company than the median of the
Sample Group with last twelve (12) month sales $20.5 million compared to the
median of $36.3 million for the Sample Group. Between 1995 and 1997, Gull
experienced a decline in sales of 9.1% on an annual basis compared to a median
increase in sales over the period for the Sample Group of 11.1% annually.
Median net income for the Sample Group for the last twelve
(12) month period was $1.9 million compared to a net loss for Gull of $2.8
million (or a net loss of approximately $1.3 million after adjustments for costs
associated with the acquisition of Fresenius Diagnostics). Median net margin for
the Sample Group for the last twelve (12) months was 5.3% compared to a loss as
a percent of sales for Gull of 13.7%.
Based on a Merger price of $2.25 per share, Gull's
price-to-revenue multiple was 0.9 times compared to the median of the Sample
Group of 1.5 times. However, Houlihan Valuation Advisors noted that the one
company in the Sample Group with negative earnings had a price to revenue ratio
of only 0.7 times. Gull's price to book ratio was substantially higher based on
a $2.25 Merger price than the median of the industry Sample Group (5.2 times vs.
1.9 times).
Gull's costs, as measured by selling, general and
administrative expenses as a percent of revenue, were significantly higher than
the industry Sample Group median (50.2% vs. 34.0%). The Company's research and
development costs as a percent of total revenues, however, were similar to the
median of the Sample Group (7.2% vs. 7.0%).
Gull's asset turnover ratios, which measure the efficiency
with which the assets of the firm are utilized, were somewhat better than the
Sample Group median. The Company's total asset turnover ratio was 1.1 times
compared to the Sample Group median of 0.8 times and its net fixed asset
turnover ratio was 4.6 times compared to the Sample Group median of 3.7 times.
The Company's receivable turnover ratio was also higher than the Sample Group
median (6.2) times vs. 4.1 times).
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On an adjusted basis (net losses adjusted for costs associated
with the acquisition of Fresenius Diagnostics), Gull had a net loss as a percent
of sales of 2.8% compared to the Sample Group median profit as a percent of
sales of 5.0%. Likewise, Gull's loss as a percent of assets and equity was 4.0%
and 12.5% respectively, compared to the Sample Group median return on assets and
equity of 6.0% and 7.0%, respectively.
The financial risk of Gull appeared to be substantially
greater than that of the Sample Group of companies. The Company's liquidity, as
measured by the current and quick ratios was substantially less than the median
of the Sample Group (0.9 times and 0.3 times vs. 3.6 times and 2.3 times,
respectively). Gull is also substantially more leveraged than the median of the
Sample Group as measured by total debt to equity (416.8% vs. 27.8%) and current
debt as a percent of equity (384.6% vs. 4.0%). The Company's interest coverage
ratio, on an adjusted basis, was 0.1 times compared to the median of the Sample
Group of 6.4 times.
In summary, Houlihan Valuation Advisors stated Gull appeared
to represent a substantially inferior investment opportunity compared to the
median of the Sample Group companies. Gull has experienced declining sales over
the past three and one-half (3 1/2) years compared to a median annual increase
in sales of the Sample Group of companies of 11.1%. Gull's operations have
generated a substantial loss in 1997, with losses continuing in the first half
of 1998. By contrast, the Sample Group of companies generated median net income
as a percent of sales of 5.3% for the last twelve (12) month period. Gull's
financial risk also appears to be substantially greater than the median of the
Sample Group of companies as measured by the current and quick ratios as well as
total debt as a percent of equity, current debt as a percent of equity, and
interest coverage ratios.
E. Analysis of Gull's Recent Stock Performance
1. Public Market for Gull Common Stock
Commencing in May 1993, the Company's common stock has been
traded on the American Stock Exchange. On September 15, 1998, there were
8,016,012 shares of Gull's common stock issued and outstanding. Of these shares,
Fresenius, the majority shareholder, owned approximately 62% as of that date.
Of the common shares issued and outstanding, available market
data indicate that only approximately 1.8 million shares are available for
trading. As a result, there has been a limited amount of trading activity in the
public market for the Company's common stock. In addition, no cash dividends
have been paid on the Company's common stock and it is not anticipated by
management that dividends will be paid in the foreseeable future.
2. Stock Performance Relative to S&P
Composite Average
Houlihan Valuation Advisors reviewed and analyzed the daily
closing per share market prices and trading volume for Gull's common stock from
January 1996 to July 31, 1998. Houlihan Valuation Advisors also reviewed the
daily closing per share market price of Gull common stock and compared the
movement of such daily closing prices with the movement of the S&P 500 composite
average over the period from January 1996 through July 1998. Houlihan Valuation
Advisors noted that, on a relative basis, Gull performed below the S&P 500
composite average for most of 1996, performed above the composite average for
the first half of 1997, performed on a relatively similar basis to the S&P 500
composite for the second half of 1997 and the first quarter of 1998, and then
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<PAGE>
experienced a significant drop in the second quarter of 1998, performing well
below the composite average.
3. Stock Performance Relative to Gull Public
Announcement Regarding Technology and
Operating Results
Houlihan Valuation Advisors reviewed and analyzed the trading
activity in Gull's Common Stock for the period between January 1996 and July
1998. The analysis indicated that Gull's stock was thinly traded during the
period, with less than 0.5% of the issued and outstanding stock trading on
average each week during the January 1996 - July 1998 period. Immediately
following the announcement of Gull's intention to acquire Fresenius Diagnostics,
trading volume increased to 56,800 shares in the week of the announcement and
108,200 shares in the week immediately following the announcement, driving the
price of the stock from $6.625 to $12.125 in a two (2) week period.
On May 6, 1998, the Company announced a first quarter 1998
operating loss of $580,000. For the period of January 1997 through April 1998,
average weekly trading volume of the Company's stock was approximately 23,000
shares. Following the announcement for the first quarter 1998 loss, weekly
volume increased to 63,800 shares in the week ending May 29 and to 240,900
shares in the week ending June 5. The stock price declined from 9 1/4 for the
week ending May 8, 1998 to 3 3/4 for the week ending June 5, 1998. On July 13,
1998, the Company announced an expected second quarter loss and that it was in
discussions for a cash merger at a price of $3.00 per share. That week trading
volume was 86,300 shares and the stock price dipped to $2.500 per share.
In summary, most of the news about Gull in 1996 and 1997 was
positive. Announcements regarding GeneSTAR(R) were relatively frequent, the
merger with Fresenius Diagnostics was viewed favorably by the investment
community, and earnings were positive. In late 1997 and early 1998, the
performance of the Company faltered as a result of higher than expected costs
associated with the acquisition of Fresenius Diagnostics, declining sales, a
substantial loss for 1997, and continuing substantial losses in the first two
quarters of 1998. The stock price held reasonably well despite the March 1998
announcement of 1997 losses. However, following the announcement of a
substantial loss in the first quarter of 1998, downward pressure on the
Company's stock price was evident, with the price declining to a low of 3 1/2
prior to the announcement of expected second quarter losses and merger
discussions.
F. Conclusion
Based on Houlihan Valuation Advisors evaluation of the various
information and materials it considered, including the various assumptions and
limitations set forth herein, and based upon such other matters as it considered
relevant, Houlihan Valuation Advisors rendered its written opinion to the
Independent Committee and Board of Directors of the Company that as of September
15, 1998, the date of such opinion, the Merger is fair to the Company's public
shareholders from a financial point of view. The Merger Agreement provides that
it is a condition to the obligations of all parties to consummate the Merger
that Houlihan Valuation Advisors confirm that its opinion is still in full force
and effect as of the closing date.
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<PAGE>
Houlihan Valuation Advisors is a nationally recognized
investment banking firm and, as a customary part of its business, is engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and corporate and
other purposes. The Company selected Houlihan Valuation Advisors to act as its
financial advisor on the basis of its qualifications, reputation, experience,
and expertise.
Pursuant to an engagement letter dated July 28, 1998, between
the Company and Houlihan Valuation Advisors, the Company agreed to pay Houlihan
Valuation Advisors a fee of $44,000 for the rendering of its opinion, all of
which has been paid. In addition, the Company has agreed to reimburse Houlihan
Valuation Advisors for its reasonable out-of-pocket expenses and to indemnify
Houlihan Valuation Advisors and its directors, officers, agents, employees and
controlling persons against certain liabilities arising out of its engagement as
financial advisor, including liabilities under the Federal securities laws.
Prior Contacts with Meridian
Commencing in March 1995, Fresenius and Meridian entered into
a confidentiality agreement and conducted meetings to explore possible marketing
relationships in Europe and the United States. No agreement was reached nor was
any transaction entered into between Fresenius and Meridian, and the discussions
terminated at the end of 1995.
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, Gull will become a wholly-owned
subsidiary of Meridian. Current Shareholders of Gull will no longer own any
interest in Gull. Such Shareholders will not share in any future earnings or
growth of Gull. The Common Stock will no longer be traded on AMEX or another
securities exchange or registered under the Exchange Act. Gull will no longer be
subject to the reporting and other requirements of the Exchange Act.
Federal Income Tax Consequences
The discussion of federal tax consequences set forth below is
directed primarily toward individual taxpayers who are citizens or residents of
the United States. However, because of the complexities of federal, state and
local income tax laws it is recommended that Gull's Shareholders consult their
own tax advisors concerning the federal, state and local tax consequences of the
Merger. Persons who are trusts, tax-exempt entities, corporations subject to
specialized income tax rules (i.e., insurance companies) or Non-United States
citizens or residents are particularly cautioned to consult their tax advisors
in considering the tax consequences of the Merger.
A. General
The following is a summary of the material federal income tax
consequences of the Merger to Gull and its Shareholders. This summary is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), the rules and
regulations promulgated thereunder, current administrative interpretations and
court decisions. No assurance can be given that future legislation, regulations,
administrative interpretations or court decisions will not significantly change
these authorities, possibly with a retroactive effect. No rulings have been
requested or received from the Internal Revenue Service (the "IRS") as to the
matters discussed herein and there is no intent to seek any such ruling.
Accordingly, no assurance can be given that the IRS will not challenge the tax
treatment of certain matters discussed in this summary or, if it does challenge
the tax treatment, that it will not be successful.
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<PAGE>
B. Federal Income Tax Consequences
to Meridian, Acquisition and Gull
The merger into Gull, with Gull surviving and with Gull's
Shareholders receiving solely cash in the transaction, constitutes a taxable
reverse subsidiary merger which will be treated for federal income tax purposes
as a direct purchase by Meridian of the Common Stock from Gull's Shareholders in
exchange for cash and as such the transitory existence of Acquisition as the
wholly-owned subsidiary will be disregarded for federal income tax purposes.
Because Meridian will be treated as purchasing the Common Stock directly from
Gull's Shareholders, unless a Code Section 338 election is made to treat the
purchase by Meridian of Gull's Common Stock as a purchase of Gull's assets
resulting in a stepped up basis in Gull's assets, no gain or loss will be
recognized by Gull as a result of the Merger. Further, no gain or loss will be
recognized by Meridian upon the receipt of the shares of Gull's Common Stock
from Gull's Shareholders in exchange for cash. The payment by Meridian of the
Merger Consideration, which will be transferred to Gull's Shareholders upon
surrender by them of their shares of Common Stock, will be treated as a
contribution by Meridian to Gull's capital and as such Meridian's tax basis in
the Common Stock will equal the amount of such capital contribution.
C. Federal Income Tax Consequences to Gull's Shareholders
Consistent with the analysis described in the preceding
paragraph, a Shareholder of Gull (other than a tax-exempt trust or other
tax-exempt organization which owns shares of Gull's Common Stock) will recognize
gain or loss as a result of the Merger, measured by the difference between such
Shareholder's amount realized and its basis in the Common Stock.
For noncorporate Shareholders of Gull who hold Common Stock as
a capital asset, gain or loss recognized as a result of the Merger will be
treated as a capital gain or loss, provided that Gull is not treated for federal
income tax purposes as a "collapsible corporation." In the opinion of Gull's
management, Gull is not a collapsible corporation for federal income tax
purposes. Under the current provisions in effect as of the date hereof, net
capital gains (i.e., the excess of net long-term capital gain for the taxable
year over net short-term capital loss for such year) of an individual
Shareholder will be taxed at a maximum rate of 20% in contrast to items taxable
as ordinary income which are subject to rates of up to 39.6%.
In the case of a corporate Shareholder, capital losses are
allowed only to the extent of capital gains. In the case of a noncorporate
Shareholder, capital losses are allowed only to the extent of capital gains plus
the lessor of: (i) $3,000 ($1,500 in the case of a married individual filing a
separate return); or (ii) the excess of losses over such gains. Generally, a
corporation may carry its excess capital loss back three (3) years or forward
five (5) years, subject to certain limitations in the Code. Generally, the case
of a noncorporate taxpayer, excess capital losses may be carried forward
indefinitely and used each year, subject to the $3,000 limitation ($1,500 in the
case of a married individual filing a separate return), until the loss is
exhausted.
Accounting Treatment of the Merger
The Merger will be treated, for financial statement purposes,
as a sale by Gull's Shareholders to Meridian for cash. Accordingly, no gain or
loss will be recognized by Gull as a result of the Merger. As part of the
Merger, Fresenius will contribute an
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<PAGE>
obligation of Gull in the amount of DM 856,281.18 and certain other amounts to
Gull's capital. The Merger will be accounted for by Meridian as a purchase.
Regulatory Approvals
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the rules and regulations thereunder (the "HSR Act"), provide that certain
acquisitions may not be consummated unless certain information has been
furnished to the Antitrust Division of the United States Department of Justice
and the Federal Trade Commission and certain waiting periods have been
satisfied. The Company is not required to make any filings under the HSR Act in
connection with the Merger. Fresenius and Meridian each filed information and
materials with the Department of Justice and the Federal Trade Commission with
respect to the Merger on September 17, 1998. Early termination of the waiting
period under the HSR Act was received on September 28, 1998. At any time before
or after consummation of the Merger, the Department of Justice, the Federal
Trade Commission or some other person could seek to enjoin or rescind the Merger
on antitrust grounds.
There are no other federal or state regulatory requirements
that must be complied with or remaining approvals that must be obtained in
connection with the Merger other than the approval of the Company's Shareholders
as required by the Utah Revised Business Corporation Act.
Expenses of the Merger
It is estimated by the Company that the expenses incurred by
the Company in connection with the Merger will be approximately
$175,000 in the aggregate. See, THE MERGER AGREEMENT -- Fees and Expenses." Such
fees and expenses include the fees and expenses of the Company's financial
advisors, counsel to the Independent Committee and the expenses of that
Committee, and the expenses incurred in connection with the preparation, filing
and distribution of this Proxy Statement. Such fees and expenses will be
effectively borne by Fresenius pursuant to its agreement to bear reductions in
the Company's shareholders' equity subsequent to December 31, 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the close of business on September 15, 1998, Gull has
issued and outstanding 8,016,012 shares of Common Stock, par value $.001 per
share. Each share is entitled to one vote on matters brought before the
Shareholders of Gull. Shareholders are not allowed to cumulate their shares in
voting for directors.
The following table sets forth, as of September 15, 1998, 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 director of the Company and certain specified officers,
and (ii) all officers and directors of the Company as a group:
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Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Amount and Nature of Percentage
Name/Address Beneficial Ownership (1, 2) of Class (2)
Principal Shareholders:
<S> <C> <C>
Fresenius AG 4,930,693 (3) 62%
Else Kroner Strasse 1
61346 Bad Homburg, Germany
Anne-Marie Ricart 852,155 11%
La Grande Buissiere 25
1380 Ohain
Belgium
Officers, Directors:
Myron W. Wentz 10,000 (4) *
Director/Chairman
c/o Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
Rainer Baule -0- *
Fresenius AG
Director
Else Kroner Strasse 1
61346 Bad Homburg, Germany
Anne-Marie Ricart
Director (see above)
Ulrich Wagner -0- *
Director
O'Melveny & Myers LLP
153 East 53rd Street
New York, NY 10022
Peter Gladkin -0- *
Director
Apache Medical Systems
1650 Tysons Boulevard, Suite 300
McLean, VA 22102
Silke Humberg -0- *
President/CEO/Director
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
Andrew Taylor 6,778(5) *
Vice President-Sales/Marketing
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
Lin Wu -0- *
Vice President
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
John Turner -0- *
Vice President
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
Fred Rachford 30,217 *
Vice President
Gull Laboratories, Inc.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
All officers and directors as a group
(13 persons) (6) 1,021,590 13%
</TABLE>
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<PAGE>
* 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
September 15, 1998 held by each listed person. It is a condition of closing
that these options be cancelled. 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 Trading Acts, holders of voting
securities of a German company listed on a stock exchange are obligated to
notify the company of the level of their holding whenever their holding or
ordinary shares 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 Dresdner Bank of AG has informed Fresenius AG that it owns 11.2% of the
Fresenius AG Ordinary Shares, and the Else Kroner-Fresenius-Stiftung (the
"Foundation") has informed Fresenius AG that it owns more than 50% 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 Professor Dr. Volker Lang, Gauting, Mr. Hans Kroner,
Professor Dr. Heinz H. Edel, Munich and Dr. Manfred Specker, Blaubeuren.
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 Postfach 101121, 80085 Munich, Germany. Mr.
Kroner is the Honorary Chairman of the Fresenius AG Supervisory Board. Dr.
Schneider is a 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. Pursuant to a pooling
agreement relating to the shares held by the Foundation and AW, the
Foundation has voting power over the shares held by AW. Accordingly,
through (i) their dispositive power 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, Dr. Schneider, 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 more than 70%
of the voting shares of Fresenius AG.
(4) Represents 10,000 shares issuable upon exercise of options as described in
note (2) above.
(5) Includes 6,250 shares issuable upon exercise of options as described in
note (2) above.
(6) Includes all shares subject to exercisable options referred to in note (2)
above, and 134,750 additional shares held or subject to options exercisable
by officers and directors of the Company not named in the table.
Except for the Merger, the Company is not aware of any arrangement which may at
a subsequent date result in any change of control of the Company.
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<PAGE>
MERGER AGREEMENT
Description of the Agreement
THE FOLLOWING IS A SUMMARY OF THE MERGER AGREEMENT, THE FULL
TEXT OF WHICH (WITHOUT THE EXHIBITS THERETO) IS INCLUDED HEREIN AS APPENDIX A.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT.
SHAREHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY FOR A MORE
COMPLETE DESCRIPTION OF THE MERGER. THE FOLLOWING DESCRIPTION ALSO CONTAINS
OTHER INFORMATION ABOUT THE MERGER.
Terms of the Merger
Pursuant to the Merger Agreement, Acquisition will merge into
and with the Company, with the Company continuing as the surviving corporation.
The Merger will occur immediately upon the filing of the Articles of Merger with
the Utah Division of Corporations and Commercial Code (the date and time of such
filing referred to herein as "Effective Time"), unless a subsequent date and
time are specified as the Effective Time in the Articles of Merger. The name of
the Company will remain Gull Laboratories, Inc. At the Effective Time, the
Articles of Incorporation and Bylaws of Acquisition as in effect immediately
prior to the Effective Time until thereafter amended, will be the Articles of
Incorporation and Bylaws of the Company, except that Meridian has covenanted to
cause the Company to retain in effect the provision of the Company's By-laws
relating to the indemnification of directors and officers for a period of five
(5) years following the Effective Time. The officers and directors of
Acquisition immediately prior to the Effective Time will be the initial officers
and directors of the Company until their successors are elected and qualified,
as the case may be. At the Effective Time, all issued and outstanding shares of
Common Stock owned by the Shareholders of the Company, other than treasury
shares, will be canceled and extinguished and, except for dissenters' shares,
will be converted into the right to receive the Merger Consideration. Payments
of cash to Shareholders of the Company will be made promptly after the Effective
Time upon surrender by holders of their certificates, together with the
appropriate transmittal form, to the Exchange Agent referred to below. See, "THE
MERGER AGREEMENT -- Exchange of Certificates." Any treasury shares will be
canceled. In the Merger, each share of Common Stock without par value of
Acquisition which is issued and outstanding immediately prior to the Effective
Time will be converted into and become one share of Common Stock of the Company.
As a result of the Merger, the separate corporate existence of Acquisition will
cease and the Company will continue to operate as a wholly-owned subsidiary of
Meridian.
All properties and assets of every kind held by the Company
and Acquisition at the Effective Time will become property and assets of the
Company, and the Company will continue to be liable for all of its obligations,
debts and other liabilities, as well as those, if any, of Acquisition.
The Company expects the Effective Time to occur on
or about November 6, 1998. The Effective Time cannot occur until all conditions
to the Merger have been satisfied or waived. See, "THE MERGER AGREEMENT --
Conditions to the Merger."
The Merger Agreement provides for the exercise of appraisal or
other rights as may be available under Utah law.
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<PAGE>
Conditions to the Merger
The obligations of Meridian, Acquisition and the Company to
effect the Merger are conditioned on, among other things: (i) the Merger
Agreement receiving the requisite approval of the Company's Shareholders and the
Fresenius Supervisory Board (See, "THE SPECIAL MEETING -- Vote Required to
Approve the Merger"); (ii) the waiting period under the HSR Act shall have
expired or been terminated and no objections to the Merger shall have been
raised; (iii) no statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or order shall have been
issued by any court or governmental entity preventing the consummation of the
Merger and shall be in effect; (iv) there shall not have been instituted or be
pending or threatened, any suit, action or proceeding by any person or entity as
a result of the Merger Agreement or the Merger, which if the person or entity
were to prevail, would reasonably be expected to prevent the consummation of the
Merger or have a material adverse effect on the business, financial conditions
or results of operations of the Company and its subsidiaries, taken as a whole;
and (v) Houlihan Valuation Advisors shall have delivered a letter to the Company
as of the Closing Date that its fairness opinion is still in full force and
effect.
The obligations of the Company to effect the Merger
additionally are conditioned on, among other things: (i) the performance in all
material respects by Meridian and Acquisition of the obligations to be performed
by them at or prior to the Effective Time; (ii) the truth and correctness in all
material respects of the representations and warranties of the parent and the
purchaser contained in the Merger Agreement; and (iii) delivery of certain
closing certificates and opinions by Meridian.
The obligations of Meridian and Acquisition to effect the
Merger additionally are conditioned on, among other things: (i) the performance
in all material respects by the Company and Fresenius of the obligations to be
performed by them under the Merger Agreement; (ii) the truth and correctness in
all material respects of the representations and warranties of the Company
contained in the Merger Agreement; (iii) absence of material adverse change in
Gull's business, financial condition, cash flows, results of operations or
prospects, other than reductions in Gull's shareholders' equity to be offset
against Gull's obligations to Fresenius, as described below under "Additional
Agreements of Fresenius" and other than changes relating to the diagnostics
industry or the economy in general; (iv) the execution of employment agreements
between the Company and Dr. Fred Rachford and John Turner, and a consulting
agreement with Holly Scribner; (iv) cancellation of all outstanding options to
purchase the Company's Common Stock on terms acceptable to Meridian and
acquisition by Gull or Meridian of the minority shares of certain Gull
subsidiaries held by two executive officers of Gull; (vi) delivery of certain
closing opinions and certificates by the Company and Fresenius; (vii) Meridian
and Fresenius shall have entered a mutually satisfactory agreement for the
continued manufacture of blood group and HLA products currently being
manufactured in Fresenius' facility; (viii) satisfactory completion of due
diligence; and (ix) receipt of the consent of the College of American
Pathologists ("CAP") to the change of control of Gull that will occur in the
Merger and to the transfer of the location of production of the products
manufactured by Gull for CAP. During 1997, sales to CAP constituted
approximately 11% of Gull's sales.
The terms of the Merger Agreement may be modified or waived,
subject to certain restrictions. See, THE MERGER AGREEMENT -- Modification and
Waiver" and "SPECIAL FACTORS -- Background and Negotiations Regarding the
Merger."
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<PAGE>
Representations and Warranties
The Company, Meridian and Acquisition have made certain
representations and warranties to each other in the Merger Agreement, including,
among other things, representations and warranties relating to their respective
organizations, qualifications and capitalizations, authorizations to enter into
the Merger Agreement, that the Merger and Merger Agreement do not conflict or
fail to comply with certain other agreements or instruments, the consents and
approvals that must be obtained in connection with the Merger, their
organizational documents, and the absence of brokers' or finders' fees.
The Company has made certain additional representations and
warranties (which representations and warranties are subject, in certain cases,
to specified exceptions), including representations and warranties as to the
following: (i) the accuracy of the Company's filings with the United States
Securities and Exchange Commission and the financial statements of the Company;
(ii) the absence of any material adverse change to the Company before the
Effective Time; (iii) the absence of undisclosed material liabilities or
litigation; (iv) the existence and status of material contracts, proprietary
rights, properties and environmental matters, (v) existence and status of
employee benefit plans; and (vi) the payment of taxes.
Fresenius has made certain representations and warranties in
the Merger Agreement regarding, among other matters, its organization and
authorization to enter into the Merger Agreement, the ownership of Gull Common
Stock, and the accuracy of information in the Company's filings with the SEC and
otherwise provided to Gull regarding transactions between Fresenius and its
subsidiaries and the Company and its subsidiaries. Fresenius has also made
representations as to the accuracy of the Company's representations and
warranties in the Merger Agreement.
Conduct of Business Pending Merger
In the Merger Agreement, the Company covenants and agrees
that, prior to the Effective Time, unless Meridian otherwise agrees in writing,
or except as disclosed in the Disclosure Schedules to the Merger Agreement or as
otherwise expressly contemplated by the Merger Agreement, neither the Company
nor any of its subsidiaries will take any action except in the ordinary course
of business and consistent with past practices, and the Company will use its
best efforts to maintain and preserve its business organization, assets,
prospects, employees and advantageous business relationships.
The Company has also agreed that, unless Meridian otherwise
agrees in writing, neither the Company nor any of its subsidiaries will,
directly or indirectly, do any of the following: (i) amend its Articles of
Incorporation or Bylaws or similar organization documents; (ii) set aside or pay
any dividend or make any distribution, payable in cash, stock, property or
otherwise with respect to its capital stock or redeem, repurchase or otherwise
acquire any of its capital stock (other than options which may be purchased at
Meridian's expense to satisfy the Company's obligation to assure that no options
to purchase Common Stock are outstanding at the Effective Time); (iii) grant any
options, warrants or other rights to purchase or obtain any of its capital stock
or issue, sell or dispose of any of its capital stock except upon the exercise
of options, warrants or other rights to purchase currently outstanding; (iv)
issue any note, bond or debt security, or, other than in the ordinary course of
business, incur any indebtedness except for financing provided by Fresenius and
extensions or refinancings of existing indebtedness; (v) impose or permit to be
imposed any lien, encumbrance or other security interest upon its assets other
than in the ordinary course of business; (vi) make any capital investment in,
make
35
<PAGE>
any loan to or acquire the securities or assets of any other individual or
entity other than purchasers of inventory in the ordinary course of business;
(vii) make any change in employment terms, policies or practices for any
directors or officers or make any change in employment terms, policies or
practices for its non-officer employees outside the ordinary course of business;
or (viii) commit to do any of the foregoing. The Company has also agreed to
disclose to Meridian the Company's manufacturing processes and trade secrets
relating to its products, to preserve all manufacturing instructions, formulas
and other documentation and available information concerning products under
development, and to have available at the closing, inventory of certain
specified products, representing approximately 80% of the Company's recent unit
sales, sufficient to meet normal sales demand for such products during the four
months following the closing.
The Company and Fresenius have agreed that each of the Company
and Fresenius and their respective directors, officers, and authorized agents
will not, and will not authorize or direct any other person to, directly or
indirectly solicit, initiate or encourage the submission of any proposal or
offer from any individual or entity relating to a tender or exchange offer, a
merger, consolidation or other business combination involving the Company and
its subsidiaries or any proposal to acquire in any manner a substantial equity
interest in, or substantial portion of the assets of the Company or any of its
subsidiaries (a "Third Party Offer"). Notwithstanding the foregoing, if the
Board of Directors of the Company, in the exercise of its fiduciary duties,
makes a good faith determination that the Board of Directors' failure to permit
the Company to take any such action would constitute a breach of its fiduciary
duties (based as to the legal issues involved on advice of legal counsel), the
Company shall so advise Meridian and, thereafter, the taking of any such action
shall not be a violation of the above prohibition.
In the event the Company engages in such discussions or
receives a Third Party Offer, it shall notify Meridian and provide Meridian with
a summary of the material terms and the identity of the offeror. Meridian shall
have two (2) business days to respond with a counteroffer to the Third Party
Offer. Should this process result in a substantial amount of assets or stock of
the Company being sold to another party, the Company and Fresenius agree to pay
Meridian $350,000 to compensate Meridian for its time and costs involved in the
Merger.
Additional Agreements
In the Merger Agreement, the Company, Meridian and Acquisition
have agreed to certain other matters, including the preparation of all documents
required to be submitted under federal and state law to Shareholders and federal
or state agencies; to submit the proposed Merger to a vote of the Shareholders
of the Company, subject to the right of the Independent Committee and the Board
of Directors to withdraw their recommendations in accordance with the exercise
of their fiduciary responsibilities; the cancellation of all outstanding options
as well as termination of all plans pursuant to which such Options are granted
or issued; the payment of certain fees as set forth below and to provide
indemnification to certain directors and officers of the Company and any of its
subsidiaries.
Additional Agreements of Fresenius
In addition to the obligations set forth above, Fresenius has
agreed to do the following: (i) indemnify Meridian for loss incurred as a result
of any inaccuracy of any representation or warranty made by Gull or Fresenius,
Shareholder lawsuits (other than appraisal proceedings) and certain specified
contingencies disclosed by Gull to Meridian
36
<PAGE>
pursuant to the Merger Agreement, subject to a maximum
indemnity obligation of $3,000,000 except in the case of certain knowing
misrepresentations or omissions and certain specified contingencies; (ii)
continue the service arrangements and lease that it currently has with Gull for
the benefit of Meridian; (iii) vote its shares in favor of the Merger; (iv) if a
third party offer results in consummation of a transaction involving payment to
Shareholders of more than $2.25 per share, to pay Meridian the excess of any
Merger Consideration to which Fresenius may otherwise be entitled in excess of
$2.25 per share (but such obligation will not bind any other Shareholders); (v)
continue its financial support of Gull until the closing of the Merger; (vi)
contribute any reductions in the shareholders' equity of Gull which occurs
subsequent to December 31, 1997 against any amounts owed by Gull to Fresenius to
the capital of Gull; (vii) enter into a covenant to not initiate a new business
venture or acquire any business which is predominately engaged in the
manufacture and sale of diagnostic testing kits and reagents in the same field
of application as existing Meridian or Gull products for a period of three (3)
years; and (viii) forgive an invoice in the amount of DM 856,281.18 to Gull for
restructuring costs through the contribution of such obligation to the Company's
capital. Fresenius has also agreed to accept Meridian's note in satisfaction of
the Company's indebtedness to Fresenius (as such indebtedness may be reduced
pursuant to clause (vi) above) and that amounts due under such note may be
reduced by the acquisition cost of certain equipment remaining unsold at
December 31, 1999 and by certain deferred tax assets and income tax refund
receivables of the Company which may not be available for utilization by
Meridian or any of its subsidiaries at that date.
Indemnification
Fresenius has agreed to indemnify Meridian with respect to and
hold Meridian harmless from any liability, cost or expense which Meridian or
Gull may directly or indirectly incur or suffer by reason of, or which results
from, arises out of or is based upon the inaccuracy of any representations or
warranties of and failures to comply with covenants made by Fresenius or Gull in
the Merger Agreement, Shareholders lawsuits (other than appraisal proceedings)
and certain specified contingencies identified by Gull to Meridian. No claim for
indemnification may be made until the aggregate of all such claims exceed
$500,000. The indemnification obligations of Fresenius are limited to: (i) the
amount of Merger Consideration received by Fresenius for representations and
warranties concerning taxation; (ii) the entire aggregate amount of the Merger
Consideration received by all Shareholders for material and undisclosed
liabilities of which Fresenius had knowledge; (iii) the amount of the Merger
Consideration received by Fresenius for material undisclosed liabilities of
which Gull, but not Fresenius, had knowledge or Shareholders' lawsuits brought
against Meridian or Gull; (iv) for certain specified contingencies, $4,000,000;
and (v) for all other matters, $3,000,000.
Meridian has agreed to indemnify Fresenius with respect to and
hold Fresenius harmless from any liability, cost or expense which Fresenius may
directly or indirectly incur, suffer by reason of, or which results from, arises
out of or is based upon (i) the inaccuracy of any representation or warranty or
failure to comply with any covenant made by Meridian in the Merger Agreement;
(ii) failure of Gull to pay when due any indebtedness of Gull guaranteed by
Fresenius; (iii) failure of Meridian to pay any installment of interest on or
principal of the note executed by Meridian and payable to Fresenius; (iv) or
failure to comply with a covenant regarding compliance with the Worker
Adjustment and Restraining Notification Act of 1988 and the payment of severance
obligations of Gull. No claim for indemnification may be made until the
aggregate of all such claims exceed $500,000. The indemnification obligation of
Meridian with respect to
37
<PAGE>
representations, warranties, and covenants other than those described in (ii)
through (iv) above is limited to $3,000,000.
Fees and Expenses
All costs and expenses, incurred in connection with the Merger
are to be paid by the party incurring such expenses. The Company's expenses will
effectively be born by Fresenius pursuant to its agreement to bear reductions in
the Company's shareholders' equity subsequent to December 31, 1997.
Modification and Waiver
The Merger Agreement may be amended by the Company (including
the Independent Committee), Fresenius, Meridian and Acquisition if set forth in
an instrument in writing signed on behalf of each or the time for performance of
any obligation or act or compliance with any agreement or condition may be
extended or waived by a party, provided that any decrease in Merger
Consideration shall be submitted to the Company's Shareholders for approval.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval of the Merger by the Shareholders
of the Company, by mutual written consent of the parties. The Company or
Meridian may terminate the Merger Agreement if the Effective Time has not
occurred by December 1, 1998, provided that the right to terminate is not
available to a party whose failure to fulfill any obligation under the Merger
Agreement has caused or resulted in the failure of the Effective Time to occur.
The Company may terminate the Merger Agreement for failure by
Meridian to perform in any material respect any of its obligations under the
Merger Agreement, if the representations and warranties of Meridian or
Acquisition set forth in the Merger Agreement are not true and correct in all
material respects prior to the Effective Time, if the Company's Board of
Directors, in the exercise of its fiduciary duty under the circumstances
described above, withdraws its recommendation to the Shareholders of the Company
to adopt and approve the Merger or changes such recommendation in any manner
adverse to Meridian and Acquisition in which case Fresenius and the Company will
pay Meridian the sum of $350,000 as liquidated damages.
Meridian and Acquisition may terminate the Merger Agreement if
the Company accepts a Third Party Offer as described above, regardless of
whether the taking of such action is permitted in the exercise of the fiduciary
duties of the Company's Board of Directors in which case Fresenius and the
Company will pay Meridian $350,000 as liquidated damages. If the Company fails
to perform in any material respects its obligations under the Merger Agreement
or the representations and warranties of the Company set forth in the Merger
Agreement are not true and correct in all material respects prior to the
Effective Time; or if Fresenius's Management Board does not approve the actions
of its officer executing this Agreement. If the Merger Agreement is terminated,
it will become void and have no effect except with respect to obligations of the
parties to maintain confidentiality of information and with respect to payment
of certain fees and expenses. See, "THE MERGER AGREEMENT -- Fees and Expenses."
However, a party will remain liable for willful default of its obligations under
the Merger Agreement.
38
<PAGE>
Exchange of Certificates
Promptly after the Effective Time a commercial bank selected
by Meridian (the "Paying Agent" as defined in the Merger Agreement), will mail
to each record holder of certificates representing shares of Common Stock
("Certificates") that were converted into the right to receive cash, a letter of
transmittal advising the holders of the procedure for surrendering Certificates
for payment of the Merger Consideration. Until surrendered with the letter of
transmittal duly executed and completed, the Certificates will represent only
the right to receive the amount of Merger Consideration, without interest,
applicable to those shares represented by the Certificates. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the Certificate surrendered for payment is registered, that person will be
responsible for paying, or establishing the payment or non- applicability of any
transfer or other taxes required. After one hundred eighty (180) days following
the Effective Time, a holder of Certificates may surrender the Certificates for
payment of the Merger Consideration only to the Company (subject to abandoned
property, escheat or similar laws), but will have no greater rights to payment
than a general unsecured creditor of the Company. After the Effective Time, no
transfers of Common Stock on the transfer books of the Company will be made.
Certificates presented after the Effective Time will be canceled and exchanged
only for the applicable Merger Consideration. From and after the Effective Time,
holders of Certificates will cease to have any other rights with respect to the
Certificates other than the right to receive the Merger Consideration.
39
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
Statement of Operations Data
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands except share information)
1997* 1996* 1995* 1994* 1993*
<S> <C> <C> <C> <C> <C>
Operating
Revenue, 21,706 24,444 26,261 23,652 15,406
Net
Income (Loss)
Before (2,008) 117 1,589 1,443 267
Income
Taxes
Provision
for (193) 226 1,130 1,177 (668)
Income
Tax
Net
Income (1,815) (109) 459 266 (401)
(Loss)
PER
SHARE
DATA
Net
Income (.23) (.01) .06 .03 (.06)
(Loss)
Weighted
Average
Shares 7,926,775 7,883,934 7,899,199 7,858,176 7,738,692
Outstanding
</TABLE>
Statement of Operations Data
Six Months Ended
June 30
(in thousands except
share information)
1998 1997
Operating
Revenue, 10,050 11,225
Net
Income
Before (2,030) 587
Income
Taxes
Provision
for (107) 411
Income
Tax
Net
Income (1,923) 176
(Loss)
PER
SHARE
DATA
Net
Income (.24) .02
(Loss)
Weighted
Average
Shares 8,000,662 8,077,341
Outstanding
* Financial information for 1994 through 1997 has been restated to reflect the
merger with Fresenius Diagnostics, which occurred in August 1997. The merger
was accounted for as a combination of entities under common control in a
manner similar to a pooling of interests. Statement of operations data for
1993 has not been restated because financial information for Fresenius
Diagnostics is not available for years prior to 1994.
40
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet Data
As of December 31 Quarter Ended June 30
(in thousands) (in thousands)
1997 1996 1995 1998 1997
<S> <C> <C> <C> <C> <C>
Current Assets 9,109 9,080 10,245 11,786 10,701
Total Assets 15,301 15,290 16,209 18,064 16,566
Current Liabilities 9,266 4,895 7,773 13,445 5,865
Long-Term Debt &
Capital Lease 733 3,001 210 749 3,462
Obligations, Net
of Current Portion
Other Long-Term 362 666 1,193 375 937
Liabilities
Shareholder's 4,940 6,728 7,032 3,495 6,302
Equity
</TABLE>
* Information for 1994 is not presented because balance sheet data for
Fresenius Diagnostics is not available for years prior to 1995.
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information
The Company's common stock is listed on the American Stock
Exchange where it is traded under the symbol "GUL."
The following table sets forth, for the periods indicated, the
prices of the Company's common stock, based on the closing sale quotation
without markup, markdown, commissions or adjustments.
41
<PAGE>
Prices of Common Stock
Quarter Ended Low High
1996
March 31, 3.625 5.500
June 30, 4.250 5.500
September 30, 4.125 7.125
December 31 5.875 12.000
1997
March 31, 8.625 11.125
June 30, 9.563 11.750
September 30, 9.625 13.375
December 31, 10.000 11.750
1998
March 31, 9.875 11.750
June 30, 3.250 11.875
September 30, 1.938 5.625
Security Holders
On September 15, 1998 there were approximately 1,000
beneficial owners of the Company's common stock.
Dividends
No cash dividends have been paid by the Company since its
inception. If the Merger is not consummated, the Company intends to use future
earnings to repay debt and finance additional growth and, therefore, does not
anticipate paying dividends in the foreseeable future.
RECOMMENDATION OF THE BOARD OF DIRECTORS AND VOTE REQUIRED
The Agreement requires the approval of a majority of the votes
cast by the holders of the shares of Common Stock present at the annual meeting
of the Company's shareholders. Proxies will be voted for or against such
approval in accordance with the specifications marked thereon, and, if no
specification is made, will be voted in favor of such approval. Fresenius AG
intends to vote all shares of Common Stock owned by it for approval and
ratification of the Agreement. Accordingly, the Agreement will be approved.
Anne-Marie Ricart, a director of the Company and a member of the Independent
Committee and the owner of 852,155 shares of Common Stock has informed the
Company that she intends to vote in favor of the Agreement.
The Board of Directors of the Company, including all members
of the Independent Committee recommends a vote FOR approval and ratification of
the Agreement.
42
<PAGE>
INTEREST OF CERTAIN PERSONS IN THE MERGER
All current officers and directors of Gull will resign as part
of the closing of the Merger. Certain officers or employees of Gull may be
entitled to severance payments upon the termination of their employment. Gull
has been informed by Meridian that Meridian intends to enter into employment
agreements with Dr. Fred Rachford and John Turner, both current executive
officers of Gull, and a consulting agreement with Holly Scribner, formerly an
executive officer of and currently a consultant to Gull. The execution of such
agreements is a condition to Meridian's Obligation to consummate the Merger. All
current directors of Gull will be entitled to certain indemnification rights
under the Merger Agreement. Consequently, the interests of Messrs. Rachford and
Turner, by virtue of their employment agreements, and Ms. Scribner, by virtue of
her consulting agreement and the interests of all of the Company's directors, by
virtue of their indemnification rights, may be deemed to be separate from or
adverse to the interests of the remaining Shareholders. Fresenius has also
agreed to indemnify the directors of Gull, and has entered into indemnification
agreements with the members of the Independent Committee relating to their
service on that Committee. As of the Record Date, Messrs. Rachford and Turner
and Ms. Scribner held of record or beneficially (excluding 138,500 shares
underlying options) 33,017 (30,217 shares owned by Dr. Rachford and 2,800 shares
owned by Ms. Scribner) shares of Common Stock or less than 1% of the issued and
outstanding Common Stock. It is expected that the shares of Common Stock owned
by Dr. Rachford and Ms. Scribner will be voted in favor of the Merger, that
Messrs. Rachford and Turner and Ms. Scribner will surrender their options to
purchase Gull common stock, and that their compensation arrangements under their
employment or consulting agreements with Meridian will include options to
purchase Meridian common stock. See, "INFORMATION PERTAINING TO MERIDIAN AND
ACQUISITION," "THE MERGER AGREEMENT."
In the Merger Agreement, Fresenius has agreed, subject to
certain limitations, to indemnify Meridian for losses arising out of breaches of
the Company's representations and warranties and non-performance of the
Company's obligations. Fresenius has also agreed to forgive certain obligations
due from the Company and that amounts due from the Company to Fresenius
(approximately $5,000,000 at September 30, 1998, comprising payments by
Fresenius to vendors on behalf of the Company and other advances and fees) will
be reduced by an amount equal to the decrease in the stockholders' equity of the
Company from December 31, 1997 to the Closing Date. The net amount due to
Fresenius will be evidenced by a promissory note of Meridian bearing interest at
7 1/2% per annum and payable in two equal installments on June 15, 1999 and
December 31, 1999. The note will be subject to certain offsets. See "MERGER
AGREEMENT - - Additional Agreements of Fresenius." Fresenius has also agreed to
continue the lease of certain property in Bad Homburg, Germany and to continue
providing certain services, which it has previously provided and currently does
provide to Gull. Fresenius will also enter into an agreement with Meridian to
make available facilities for the manufacture of certain Gull products at
Fresenius's facility for a period not to exceed two years.
See also "MERGER AGREEMENT -- Additional Agreements of Fresenius."
43
<PAGE>
SOLICITATION AND VOTE OF PROXIES
All shares represented by duly executed proxies will be voted
as specified therein. If no specification is made, proxies will be voted FOR
approval and ratification of the Merger. If any other matter should come before
the meeting, then the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their best judgment.
Consistent with state law and under the Company's bylaws, a
majority of the shares entitled to be cast on the Merger, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Annual Meeting will be counted by one or more persons
appointed by the Company to act as Inspectors of Election for the meeting. The
vote of a majority of the shares entitled to vote at the Special Meeting is
required for approval of the Merger. Failure to attend the meeting or abstention
will not be counted as a vote against approval and ratification of the
Agreement.
By virtue of its ownership of a majority of the Company's
outstanding common stock, an affirmative vote by Fresenius will result in the
approval of the Merger, even if all shares of Common Stock currently outstanding
that are not held by Fresenius vote against the Merger
The Inspectors of Election will count the total number of
votes cast FOR the Merger for purposes of determining whether sufficient
affirmative votes have been cast. The Inspectors of Election will count shares
represented by proxies that withhold authority to vote for a nominee for
election as a director or that reflect abstentions and "broker non- votes"
(i.e., shares represented at the Annual Meeting held by brokers or nominees as
to which: (i) instructions have not been received from the beneficial owners or
persons entitled to vote, and (ii) the broker or nominee does not have the
discretionary voting power on a particular matter) only as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum, but neither abstentions or "broker non-votes" will have
any effect on the outcome of voting on the matter.
The expenses of preparing, printing and mailing the materials
used in the solicitation of proxies will be borne by the Company. In addition to
the solicitation of proxies by use of the mails, the Company may utilize the
services of some of its officers and employees (who will receive no compensation
therefor in addition to their regular salaries) to solicit proxies personally
and by telephone and facsimile from brokerage houses and other shareholders.
Services will be provided by Progressive Transfer Company in soliciting banks
and brokers holding stock in their names or custody, or in the names of nominees
for others. The Company does not anticipate paying any additional fee for such
services.
SHAREHOLDER PROPOSALS
It is currently anticipated that the Company's next annual
meeting of Shareholders will occur after the Closing Date and accordingly the
Company's existing shareholders will not be entitled to participate in such
meeting unless the Merger is not consummated. If the Merger is not consummated,
proposals of Shareholders intended to be presented at the next annual meeting of
the Company's Shareholders must be received by the Company within a reasonable
time prior to the mailing of the proxy statement for
44
<PAGE>
such meeting but not later than February 29, 1999. Such proposals must otherwise
be in compliance with applicable laws and regulations and the governing
provisions of the articles of incorporation and bylaws of the Company. The form
of Proxy for the Company's Special Meeting of shareholders grants authority to
the designated proxies to vote in their discretion on any matters that come
before the Special Meeting except those set forth in the Company's Proxy
Statement and except for matters as to which adequate notice is received. In
order for a notice to be deemed adequate for the 1999 Annual Shareholder's
Meeting, it must be received prior to February 29, 1999.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Gull (registrant
0-16864) with the Securities and Exchange Commission pursuant to the Exchange
Act are incorporated by reference in this Proxy Statement:
1. Annual Report on Form 10-K for the year ended December 31,
1997 (filed April 14, 1998), filing number 000096313-98-000052.
2. Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 (filed May 15, 1998), filing number 000096313-98-000065.
3. Quarterly Report on Form 10-Q for the quarter ended June
30, 1998 (filed August 14, 1998), filing number 000096313-98-000106.
All documents filed by Gull pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the filing of this Proxy Statement
and prior to the date of the Special Meeting are deemed to be incorporated
herein by reference herein, as modified or amended, if applicable.
Upon written or oral request, Gull will send to you, without
charge, a copy of any or all of the documents incorporated by reference. The
request must be directed to the attention of Michael B. Malan, Vice
President Finance, Gull Laboratories, Inc., 1011 East Murray Holladay Road, Salt
Lake City, UT 84117.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
It is anticipated that a representative of KPMG Peat Marwick
LLP will be present at the Special Meeting to repond to appropriate questions
from shareholders in attendance and to make a statement if desired.
MISCELLANEOUS
Availability of Information
THE COMPANY IS PROVIDING TO EACH SHAREHOLDER TO WHOM THIS
PROXY STATEMENT IS DELIVERED, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997, INCLUDING THE FINANCIAL STATEMENTS, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND A COPY OF THE COMPANY'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN OR ORAL REQUESTS FOR ADDITIONAL
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1997 OR THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1998 SHOULD BE DIRECTED TO MR. MICHAEL MALAN, CORPORATE SECRETARY, GULL
LABORATORIES, INC., 1011 EAST MURRAY HOLLADAY ROAD, SALT LAKE CITY, UTAH 84117.
GULL LABORATORIES, INC.
By Order of the Board of Directors
Silke Humberg, Ph.D., CEO/President
October 5, 1998
45
<PAGE>
GULL LABORATORIES, INC.
Special Meeting of Stockholders
November 5, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints Silke Humberg and
Michael B. Malan and each of them (acting jointly or, if one be present, then by
that one alone), his attorneys and proxies, with full power of substitution and
revocation to each, for and in the name, place, and stead of the undersigned, to
vote, and act with respect to all shares of Common Stock, par value $.001 per
share of Gull Laboratories, Inc. (the "Company"), standing in the name of the
undersigned or with respect to which the undersigned is entitled to vote and
act, at the Special Meeting of Shareholders to be held at the 53rd Floor
Conference Center at the offices of O'Melveny & Myers LLP, 153 East 53rd Street,
New York, New York 10022 on November 5, 1998 at 10 a.m. Eastern Standard Time,
and at any adjournment(s) thereof, and especially to vote as follows:
1. With respect to the approval of the Merger Agreement dated as
of September 15, 1998 among the Company, Meridian Diagnostics,
Inc., Fresenius AG, and Meridian Acquisition Co. and the merger
of Meridian Acquisition Co. into the Company.
|_| FOR |_| AGAINST |_| ABSTAIN
2. In their discretion, any other matters as may properly come
before the meeting or any adjournment(s) thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED ABOVE. IF
NO DIRECTION IS INDICATED, IT WILL BE VOTED FOR THE APPROVAL MERGER
AGREEMENT AND THE MERGER.
Dated: ___________________, 1998 ________________________________________
Signature
----------------------------------------
Signature if held jointly
Please date this proxy and sign your name exactly as it appears hereon. When
there is more than one owner, each owner should sign. When signing as an agent,
attorney, administrator, executor, guardian or trustee, please indicate your
title as such. If executed as a corporation, the proxy should be signed in the
corporate name by a duly authorized officer who should indicate his title.
Please date, sign, and mail this proxy in the enclosed envelope.
<PAGE>
APPENDIX A
MERGER AGREEMENT
among
GULL LABORATORIES, INC.
MERIDIAN DIAGNOSTICS, INC.,
FRESENIUS AG
and
MERIDIAN ACQUISITION CO.
Dated as of September 15, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<C> <S> <C>
1. Definitions............................................................................................ 1
2. Basic Transaction...................................................................................... 4
2.1 The Merger.................................................................................... 4
2.2 The Closing................................................................................... 4
2.3 Actions at the Closing........................................................................ 4
2.4 Effect of Merger.............................................................................. 4
2.5 Procedure for Payment......................................................................... 5
2.6 Closing of Transfer Records................................................................... 6
3. Representations and Warranties of Gull and Fresenius................................................... 6
3.1 Organization, Qualification, and Corporate Power.............................................. 6
3.2 Capitalization................................................................................ 7
3.3 Authorization of Transaction.................................................................. 7
3.4 Noncontravention.............................................................................. 7
3.5 Filings with the SEC.......................................................................... 8
3.6 Events After December 31, 1997................................................................ 8
3.7 Undisclosed Liabilities....................................................................... 9
3.8 Brokers' Fees................................................................................. 9
3.9 Insurance..................................................................................... 9
3.10 Litigation................................................................................... 10
3.11 Product Warranty............................................................................. 10
3.12 Product Liability............................................................................ 11
3.13 Employees.................................................................................... 11
3.14 Employee Benefits............................................................................ 11
3.15 Guaranties................................................................................... 13
3.16 Environment, Health and Safety............................................................... 13
3.17 Intellectual Property........................................................................ 15
3.18 Disclosure................................................................................... 18
3.19 Opinion of Financial Advisor................................................................. 18
3.20 Proficiency Surveys.......................................................................... 18
3.21 Products, Inventories and Operations......................................................... 18
3.22 Formulae, Etc., for Products................................................................. 20
3.23 Expiration Dates. .......................................................................... 20
3.24 Subsidiaries and Other Capital Stock......................................................... 20
3.25 Real Property................................................................................ 20
3.26 Equipment.................................................................................... 21
3.27 Contracts and Agreements..................................................................... 21
3.28 Accounts Receivable.......................................................................... 21
3.29 Licenses and Permits......................................................................... 22
3.30 Taxes and Tax Returns........................................................................ 22
3.31 Transactions With Affiliates................................................................. 23
3.32 Compliance with Applicable Law............................................................... 23
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3.33 General Disclosure Matters................................................................... 23
3.34 Other Disclosures............................................................................ 23
4. Representations and Warranties of Meridian and the Transitory Subsidiary.............................. 23
4.1 Organization................................................................................. 24
4.2 Authorization of Transaction................................................................. 24
4.3 Noncontravention............................................................................. 24
4.4 Brokers' Fees................................................................................ 24
4.5 Disclosure................................................................................... 25
4.6 Litigation................................................................................... 25
4.7 Available Funds.............................................................................. 25
5. Representations and Warranties of Fresenius........................................................... 25
5.1 Organization................................................................................. 25
5.2 Authorization of Transaction................................................................. 25
5.3 Brokers' Fees................................................................................ 26
5.4 Disclosure................................................................................... 26
5.5 Ownership of Stock of Gull Shares............................................................ 26
5.6 Transactions with Gull....................................................................... 26
6. Covenants............................................................................................. 26
6.1 General...................................................................................... 26
6.2 Notices and Consents......................................................................... 26
6.3 Regulatory Matters and Approvals............................................................. 26
6.4 Operation of Business........................................................................ 27
6.5 Continuance of Operations.................................................................... 28
6.6 Due Diligence................................................................................ 29
6.7 Notice of Developments....................................................................... 30
6.8 Exclusivity.................................................................................. 30
6.9 Bylaw Indemnification........................................................................ 30
6.10 Closing Balance Sheet........................................................................ 31
6.11 Value of Certain Gull Assets................................................................. 31
6.12 WARN Act Compliance; Severence Obligations................................................... 32
6.13 Service and Other Arrangements............................................................... 32
6.14 Closing Deliveries........................................................................... 33
6.15 Further Meridian Obligations................................................................. 33
7. Covenants of Fresenius; Indemnification............................................................... 33
7.1 Voting of Shares............................................................................. 33
7.2 Indebtedness of Gull to Fresenius............................................................ 33
7.3 Indemnification for Shareholder Actions...................................................... 34
7.4 Indemnification by Fresenius................................................................. 34
7.5 Indemnifications by Meridian................................................................. 35
7.6 Zoning Interruptions......................................................................... 36
7.7 Indemnification Procedures................................................................... 36
7.8 Transition................................................................................... 37
7.9 Confidentiality.............................................................................. 37
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7.10 Noncompetition and NonSolicitation Covenants................................................. 37
7.11 Contribution to Capital...................................................................... 38
8. Conditions to Obligations to Close.................................................................... 38
8.1 Conditions to Each Party's Obligation to Effect the Merger................................... 38
8.2 Conditions to Obligation of Meridian and the Transitory Subsidiary........................... 39
8.3 Conditions to Obligation of Gull and Fresenius............................................... 41
9. Termination........................................................................................... 41
9.1 Termination of Agreement..................................................................... 41
9.2 Effect of Termination........................................................................ 42
10. Miscellaneous......................................................................................... 43
10.1 Survival..................................................................................... 43
10.2 Press Releases and Public Announcements...................................................... 43
10.3 No Obligations Upon Fresenius Medical Care AG................................................ 43
10.4 No Third Party Beneficiaries................................................................. 43
10.5 Entire Agreement............................................................................. 44
10.6 Successors and Assignment.................................................................... 44
10.7 Counterparts................................................................................. 44
10.8 Headings..................................................................................... 44
10.9 Notices...................................................................................... 44
10.10 Governing Law................................................................................ 45
10.11 Amendments and Waivers....................................................................... 45
10.12 Severability................................................................................. 46
10.13 Expenses..................................................................................... 46
10.14 Construction................................................................................. 46
10.15 Incorporation of Exhibits and Schedules...................................................... 46
10.16 Jurisdiction. .............................................................................. 46
</TABLE>
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LIST OF EXHIBITS
Exhibit A - Articles of Merger
Exhibit B - Legal Opinion of Counsel to Gull
Exhibit C - Legal Opinion of Counsel to Fresenius
Exhibit D - Legal Opinion of Counsel to Meridian
Exhibit E - Fairness Opinion
DISCLOSURE SCHEDULES
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MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is entered into as of
September 15, 1998, among GULL LABORATORIES, INC., a Utah corporation ("Gull"),
MERIDIAN DIAGNOSTICS, INC., an Ohio corporation ("Meridian"), FRESENIUS AG, a
German stock corporation ("Fresenius") and MERIDIAN ACQUISITION CO., a Utah
corporation wholly-owned by Meridian ("Transitory Subsidiary").
R E C I T A L S:
This Agreement contemplates a transaction in which Meridian
will acquire Gull for cash through a reverse subsidiary merger of the Transitory
Subsidiary into Gull.
Now, therefore, in consideration of the premises and the
mutual covenants and undertakings contained hereinafter, the Parties agree as
follows.
1.0 Definitions.
Unless the context otherwise requires, capitalized terms used
in this Agreement shall have the respective meanings ascribed to them in this
ss.1.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Closing Date" has the meaning set forth in ss.2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning
the businesses and affairs of Gull and its Subsidiaries that is not already
available to the public or generally known in the businesses in which Gull and
its Subsidiaries are engaged.
"Controlled Group of Corporations" has the meaning set forth
inss.1563 of the Code.
"Disclosure Schedule" has the meaning set forth in ss.3.
Information set forth in any section of the Disclosure Schedule shall be deemed
to qualify each section of this Agreement without the necessity of expressed
reference to such section.
"Dissenting Share" means any Gull Share held of record by a
stockholder who or which has exercised his or its appraisal rights under the
Utah Revised Business Corporation Act.
"Effective Time" has the meaning set forth in ss.2.4.1.
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"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any multiemployer plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA ss.3(1).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Fairness Opinion" has the meaning set forth in ss.3.19.
"Fresenius" has the meaning set forth in the preface.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Gull" has the meaning set forth in the preface and includes
its Subsidiaries unless the context requires otherwise.
"Gull Share" means any share of the Common Stock, $0.001 par
value per share, of Gull.
"Gull Stockholder" means any Person who or which is a holder
of record of any Gull Shares.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property Assets" has the meaning set forth in
ss.3.17.
"Knowledge" or "to the Knowledge of" means in the case of
Gull, the actual knowledge after reasonable investigation of Dr. Silke Humberg,
Michael B. Malan, Dr. Fred Rachford, Holly Scribner, Frank J. Simon, Andrew
Taylor, John Turner, Dr. Martina Vogel or Dr. Linxian Wu, and in the case of
Fresenius, has the meaning set forth in ss.5.
"Meridian" has the meaning set forth in the preface.
"Meridian Note" The promissory note of Meridian to be issued
to Fresenius at the Closing pursuant to ss.7.2.
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"Merger" has the meaning set forth in ss.2.1.
"1997 10-K" has the meaning set forth in ss.3.5.
"1998 10-Q" has the meaning set forth in ss.3.5.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Paying Agent" has the meaning set forth in ss.2.5.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Products" means all of the products manufactured, produced or
distributed by Gull and its Subsidiaries, including, without limitation, the
products identified in the Disclosure Schedule.
"Proxy Materials" means the proxy materials relating to the
special meeting.
"Public Reports" has the meaning set forth in ss.3.5.
"SEC" means the Securities and Exchange Commission.
"SEC Filings" has the meaning set forth in ss.6.3.1.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge or other security interest, excepting only (a) mechanic's,
materialman's and similar liens, (b) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens securing rental payments under capital
lease arrangements, and (d) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of securities entitled to vote
generally in the election of directors sufficient to elect a majority of the
directors. In the case of Gull, Subsidiaries includes non-corporate entities,
all or a majority of the equity interest of which are owned by Gull or a
Subsidiary of Gull, with the Subsidiaries being Gull Laboratories International,
Inc., Gull Laboratories GmbH, Gull Europe S.A., Biodesign, Inc., Gull
Laboratories S.A., Gull Laboratories N.V.
"Third Party Offer" has the meaning set forth in ss.6.8.
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"Transitory Subsidiary" has the meaning set forth in the
preface.
2.0 Basic Transaction.
2.1 The Merger. Subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge into Gull at the Effective Time
(the "Merger"). Gull shall be the corporation surviving the Merger.
2.2 The Closing. The closing of the Merger shall take place at
the offices of Keating, Muething & Klekamp, P.L.L., One East Fourth Street,
Cincinnati, Ohio 45202, commencing at 10:00 a.m. Eastern time on the second
business day following the satisfaction or waiver of all conditions set forth in
ss.8 (other than conditions with respect to actions the respective Parties will
take at the closing itself) or such other date and place as the Parties may
mutually determine in writing (the "Closing Date").
2.3 Actions at the Closing. At the closing, Gull will deliver
to Meridian and the Transitory Subsidiary the certificates, instruments and
documents referred to in ss.8.2. Meridian and the Transitory Subsidiary will
deliver to Gull the certificates, instruments and documents referred to in
ss.8.3. On the Closing Date, Gull and the Transitory Subsidiary will file with
the Utah Division of Corporations and Commercial Code Articles of Merger in the
form attached hereto as Exhibit A, and Meridian will deliver the Merger
consideration to the Paying Agent in the manner provided in this ss.2.
2.4 Effect of Merger.
2.4.1 General. The Merger shall become effective at the time
Gull and the Transitory Subsidiary file the properly executed and certified
Articles of Merger with the Utah Division of Corporations and Commercial Code,
or at such later time as the parties shall agree and specify in the Articles of
Merger (the "Effective Time"). The Merger shall have the effects set forth in
the Utah Revised Business Corporation Act. From and after the Effective Time,
Gull, as the surviving corporation in the Merger, shall possess all of the
rights, privileges, powers and franchises of a public as well as a private
nature, and be subject to all of the restrictions, disabilities and duties of
each of Gull and the Transitory Subsidiary, as the constituent corporations in
the Merger, all as set forth in ss.16-10a-1101, et seq., of the Utah Revised
Business Corporation Act.
2.4.2 Gull Corporate Documents. The Articles of Incorporation
and Bylaws of Gull shall be amended at the Effective Time as set forth in the
Articles of Merger to be identical to the Articles of Incorporation and Bylaws
of the Transitory Subsidiary immediately prior to the Effective Time, except as
provided in ss.6.9.
2.4.3 Directors and Officers. The directors and officers of
the Transitory Subsidiary shall become the directors and officers of Gull at the
Effective Time.
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2.4.4 Conversion of Gull Shares. At the Effective Time, by
virtue of the Merger and without any further action by Gull, Meridian, Fresenius
or the Transitory Subsidiary, each Gull Share then issued and outstanding, other
than any Dissenting Share, shall be converted into the right to receive Two
Dollars and Twenty-Five Cents ($2.25) in cash without interest, and each
Dissenting Share shall be converted into the right to receive payment from Gull
with respect thereto to the extent provided by, and in accordance with, the
provisions of the Utah Revised Business Corporation Act, provided, however, that
the Merger consideration per Gull Share shall be subject to equitable adjustment
in the event of any stock split, stock dividend, reverse stock split, or other
change in the number of Gull Shares outstanding other than an increase in the
number of outstanding Gull Shares resulting from the exercise of options to
purchase Gull Shares outstanding on the date hereof. After the Effective Time,
no Gull Share shall be deemed to be outstanding, other than Gull Shares issued
pursuant to ss.2.4.5,or to have any rights other than those set forth in this
Section.
2.4.5 Conversion of Capital Stock of the Transitory
Subsidiary. At and as of the Effective Time, each share of Common Stock of the
Transitory Subsidiary shall be converted into one share of Common Stock, $0.001
par value per share, of Gull.
2.5 Procedure for Payment.
2.5.1. Immediately after the Effective Time, Meridian will
deposit with a commercial bank (the "Paying Agent") a payment fund consisting of
cash sufficient for the Paying Agent to make full payment of the Merger
consideration to the holders of record immediately prior to the Effective Time
of all of the outstanding Gull Shares (other than any Dissenting Shares).
Meridian will cause the Paying Agent to mail a letter of transmittal in
customary form which shall contain instructions for use in effecting the
surrender of such certificates evidencing the outstanding Gull Shares in
exchange for the Merger consideration. Upon surrender of a certificate to the
Paying Agent for cancellation, together with a duly executed letter of
transmittal and such other documents as may be reasonably requested by the
Paying Agent, the holder of such certificate shall be entitled to receive in
exchange therefor the amount of cash, without interest, into which Gull Shares
theretofore represented by such certificate shall have been converted at the
Effective Time; and the certificate so surrendered shall be canceled. In the
event of a transfer of ownership of Gull Shares that is not registered in the
transfer records of Gull, payment may be made to a Person other than the Person
in whose name the certificate so surrendered is registered if such certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of such
certificate or establish to the satisfaction of Gull, as the surviving
corporation, that such tax has been paid or is not applicable. Until so
surrendered, each certificate shall be deemed at any time after the Effective
Time to represent only the right to receive the amount of cash, without
interest, into which Gull Shares theretofore represented by such certificate
shall have been converted at the Effective Time pursuant to this Section.
If a certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
certificate to be lost, stolen or destroyed and,
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if required by Meridian or Gull, upon the posting by such Person of a bond in
such amount as Meridian or Gull may reasonably direct as indemnity against any
claim that may be made against it with respect to such certificate and upon such
Person's compliance with the other requirements set forth herein, the Paying
Agent will issue in respect of such lost, stolen or destroyed certificate, the
Merger consideration to be received by virtue of the Merger with respect to Gull
Shares represented thereby.
2.5.2 Meridian may cause the Paying Agent to invest the
payment fund in securities of a United States commercial bank or of the
government of the United States or any state thereof, provided, that the terms
and conditions of the investments shall be such as to permit the Paying Agent to
make prompt payment of the Merger consideration as necessary. Meridian may cause
the Paying Agent to pay over to Gull any net earnings with respect to the
investments, and Meridian will deposit promptly with the Paying Agent any
portion of the payment fund which is lost through investments.
2.5.3 Meridian may cause the Paying Agent to pay over to Gull
any portion of the payment fund including any earnings thereon remaining 180
days after the Effective Time, and thereafter all former Gull Stockholders shall
be entitled to look to Gull, subject to abandoned property, escheat, and other
similar laws, as general creditors thereof with respect to the Merger
consideration payable upon surrender of their certificates.
2.5.4 Meridian shall pay all charges and expenses of the
Paying Agent.
2.6 Closing of Transfer Records. After the close of business
on the Closing Date, transfers of Gull Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of Gull.
3.0 Representations and Warranties of Gull and Fresenius. Gull
represents and warrants to Meridian and the Transitory Subsidiary that the
statements contained in this ss.3 and the accompanying Disclosure Schedule are
correct and complete as of the date of this Agreement.
3.1 Organization, Qualification, and Corporate Power. Each of
Gull and its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization. Each of Gull and its Subsidiaries is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required except where the lack of such qualification would not
have a material adverse effect on the financial condition of Gull and its
Subsidiaries taken as a whole or on the ability of the parties to consummate the
transactions contemplated by this Agreement. Each of Gull and its Subsidiaries
has full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. The minute books
containing records of meetings of Gull Stockholders, directors and committees of
directors, Gull stock certificate books and stock records are each correct and
complete. Neither any of Gull nor any of its Subsidiaries is in default under or
in violation of any provision of its charter or Bylaws.
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3.2 Capitalization. The entire authorized capital stock of
Gull consists of 50,000,000 Gull Shares, $0.001 par value per share, and
5,000,000 shares of Preferred Stock, $0.01 par value per share. As of the date
hereof, 8,016,012 Gull Shares are issued and outstanding and no Gull Shares are
held in treasury. No shares of Gull Preferred Stock are outstanding. All of the
issued and outstanding Gull Shares have been duly authorized and are validly
issued, fully paid and non-assessable. Except as set forth in the Disclosure
Schedule, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Gull or any of its Subsidiaries to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Gull or any of its
Subsidiaries. Except as set forth in the Disclosure Schedule, all issued and
outstanding shares of capital stock of each Subsidiary of Gull have been duly
authorized and are validly issued and fully paid and non-assessable and all of
such shares are owned of record and beneficially by Gull, free, clear and
unencumbered, and Gull or a wholly-owned Subsidiary has sole voting power with
respect to all of such shares.
3.3 Authorization of Transaction. The Board of Directors of
Gull, at a meeting duly called and held, has duly adopted resolutions approving
this Agreement and the Merger, determining that the terms of the Merger are fair
to, and in the best interests of, Gull's Stockholders and recommending that
Gull's Stockholders approve and adopt this Agreement and the Merger. Gull has
full power and authority to execute and deliver this Agreement and to perform
its obligations hereunder, subject to approval and adoption of this Agreement
and the Merger by the requisite majority-in-interest of Gull Stockholders as
provided by the Utah Revised Business Corporation Act. The execution, delivery
and performance of this Agreement and the consummation by Gull of the Merger and
of the other transactions contemplated hereby have been duly authorized by the
Board of Directors of Gull and no other corporate proceedings on the part of
Gull are necessary to authorize this Agreement or to consummate the transactions
so contemplated other than the requisite stockholder approval. This Agreement
has been duly executed and delivered by Gull and, assuming this Agreement
constitutes a valid and binding obligation of Meridian and the Transitory
Subsidiary, constitutes a valid and binding obligation of Gull enforceable
against Gull in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally and to general principles of equity.
3.4 Noncontravention. Except as set forth in the Disclosure
Schedule and, except for filings, permits, authorizations, consents and
approvals as may be required under applicable requirements of the Securities
Exchange Act, the Hart-Scott-Rodino Act, the laws of Utah, the laws of other
states in which Gull and its Subsidiaries are qualified to do or are doing
business and state takeover laws, and except for requisite Gull Stockholder
approval and the filing of Articles of Merger with the Utah Division of
Corporations and Commercial Code, neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Gull and its Subsidiaries is
subject or any provision of the charter or Bylaws of any of Gull and its
Subsidiaries or conflict with, result in a breach of, constitute a default
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under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of Gull and its Subsidiaries is a party or by which it is bound or to which
any of its assets is subject or result in the imposition of any Security
Interest upon any of its assets, except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
financial condition of Gull and its Subsidiaries taken as a whole or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement.
3.5 Filings with the SEC. Gull has made all filings with the
SEC that it has been required to make under the Securities Exchange Act,
including, without limitation, Gull's Annual Report on Form 10-K for the year
ended December 31, 1997 (the "1997 10-K") and Gull's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 (the "1998 10-Q") (the 1997 10-K and
1998 10-Q being referred to collectively as the "Public Reports"). At the time
filed with the SEC, each of the Public Reports complied in all material respects
with the Securities Exchange Act and the applicable rules and regulations of the
SEC thereunder. At the time filed with the SEC, the Public Reports, as of their
respective filing dates, did not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Gull has delivered to Meridian a correct and complete copy of each
Public Report.
3.6 Events After December 31, 1997.
3.6.1 Except as disclosed in the Public Reports or in the
Disclosure Schedule, since December 31, 1997 there has not been any material
adverse change in the business, financial condition, cash flows, operations,
results of operations or prospects of Gull and its Subsidiaries, taken as a
whole.
3.6.2 Except as set forth in the Disclosure Schedule, since
December 31, 1997, neither Gull nor any of its Subsidiaries:
3.6.2.1 has transferred or encumbered assets or
entered into any agreement outside the Ordinary Course of Business or granted
any license or sublicense of any rights with respect to any Intellectual
Property Assets; or
3.6.2.2 granted any Security Interest or made any
loan or entered into any other transaction with any directors, officers or
employees outside the Ordinary Course of Business; or
3.6.2.3 entered into any employment agreement,
modified the terms of any existing employment agreement; or
3.6.2.4 granted any increase in base compensation to
any director, officer or employee; or
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3.6.2.5 adopted, amended or modified any Employee
Benefit Plan; or
3.6.2.6 made any capital expenditures or committed to
make such expenditures in excess of $10,000; or
3.6.2.7 reduced or limited the insurance coverages
maintained on its behalf or the manner in which it uses, operates or maintains
its property; or
3.6.2.8 made any investments or contributions to any
other Person other than in the Ordinary Course of Business, in excess of
$10,000, individually or in the aggregate.
3.7 Undisclosed Liabilities. Except as set forth in the
Disclosure Schedule, none of Gull and its Subsidiaries has any material
liability, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated and whether due
or to become due, including any material liability for taxes, except for
liabilities set forth in the Public Reports or for which reasonable reserves are
maintained, and liabilities which have arisen after June 30, 1998 in the
Ordinary Course of Business.
3.8 Brokers' Fees. Except as set forth in the Disclosure
Schedule, none of Gull and its Subsidiaries has any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.9 Insurance. The Disclosure Schedule sets forth the
following information with respect to each insurance policy, including without
limitation policies providing medical, directors' and officers', property,
casualty, liability and workers' compensation coverage and bond and surety
arrangements, to which any of Gull and its Subsidiaries is a party, a named
insured or otherwise the beneficiary of coverage:
3.9.1 the name, address and telephone number of the agent;
3.9.2 the name of the insurer, the name of the policyholder
and the name of each covered insured;
3.9.3 the policy number and the period of coverage;
3.9.4 the scope, including an indication of whether the
coverage was on a claims made, occurrence or other basis, and amount, including
a description of how deductibles and ceilings are calculated and operate, of
coverage; and
3.9.5 a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy, to Gull's Knowledge: (a) the policy
is legal, valid, binding, enforceable and in full force and effect; (b) the
policy will continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the consummation
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of the Merger except that, subject to ss.6.9, coverage of Gull under policies
maintained by Fresenius will terminate at the Effective Time; (c) none of Gull
and its Subsidiaries nor any other party to the policy is in material breach or
default (including with respect to the payment of premiums or the giving of
notices) and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification
or acceleration, under the policy; and (d) no party to the policy has repudiated
any provision thereof. Each of Gull and its Subsidiaries has been covered since
January 1, 1995 by insurance in scope and amount customary and reasonable for
the businesses in which it has engaged during the aforementioned period. The
Disclosure Schedule describes any self-insurance arrangements affecting any of
Gull and its Subsidiaries.
3.10 Litigation. The Disclosure Schedule sets forth each
instance in which any of Gull and its Subsidiaries is subject to any outstanding
injunction, judgment, order, decree, ruling or charge or is a party or, to
Gull's Knowledge is threatened in writing to be made a party to any action,
suit, proceeding, hearing or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator, an adverse determination of which could
reasonably be expected to result in any material adverse change in the business,
financial condition, cash flows, operations, results of operations or prospects
of Gull and its Subsidiaries, taken as a whole.
3.11 Product Warranty. Except as set forth in the Disclosure
Schedule, to Gull's Knowledge, each product manufactured, distributed, sold,
leased or delivered by Gull or any of its Subsidiaries has been in conformity in
all material respects with all applicable contractual commitments and all
expressed and implied warranties. Except as set forth in the Disclosure
Schedule, none of Gull and its Subsidiaries has any liabilities in excess of the
liabilities set forth in the Public Reports or for which reasonable reserves are
maintained for any guaranty, warranty or other indemnity arising from products
manufactured, sold, leased or delivered by any of Gull and its Subsidiaries,
except for liabilities which are not reasonably expected to result in any
material adverse change in the business, financial condition, cash flows,
operations, results of operations or prospects of Gull and its Subsidiaries,
taken as a whole, and liabilities which have arisen after June 30, 1998 in the
Ordinary Course of Business.
3.12 Product Liability. Except as reserved for in the
consolidated financial statements contained in the 1997 10-K or as set forth in
the Disclosure Schedule, to Gull's Knowledge, none of Gull and its Subsidiaries
has any liability arising out of any injury to any Person or property as a
result of the ownership, possession or use of any Product manufactured,
distributed, sold, leased or delivered by any of Gull and its Subsidiaries
except for any such liabilities which are not reasonably expected to result in
any material adverse change in the business, financial condition, cash flows,
operations, results of operations or prospects of Gull and its Subsidiaries,
taken as a whole.
3.13 Employees. Except as set forth in the Disclosure
Schedule, to Gull's Knowledge, no executive, key employee or group of employees
has any plans to terminate employment with any of Gull and its Subsidiaries
other than routine terminations which are not reasonably expected to result in
any material adverse change in the business, financial condition,
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cash flows, operations, results of operations or prospects of Gull and its
Subsidiaries, taken as a whole. Except as set forth in the Public Reports, none
of the employees of Gull or its Subsidiaries are subject to any collective
bargaining agreement. Since January 1, 1998, none of Gull or its Subsidiaries
have committed an unfair labor practice as such term is defined in federal labor
law or similar action under non-United States labor laws, or experienced any
strikes, charges of unfair labor practices or other collective bargaining
disputes, except for any such practices, strikes, claims or disputes which are
not reasonably expected to result in any material adverse change in the
business, financial condition, cash flows, operations, results of operations or
prospects of Gull and its Subsidiaries, taken as a whole. Gull has no Knowledge
of any organizational effort presently being made or threatened by or on behalf
of any labor union with respect to employees of any of Gull and its
Subsidiaries.
3.14 Employee Benefits.
3.14.1 The Disclosure Schedule lists each Employee Benefit
Plan that any of Gull and its Subsidiaries maintains or to which any of Gull and
its Subsidiaries contributes.
3.14.1.1 Each such Employee Benefit Plan (and each
related trust, insurance contract or fund) subject to ERISA substantially
complies in form and in operation in all material respects with the applicable
requirements of ERISA, the Code and other applicable laws of United States or
non-United States jurisdictions. 3.14.1.2 All required reports and descriptions,
including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary
Plan Descriptions, have been filed or distributed appropriately with respect to
each Employee Benefit Plan subject to Title I of ERISA. The requirements of Part
6 of Subtitle B of Title 1 of ERISA and of Code ss.4980B have materially been
met with respect to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
3.14.1.3 All contributions, including all employer
contributions and employee salary reduction contributions, which are due prior
to the date of this Agreement have been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan and all contributions which are due
for any period ending on or before the Closing Date will have been paid on or
before the Closing Date to each such Employee Pension Benefit Plan or will have
been accrued in accordance with the past custom and practice of Gull and its
Subsidiaries. All premiums or other payments which are due for all periods
ending on or before the Closing Date will have been paid on or before the
Closing Date with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
3.14.1.4 Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan covering employees in the United States which is
intended to be a "qualified plan" under Code ss.401(a) substantially meets the
requirements of Code ss.401(a) and has received a favorable determination letter
form the Internal Revenue Service or has pending an application for a
determination letter which was timely filed.
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3.14.1.5 The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit Plan covering
employees in the United States, other than any multiemployer plan, equals or
exceeds (or does not fail by an amount which is material to Gull to equal or
exceed) the present value of all vested and nonvested liabilities thereunder
determined in accordance with PBGC methods, factors and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for determination.
3.14.1.6 Gull has delivered to Meridian correct and
complete copies of the plan documents and summary plan description, the most
recent determination letter received from the Internal Revenue Service (for each
Employee Pension Benefit Plan), the most recent Form 5500 Annual Report, if
applicable, and all related trust agreements, insurance contracts and other
funding agreements or other documents which implement each Employee Benefit
Plan.
3.14.2 With respect to each Employee Benefit Plan that any of
Gull, its Subsidiaries and the Controlled Group of Corporations which includes
Gull and its Subsidiaries maintains or ever has maintained, within the seven
years ending on the Closing Date, or to which any of them contributes,
contributed within the seven years ending on the Closing Date, or ever has been
required to contribute, within the seven years ending on the Closing Date:
3.14.2.1 No such Employee Benefit Plan is an Employee
Pension Benefit Plan that is subject to Title IV of ERISA.
3.14.2.2 To Gull's Knowledge, there have been no
prohibited transactions (as defined in ERISA ss.406 and Code ss.4975) with
respect to any such Employee Benefit Plan subject to Title I of ERISA. No
Fiduciary (as defined in ERISA ss.3(21)) has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to Gull's Knowledge,
threatened. Gull has no Knowledge of any basis for any such action, suit,
proceeding, hearing or investigation.
3.14.3 None of Gull, its Subsidiaries and the other members of
the Controlled Group of Corporations that includes Gull and its Subsidiaries
contributes to, has, within the seven years ending on the Closing Date,
contributed to, or been required to contribute to any multiemployer plan or has
any liability, including withdrawal liability, under any multiemployer plan as
defined in ss.4001(a)(3) of ERISA.
3.14.4 None of Gull and its Subsidiaries contributes or is
required to contribute to any Employee Welfare Benefit Plan providing medical,
health or life insurance or other welfare- type benefits for current or future
retired or terminated employees, their spouses or their dependents, other than
in accordance with Code ss.4980B.
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3.15 Guaranties. Except as set forth in the Disclosure
Schedule or the Public Reports, none of Gull and its Subsidiaries is a guarantor
or otherwise is liable for any material liability or obligation, including
indebtedness, of any other Person.
3.16 Environment, Health and Safety.
3.16.1 Except as set forth in the Disclosure Schedule, to the
Knowledge of Gull, all real property owned, leased or controlled by Gull and the
improvements thereon and the soil and groundwater thereunder ("Properties"): (i)
do not contain and are not contaminated by any Hazardous Substance; (ii) do not
contain and have not previously contained underground storage tanks; (iii) have
never been used for the generation, treatment, storage or disposal of any
Hazardous Substance (other than routine storage, use and sale of Hazardous
Substances from time to time in the Ordinary Course of Business and in
compliance, in all material respects, with Environmental, Health and Safety
Laws), or for mining, landfilling, dumping, gasoline station, dry cleaning or
commercial petroleum product storage purposes; (iv) have never been the subject
of any activities representing a violation or alleged violation of, and are not
currently under investigation pursuant to, any Environmental, Health or Safety
Laws or any obligation to report to or action by a governmental authority
pursuant to any Environmental, Health or Safety Laws, and are in full compliance
with all Environmental, Health or Safety Laws; (v) have not been subject to any
release of any Hazardous Substance from any nearby property; (vi) have never
been the subject of an environmental audit or assessment, or remedial action or
a lien or encumbrance for an environmental problem; and (vii) do not contain
asbestos, polychlorinated biphenyls (PCBs) or nuclear fuels or wastes.
3.16.2 Gull: (i) is, and has been, to its Knowledge, in
compliance in all material respects with all applicable Environmental, Health or
Safety Laws; (ii) has not received any notices, demand letters or requests for
information from any governmental entity or any third party that assert Gull may
be in violation of, or liable under, any Environmental, Health or Safety Laws;
(iii) is not subject to any notice, order or decree of any court, or
governmental entity arising under any Environmental, Health or Safety Laws,
except for such matters as do not, individually or in the aggregate, have a
material adverse effect on Gull, its business, or its Properties; (iv) has not
transported or arranged for the transportation of any Hazardous Substances to
any site listed on EPA's National Priorities List of Hazardous Substance Sites
or comparable state Hazardous Substance Site List; and (v) is not liable for any
Hazardous Substance contamination at any other site or location under any
Environmental, Health and Safety Laws. To its Knowledge, Gull has timely and
accurately filed every report or notification required to be filed, and has
acquired, maintained and timely submitted renewal applications for all necessary
certificates and permits and has and is in compliance with such certificates and
permits (all of which are listed in the Disclosure Schedule), and has generated
and maintained all data, documentation and records required under all
Environmental, Health or Safety Laws. Copies of all documents received by Gull
from, or submitted by Gull to, any governmental authority, court, or third party
concerning any matters arising under any Environmental, Health and Safety Laws,
and all reviews, audits, assessments, analyses or other documents pertaining to
Environmental, Health and Safety Laws, have been furnished by Gull to Meridian.
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3.16.3 Except as set forth in the Disclosure Schedule, there
are not now pending or, to Gull's Knowledge, threatened, and during the
preceding five (5) years, there has not occurred any Occupational Safety and
Health Act ("OSHA") inspections, complaints, and/or citations relating to Gull's
business operations or the places where it conducts its business operations. To
Gull's Knowledge, no modifications or changes in or to any of the Properties or
the manner in which Gull conducts its business are necessary to continue
operations in accordance with applicable OSHA requirements.
3.16.4 Definitions.
3.16.4.1 "Environmental, Health and Safety Laws"
means all foreign, federal, state and local laws, statutes, codes, ordinances,
regulations, rules, policies, consent decrees, judicial or administrative
orders, permits, approvals, or other requirements relating to the protection of
human health or the environment, all as amended or modified from time to time,
including without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss.9601, et
seq.), the Solid Waste Disposal Act, as amended (42 U.S.C. ss.6901, et seq.),
the Hazardous Waste Materials Transportation Act, as amended (49 U.S.C. ss.1801,
et seq.), the Clean Air Act, as amended (42 U.S.C. ss.7401, et seq.), the
Federal Water Pollution Control Act, as amended (33 U.S.C. ss.1251, et seq.),
the Toxic Substances Control Act, as amended (15 U.S.C. ss.2601, et seq.), the
Safe Drinking Water Act, as amended (42 U.S.C. ss.300f, et seq.), the Atomic
Energy Act, as amended (42 U.S.C. ss.2014, et seq.), the Federal Insecticide
Fungicide and Rodenticide Act, as amended (7 U.S.C. ss.136, et seq.), the Oil
Pollution Act of 1990, as amended (33 U.S.C. ss.2701, et seq.), the Emergency
Planning and Community Right-to-Know Act of 1986, as amended (42 U.S.C.
ss.11001, et seq.), the Occupational Safety and Health Act, as amended (29
U.S.C. ss.651, et seq.), and the regulations adopted and publications
promulgated pursuant thereto, and shall also include any common law theory based
on nuisance, trespass, negligence or other tortious conduct.
3.16.4.2 "Hazardous Substance" means any substance,
material or waste (a) the presence of which requires investigation or
remediation under any Environmental, Health and Safety Laws; or (b) which is
defined, characterized, identified, or listed as a hazardous waste, hazardous
substance, toxic substance, infectious waste, solid waste, industrial waste,
mixed (hazardous and radioactive) waste, pollutant, contaminant or similar term
under any Environmental, Health and Safety Laws; or (c) which is toxic,
explosive, corrosive, reactive, ignitable, flammable, infectious, radioactive,
toxic, carcinogenic, mutagenic, or otherwise hazardous and is or becomes
regulated by any governmental authority as a threat to human health or safety or
the environment; or (d) the presence of which on the property causes or
threatens to cause a nuisance upon the property or to adjacent property or poses
or threatens to pose a hazard to the health or safety of Persons on or about the
property; or (e) the release of which on adjacent properties could constitute a
trespass; or (f) which is asbestos or asbestos containing materials; or (g)
which is polychlorinated biphenyls; or (h) which contains petroleum or any
petroleum- derived products or fractions thereof; or (i) which is dioxin; or (j)
which may give rise to liability or is otherwise regulated under any
Environmental, Health and Safety Laws.
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3.17 Intellectual Property.
3.17.1 For purposes of thisss.3.17, the following terms shall
have the following meanings:
3.17.1.1 "Marks" means names "Gull," "Seagull
Design," "Protectoral," "Sportstaff," ":XTrax," "ONLi" or "GeneSTAR" and all
fictional business names, trading names, registered and unregistered trademarks,
service marks and applications used in the business or owned, used or licensed
by Gull;
3.17.1.2 "Patents" means the patents, patent
applications, and inventions and discoveries that may be patentable that are
used in the business and are owned, used or licensed by Gull;
3.17.1.3 "Copyrights" means all copyrights in both
published works and unpublished works owned, used or licensed by Gull;
3.17.1.4 "Trade Secrets" means all know-how, trade
secrets, confidential information, customer lists, internally derived or custom
software, technical information, data, process technology, plans, drawings, and
blue prints owned, used, or licensed by Gull as licensee or licensor;
3.17.1.5 "Software" means the computer software and
all computer software code documentation commentaries, owned, licensed or used
by Gull in the conduct of the business; and
3.17.1.6 "Intellectual Property Assets" means
collectively the Marks, Patents, Copyrights, Trade Secrets and Software.
3.17.2 The Disclosure Schedule contains a complete and
accurate list and summary description, including any royalties paid or received
by Gull, of all agreements relating to its Intellectual Property Assets to which
Gull is a party or by which Gull is bound except for any license applied by the
sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $2,000 under which Gull is a
licensee. There are no outstanding and, to Gull's Knowledge, no threatened
disputes or disagreements with respect to any such agreement.
3.17.3 The Disclosure Schedule contains a complete and
accurate list and summary description of all Marks. Except as set forth in the
Disclosure Schedule, all Marks that have been registered with the applicable
Trademark Office are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within 90 days after the
Closing Date. Except as set forth in the Disclosure Schedule, Gull has taken all
necessary actions in accordance with applicable law to maintain and protect each
Mark. Except as set for in the Disclosure Schedule, no Mark has been or is now
involved in any opposition, invalidation, or cancellation and, to Gull's
Knowledge, no such action is threatened with respect to any of the Marks, nor is
there any potentially interfering trademark or trademark application of any
third party.
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3.17.4 With respect to the Trade Secrets taken as a whole, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the Knowledge or memory of any individual. Gull
has taken all reasonable precautions to protect the secrecy, confidentiality and
value of its Trade Secrets.
3.17.5 Except as listed on the Disclosure Schedule, no action
is pending or, to the Knowledge of Gull, threatened with respect to Gull's
ownership of, or potential infringements of or any other claims of any nature
relating to or arising from its Intellectual Property Assets or the current
products of Gull. None of Gull's Intellectual Property Assets, including current
products manufactured by Gull, infringe, violate or constitute a
misappropriation, or to the Knowledge of Gull in the past infringed, violated or
constituted a misappropriation, of any intellectual property rights of any other
Person or entity. Neither Fresenius nor Gull has received any complaint, claim
or notice and, to Gull's Knowledge, there is no basis for any such complaint,
claim or notice. Gull has taken all reasonable measures to protect the
proprietary nature and value of each of the Intellectual Property Assets, and to
maintain in confidence all Trade Secrets that it owns or uses. No other Person
or entity has any rights to any of the Intellectual Property Assets owned or
used by Gull, except for licensors of Intellectual Property Assets to Gull or
other licensees of Intellectual Property Assets to which Gull has not been
granted an exclusive license, and to Gull's Knowledge, no other Person or entity
is infringing, violating or misappropriating any of the Intellectual Property
Assets of Gull.
3.17.6 Except as set forth in the Disclosure Schedule with
respect to "GeneSTAR," Gull does not own or operate any Software developed by it
or developed by others exclusively for its use.
3.17.7 The Software included in the Intellectual Property
Assets performs in accordance with the documentation and other written materials
used in connection with the Software and is free of defects in programming and
operation, is in machine-readable form, contains all currently available
computer programs, materials, tapes, object and source codes, other written
materials, know-how and processes related to the Software. Gull has made
available to Meridian for its review complete and correct copies of all user and
technical documentation related to the Software.
3.17.8 Fresenius and Gull have each kept secret and neither
has disclosed the source code for the Software to any Person or entity other
than certain employees of Fresenius and Gull who are subject to the terms of a
binding confidentiality agreement with respect thereto. Fresenius and Gull have
each taken all appropriate measures to protect the confidential and proprietary
nature of the Software, including without limitation the use of confidentiality
agreements with all of its employees having access to the Software source and
object code. There have been no Patents applied for and no Copyrights registered
for any part of the Software. There are no trademark rights of any Person or
entity in the names "Gull," "Seagull Design," "Protectoral," "Sportstaff,"
":XTrax," "ONLi" or "GeneSTAR."
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3.17.9 The Software includes acceptable design and performance
specifications so that the Software will not abruptly end or provide invalid or
incorrect results during the operation of Gull's business on or after January 1,
2000. The Software is designed to ensure year 2000 compatibility and includes,
but is not limited to, date data century recognition, calculations that
accommodate same century and multi-century formulas and date values, date data
interface values that reflect the century, and includes year 2000 leap year
calculations.
3.18 Disclosure. The Proxy Materials will comply in all
material respects with the Securities Exchange Act and the applicable rules and
regulations thereunder. None of the information that Gull will supply that is
included in the Proxy Materials will, at the time the Proxy Materials are first
mailed to Gull's Stockholders or at the time of the meeting of Gull
Stockholders, include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they will be made, not misleading; provided,
however, that Gull makes no representation or warranty with respect to any
information that Meridian and the Transitory Subsidiary supply that is included
in the Proxy Materials.
3.19 Opinion of Financial Advisor. Gull has received the
opinion of Houlihan Valuation Advisors, a true and correct copy of which is
attached as Exhibit E, dated the date of this Agreement (the "Fairness
Opinion").
3.20 Proficiency Surveys. Except as set forth in the
Disclosure Schedule, the supply contract pursuant to which Gull provides test
specimens to the College of American Pathologists' Proficiency Surveys will not
be adversely affected by completion of the Merger.
3.21 Products, Inventories and Operations.
3.21.1 Except as set forth in the Disclosure Schedule, the
Products manufactured by Gull have at all times been manufactured in compliance
in all material respects with all rules and regulations with respect to Good
Manufacturing Practices as such may be determined by the Federal Food and Drug
Administration ("FDA") or in compliance with all other applicable laws of both
the United States and non-United States governments ("GMP Requirements") and in
compliance in all material respects with all representations made in any
submissions to the FDA or similar non-United States authorities concerning or
relating to such Products, including submissions to obtain marketing approval.
Gull has maintained its registration of its manufacturing facilities with FDA at
all times.
3.21.2 Except as set forth in the Disclosure Schedule, the
finished goods inventories, net of reserves for excess and obsolete inventories,
of the Products at the Closing are in good, usable and salable condition, free
from any defect, whether latent or patent, and currently of a quality, strength
and purity which are in conformity with applicable FDA regulations or similar
non-United States laws and regulations. Except as set forth in the Disclosure
Schedule, no article in such inventories is adulterated or misbranded within the
meaning of the Federal Food, Drug and Cosmetic Act or similar non-United States
laws or regulations nor is any finished article contained in such inventories an
article which may not, under the provisions of Sections
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404 or 505 of the said Act, be introduced into interstate commerce for the uses
thereof previously made by Gull and all written representations with respect to
the Products made by Gull to its customers have been in all material respects
true, correct and complete. The inventories of finished goods of the Products
are packaged for resale in customary packaging used for those products by Gull.
3.21.3 Except as set forth in the Disclosure Schedule, the
manufacture, use, distribution and sale by Gull of the Products are in
accordance in all material respects with the provisions of the applicable
authorizations, comply in all material respects with all applicable laws and
regulations and do not interfere with the rights of any Person to know-how or to
any property right the existence of which would materially adversely affect the
value of the Products.
3.21.4 Except as set forth in the Disclosure Schedule, since
June 30, 1998, Gull has not failed to file any report, data, or other
information with respect to the Products, the materials or the operation of
Gull's plants where the Products are manufactured that is required to be filed
with the FDA or any other federal, state or local government agency or
non-United States government agency, which failure to file would materially
adversely affect the Products, the materials or the operations of Gull's plants
where the Products are manufactured. Except as disclosed in the Public Reports
or the Disclosure Schedule, Gull is in all material respects in compliance with
current federal, state, state agency and local government and other governmental
and non-United States government reporting requirements, if any, relating to the
Products, the materials and the plant operation where the Products are
manufactured.
3.21.5 All information concerning the Products, the materials
and the operation of Gull's plants where the Products are manufactured,
including published and unpublished data, relating to the safety and efficacy of
the Products, coming to the attention of Gull or Fresenius within two years
prior to the Closing Date not already listed on other Disclosure Schedules will
be promptly disclosed to Meridian prior to Closing.
3.21.6 Schedule 3.21.6 sets forth all FDA Form 483
inspectional observations delivered by the FDA to Gull since June 28, 1994. Gull
is currently in full compliance with all FDA Form 483 inspectional observations
delivered by the FDA to Gull, or Gull has delivered plans of correction to the
FDA for compliance in all material respects with all observations of
objectionable conditions and practices listed on such FDA Form 483 to the FDA,
and such plans of correction have been completed or are being diligently pursued
in accordance with the terms and conditions agreed between the FDA and Gull to
correct such objectionable practices identified by the FDA on all such FDA Form
483 inspectional reports.
3.22 Formulae, Etc., for Products.
3.22.1 The Disclosure Schedule contains a true and correct
list of the Products in inventory, those being manufactured and those being sold
or distributed by Gull and other products or technology related to the Products.
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3.22.2 With respect to the Products currently being
manufactured, Gull has a sufficient combination of manufacturing and testing
instructions, formulae and other documentation sufficient for the manufacture of
such Products in accordance with Gull's current manufacturing practices.
3.23 Expiration Dates. Except as set forth in the Disclosure
Schedule, all of the Products bear an expiration date suitable for sale of the
Products in the Ordinary Course of Business which is based upon Gull's available
data.
3.24 Subsidiaries and Other Capital Stock. The Subsidiaries
are listed in the Disclosure Schedule. Except as set forth in the Disclosure
Schedule, Gull owns all outstanding securities of each of the Subsidiaries. No
Subsidiary has outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that could require such Subsidiary to issue, sell, or otherwise
cause to become outstanding any of its capital stock.
3.25 Real Property. The Disclosure Schedule sets forth a
description of all real property of Gull owned, leased or subject to a purchase
contract or lease commitment, detailing which properties are owned and which are
leased, with a brief description of all buildings and structures thereon
(sometimes collectively the "Real Property"). A list of all such purchase
contracts or leases is contained in the Disclosure Schedule. With respect to the
Real Property that is owned by Gull and identified on the Disclosure Schedule,
title to such Real Property is, and at the Effective Time shall be, except to
the extent identified in the Disclosure Schedule, good and marketable, fee
simple, free and clear of all liens, encumbrances, adverse claims and other
matters affecting Gull's title to or possession of such Real Property,
including, but not limited to, all encroachments, boundary disputes, covenants,
restrictions, easements, rights of way, mortgages, security interests, leases,
encumbrances and title objections, excepting only (i) liens for real estate
taxes not yet due and payable and (ii) such easements, restrictions and
covenants presently of record which will not, in Meridian's sole judgment (which
judgment will be exercised prior to Closing to the extent such easements,
restrictions and covenants have been disclosed in the Disclosure Schedule),
interfere with or impair Meridian's intended use of any of the Real Property or
reduce the value of any of the Real Property, which easements, restrictions and
covenants are listed on the Disclosure Schedule in a manner so that the Real
Property to which they relate is readily identifiable (collectively the
"Permitted Encumbrances"). At Closing, title to the Real Property owned by Gull
shall be insurable by Meridian by a title insurance company reasonably
satisfactory to Meridian, at such company's regular rates pursuant to an ALTA
1987 owner's form of policy, free of all exceptions except the aforesaid
easements, restrictions and covenants to the extent not objectionable to
Meridian. A list of existing title insurance policies is contained in the
Disclosure Schedule. Except as set forth in the Disclosure Schedule, all Real
Property and the buildings located thereon are in compliance in all material
respects with applicable zoning laws and regulations. All buildings and
structures owned or leased by Gull, and the mechanical components (including
HVAC systems), roofs, fixtures and equipment located therein or thereon, are
now, and at the Closing Date will be, in good operating condition and repair,
subject only to normal maintenance and repair, fit for the uses for which they
are intended, and no material repairs will need to be made as of the Closing
Date to continue the use of such buildings and structures as presently used.
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3.26 Equipment. Gull shall deliver to Meridian prior to
Closing a computer generated asset register which will list all material items
of machinery, equipment and similar property, including vehicles, owned by Gull
on the Closing Date. All such machinery, equipment and similar property,
including vehicles, shall be in good working order on the Closing Date. Except
as set forth in the Disclosure Schedule, all equipment owned by Gull and placed
with customers has been validated for the specific Gull tests that run on that
equipment.
3.27 Contracts and Agreements. The Disclosure Schedule sets
forth a description of all contracts and agreements, whether written or oral,
and all amendments thereto or modifications thereof to which Gull is a party or
by which it is bound, which involve future payments by or to Gull of $25,000 or
more, other than contracts which are terminable by Gull upon thirty days or less
notice without cost or expense to Gull, and all notes, mortgages, pledges, deeds
of trust, security, loan or credit agreements and similar instruments or
arrangements to which Gull is a party or by which it is bound and all amendments
or modifications thereof (collectively the "Contracts"), together in each case
with copies of all such agreements, contracts and other instruments as Meridian
may reasonably request. Except as set forth in the Disclosure Schedule:
3.27.1 Each Contract is a valid and binding agreement of Gull
and, to the best of Gull's Knowledge, is a valid and binding agreement of the
other parties thereto;
3.27.2 Gull has fulfilled all obligations required pursuant to
each Contract to have been performed by Gull on its part prior to the date
hereof, and Gull has no reason to believe that it will not be able to fulfill,
when due, all of Gull's obligations under the Contracts that remain to be
performed after the date hereof; and
3.27.3 There has not occurred any default under any Contract
on the part of Gull; Gull does not have any Knowledge that any default under any
Contract on the part of the other parties thereto has occurred; and Gull does
not have any Knowledge that any event has occurred which with the giving of
notice or the lapse of time, or both, would constitute any default under any of
the Contracts.
3.28 Accounts Receivable. All accounts receivable of Gull that
are reflected in the financial statements contained in the 1998 10-Q are valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business of Gull. Except as set forth on the Disclosure
Schedule, there is no contest, claim or right of set-off, other than returns in
the ordinary course of business of Gull, under any contract or arrangement with
any obligor of an accounts receivable relating to the amount or validity of such
accounts receivable.
3.29 Licenses and Permits. The Disclosure Schedule sets forth
a list of, and Gull is in possession of, all licenses, permits for the
development, manufacture and marketing of products pursuant to such licenses and
permits of Gull, other than any permit, the absence of which does not have a
material adverse effect upon the business, financial condition or prospects, and
states that the permits are valid and in full force and effect. Except as set
forth in the Disclosure Schedule, Gull is in compliance in all material respects
with all conditions or
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requirements imposed by or in connection with the permits and with respect to
the conduct of its business. Gull has received no notice of, and there is not to
the Knowledge of Gull, any reason to believe that any authority intends to
cancel, terminate or modify any of the permits or adopt or modify rules and
regulations which would adversely affect the permits.
3.30 Taxes and Tax Returns. Gull will, between the date hereof
and the Closing Date, and through the date of this Agreement has, duly and
timely filed all federal, state and local (United States and all foreign
jurisdictions) tax returns required to be filed by it (unless a valid extension
therefore has been granted), and all such returns are, or will be when filed,
true, complete and correct in all material respects. Gull has, or will have
prior to the Closing Date, duly and timely paid or made adequate provision for
the payment of all taxes, assessments and other governmental charges which have
been incurred as set forth in the aforementioned tax returns or are otherwise
due and payable with respect to periods ending on or prior to the Closing Date.
All sales taxes required through the date of this Agreement to be collected and
remitted by Gull have been properly collected and remitted. All sales taxes will
continue to be properly collected and remitted to the extent required, up to and
through the Closing Date. All necessary sales tax exemption certificates have
been obtained by Gull and all such certificates have been properly completed and
maintained. No tax return, except as set forth in the Disclosure Schedule, filed
by Gull is under audit or examination by any taxing authority and there are no
applications or agreements for the extension of the time for the filing of any
tax return or for the assessment of any amounts of tax nor any consent to an
extension of the period of limitations applicable to such assessment or to the
collection of any tax. No issues have been raised in connection with any prior
or pending inquiry into, or audit of, any tax filings of Gull which may be
expected to be raised in the future by such taxing authorities and no facts
exist or have existed which would constitute grounds for the assessment of any
further tax liabilities, which individually or in the aggregate are material
with respect to the periods which have not been examined by the taxing authority
of the relevant jurisdiction. Gull has made available to Meridian true and
complete copies of all United States federal, state and local income tax returns
and similar tax returns filed with non-United States jurisdictions which it has
filed for each of the past three years as set forth in the Disclosure Schedule
together with copies of all schedules, work papers, elections, tax depreciation
schedules and other documents which were used in the preparation of each such
tax return. There are no liens for taxes upon the assets of Gull except for
liens for taxes not yet due. As used herein, "taxes" mean all net income, gross
income, gross receipts, value added, sales, use, transfer, franchise, profits,
withholding, payroll, employment, excise, severance, property or windfall
profits taxes, or other taxes of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority, domestic or non-United States, upon Gull with respect to all periods
or portions thereof ending on or before the Effective Time and/or any liability
of Gull for the payment of any amounts of the type described in the immediately
preceding clause as a result of being a member of an affiliated or combined
group or a Controlled Group of Corporations.
3.31 Transactions With Affiliates. Except as set forth in the
Public Reports or the Disclosure Schedule and except for compensation or other
customary employee benefits provided in the Ordinary Course of Business, since
December 31, 1997, Gull has not entered into, or been a party to, any
transaction with a value in excess of $5,000 which provided for payment
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to or from, or the transfer of, any property of Gull to or from any Gull
Stockholders, any director, officer or other employee of Gull, to any member of
the family of any such Person or to any corporation, partnership, trust or other
entity in which any such Person has an ownership interest or is an officer,
director, partner or trustee.
3.32 Compliance with Applicable Law. Except as set forth in
the Disclosure Schedule, Gull is conducting and has conducted its business so as
to comply, in all material respects with all applicable laws, ordinances,
regulations, decrees and orders, of any govern mental entity, domestic or
non-United States, including without limitation compliance with the National
Labor Relations Act, as amended, the Welfare and Pension Plans Disclosure Act,
the Fair Labor Standards Act and Equal Pay Act, Title 7 of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, and any other law,
ordinance, regulation, decree or order, except, in each case, for any failure to
comply which is not reasonably likely to have a material adverse effect on the
financial condition, business, properties, reputation, results of operations or
prospects of Gull, Meridian and the Transitory Subsidiary.
3.33 General Disclosure Matters. No representation or warranty
by Gull contained in this Agreement, the Disclosure Schedule attached hereto or
in any statement or certification furnished or to be furnished to Meridian
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
3.34 Other Disclosures. Notwithstanding the foregoing ss.3.1
through ss.3.33, if Meridian has actually received notice of or has actual
knowledge of a fact or matter, such fact or matter shall be deemed to have been
disclosed to Meridian as required by this Agreement.
4.0 Representations and Warranties of Meridian and the
Transitory Subsidiary. Each of Meridian and the Transitory Subsidiary represents
and warrants to Gull and Fresenius that the statements contained in this Section
are correct and complete as of the date of this Agreement.
4.1 Organization. Meridian and the Transitory Subsidiary are
corporations each duly organized, validly existing, and in good standing under
the laws of Ohio and Utah, respectively. The Transitory Subsidiary was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby. Meridian has full corporate power and authority to carry on
the business in which it is engaged and to own and use the properties owned and
used by it.
4.2 Authorization of Transaction. Each of Meridian and the
Transitory Subsidiary has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by Meridian and the Transitory Subsidiary and the
consummation by Meridian and the Transitory Subsidiary of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
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necessary corporate action on the part of Meridian and the Transitory
Subsidiary. No vote of Meridian's stockholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Meridian and the Transitory Subsidiary and, assuming
this Agreement constitutes a valid and binding obligation of Gull and Fresenius,
constitutes a valid and binding obligation of each of Meridian and the
Transitory Subsidiary enforceable against Meridian and the Transitory Subsidiary
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity.
4.3 Noncontravention. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Exchange Act, the Hart-Scott-Rodino
Act, the laws of Utah, the laws of other states in which Gull is qualified to do
or is doing business and state takeover laws, and except for the filing of
Articles of Merger with the Utah Division of Corporations and Commercial Code,
neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which either
Meridian or the Transitory Subsidiary is subject or any provision of the charter
or Bylaws of either Meridian or the Transitory Subsidiary or conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument
or other arrangement to which either Meridian or the Transitory Subsidiary is a
party or by which it is bound or to which any of its assets is subject, except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not have a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
4.4 Brokers' Fees. Neither Meridian nor the Transitory
Subsidiary has any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement for which any of Gull, Fresenius or their Subsidiaries could become
liable or obligated.
4.5 Disclosure. None of the information that Meridian and the
Transitory Subsidiary will supply specifically for use in the Proxy Materials
will contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they will be made, not misleading.
4.6 Litigation. As of the date of this Agreement, there is no
suit, claim, action, proceeding or investigation pending or, to the Knowledge of
Meridian and the Transitory Subsidiary, threatened against Meridian or any of
its Subsidiaries that could reasonably be expected to prevent or materially
delay the consummation of the Merger. As of the date of this Agreement, neither
Meridian nor any of its Subsidiaries is subject to any outstanding order, writ,
injunction or decree that could reasonably be expected to prevent or materially
delay the consummation of the Merger.
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4.7 Available Funds. At the closing, Meridian will have
sufficient funds available to pay the Merger consideration and to fulfill and
satisfy its other obligations to Fresenius under this Agreement.
5.0 Representations and Warranties of Fresenius. Fresenius
represents and warrants to Meridian that the statements contained in this
Section and the representations and warranties of Gull set forth in ss.3 and the
accompanying Disclosure Schedule are correct and complete as of the date of this
Agreement provided that matters represented to Knowledge of Gull shall in this
respect be represented to the Knowledge of Fresenius based on the actual
Knowledge of Rainer Baule or Yorck Schmidt. Nothing in this Section 5 shall
constitute a representation by Fresenius as to the Knowledge of Gull.
5.1 Organization. Fresenius is a corporation duly organized
and validly existing under the laws of Germany.
5.2 Authorization of Transaction. Fresenius has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by Fresenius and the consummation by Fresenius of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Fresenius and no other corporate proceedings on the part of
Fresenius are necessary to authorize this Agreement or to consummate the
transactions so contemplated, subject to approval by the Supervisory Board of
Fresenius. No vote of Fresenius' stockholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Fresenius and, assuming this Agreement constitutes a
valid and binding obligation of Gull, Meridian and the Transitory Subsidiary,
constitutes a valid and binding obligation of Fresenius enforceable against
Fresenius in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally and to general principles of equity.
5.3 Brokers' Fees. Fresenius has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which any of Gull and its
Subsidiaries could become liable or obligated.
5.4 Disclosure. None of the information that Fresenius will
supply specifically for use in the Proxy Materials will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they will be made, not misleading.
5.5 Ownership of Stock of Gull Shares. Fresenius warrants that
it owns 4,930,693 Gull Shares free, clear and unencumbered and has sole voting
power with respect to all of such Gull Shares.
5.6 Transactions with Gull. The Public Reports or the
Disclosure Schedule sets forth all material business arrangements or
relationships that Fresenius or any of its Affiliates have had with Gull or any
of its Subsidiaries since January 1, 1997. Except as set forth in the
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Disclosure Schedule, neither Fresenius nor any of its Affiliates owns any asset
used in the business of Gull and its Subsidiaries.
6.0 Covenants. The Parties agree as follows with respect to
the period from and after the execution of this Agreement.
6.1 General. Each Party will use its reasonable best efforts
to take all actions and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by this
Agreement including satisfaction, but not waiver, of the closing conditions set
forth in ss.8.
6.2 Notices and Consents. Gull will give any notices, and will
cause each of its Subsidiaries to give any notices, to third parties and will
use its reasonable best efforts to obtain, and will cause each of its
Subsidiaries to use its reasonable best efforts to obtain, any third party
consents, that Meridian reasonably may request in connection with the matters
referred to in ss.3.4.
6.3 Regulatory Matters and Approvals. Each of the Parties
will, and Gull will cause each of its Subsidiaries to, give any notices to, make
any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.ss. 3.4 and 4.3. Without
limiting the generality of the foregoing:
6.3.1 Securities Exchange Act. Gull will promptly after the
execution of this Agreement prepare and file with the SEC preliminary proxy
materials and any other statements or filings required under the Securities
Exchange Act relating to the special meeting and the transactions contemplated
hereunder (the "SEC Filings"). Gull will use its reasonable best efforts to
respond to the comments of the SEC thereon and will make any further filings in
connection therewith that may be necessary, proper or advisable. Meridian, the
Transitory Subsidiary and Fresenius will provide Gull with whatever information
and assistance in connection with the foregoing filings that Gull reasonably may
request. Each of Gull, Meridian, the Transitory Subsidiary and Fresenius shall
correct promptly any such information specifically provided by it which shall
have become false or misleading in any material respect. Gull shall take all
steps necessary to file or to cause to be filed with the SEC and have cleared by
the SEC any amendment or supplement to the preliminary proxy statement so as to
correct the same and to cause the Proxy Statement as so corrected to be
disseminated to Gull Stockholders, in each case as and to the extent required by
applicable law.
6.3.2 Special Meeting. Gull will call a special meeting of
Gull Stockholders, as soon as reasonably practicable in order that Gull
Stockholders may consider and vote upon the adoption of this Agreement and the
approval of the Merger in accordance with the Utah Revised Business Corporation
Act. Gull will mail the Proxy Materials to its Stockholders as soon as
reasonably practicable after clearance thereof by the SEC. Gull shall, through
its Board of Directors, recommend to its Stockholders adoption of this Agreement
and approval of the Merger and shall not withdraw such recommendation; provided,
however, that Gull's Board of Directors
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shall not be required to make and shall be entitled to withdraw such
recommendation if the Fairness Opinion shall be withdrawn or if Gull's Board of
Directors reasonably concludes, for any other reason, in good faith after
consultation with, and based on the advice of, its outside counsel, that the
making of or the failure to withdraw, such recommendation would be inconsistent
with the fiduciary obligations of Gull's Board of Directors under applicable
law.
6.3.3 Hart-Scott-Rodino Act. Meridian and Fresenius will file
Notification and Report Forms and related material with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act, and each will use its reasonable best efforts
to obtain, an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper, or
advisable.
6.4 Operation of Business. Gull will, and will cause its
Subsidiaries to, engage only in practices, and only take actions, or enter into
transactions in the Ordinary Course of Business. In addition, during the period
from the date of this Agreement through the Effective Time, Gull will not and
will not cause or permit any of its Subsidiaries to do any of the following
without, in each instance, the prior written consent of Meridian, which consent
shall not be withheld unreasonably:
6.4.1 none of Gull and its Subsidiaries will authorize or
effect any change in its Articles of Incorporation, Charter or Bylaws;
6.4.2 none of Gull and its Subsidiaries will grant any
options, warrants, or other rights to purchase or obtain any of its capital
stock or issue, sell, or otherwise dispose of any of its capital stock except
upon the exercise of options, warrants, and other rights currently outstanding;
6.4.3 none of Gull and its Subsidiaries will declare, set
aside, or pay any dividend or distribution with respect to its capital stock,
whether in cash or in kind, or redeem, repurchase, or otherwise acquire any of
its capital stock other than repurchases of outstanding options to purchase Gull
Shares;
6.4.4 none of Gull and its Subsidiaries will issue any note,
bond, or other debt security or, other than in the Ordinary Course of Business,
create, incur, assume or guarantee any indebtedness for borrowed money or
capitalized lease obligation except for financing provided by Fresenius and
except for extensions or refinancings of existing indebtedness;
6.4.5 none of Gull and its Subsidiaries will impose or permit
or cause to be imposed any Security Interest upon any of its assets outside the
Ordinary Course of Business;
6.4.6 other than purchases of inventory in the Ordinary Course
of Business, none of Gull and its Subsidiaries will make any capital investment
in, make any loan to, or acquire the securities or assets of any other Person in
amounts exceeding $10,000 in any one or related group of transactions;
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6.4.7 none of Gull and its Subsidiaries will make any change
in employment terms, policies or practices for any of its directors or officers
or make any change in employment terms, policies or practices for its
non-officer employees outside the Ordinary Course of Business;
6.4.8 none of Gull and its Subsidiaries will commit to do any
of the foregoing; and
6.4.9 Gull shall preserve all manufacturing instructions,
formulae and other documentation and all available information concerning the
Products under development and shall disclose to Meridian all manufacturing
processes and Trade Secrets possessed by Gull relating to the Products.
6.5 Continuance of Operations. Gull will, and will cause each
of its Subsidiaries to, use its reasonable efforts to keep its business and
property substantially intact, including its present operations, its physical
facilities, working conditions and relationships with lessors, licensors,
suppliers, customers and employees and operate so as to maintain the levels of
finished and raw goods inventory and sales activity consistent with its
practices during the preceding twelve months. Gull shall take such steps as are
appropriate so at the closing it will have on hand finished goods inventory of
the Products listed below, which represent approximately 80% of Gull's sales on
a unit basis, during the six months ended September 9, 1998, and which will be
sufficient to meet normal sales demand for the next four months following the
Closing Date. The listing of products is:
ANALYTE H2E150-E/EIA HSV 2 IgM
XX715-E/GULLSORB EA101-E/IFA EBV-EA
EBE150/EIA EBV IgM PEMA EB211-E/IFA EBV IgG
4870311/EIA EBV IgG PEMA RBE100-E/EIA RBOLA IgG
EBE150-E/EIA EBV IgM XX710-E/GULLSORB
4870011/IFA EBV IgG PEMA LDE150/EIA LYME IgM
EB100-E/IFA EBV IgG EB251-E/IFA EBV M PCK
4870031/IFA EBV IgM PEMA RUE100-E/EIARBELA IgG
EBE100/EIA EBV IgG H2I101-E/EIA HSVTS IgG
EB150-E/IFA EBV IgM EN100-E/IFA EBNA
XX71AN/GULLSORB PEMA VZE101-E/EIA VZV QQ
4870331/EIA EBNA PEMA CME150-E/EIA CMV IgM
TCE100-E/EIA CHAGAS H2E100-E/EIA HSV IgG
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4870321/EIA EBV IgM PEMA CME100/EIA CMV IgG
H1E150-E/EIA HSV 1 IgM
6.6 Due Diligence. Fresenius and Gull will each, and will
cause Gull's Subsidiaries to, permit representatives of Meridian to have
reasonable access at reasonable times upon reasonable notice to all premises,
properties, personnel, books, records including tax records, contracts, and
documents of or pertaining to each of Gull and its Subsidiaries. Such parties
will also furnish Meridian and its representatives with all such information and
data concerning the affairs of Gull as Meridian reasonably may request for the
purpose of verifying the representations and warranties made herein and further
investigating the business and affairs of Gull. In furtherance thereof, Gull
will permit Meridian, in a manner approved by Gull, to make contact with all
members of management of Gull and its Subsidiaries, with their customers and
with such other Persons with which Gull has been conducting business. The
performance of this due diligence by Meridian will be conducted as expeditiously
as practical. Meridian's performance of due diligence of the acquisition of
information by Meridian shall not relieve Gull or Fresenius from any
representation, warranty or covenant made by either of them in this Agreement.
Fresenius or Gull will provide Meridian with the appropriate occupancy upon
commercially reasonable terms in the German facilities of Fresenius or Gull
until the closing. All information obtained by Meridian or the Transitory
Subsidiary pursuant to this Agreement shall be kept confidential in accordance
with the Confidentiality Agreement dated November 18, 1997 between Gull and
Meridian (the "Confidentiality Agreement"). Each of Gull, Meridian and the
Transitory Subsidiary hereby expressly affirms the terms of, and acknowledges
that it is bound by, such Confidentiality Agreement and agrees and acknowledges
that such terms and the Confidentiality Agreement shall survive the termination
of this Agreement.
6.7 Notice of Developments. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in ss.ss. 3, 4 and 5. No
disclosure by any Party pursuant to this Section, however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant unless the Party
closes the transaction after receipt of such written disclosure.
6.8 Exclusivity. Each of Fresenius and Gull will not, and will
not cause or permit any of its employees or agents to, solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to a
tender or exchange offer, a merger, consolidation or other business combination
involving Gull or any of its Subsidiaries or any proposal to acquire in any
manner a substantial equity interest in, or substantial portion of the assets
of, Gull or any of its Subsidiaries (a "Third Party Offer"); provided, however,
that Fresenius, Gull and their respective directors and officers may engage in
discussions or negotiations with, or furnish information concerning Gull and its
properties, assets and business to any Person which makes a Third Party Offer if
the Board of Directors of Gull reasonably concludes in good faith after
consultation with, and based on the advice of, its outside counsel, that the
failure to take such action would be inconsistent with the fiduciary obligations
of such Board of Directors under
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applicable law; and provided further, that notwithstanding anything to the
contrary herein contained, the Board of Directors of Gull may take and disclose
to Gull Stockholders a position contemplated by Rule 14e-2 promulgated under the
Securities Exchange Act, comply with Rule 14d-9 thereunder and make all
disclosures required by applicable law in connection therewith and such actions
shall not be considered a breach of this Section of this Agreement. Gull shall
promptly, but in no case later than 48 hours, notify Meridian of a decision by
Gull to engage in discussions or negotiations with, or furnish information
concerning Gull or its properties, assets or business to, any Person or of the
receipt of any Third Party Offer providing Meridian with a summary of the
material terms thereof and the identity of the offeror. Gull shall afford
Meridian two business days to respond with a counteroffer to any Third Party
Offer. Should this process result in a substantial amount of assets or stock of
Gull being sold to another party, Gull and Fresenius will be jointly and
severally obligated to pay Meridian $350,000 to compensate Meridian for its time
and costs involved in the transaction contemplated by this Agreement. Any such
payment will be made promptly in immediately available United States funds.
6.9 Bylaw Indemnification. The Bylaws of Gull, as the
surviving corporation, shall contain the provisions with respect to
indemnification set forth in the Articles of Incorporation and Bylaws of Gull on
the date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of five years after the Effective Time in any
manner that would adversely affect the rights thereunder of Persons who at any
time prior to the Effective Time were prospective indemnitees under the Articles
of Incorporation or Bylaws of Gull in respect of actions or omissions occurring
at or prior to the Effective Time, including, without limitation, the
transactions contemplated by this Agreement, unless such modification is
required by law. For a period of five years after the Effective Time, Meridian
will reimburse Fresenius for its actual out-of-pocket costs for the maintenance
of "tail coverage" of Gull's officers and directors pursuant to Fresenius'
existing insurance policy covering such matters to the extent that such coverage
may be purchased with premium payments for such tail coverage established as of
the Closing Date or Meridian may, at its option, maintain such coverage with a
United States nationally-recognized insurer.
6.10 Closing Balance Sheet. At Meridian's expense, Gull will
prepare a balance sheet as of the Closing Date in accordance with GAAP, except
as provided in ss.6.11, which will be audited by Arthur Andersen LLP in
accordance with generally accepted auditing standards. Matters which are subject
to judgment will be treated in a manner consistent with Gull's historical
accounting practices provided such practices are in accordance with GAAP.
6.11 Value of Certain Gull Assets.
6.11.1 Subject to ss.ss.6.11.2 and 6.11.3, Fresenius and Gull
represent and covenant that the balance sheet prepared as of the Closing Date
will contain the values shown for the following assets adjusted to reflect the
proceeds from any realization of such assets since May 31, 1998 recorded in a
manner consistent with Gull's historical accounting practices:
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ASSETS VALUE
Hodges Accounts Receivable 0 - Gull to write off
Dental Protocol Patent Corp. 0 - Gull to write off
Standard Engineering Purchase Deposit 0 - Gull to write off
Hypreps 0
MRX's 0
Omni's and Components 0 - Gull to write off
Duets Instruments $1,091,000
Duet Components and Miscellaneous $146,000
Equipment, Inventory and Certifications
Bio Lab 300 -200 $320,000
Instrumentation Classed as fixed asset $472,000
Notes Receivable - Instruments $900,000
Bartels Accounts Receivable $180,000
Inventory To be based on
physical inventory in
the audited balance
sheet specified in
ss.6.10
Deferred Tax Assets and Income Tax 1,000,000
Refund Receivable
6.11.2 Duet Instrument Sales. Commencing on the Closing Date
and continuing through December 30, 1999, Meridian shall use, and shall cause
Gull to use, its and Gull's respective best commercial efforts to effect sales
and rental placements of Duet Instruments. Provided Meridian shall have
satisfied its obligations under this ss.6.11.2, Meridian shall be entitled to
offset against the principal installment of the Meridian Note due December 31,
1999 an amount equal to $1,091,000 minus the historical acquisition cost of all
Duet Instruments sold or placed under rental agreements by Gull, Meridian and
their Subsidiaries during such period, provided, however, that the maximum
amount of such offset shall be $545,000.
6.11.3 Deferred Tax Assets; Income Tax Refund Receivable.
Meridian shall be entitled to offset against the installment of principal of the
Meridian Note due December 31, 1999 a sum equal to the amount by which
$1,000,000 exceeds the portion of Gull's deferred tax assets and income tax
refund receivable which, in accordance with the advice of Arthur Andersen Europe
is, was or will be in the future available for utilization by Meridian or any of
its Subsidiaries prior to December 31, 1999, provided, however, that the maximum
amount of any
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such offset shall be $500,000. As a condition to Meridian's right of offset
pursuant to this ss.6.11.3, Meridian shall deliver to Fresenius, on or before
December 30, 1999, an opinion of Arthur Andersen Europe stating that the
deferred tax assets and income tax refund receivable are not, were not and will
not be technically available in the future for utilization by Meridian or its
Subsidiaries.
6.12 WARN Act Compliance; Severence Obligations. Meridian
shall comply with the Worker Adjustment and Retraining Notification Act of 1988
or it shall pay all wages, benefits and fines and other amounts due as a result
of its failure to do so. Gull shall use its best efforts to cause commitments to
be made by such employees of Gull as Meridian deems necessary to remain employed
by Gull. Meridian shall be responsible for all severance pay, costs to cancel
outstanding options to purchase Gull Common Stock held by Gull employees and by
Eugene Malone or other payments in lieu of compensation due and payable and
required to be paid with respect to any employees of Gull terminated after the
closing.
6.13 Service and Other Arrangements. All service agreements,
leases, licenses and other agreements similar in nature between Fresenius and
its Subsidiaries and Gull and its Subsidiaries will continue in full force and
effect subject to the right, after the Closing Date, of Gull or its Subsidiaries
to cancel any or all such agreements from time to time prior to termination by
their terms upon 30 days written notice to Fresenius. Any inventory of Gull not
relabeled by the Closing Date may continue to be sold with a Fresenius label or
relabeled at Fresenius' expense.
6.14 Closing Deliveries. The Share Pledge Agreement dated July
17, 1997 by and between Gull Laboratories, Inc. and Fresenius AG will be
released at the closing upon Fresenius's receipt of any Meridian Note due
pursuant to this Agreement.
6.15 Further Meridian Obligations. Meridian shall take all
reasonable steps at its expense to provide the College of American Pathologists
with the information necessary for the College of American Pathologists to
determine whether to give its written consents called for in ss.8.2.13 for
Meridian's assumption of control of Gull and to the transfer of the location of
production specified therein.
7.0 Covenants of Fresenius; Indemnification.
7.1 Voting of Shares. Subject to the receipt by directors of
Gull of the Fairness Opinion and compliance with the Hart-Scott-Rodino Act as
stated in ss.6.3, Fresenius will vote all of the Gull Shares owned by it as
stated in ss.5 in favor of the Merger at the special meeting of Stockholders of
Gull called to vote upon the Merger. Fresenius shall not be obligated to vote
such shares in favor of the Merger if the Fairness Opinion is withdrawn for
reasons other than the appearance of a Third Party Offer. In addition, Fresenius
shall not be obligated to vote such shares in favor of the Merger if the
Fairness Opinion is withdrawn because of the appearance of a Third Party Offer,
but in such case Fresenius will pay to Meridian the entire amount of
consideration received by Fresenius in excess of $11,094,059 through the
consummation of a transaction pursuant to such Third Party Offer. Fresenius will
retain ownership and all voting rights to the Gull Shares owned by it through
the closing.
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7.2 Indebtedness of Gull to Fresenius. Upon the closing of the
Merger all amounts then owed by Gull to Fresenius will be reduced by a
contribution by Fresenius to the capital of Gull to the extent of any reductions
in the shareholders' equity of Gull that occurs from December 31, 1997 through
the Closing Date. Any remaining amounts owed by Gull to Fresenius, including
accrued interest, will be represented by a note of Meridian payable to Fresenius
to the extent of 50% of the principal on June 15, 1999 and the balance on
December 31, 1999 together in each case with interest on the unpaid balance at 7
1/2% per annum. Should the reduction in shareholders' equity, including without
limitation reductions established through ss.ss.6.11.2 and 6.11.3, exceed the
aforesaid amounts owed by Gull to Fresenius, the balance will be paid to
Meridian by Fresenius at the closing and at the time of determination provided
in ss.ss.6.11.2 and 6.11.3. Fresenius will continue to finance Gull through the
closing of the Merger in amounts and to the extent and on terms and conditions
consistent with Fresenius' past practices in financing Gull. The amount of any
such reduction in the shareholder's equity shall be as determined by the balance
sheet prepared as of the Closing Date as called for in ss.6.10. Should the
parties not agree on the closing balance sheet, any areas of disagreement shall
be resolved by an accounting firm jointly picked by the accounting firms that
audited Gull's and Meridian's last annual financial statements.
7.3 Indemnification for Shareholder Actions. Fresenius will
indemnify and hold harmless Meridian and Gull, and their officers, directors,
employees, agents and Subsidiaries from and against any and all claims and
demands brought by Gull Stockholders or Fresenius shareholders against any of
them with respect to matters arising prior to the Closing Date including,
without limitation, the matters contemplated by this Agreement, other than
amounts paid by Meridian or Gull to dissenting Gull Stockholders and expenses
incurred in related appraisal proceedings. The obligations of Fresenius will be
limited to $11,094,059. Meridian will indemnify and hold harmless Fresenius and
Gull, and their officers, directors, employees, agents and Subsidiaries from and
against any and all claims and demands brought by Meridian shareholders against
any of them with respect to the matters contemplated by this Agreement
including, without limitation, with respect to information provided by Meridian
in writing for inclusion in the proxy statement of Gull for submission to Gull
Stockholders to vote upon the Merger. The obligations of Meridian will be
limited to $3 million.
7.3.1 Promptly after receipt by an indemnified party of
written notice of the commencement of any action or proceeding threatened or
initiated with respect to which a claim for indemnification is to be made
pursuant to this Section, the indemnified party will give written notice to the
indemnitor of the commencement of such action; provided the failure to give
notice shall not relieve the indemnitor of its obligations hereunder except to
the extent that the indemnitor is actually prejudiced by such failure to give
notice. Unless in the indemnified party's reasonable judgment a conflict of
interest between the Persons indemnified and the indemnitor may exist in respect
of the claim, the indemnitor shall be entitled to participate and to assume the
defense of such claim, jointly with any other such claim to the extent that it
may desire with counsel reasonably satisfactory to the indemnified party as the
case may be. After notice from the indemnitor of its election to assume the
defense thereof, the indemnitor will not be liable to the Persons indemnified
for any legal or other expenses subsequently incurred by them in connection with
the defense thereof. The indemnitor will not consent to the entry of any
judgment
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or enter into any settlement which does not include as an unconditional term
given by the claimant or plaintiff to the Persons indemnified, a release from
all liability with respect to such claim or litigation. The indemnitor shall not
be liable for any settlement of any such claim or action effected without its
written consent.
7.3.2 If the matters giving rise to indemnification stated
above become subject to a final judgment of a court of competent jurisdiction
which allocates the relative liability for payment of any such claims or demands
by shareholders of Fresenius, Gull or Meridian, the liability that would
otherwise be that of an indemnitor shall instead be allocated among Fresenius,
Gull or Meridian. The allocation will be in such proportions as is appropriate
to reflect the relative fault of the particular parties in connection with the
statements or omissions or actions or inactions which resulted in such claims or
damages of third parties, as determined in such final judgment.
7.4 Indemnification by Fresenius. Fresenius shall indemnify
Meridian with respect to and hold Meridian harmless from any liability, cost or
expense which Gull or Meridian may directly or indirectly incur or suffer by
reason of, or which results from, arises out of or is based upon the inaccuracy
of any representation, warranties of and failures to comply with covenants made
by Fresenius or Gull herein. Without limiting the generality of the foregoing,
the indemnity obligation of Fresenius with respect to the representations of
Gull contained in ss.3 shall extend to all representations and warranties of
Gull as stated in ss.3 and not be limited to those of which Fresenius has actual
Knowledge. This indemnity shall also cover any liabilities, costs or expenses
reasonably incurred which Gull or Meridian may directly or indirectly incur or
suffer by reason of, or which result from, or arise out of, or are based upon a
bankruptcy matter pending in Germany entitled Gull GmbH v. Bamphi, a notice
given Gull by INCSTAR Corporation on June 5, 1996 relating to patents dealing
with Epstein Barr Virus and with respect to certain validation questions
described in ss.3.26 of the Disclosure Schedule, in each case to the extent that
such liability, cost or expense exceeds the amount accrued therefor on the
closing balance sheet called for by ss.6.10.
7.4.1 The indemnification granted by Fresenius with respect to
representations and warranties and failures to comply with covenants made by,
Gull, is not intended to be a guarantee or surety but rather the direct,
unqualified and continuing obligation of Fresenius in its capacity as a majority
shareholder of Gull extended to Meridian as an inducement for Meridian to enter
into and perform this Agreement in reliance in part upon the representations,
warranties and covenants of Gull and in consideration of the representations and
covenants made by Meridian herein. The parties recognize that it would be
inequitable if the obligation of Fresenius, as set forth in this ss.7.4, were
construed as a guarantee or surety so as to limit the ability of Meridian to
proceed directly against Fresenius as provided hereafter. Accordingly, the
parties acknowledge that Meridian may proceed against Fresenius in accordance
with this ss.7.4 as provided below, with or without proceeding against Gull or
any of its Subsidiaries. Fresenius shall not assert or exercise any, and hereby
waives and disclaims all, rights of subrogation, indemnification or contribution
by Gull or Meridian with respect to any payments made by it to Meridian pursuant
to this Section. Fresenius agrees not to raise as a defense in any proceeding
pursuant to this ss.7.4 as provided hereafter or in any other court or forum,
any defense to the actions of Meridian based
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upon a theory that the indemnifications provided herein by Fresenius are in the
nature of a guarantee or surety.
7.4.2 The indemnification obligations of Fresenius under this
ss.7.4 shall be limited as follows: (a) a limit of $11,094,059 for
representations and warranties concerning taxation contained in ss.3.30, (b) a
limit of $18,036,027 for material undisclosed liabilities of which Fresenius had
Knowledge, (c) a limit of $11,094,059 received by Fresenius for material
undisclosed liabilities of which Gull, but not Fresenius, had Knowledge, and (d)
for all other matters covered by this ss.7.4, $3 million.
7.5 Indemnifications by Meridian. Meridian shall indemnify
Fresenius with respect to and hold Fresenius harmless from any liability, cost
or expense which Fresenius may directly or indirectly incur, suffer by reason
of, or which results from, arises out of or is based upon (i) the inaccuracy of
any representation or warranty or failure to comply with any covenant, other
than in Section 6.12, made by Meridian herein, (ii) any failure by Gull to pay
when due on or after the Closing Date any indebtedness of Gull guaranteed by
Fresenius, (iii) any failure by Meridian to pay when due any installment of
interest on or principal of the Meridian Note, and (iv) any failure by Meridian
to comply with its covenant in ss.6.12. The amount of any such liability on the
part of Meridian pursuant to clause (i) of this ss.7.5 shall be limited to
$3,000,000.
7.6 Zoning Interruptions. If the operations of Gull's facility
in Salt Lake County, Utah in the manner presently being conducted are
interrupted during the twelve months following the Closing Date for reasons
related to non-compliance with applicable zoning laws and regulations, Fresenius
will indemnify Meridian and hold it harmless, subject to a limit of $4 million,
from all liabilities, costs and expenses including, without limitation,
consequential damages resulting from interruption of production which Gull or
Meridian may incur as a result of any such interruption except costs of physical
relocation of the facility. All contacts with zoning authorities relating to
this matter shall be made by Gull and Fresenius prior to the closing and by
Fresenius during such twelve month period following the closing except as may
otherwise be authorized by Fresenius in writing.
7.7 Indemnification Procedures. The rights of indemnification
provided in ss.7.4, ss.7.5 and ss.7.6 shall be subject to the following
provisions:
7.7.1 No claim for indemnification pursuant to ss.7.4 or
clause (i) of ss.7.5 may be made until the aggregate of all such claims exceeds
$500,000.
7.7.2 The indemnified party shall notify the indemnitor of any
such liability specifying the nature of the liability and the amount or the
estimated amount thereof to the extent then feasible to estimate but an estimate
shall not be conclusive of the final amount of any such liability. The
indemnitor shall have 10 business days from receipt of such notice to notify the
indemnified party whether or not the indemnitor disputes its obligation to
indemnify the indemnified party with respect to such liability. If such notice
is not given by the indemnitor, the indemnitor shall pay the amount claimed
promptly.
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7.7.3 Nothing shall prevent the indemnified party from making
a claim with respect to a potential or contingent liability provided the
indemnified party's notice sets forth a specific basis for any such potential or
contingent liability and the estimated amount thereto to the extent then
feasible and the indemnified party has reasonable grounds to believe that such a
liability or impairment will be incurred or suffered. Any payment to an
indemnified party with respect to any such potential or contingent liability
shall be final and binding upon the indemnified party, regardless of the actual
losses incurred by the indemnified party in respect of such liability when
actually asserted or incurred.
7.7.4 The indemnified party and the indemnitor shall attempt
in good faith to resolve any dispute between them with respect to the matters
covered by this Section promptly by negotiations between executives that have
the authority to settle the dispute. Either party may give the other written
notice of any dispute not resolved in the normal course. Within 10 business days
following delivery of any such notice, executives of both parties shall meet at
a mutually acceptable time and place thereafter for as long as they deem
necessary to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within 20 business days following
delivery of such notice or if the parties fail to meet within 10 business days,
either party may initiate mediation of the dispute. Mediation shall take place
under the then current model procedure for mediation of business disputes at the
American Arbitration Association, 140 W. 51st Street, New York, New York 10020.
A neutral third party will be selected from the Association's panel. The place
of mediation shall be New York City.
7.7.5 Any dispute not resolved by mediation within 45 days
after the initiation shall be settled by arbitration conducted expeditiously in
accordance with the rules for arbitration of business disputes conducted by the
American Arbitration Association by a sole arbitrator. If one party has
requested to the other to participate in the procedures outlined above and the
other has failed, the other may initiate arbitration before expiration of the 45
day period. Arbitration shall be governed by the United States Arbitration Act
and judgment upon the award rendered by the arbitrator may be entered by any
court having jurisdiction.
7.8 Transition. Fresenius will not take any action to
discourage any lessor, licensor, customer, supplier, or other business associate
of any of Gull and its Subsidiaries from maintaining the same business
relationships with Gull and its Subsidiaries after the Closing Date as it
maintained with them prior to the Closing Date. Fresenius will refer all
customer inquiries relating to the businesses of Gull and its Subsidiaries to
Meridian from and after the Closing Date. Fresenius will perform in all material
respects all agreements now in force between it and Gull or any of its
Subsidiaries until and after the Closing Date in accordance with the terms of
any such agreements. Fresenius will transmit to Meridian any adverse reaction,
adverse experience or quality complaints pertaining to the Products coming to
Fresenius' attention after the Closing addressed to Meridian at the address set
forth hereafter.
7.9 Confidentiality. Fresenius will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Meridian or destroy, at the request of Meridian, all tangible embodiments of the
Confidential Information which are in its possession. If Fresenius is
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requested or required to disclose any Confidential Information, Fresenius will
notify Meridian promptly at the request or requirement so that Meridian may seek
an appropriate protective order or waive compliance with the provisions of this
Section. If, in the absence of a protective order or the receipt of a waiver
hereunder, Fresenius is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal, Fresenius may disclose the
Confidential Information; provided, however, that Fresenius shall use its
reasonable efforts to obtain, at the reasonable request of Meridian, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as Meridian shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
7.10 Noncompetition and Non-Solicitation Covenants. For a
period of three years after the Closing Date, Fresenius will not initiate a new
business venture or acquire any business which is predominantly engaged in the
manufacture and sale of diagnostic testing kits and reagents in the same field
of application as existing Gull or Meridian products (hereinafter referred to as
"Prohibited Business") in any geographic area in which Gull and its Subsidiaries
or Meridian and its Subsidiaries conducts that business as of the Closing Date,
or solicit directly or indirectly or encourage any person employed by Gull or
any Subsidiary or Meridian to leave such employment when Gull or Meridian
desires to retain that employee. However, notwithstanding the foregoing, this
ss.7.10 shall not prevent or prohibit Fresenius from any of the following:
7.10.1 acquiring another business that is not
predominantly engaged in the Prohibited
Business; and
7.10.2 distributing any products which are or
may be competitive with products
manufactured or sold by Gull or
Meridian.
If Fresenius acquires another business pursuant to subsection
(i) above which is also engaged in the Prohibited Business, Fresenius shall use
its best efforts to notify Meridian of such acquisition and to enter into
discussions with Meridian regarding possible business arrangements with respect
thereto acceptable to both Fresenius and Meridian.
If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section is invalid or unenforceable,
the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
7.11 Contribution to Capital. Fresenius shall release its
invoice dated June 30, 1998 in an amount of 856,281.18 German Marks evidencing
its claim against Gull for the reimbursement of certain costs and expenses
incurred by Fresenius on behalf of Gull by contributing such obligation to the
capital of Gull prior to the closing.
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8.0 Conditions to Obligations to Close.
8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each Party to effect the Merger shall be
subject to the satisfaction of the following conditions:
8.1.1 The approval of Gull's Stockholders and of the
Supervisory Board of Fresenius shall have been obtained;
8.1.2 The waiting period applicable to the consummation of the
Merger under the Hart-Scott-Rodino Act shall have expired or been terminated and
no objections to the Merger shall have been raised in connection with such
filing;
8.1.3 No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other governmental entity or
other legal restraint or prohibition preventing the consummation of the Merger
shall be in effect; provided, however, that each of the Parties shall have used
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as possible any injunction or other order that may be
entered;
8.1.4 There shall not have been instituted or be pending, or
threatened, any suit, action or proceeding by any Person or entity as a result
of this Agreement or any of the transactions contemplated hereby which, if such
Person or entity were to prevail, would reasonably be expected to prevent the
consummation of the Merger or have a material adverse effect on the business,
financial condition or results of operations of Gull and its Subsidiaries, taken
as a whole; and
8.1.5 Gull shall have received a letter from its financial
advisor, dated the Closing Date, stating that the Fairness Opinion is in full
force and effect.
8.2 Conditions to Obligation of Meridian and the Transitory
Subsidiary. The obligation of each of Meridian and the Transitory Subsidiary to
consummate the Merger is subject to satisfaction of the following conditions:
8.2.1 Gull and its Subsidiaries shall have procured all of the
third party consents specified on the date of this Agreement pursuant to ss.6.2;
8.2.2 The representations and warranties set forth in ss.ss.3
and 5 shall be true and correct in all material respects at and as of the
Closing Date other than to the extent that any such representation and warranty
is, by its terms, expressly limited to a specific date, in which case such
representation and warranty shall be true and correct as of such date and Gull
and Fresenius shall each represent and warrant to Meridian and the Transitory
Subsidiary that the statements contained in ss.ss.3 and 5, respectively, and in
the accompanying Disclosure Schedule are correct
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and complete as of the Closing Date and as though the Closing Date were
substituted for the date of this Agreement throughout those sections;
8.2.3 Gull and Fresenius shall each have performed and
complied with all of its covenants hereunder required to be performed or
complied with on or prior to the Closing Date in all material respects;
8.2.4 Since the date of this Agreement, there shall not have
been or occurred any material adverse change in the business, financial
condition, cash flows, results of operations or prospects for the manufacture
and sale of Products and products in development of Gull and its Subsidiaries,
taken as a whole, other than changes relating to Gull's industry or the economy
in general and not specifically related to Gull and its Subsidiaries and other
than reductions in shareholders' equity contemplated by ss.7.2;
8.2.5 Gull shall have delivered to Meridian a certificate to
the effect that each of the conditions specified in ss.ss. 8.2.1-8.2.4 is
satisfied in all respects;
8.2.6 Meridian shall have received from counsel to Gull and
Fresenius opinions in form and substance substantially as set forth in Exhibits
B and C attached hereto, addressed to Meridian and the Transitory Subsidiary,
and dated as of the Closing Date;
8.2.7 Meridian shall have received the resignations, effective
as of the closing, of each director and officer of Gull and each of its
Subsidiaries;
8.2.8 All outstanding options to purchase Gull Shares shall
have been canceled on terms satisfactory to Meridian and all shares of Gull
Deutschland GmbH and Gull Europe S.A. owned by Michael Malan or John Turner
shall have been acquired by Meridian or Gull;
8.2.9 Gull and Fresenius shall have furnished to Meridian and
the Transitory Subsidiary such other customary documents, certificates or
instruments as Meridian may reasonably request evidencing compliance by Gull
with the terms of this Agreement;
8.2.10 Meridian shall have entered into employment agreements
with Dr. Fred Rachford and John Turner providing for their employment for a term
of at least two years after the closing, containing confidentiality and two year
noncompetition provisions following termination of employment and otherwise on
terms reasonably satisfactory to Meridian. Meridian shall have entered into a
consulting agreement with Holly Scribner providing for a term of at least two
years of consultation after the closing, containing confidentiality and two-year
noncompetition provisions following termination of the consulting relationship
and otherwise on terms reasonably satisfactory to Meridian;
8.2.11 Meridian and Fresenius shall have entered into a
mutually satisfactory agreement for the continued manufacture for Gull or
Meridian of the blood group and HLA Products currently being manufactured in
Fresenius' facility and with such agreement expiring no more than two years
after the Closing Date;
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8.2.12 The due diligence of Meridian contemplated in ss.6.6
shall have been completed and not have revealed anything of a material adverse
nature as to the assets, liabilities, businesses, operations and financial
condition of Gull which is not the subject of a representation or warranty
contained herein; and
8.2.13 Meridian shall have obtained the written consent of the
College of American Pathologists for the assumption by Meridian of control of
Gull and to the transfer of the location of the production called for in an
agreement dated January 1, 1998 between Gull and the College of American
Pathologists from Gull's facility in Salt Lake County, Utah to Meridian's
facility in Cincinnati, Ohio.
Meridian may waive any condition specified in a writing so
stating at or prior to the closing.
8.3 Conditions to Obligation of Gull and Fresenius. The
obligations of Gull and Fresenius to consummate the Merger are subject to
satisfaction of the following conditions:
8.3.1 The representations and warranties set forth in ss.4
shall be true and correct in all material respects, at and as of the Closing
Date other than to the extent that any such representation and warranty is, by
its terms, expressly limited to a specific date, in which case such
representation and warranty shall be true and correct as of such date and
Meridian shall represent and warrant to Gull and Fresenius that the statements
contained in ss.4 are correct and complete as of the Closing Date and as though
the Closing Date were substituted for the date of this Agreement throughout
those sections;
8.3.2 Each of Meridian and the Transitory Subsidiary shall
have performed and complied with all of its covenants hereunder required to be
performed or complied with on or prior to the Closing Date in all material
respects through the closing;
8.3.3 Each of Meridian and the Transitory Subsidiary shall
have delivered to Gull a certificate to the effect that each of the conditions
specified in ss. 8.3 is satisfied in all respects;
8.3.4 The Fairness Opinion shall not have been withdrawn;
8.3.5 Gull and Fresenius shall have received from counsel to
Meridian and the Transitory Subsidiary an opinion in form and substance
substantially as set forth in Exhibit D attached hereto, addressed to each of
them; and
8.3.6 Meridian and the Transitory Subsidiary shall have
furnished to Gull such other customary documents, certificates or instruments as
Gull may reasonably request evidencing compliance by Meridian and the Transitory
Subsidiary with the terms of this Agreement.
Gull and Fresenius may waive any condition specified in a
writing so stating at or prior to the closing.
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9.0 Termination.
9.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the Effective Time by:
9.1.1 The Parties by mutual written consent;
9.1.2 Meridian and the Transitory Subsidiary by giving written
notice to Gull and Fresenius if the conditions set forth in ss.8.2.12 have not
been met or if Fresenius or Gull has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect,
Meridian or the Transitory Subsidiary has notified Fresenius or Gull of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of breach or if the closing shall not have occurred on or before
December 1, 1998, unless the failure to close results from the failure of Gull
or Fresenius to satisfy conditions set forth in ss.ss.8.2.2 and 8.2.3;
9.1.3 Gull by giving written notice to Meridian and the
Transitory Subsidiary if Meridian or the Transitory Subsidiary has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Gull has notified Meridian and the Transitory Subsidiary
of the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or if the closing shall not have occurred on or
before December 1, 1998, unless the failure to close results from the failure of
Meridian to satisfy the conditions set forth in ss.ss.8.3.1 and 8.3.2;
9.1.4 Gull, if notwithstanding Gull's compliance with ss.6.8,
Gull receives and accepts prior to the Closing Date a Third Party Offer;
provided, however, that, in the event of such acceptance of a Third Party Offer
Gull shall immediately pay to Meridian as called for in ss.6.8, the sum of
$350,000 as liquidated damages and not as a penalty, any such payment to be made
in immediately available United States funds;
9.1.5 Gull or Meridian notwithstanding Gull's compliance with
ss.6.8, if Gull's Board of Directors prior to the Closing Date withdraws its
recommendation to Gull Stockholders of this Agreement and the Merger; provided,
however, that in the event of such withdrawal Gull shall immediately pay to
Meridian its out-of-pocket expenses incurred in relation to the transaction. In
addition, if within twelve months after such termination, Gull shall consummate
a Third Party Offer, Gull and Fresenius shall be jointly and severally obligated
to pay Meridian the additional sum of $350,000, as liquidated damages and not as
a penalty, any such payment to be made promptly in immediately available United
States funds;
9.1.6 Any Party by giving written notice to the other Parties
if this Agreement and the Merger fail to receive the approval of Gull's
Stockholders or if any governmental entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the Merger and such order, decree or ruling or
other action shall have become final and nonappealable; or
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9.1.7 Meridian, if Fresenius' Supervisory Board shall not have
duly approved the actions of its officer executing this Agreement.
9.2 Effect of Termination. If any Party terminates this
Agreement pursuant to ss.9.1, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
except for any liability of any Party then in breach or as set forth in ss.9.1;
subject to ss.ss.3.8, 4.4, 5.3 and 7.9, the confidentiality provisions contained
in ss.6.6, this ss.9.2 and ss.10, each of which shall survive any such
termination.
10.0 Miscellaneous.
10.1 Survival. The representations, warranties and covenants
of the Parties will survive the closing of the Merger for a period of one year
following the delivery to Meridian of audited financial statements for Meridian
and Gull covering the year ended September 30, 1998, but such date of delivery
shall be deemed to be no later than December 30, 1998. This time period shall be
one year following the delivery of audited financial statements from Meridian
and Gull covering the year ended September 30, 1999 but such date of delivery
shall be deemed to be no later than December 30, 1999 with respect to the
matters covered by the following sections of this Agreement: ss.3.5 - "Filings
with the SEC," ss.3.7 - "Undisclosed Liabilities," ss.3.10 "Litigation," ss.3.11
- - "Product Warranty," ss.3.12 - "Product Liability," ss.3.14 - "Employee
Benefits," ss.3.27 - "Contracts and Agreements," ss.3.28 - "Licenses and
Permits," ss.3.30 - "Taxes and Tax Returns," ss.6.8 - "Exclusivity," ss.7.3 -
"Indemnification for Shareholder Actions," and except that the period of
survival shall be five years after the Closing Date for ss.6.9 - "Bylaw
Indemnification," and three years after the Closing Date for ss.7.10 - "Covenant
Not to Compete" and twelve months after a termination for the matters
contemplated by ss.9.1.5. ss.7.4, ss.7.5 and ss.7.6 shall survive subject to the
various periods of limitations set forth above. Any claim brought under ss.7.4,
ss.7.5 and ss.7.6 shall be presented within 60 days after expiration of the
relevant period of survival with respect to each such claim.
10.2 Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or by any listing or
trading agreement concerning its publicly-traded securities in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure.
10.3 No Obligations Upon Fresenius Medical Care AG. It is
expressly understood among the parties to this Agreement that no representation,
warranty, covenant or any other provision contained in this Agreement shall
apply to or be binding upon Fresenius Medical Care AG or any of its
Subsidiaries.
10.4 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in ss.2 concerning payment of the Merger consideration are intended
for the benefit of, and shall be enforceable by Gull Stockholders, their
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heirs and their respective legal representatives and the provisions in ss.6.9
are intended for the benefit of, and shall be enforceable by the individuals
specified therein and their heirs and their respective legal representatives and
shall be binding on Meridian, the Transitory Subsidiary and Gull, their
respective Subsidiaries and their respective successors and assigns.
10.5 Entire Agreement. This Agreement including the documents
referred to herein constitutes the entire agreement among the parties and
supersedes any prior or contemporaneous understandings, agreements or
representations by or among the parties, written or oral, to the extent they
related in any way to the subject matter hereof.
10.6 Successors and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties provided, however, that Meridian may
assign its rights hereunder to an affiliated entity without the prior written
consent of Gull and Fresenius provided Meridian executes a written guarantee of
the obligations of any such assignee in a form reasonably acceptable to Gull and
Fresenius.
10.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.8 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.9 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be addressed to the intended recipient as
set forth:
If to Gull: GULL LABORATORIES, INC.
1011 East Murray Holladay Road
Salt Lake City, UT 84117
Attention: Silke Humberg Ph.D.
Fax: 801-269-8251
With a required PRINCE, YEATES & GELDZAHLER
copy to: City Centre I, Suite 900
175 East 400 South
Salt Lake City, UT 84111
Attention: Gregory E. Lindley, Esq.
Fax: 801-524-1099
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<PAGE>
If to Fresenius FRESENIUS AG
Else-Kroner Str. 1
61346 Bad Homburg, Germany
Attention: Rainer Baule
Fax: 011-49-6172-608-2386
With a required O'MELVENY & MYERS LLP
copy to: Citicorp Center
153 East 53rd Street
New York, NY 10022-4461
Attention: Robert A. Grauman, Esq.
Fax: 212-326-2061
If to Meridian MERIDIAN DIAGNOSTICS, INC.
or the Transitory 3471 River Hills Drive
Subsidiary: Cincinnati, OH 45244
Attention: Mr. John A. Kraeutler
Fax: 513-271-3762
Copy to: KEATING, MUETHING & KLEKAMP
1800 Provident Tower
One East Fourth Street
Cincinnati, OH 45202
Attention: Gary P. Kreider, Esq.
Fax: 513-579-6956
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above by any commercially reasonable means, but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner provided herein.
10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of Ohio without
giving effect to any choice or conflict of law provision or rule, whether of
Ohio or any other jurisdiction, that would cause or result in the application of
the laws of any jurisdiction other than Ohio.
10.11 Amendments and Waivers. The Parties may mutually amend
any provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective Boards of Directors; provided, however,
that any amendment effected after obtaining
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<PAGE>
the approval of Gull Stockholders will be subject to the restrictions contained
in the Utah Revised Business Corporation Act. Any decrease in the Merger
consideration per Gull Share shall be submitted to Gull's Stockholders for
approval. No amendment of any provision of this Agreement shall be valid unless
it is in writing and signed by all of the Parties. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.12 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
10.13 Expenses. Each of the Parties will bear its own costs
and expenses including legal fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby. Meridian shall pay filing
fees under the Hart-Scott-Rodino Act.
10.14 Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
10.15 Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement and the Disclosure Schedule are
incorporated herein by reference and made a part hereof.
10.16 Jurisdiction. All within the meaning of ss.2307.39 of
the Ohio Revised Code, any lawsuit to enforce or interpret this Agreement can be
brought and maintained only in the Court of Common Pleas of Hamilton County,
Ohio or the U.S. District Court for the Southern District of Ohio at Cincinnati,
and the substantive law of the State of Ohio will govern and control every issue
or dispute relating to the interpretation or enforcement of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this
Merger Agreement on September 15, 1998.
GULL LABORATORIES, INC.
By:_________________________________
Name:
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<PAGE>
Title:
MERIDIAN DIAGNOSTICS, INC.
By:_________________________________
Name:
Title:
FRESENIUS AG
By:_________________________________
Name:
Title:
MERIDIAN ACQUISITION CO.
By:_________________________________
Name:
Title:
G:\DIANE\GEL\CLIENTS\GULL\PART.001
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<PAGE>
September 15, 1998
Independent Committee, Board of Directors
Gull Laboratories, Inc.
c/o Mr. Gregory E. Lindley, Attorney at Law
Prince, Yeates & Geldzahler
175 East Fourth South, Suite 900
Salt Lake City, Utah 84111
Re: Fairness Opinion - Proposed Merger of Gull Laboratories, Inc. with
Meridian Diagnostics, Inc. - Revised September 15, 1998
Gentlemen/Ladies:
Houlihan Valuation Advisors ("HVA") has been retained by the Independent
Committee of the Board of Directors of Gull Laboratories, Inc. ("Gull" or "the
Company") to issue a fairness opinion for the proposed merger ("Transaction")
between Gull and Meridian Diagnostics, Inc. ("Meridian"). The fairness opinion
("the Opinion") is issued from a financial point of view from the perspective of
the minority shareholders of Gull. It is anticipated by Company management that
the Transaction will close in October 1998. The Opinion is as of September 15,
1998 and is valid as of that date. Circumstances could change which would render
this opinion invalid as of the actual closing date. To be valid as of the
closing date, the Opinion will have to be reviewed and updated by HVA.
The Draft Merger Agreement of September 15, 1998 ("the Agreement") among Gull,
Meridian, Fresenius AG ("Fresenius") and Meridian Acquisition Co. provides for
the acquisition of the Company by Meridian in an all-cash transaction providing
for payment of $2.25 per share of issued and outstanding common stock ("the
Transaction"). Under the terms of the Agreement, Meridian will acquire all of
the outstanding shares of the Company (8,016,012) for a total purchase price of
$18,036,027. At the close of the transaction, each outstanding share of Gull
common stock, other than any Dissenting Share, will be converted into the right
to receive $2.25 in cash without interest, and each Dissenting Share shall be
converted into the right to receive payment from Gull with respect thereto to
the extent provided by, and in accordance with, the provisions of the Utah
Revised Business Corporation Act.
Upon the closing of the Transaction, all amounts then owed by Gull to Fresenius
will be reduced to the extent of any reductions in the shareholders' equity of
Gull that occur from December 31,
<PAGE>
1997 through the closing of the Transaction. However, minority shareholders will
receive $2.25 per share regardless of any reductions in amounts owed to
Fresenius by Gull.
In delivering this opinion, HVA has completed, among others, the following
tasks:
Reviewed the Draft Merger Agreement among Gull Laboratories,
Inc., Meridian Diagnostics, Inc., Fresenius AG, and Meridian
Acquisition Company, dated August 6, 1998, revised as of September
15, 1998
Reviewed the annual reports of Gull for the years of 1993-1995
Reviewed the Proxy Statement for the 1997 Annual Meeting of
Shareholders of Gull
Reviewed various Securities and Exchange Commission filings of
Gull, including Form 10-Ks for years ended December 31, 1996 and
1997, Form 10-Qs for Gull for quarters ended June 30, 1996,
September 30, 1996, March 31, 1997, June 30, 1997, September 30,
1997, March 31, 1998, and June 30, 1998.
Reviewed Gull's unaudited draft financial statements for the
three months ending June 30, 1998
Reviewed Gull's projected income statements for continuing
operations for calendar years ending December 31, 1998 through
2003
Reviewed the reported market prices and trading activity for Gull
common stock for the period of January 1996 through July 1998
Reviewed transaction premium data prepared by Houlihan Lokey
Howard & Zukin as presented in Mergerstat Review 1998
Discussed the financial condition, results of operations,
business and prospects of Gull with Company management
Compared the results of operations and financial condition of
Gull with those of certain other publicly-traded data medical
diagnostic product firms that HVA deemed to be reasonably
comparable to Gull
Reviewed Company product information and status of new product
development
In addition to a review of the above described documents, the following
analytical procedures were conducted in arriving at our Opinion:
HVA met with representatives of the Company at the Company's
headquarters in Salt Lake City, Utah and conducted discussions
regarding matters pertinent to our analysis. Inquiries were made
with certain officers of the Company who have senior
responsibility for operating matters regarding: (i) the
operations, financial condition, future prospects and projected
operations and performance of the Company; (ii) whether management
is aware of any events or conditions which might cause any of the
assumptions set forth in this Opinion to be incorrect; and (iii)
whether management is aware of any material change in the
Company's assets, financial condition or business outlook since
June 30, 1998 (the date of the Company's most recent financial
statements)
- --------------------------------------------------------------------------------
Fairness Opinion - Gull Laboratories, Inc. as of September 15, 1998 Page 2
<PAGE>
Certain financial projections and accompanying assumptions
prepared by Company management for the calendar years ending
December 31, 1998 through December 31, 2003 were reviewed, and the
assumptions underlying such forecasts were discussed with Company
management
Generally recognized financial analysis and valuation procedures
were undertaken to ascertain the financial condition of the
Company as well as to estimate its fair market value
Discussed valuation of the Company, efforts to solicit bids, and
negotiations regarding offering price with representatives of
Wasserstein Perella & Co., investment bankers retained by
Fresenius to advise Fresenius as to strategic alternatives
relating to the Company
Performed such other analyses and reviewed and analyzed such
other information as HVA deemed appropriate
In rendering this opinion, HVA did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning Gull furnished to it by Gull, or the publicly-available financial and
other information regarding Gull and other medical diagnostic product firms. HVA
has assumed that all such information is accurate and complete. HVA has further
relied on assurances of management of Gull that it is not aware of any facts
that would make such financial or other information relating to such entities
inaccurate or misleading.
With respect to financial forecasts for Gull provided to HVA by Gull management,
HVA has assumed, for the purposes of this opinion, that the forecasts have been
reasonably prepared on bases reflecting the best available estimates and
judgments of its management at the time of preparation as to the future
financial performance of Gull. We are unaware of and have not received any
information which would lead us to believe that it was unreasonable to utilize
the aforementioned projections as part of our analysis related to the Opinion.
HVA, however, assumes no responsibility for and expresses no view as to such
forecasts or the assumptions under which they were prepared.
HVA has assumed that there has been no material change in Gull's assets,
financial condition, results of operations, business or prospects since June 30,
1998. HVA's conclusions and opinion are necessarily based upon economic, market
and other conditions and the information made available to HVA as of the date of
this opinion. HVA expresses no opinion on matters of legal, regulatory, tax or
accounting nature related to the Merger.
We have not been requested to, and did not solicit, third party indications of
interest in acquiring all or any part of the common stock of the Company.
Furthermore, at your request, we have not negotiated the Transaction nor advised
you with respect to alternatives to it.
Limiting Conditions
The Opinion is subject to the following limiting conditions:
- --------------------------------------------------------------------------------
Fairness Opinion - Gull Laboratories, Inc. as of September 15, 1998 Page 3
<PAGE>
1. Neither HVA nor its principals have any present or intended interest in
Gull, Meridian, Fresenius, or in any related entities. HVA's fees for
the Opinion are based on professional time and a charge for the
Opinion, and are in no way contingent upon the final conclusions
derived.
2. The Opinion is intended only for the specific use and purpose stated
herein. It is intended for no other uses and is not to be copied nor
given to unauthorized persons without the direct written consent of HVA
except as set forth below. The Opinion and information contained herein
are valid only for the stated purpose and date of the study, and should
in no way be construed to be investment advice.
3. It is beyond the scope of the Opinion to render any opinion relative to
the solvency or insolvency of Gull or Meridian either prior to or
following the Transaction. HVA has not been requested to render such an
opinion, and nothing in the Opinion should be construed as such.
4. This engagement is limited to the production of the Opinion and the
conclusions and opinions contained herein. HVA has no obligation to
provide future services (e.g., expert testimony in court or before
governmental agencies) related to the contents of the Opinion unless
prior arrangements for such services have been made. HVA understands
that Gull will require confirmation that the opinion is still in effect
as of the closing date of the transaction, which is anticipated to
occur by October 31, 1998.
It is our understanding that Gull's Board of Directors either has had or will
have the opportunity to make their own independent investigation of the
Transaction, and their decision to participate in the Transaction should be
based primarily on such investigation. Delivery of the Opinion to Gull's Board
of Directors and the Independent Committee of the Board of Directors is subject
to the conditions, limitations and assumptions set forth in the Opinion.
This opinion is for the benefit of the Board of Directors of Gull and shall not
be relied upon by others and shall not be published or otherwise used, nor shall
any public references to HVA be made without our written consent. However,
notwithstanding the foregoing, HVA consents to a description of and the
inclusion of the text of its written Opinion and its accompanying Fairness
Memorandum in the proxy to be issued in connection with the special meeting of
the Company's Stockholders. This opinion is not intended to be and does not
constitute a recommendation to any Stockholder as to how such Stockholder should
vote with respect to the Merger.
Conclusions
Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, and based upon such other matters as we consider
relevant, it is our opinion that the proposed Transaction, assuming it is
consummated as proposed, is fair from a financial point of view to the minority
shareholders of Gull based on the circumstances existing as of September 15,
1998. HVA reserves the right, in the event that events or facts subsequent to
the date of the Opinion become known which have a material impact on the value
of the Company, to supplement or withdraw the Opinion prior to the closing date
of the Transaction.
- --------------------------------------------------------------------------------
Fairness Opinion - Gull Laboratories, Inc. as of September 15, 1998 Page 4
<PAGE>
This Opinion is delivered to you subject to the conditions, scope of engagement,
limitations, indemnification and understandings set forth in this Opinion and
the engagement letter between HVA, Gull, and the Independent Committee of the
Board of Directors of Gull dated July 28, 1998 and executed by Gull and the
Independent Committee of the Board of Directors on July 29, 1998. This Opinion
is subject to the understanding that the obligations of HVA in the Transaction
are solely corporate obligations, and no officer, director, employee, agent,
shareholder or controlling person of HVA shall be subjected to any personal
liability whatsoever to any person, nor will any such claim be asserted by or on
behalf of you or your affiliates.
HOULIHAN VALUATION ADVISORS
- -----------------------------
Frederic L. Jones, ASA
<PAGE>
APPENDIX C
NOTICE OF DISSENTERS' RIGHTS
(Under Section 16-10a-1301 et seq. Utah Revised Business Corporation Act)
Proposed Action
The Board of Directors of Gull Laboratories, Inc., a Utah
corporation, ("Gull") has adopted and approved a Merger Agreement, among Gull,
Fresenius AG, Meridian Diagnostics, Inc., and Meridian Acquisition Co. (the
"Merger Agreement"). The Merger Agreement subject to shareholder approval. A
copy of the Merger Agreement is being furnished to you contemporaneously with
the delivery of this Notice. Pursuant to the Merger Agreement, Gull will merge
into Meridian Acquisition Co., with Gull as the surviving corporation. Each
issued and outstanding share of Gull common stock, other than dissenters'
shares, will be converted into the right to receive a cash payment of $2.25,
without interest. The Board of Directors has recommended that Shareholders vote
"FOR" approval of the Merger Agreement.
Shareholder Approval
Under Section 16-10a-1103 of the Utah Revised Business
Corporation Act (the "Act"), the Merger Agreement requires the affirmative vote
of a majority of the shares entitled to vote to approve the merger. Attached
hereto is a Notice of Special Meeting of Shareholders and Proxy Statement
relating to the Special Meeting for the purpose of approving the merger.
Dissenters' Rights
Under Part 13 of the Act, Shareholders of Gull are entitled to
assert "dissenters rights'" in connection with the proposed merger. A copy of
Part 13 of the Act is attached hereto.
Generally, a Shareholder may dissent from the proposed merger
transaction and obtain cash payment of the fair value of his/her shares in the
event the merger transaction is effectuated. Fair value of the shares means the
value of the shares immediately before the effective date of the merger,
excluding any appreciation or depreciation in anticipation of the merger.
A Shareholder who desires to exercise his or her dissenters'
right, must:
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<PAGE>
1. Cause Gull to receive, before the Shareholder vote is
taken, written notice of his/her intent to demand
payment for shares if the proposed Merger is
effectuated; and
2. Not vote any of his/her shares in favor of the proposed
merger.
Notice must be sent in writing, postage prepaid, and addressed
to the Secretary of Gull at Gull's offices located at 1011 East Murray-Holladay
Road, Salt Lake City, Utah 84117.
RIGHTS OF A DISSENTING SHAREHOLDER TO DEMAND PAYMENT ARE LOST
IF THE DISSENTER VOTES IN FAVOR OF THE PROPOSAL OR FAILS TO GIVE WRITTEN NOTICE
OF INTENT TO DEMAND PAYMENT AS ABOVE DESCRIBED.
If the merger is effectuated over the dissent of a
Shareholder, a notice will be sent to the Shareholder within ten (10) days after
the effective date of the merger approval by Shareholders. That notice will
state when and where written demand for payment must be sent and when
certificates for shares must be deposited by the Shareholder to effectuate the
purchase of shares from the dissenting Shareholder.
RIGHTS OF THE DISSENTER TO DEMAND PAYMENT MAY ALSO BE LOST IF
THE DISSENTER FAILS TO TIMELY MAKE WRITTEN DEMAND FOR PAYMENT AFTER RECEIVING
THE SUBSEQUENT NOTICE OF HOW TO MAKE WRITTEN DEMAND AND TENDER CERTIFICATES.
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APPENDIX D
PART 13 OF THE
UTAH REVISED BUSINESS CORPORATION ACT
16-10a-1301. Definitions.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring corporation
by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 16-10a-1302 and who exercises that right
when and in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means
the value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the statutory rate set forth in
Section 15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
(7) "Shareholder" means the record shareholder or the
beneficial shareholder.
History: C.1953, 16-10a-1301, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277,138. 249 makes the act effective on July 1, 1992.
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<PAGE>
16-10a-1302. Right to dissent.
(1) A Shareholder, whether or not entitled to vote, is
entitled to dissent from, and obtain payment of the fair value of shares held by
him in the event of, any of the following corporate actions:
(a) consummation of a plan of merger to which the
corporation is a party if:
(i) shareholder approval is required for the merger
by Section 16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged
with its parent under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired.
(c) consummation of a sales, lease, exchange, or other
disposition of all, or substantially all, of the property of the corporation for
which a shareholder vote is required under Subsection 16-10a-1202(1), but not
including a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one year after the date of sale; and
(d) consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of an entity
controlled by the corporation if the shareholders of the corporation were
entitled to vote upon the consent of the corporation to the disposition pursuant
to Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of
the fair value of his shares in the event of any other corporate action to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors so provides.
(3) Notwithstanding the other provisions of this part, except
to the extent otherwise provided in the articles of incorporation, bylaws, or a
resolution of the board of directors, and subject to the limitations set forth
in Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (1) of the fair value of the shares of any class or series of
shares which either were listed on a national securities exchange registered
under the federal Securities Exchange Act of 1934, as amended, or on the
National Market System of the National Association of Securities Dealers
Automated Quotation System, or were held of record by more than 2,000
shareholders, at the time of:
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<PAGE>
(a) the record date fixed under Section 16-10a-707 to
determine the shareholders entitled to receive notice of the shareholders'
meeting at which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to
determine shareholders entitled to sign writings consenting to the proposed
corporate action; or
(c) the effective date of the corporate action if the
corporate action is
authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply
if the shareholder will receive for his shares, pursuant to the corporate
action, anything except:
(a) shares of the corporation surviving the consummation
of the plan of merger or share exchange;
(b) shares of a corporation which at the effective date of
the plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal Securities Exchange Act of
1934, as amended, or on the National Market System of the National Association
of Securities Dealers Automated Quotation System, or will be held of record by
more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection
(4), or cash in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for
his shares under this part may not challenge the corporate action creating the
entitlement unless the action is unlawful or fraudulent with respect to him or
to the corporation.
History: C.1953, 16-10a-1302, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 139. 249 makes the act effective on July 1, 1992.
16-10a-1303. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in his name only if the shareholder
dissents with respect to all shares beneficially owned by any one person and
causes the corporation to receive written notice which states the dissent and
the name and address of each person on whose behalf dissenters' rights are being
asserted. The rights of a partial dissenter under this subsection are determined
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<PAGE>
as if the shares as to which the shareholder dissents and the other shares held
of record by him were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as
to shares held on his behalf only if:
(a) the beneficial shareholder causes the corporation to
receive the record shareholder's written consent tot he dissent not later than
the time the beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to
all shares of which he is the beneficial shareholder.
(3) The corporation may require that, when a record
shareholder dissents with respect to the shares held by any one or more
beneficial shareholders, each beneficial shareholder must certify to the
corporation that both he and the record shareholders of all shares owned
beneficially by him have asserted, or will timely assert, dissenters' rights as
to all the shares unlimited on the ability to exercise dissenters' rights. The
certification requirement must be stated in the dissenters' notice given
pursuant to Section 16-10a-1322.
History: C.1953, 16-10a-1303, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch.277, 140. 249 makes the act effective on July 1, 1992.
16-10a-1320. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must be sent to all shareholders of the corporation as of the
applicable record date, whether or not they are entitled to vote at the meeting.
The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this part. The notice must be accompanied by a copy of
this part and the materials, if any, that under this chapter are required to be
given the shareholders entitled to vote on the proposed action at the meeting.
Failure to give notice as required by this subsection does not affect any action
taken at the shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized without a meeting of shareholders
pursuant to Section 16-10a-704, any written or oral solicitation of a
shareholder to execute a written consent to the action contemplated by Section
16-10a-704 must be accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights under this
part, by a copy of this part, and by the materials, if any, that under this
chapter would have been
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required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
History: C.1953, 16-10a-1320, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 141. 249 makes the act effective on July 1, 1992.
16-10a-1321. Demand for payment - Eligibility and notice of intent.
(1) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote
is taken, written notice of his intent to demand payment for shares if the
proposed action is effectuated; and
(b) may not vote any of his shares in favor of the
proposed action.
(2) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized without a meeting of shareholders
pursuant to Section 16-10a-704, a shareholder who wishes to assert dissenters'
rights may not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this
part, unless otherwise provided in the articles of incorporation, bylaws, or a
resolution adopted by the board of directors, a shareholder must have been a
shareholder with respect to the shares for which payment is demanded as of the
date the proposed corporate action creating dissenters' rights under Section
16-10a-1302 is approved by the shareholders, if shareholder approval is
required, or as of the effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of
Subsections (1) through (3) is not entitled to payment for shares under this
part.
History: C.1953, 16-10a-1321, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 142. 249 makes the act effective on July 1, 1992.
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16-10a-1322. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be
sent no later than ten days after the effective date of the corporate action
creating dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the
effective date or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive
payment demands and an address at which certificates for certificated shares
must be deposited;
(c) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form
requests a dissenter to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the
payment demand and by which certificates for certificated shares must be
deposited at the address indicated in the dissenters' notice, which dates may
not be fewer than 30 nor more than 70 days after the date the dissenters' notice
required by Subsection (1) is given;
(f) state the requirement contemplated by Subsection
16-10a-1303(3), if the requirement is imposed; and
(g) be accompanied by a copy of this part.
History: C.1953, 16-10a-1322, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 143. 249 makes the act effective on July 1,1992.
16-10a-1323. Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice described
in Section 16-10a-1322, who meets the requirements of Section 16-10a-1321, and
wishes to assert dissenters' rights must, in accordance with the terms of the
dissenters' notice:
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(a) cause the corporation to receive a payment demand,
which may be the payment demand form contemplated in Section 16-10a-1322 (2)
(d), duly completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in
accordance with the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters'
notice described in Section 16-10a-1322, as contemplated by Section 16-10a-1327,
certify in writing, in or with the payment demand, whether or not he or the
person on whose behalf he asserts dissenters' rights acquired beneficial
ownership of the shares before the date of the first announcement to news media
or to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with
Subsection (1) retains all rights of a shareholder except the right to transfer
the shares until the effective date of the proposed corporate action giving rise
to the exercise of dissenters' rights and has only the right to receive payment
for the shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit
share certificates as required, by the date or dates set in the dissenters'
notice, is not entitled to payment for shares under this part.
History: C.1953, 16-10a-1323, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 144. 249 makes the act effective on July 1, 1992.
16-10a-1324. Uncertificated shares.
(1) Upon receipt of a demand for payment under Section
16-10a-1323 from a shareholder holding uncertificated shares, and in lieu of the
deposit of certificates representing the shares, the corporation may restrict
the transfer of the shares until the proposed corporate action is taken or the
restrictions are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section
16-10a-1323 apply to shareholders who own uncertificated shares.
History: C.1953, 16-10a-1324, Effective Dates. - Laws 1992, ch 277,
enacted by, L.1992 ch. 277, 145. 249 makes the act effective on July 1, 1992.
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16-10a-1325. Payment.
(1) Except as provided in Section 16-10a-1327, upon the later
of the effective date of the corporate action creating dissenters' rights under
Section 16-10a-1302, and receipt by the corporation of each payment demand
pursuant to Section 16-10a-1323, the corporation shall pay the amount the
corporation estimates to be the fair value of the dissenter's shares, plus
interest to each dissenter who has complied with Section 16-10a-1323, and who
meets the requirements of Section 16-10a-1321, and who has not yet received
payment.
(2) Each payment made pursuant to Subsection (1) must be
accompanied by:
(a) (i)(A) the corporation's balance sheet as of the end
of its most recent fiscal year, or if not available, a fiscal year ending not
more than 16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity
for that year and a statement of cash flow for that year, if the corporation
customarily provides such statements to shareholders; and
(D) the latest available interim financial
statements, if any;
(ii) the balance sheet and statements referred to in
Subsection (i) must be audited if the corporation customarily provides audited
financial statements to shareholders;
(b) a statement of the corporation's estimate of the fair
value of the shares and the amount of interest payable with respect to the
shares;
(c) a statement of the dissenter's right to demand payment
under Section 16-10a-1328; and
(d) a copy of this part.
History: C.1953, 16-10a-1325, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 146. 249 makes the act effective on July 1, 1992.
16-10a-1326. Failure to take action.
(1) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 does not occur within 60 days after
the date set by the corporation as the
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date by which the corporation must receive payment demands as provided in
Section 16-10a-1322, the corporation shall return all deposited certificates and
release the transfer restrictions imposed on uncertificated shares, and all
shareholders who submitted a demand for payment pursuant to Section 16-10a-1323
shall thereafter have all rights of a shareholder as if no demand for payment
had been made.
(2) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 occurs more than 60 days after the
date set by the corporation as the date by which the corporation must receive
payment demands as provided in Section 16-10a-1322, then the corporation shall
send a new dissenters' notice, as provided in Section 16-10a-1322, and the
provisions of Sections 16-10a-1323 through 16-10a-1328 shall again be
applicable.
History: C.1953, 16-10a-1326, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 147. 249 makes the act effective on July 1, 1992.
16-10a-1327. Special provisions relating to shares acquired after
announcement of proposed corporate action.
(1) A corporation may, with the dissenters' notice given
pursuant to Section 16-10a-1322, state the date of the first announcement to
news media or to shareholders of the terms of the proposed corporate action
creating dissenters' rights under Section 16-10a-1302 and state that a
shareholder who asserts dissenters' rights must certify in writing, in or with
the payment demand, whether or not he or the person on whose behalf he asserts
dissenters' rights acquired beneficial ownership of the shares before that date.
With respect to any dissenter who does not certify in writing, in or with the
payment demand that he or the person on whose behalf the dissenters' rights are
being asserted, acquired beneficial ownership of the shares before that date,
the corporation may, in lieu of making the payment provided in Section
16-10a-1325, offer to make payment if the dissenter agrees to accept it in full
satisfaction of his demand.
(2) An offer to make payment under Subsection (1) shall
include or be accompanied by the information required by Subsection
16-10a-1325(2).
History: C.1953, 16-10a-1327, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 148. 249 makes the act effective on July 1, 1992.
16-10a-1328. Procedure for shareholder dissatisfied with payment or
offer.
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(1) A dissenter who has not accepted an offer made by a
corporation under Section 16-10a-1327 may notify the corporation in writing of
his own estimate of the fair value of his shares and demand payment of the
estimated amount, plus interest, less any payment made under Section
16-10a-1325, if:
(a) the dissenter believes that the amount paid under
Section 16-10a-1325 or offered under Section 16-10a-1327 is less than the fair
value of the shares;
(b) the corporation fails to make payment under Section
16-10a-1325 within 60 days after the date set by the corporation as the date by
which it must receive the payment demand; or
(c) the corporation, having failing to take the proposed
corporate action creating dissenter's rights, does not return the deposited
certificates or release the transfer restrictions imposed on uncertificated
shares as required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this
section unless he causes the corporation to receive the notice required by
Subsection (1) within 30 days after the corporation made or offered payment for
his shares.
History: C.1953, 16-10a-1328, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 149. 249 makes the act effective on July 1, 1992.
16-10a-1330. Judicial appraisal of shares - Court action.
(1) If a demand for payment under Section 16-10a-1328 remains
unresolved, the corporation shall commence a proceeding within 60 days after
receiving the payment demand contemplated by Section 16-10a-1328, and petition
the court to determine the fair value of the shares and the amount of interest.
If the corporation does not commence the proceeding within the 60-day period, it
shall pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in
Subsection (1) in the district court of the county in this state where the
corporation's principal office, or if it has no principal office in this state,
the county where its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have
satisfied the requirements of Sections 16-10a-1321, 16-10a-1323, and
16-10a-1328, whether or not they are
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residents of this state whose demands remain unresolved, parties to the
proceeding commenced under Subsection (2) as an action against their shares. All
such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares.
Service may also be made otherwise as provided by law.
(4) The jurisdiction of the court in which the proceedings is
commenced under Subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced
under Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that
the fair value of his shares, plus interest, exceeds the amount paid by the
corporation pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under Section 16-10a-1327.
History: C.1953, 16-10a-1330, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 150. 249 makes the act effective on July 1, 1992.
16-10a-1331. Court costs and counsel fees.
(1) The court in an appraisal proceedings commenced under
Section 16-10a-1330 shall determine all costs of the proceedings, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds that the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section
16-10a-1328.
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(2) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially comply with
the requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more
dissenters, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to those counsel reasonable fees to be paid out
of the amounts awarded the dissenters who were benefited.
History: C.1953, 16-10a-1331, Effective Dates. - Laws 1992, ch 277,
enacted by L.1992, ch. 277, 151. 249 makes the act effective on July 1, 1992.
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