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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
LUNAR CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/ / No Fee Required.
/X/ Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
Common Stock, par value $0.01 per share
2) Aggregate number of securities to which transaction
applies:
10,120,940
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
The underlying value of the transaction of $166,362,951.25
has been calculated pursuant to Exchange Act Rule 0-11 by
determining the product of (i) $16.4375 (the average of
the high and low prices of Lunar Common Stock on June 14,
2000 on the Nasdaq National Market) times (ii) 10,120,940
(the aggregate number of shares of Lunar Common Stock
outstanding and reserved for issuance upon the exercise of
options to purchase Lunar Common Stock). One fiftieth of
one percent of $166,362,951.25, or $33,273, is the amount
of the filing fee.
4) Proposed maximum aggregate value of transaction:
$166,362,951.25
5) Total fee paid:
$33,273
/ / 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:
----------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
3) Filing Party:
----------------------------------------------------------
4) Date Filed:
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LUNAR CORPORATION
PRELIMINARY PROXY MATERIALS
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LUNAR CORPORATION GENERAL ELECTRIC COMPANY
SPECIAL MEETING OF SHAREHOLDERS PROSPECTUS
MERGER PROPOSED
YOUR VOTE IS VERY IMPORTANT
</TABLE>
Dear Shareholders:
The Lunar board of directors is soliciting your proxy and seeking your
approval of Lunar's merger with General Electric Company which will result in:
- Lunar becoming a wholly-owned subsidiary of GE; and
- each outstanding share of Lunar common stock being converted into the
right to receive $17.00 payable in shares of GE common stock based on the
average of the daily volume-weighted trading prices of GE common stock on
the NYSE for the ten consecutive trading day period ending five calendar
days prior to the closing of the merger.
On June 2, 2000, there were 8,713,755 shares of Lunar common stock
outstanding and 1,407,185 shares of Lunar common stock issuable upon the
exercise of outstanding stock options.
The shares of Lunar common stock trade on the Nasdaq National Market under
the symbol "LUNR." The shares of GE common stock are principally listed on the
New York Stock Exchange under the symbol "GE."
Richard B. Mazess, Ph.D.
Chairman, President and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES OF GE COMMON STOCK TO BE
ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated [DATE], 2000 and is first being
mailed to shareholders of Lunar on or about [DATE], 2000.
<PAGE>
LUNAR CORPORATION
PRELIMINARY PROXY MATERIALS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2000
, 2000
To our shareholders:
A special meeting of shareholders of Lunar Corporation, a Wisconsin
corporation, will be held at Lunar's executive offices located at 726 Heartland
Trail, Madison, Wisconsin 53717, on [MEETING DATE] at 9:00 a.m., local time, for
the purpose of voting on the following proposals:
1. To consider and vote upon a proposal to adopt the Agreement and Plan
of Merger, dated as of June 2, 2000, by and among Lunar, General Electric
Company, a New York corporation, and Topaz Merger Corp., a wholly-owned
Wisconsin subsidiary of GE, that provides for, among other things, a merger
that will result in Lunar becoming a wholly-owned subsidiary of GE and Lunar
shareholders becoming GE stockholders. In the merger, each share of Lunar
common stock will be converted into the right to receive $17.00 payable in
shares of GE common stock based on the average of the daily volume-weighted
trading prices of GE common stock on the NYSE for the ten consecutive
trading day period ending five calendar days prior to the closing of the
merger, plus cash in lieu of fractional shares.
2. To consider and vote upon any other matters properly presented for
action at the special meeting, including the postponement and adjournment of
the special meeting in order to solicit additional votes to approve the
merger agreement if the secretary of the special meeting determines that
there are not sufficient votes to approve the merger agreement.
The close of business on [RECORD DATE], 2000 has been fixed as the record
date for determining those shareholders entitled to vote at the special meeting
and any adjournments or postponements of the special meeting. Therefore, only
shareholders of record on [RECORD DATE], 2000 are entitled to notice of, and to
vote at, the special meeting and any adjournments or postponements of the
special meeting.
By Order of the Board of Directors
Richard B. Mazess, Ph.D.
Chairman, President and Chief Executive Officer
The accompanying proxy statement/prospectus describes the terms and
conditions of the merger agreement and includes, as Annex A, the complete text
of the merger agreement. We urge you to read the enclosed materials carefully
for a complete description of the merger. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED ENVELOPE, which requires no postage if mailed in the
United States. If you attend the special meeting, you may revoke your proxy and
vote in person if you wish, even if you have previously returned your proxy
card. PLEASE DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARDS AT THIS
TIME. Do not send in your stock certificates until you receive a letter of
transmittal.
The merger agreement must be approved by the holders of a majority of the
outstanding shares of Lunar common stock. YOUR VOTE IS VERY IMPORTANT. We urge
you to review the enclosed materials and return your proxy card promptly. YOUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
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TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER......................
REFERENCES TO ADDITIONAL INFORMATION........................
SUMMARY.....................................................
The Companies.............................................
What You Will Receive in the Merger.......................
The Special Meeting.......................................
Shareholder Agreement.....................................
Lunar's Reasons for the Merger............................
Interests of Certain Persons in the Merger................
Regulatory Approvals......................................
Conditions to the Merger..................................
Termination of the Merger Agreement.......................
Termination Fees..........................................
No Solicitation of Competing Transactions.................
Stock Option Agreement....................................
Appraisal Rights..........................................
Material United States Federal Income Tax Consequences....
Comparison of Rights of Lunar Shareholders and GE
Stockholders............................................
Forward-Looking Statements May Prove Inaccurate...........
Summary Selected Financial Data...........................
Selected Historical Financial Data of Lunar...............
Selected Historical Financial Data of GE..................
Significant Factors Affecting Operating Results...........
Comparative Per Share Data................................
Comparative Market Price Data.............................
THE SPECIAL MEETING.........................................
General...................................................
Purpose of the Special Meeting............................
Recommendation of the Lunar Board.........................
Required Vote.............................................
Record Date...............................................
Quorum....................................................
Proxies...................................................
Revocation................................................
Solicitation of Proxies...................................
THE MERGER..................................................
General...................................................
Background of the Merger..................................
Recommendation of the Lunar Board of Directors, Reasons
for the Merger..........................................
Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation.............................................
Interests of Certain Persons in the Merger; Conflicts of
Interest................................................
Procedures for Exchange of Lunar Common Stock
Certificates............................................
Anticipated Accounting Treatment..........................
Changes in Stock Rights...................................
Forward-Looking Statements May Prove Inaccurate...........
Material United States Federal Income Tax Consequences....
Appraisal Rights..........................................
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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THE MERGER AGREEMENT........................................
Form of the Merger........................................
Merger Consideration......................................
Effective Time............................................
Representations and Warranties............................
Covenants and Agreements..................................
Conditions Precedent to the Merger........................
Termination of the Merger Agreement.......................
Amendment; Waiver.........................................
THE STOCK OPTION AGREEMENT..................................
Exercisability............................................
Put Right.................................................
Repurchase Right..........................................
Registration Rights.......................................
Termination...............................................
Maximum Amount Realizable by GE...........................
Effect of the Stock Option Agreement......................
THE SHAREHOLDER AGREEMENT...................................
Shares Subject to the Shareholder Agreement...............
Covenants.................................................
Liquidated Damages........................................
Termination...............................................
REGULATORY MATTERS..........................................
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS..................
COMPARISON OF RIGHTS OF LUNAR SHAREHOLDERS AND GE
STOCKHOLDERS..............................................
Authorized Capital Stock..................................
Shareholder Voting Rights.................................
Special Meetings of Shareholders; Consent to Actions of
Shareholders in Lieu of Meeting.........................
Business Combinations.....................................
Business Conducted at Shareholders' Meetings..............
Dividends.................................................
Dissenters' Appraisal Rights..............................
Warrants or Options.......................................
Number and Term of Directors..............................
Election of Directors.....................................
Classification of the Board of Directors..................
Removal of Directors......................................
Statutory Shareholder Liability...........................
Indemnification...........................................
Transactions with Interested Directors....................
DESCRIPTION OF GE'S CAPITAL STOCK...........................
LEGAL MATTERS...............................................
EXPERTS.....................................................
WHERE YOU CAN FIND MORE INFORMATION.........................
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ANNEX A AGREEMENT AND PLAN OF MERGER................................
ANNEX B OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION...............................................
ANNEX C STOCK OPTION AGREEMENT......................................
ANNEX D SHAREHOLDER AGREEMENT.......................................
</TABLE>
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION FOR WHICH I AM BEING ASKED TO VOTE?
A. Lunar proposes to be acquired by GE pursuant to the terms of a merger
agreement. In the merger, Topaz Merger Corp., a wholly-owned subsidiary of GE,
will merge into Lunar with Lunar surviving the merger. As a result, Lunar will
become a wholly-owned subsidiary of GE.
Q. WHAT EFFECT WILL THE MERGER HAVE ON MY LUNAR SHARES?
A. Each share of your Lunar common stock will be exchanged for a fraction of a
share of GE common stock having a market value of approximately $17.00, plus
cash in lieu of fractional shares. The actual number of GE shares that you
receive will be determined based on the average of the daily volume-weighted
trading prices of GE common stock on the NYSE for the 10 consecutive trading-day
period ending five calendar days prior to the closing of the merger.
For example, if the average per share price of GE stock for the valuation period
were $ (which was the closing price of GE common stock on , 2000) a
Lunar shareholder holding 100 shares of Lunar common stock would receive
shares of GE common stock, plus $ in cash instead of fractional shares.
Q. HOW WILL SHAREHOLDERS KNOW WHAT THE ACTUAL EXCHANGE RATIO IS?
A. We will issue a press release prior to the special meeting that will
disclose the exchange ratio assuming that the closing of the merger occurs on
the same day as the shareholders meeting. If the closing of the merger is
delayed for any reason, then the exchange ratio could change. The exchange ratio
is the fraction of a share of GE common stock that you would receive in the
merger for each share of Lunar common stock you own. Additionally, you can call
(800) 250-7979 to receive information about the exchange ratio as of the week of
your call.
Q. WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER ON LUNAR
SHAREHOLDERS?
A. The consummation of the merger is conditioned upon the receipt by GE and
Lunar of legal opinions from their respective tax counsel to the effect that the
merger will qualify as a tax-free reorganization under the Internal Revenue
Code. Assuming that the Merger so qualifies, you will not recognize any gain or
loss for U.S. federal income tax purposes solely on the exchange of your Lunar
shares for GE shares in the merger except for any gain or loss attributable to
cash received instead of fractional GE shares. The tax consequences to you of
the transaction will depend on your particular facts and circumstances. You
should consult your tax advisor for a full understanding of the tax consequences
of the merger to you.
Q. AM I ENTITLED TO APPRAISAL RIGHTS?
A. No. Under Wisconsin law, which governs Lunar and the rights of Lunar
shareholders in the merger, you are not entitled to appraisal rights.
Q. WHEN AND WHERE IS THE SPECIAL MEETING?
A. The Lunar special meeting is scheduled to take place on [MEETING DATE] at
9:00 a.m., local time, at Lunar's executive offices located at 726 Heartland
Trail, Madison, Wisconsin 53717.
Q. WHAT WILL I VOTE ON AT THE SPECIAL MEETING?
A. At the special meeting you will be asked to vote to approve the merger
agreement and the merger.
Q. WHAT VOTE IS REQUIRED FOR APPROVAL?
A. The merger agreement and the merger must be approved by a majority of the
outstanding shares of Lunar common stock.
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We expect to complete the merger promptly after we receive the Lunar
shareholder approval
1
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at the special meeting and after we receive all necessary regulatory approvals.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
document, please fill out and sign the proxy card, and then mail your signed
proxy card in the enclosed envelope as soon as possible so that your shares may
be voted at the special meeting. Your proxy card will instruct the persons named
on the card to vote your shares at the special meeting as you direct on the
card. If you sign and send in your proxy card and do not indicate how you want
to vote, your proxy will be voted FOR the adoption of the merger agreement. If
you do not vote or you abstain, the effect will be a vote against the merger.
YOUR VOTE IS VERY IMPORTANT.
Q. MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. You may change your vote at any time before your proxy is voted at the
meeting. You can do this in one of three ways. First, you can send a written
notice stating that you want to revoke your proxy. Second, you can complete and
submit a new proxy card. If you choose either of these two methods, you must
submit your notice of revocation or your new proxy card to:
Lunar Corporation
726 Heartland Trail
Madison, Wisconsin 53717-1915
Attention: Corporate Secretary
Third, you can attend the Lunar special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy; you must vote at the
meeting. If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. After the merger is completed, you will receive written instructions for
exchanging your stock certificates.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. Your broker will only vote your shares if you provide instructions on how to
vote. You should follow the directions provided by your broker to vote your
shares. You cannot vote shares held in "street name" by returning a proxy card
to us.
Q. WHAT DOES LUNAR'S BOARD OF DIRECTORS RECOMMEND?
A. Lunar's board of directors has determined that the proposed merger is
advisable and fair to and in the best interests of Lunar and its shareholders
and unanimously recommends that you vote FOR the proposal to approve the merger
agreement and the merger.
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REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about our companies from documents we have filed with the Securities and
Exchange Commission but have not included or delivered with this document. If
you call or write us, we will send you these documents, excluding exhibits,
without charge. You can contact us at:
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General Electric Company Lunar Corporation
3135 Easton Turnpike 726 Heartland Trail
Fairfield, Connecticut 06431-0001 Madison, Wisconsin 53717-1915
Attention: GE Corporate Investor Attention: Corporate Secretary
Communications
(203) 373-2816 (608) 828-2663
</TABLE>
PLEASE REQUEST DOCUMENTS FROM EITHER COMPANY NOT LATER THAN [5 BUSINESS DAYS
BEFORE MTG], 2000. IF YOU REQUEST ANY DOCUMENTS, WE WILL MAIL THE DOCUMENTS TO
YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS, BY THE NEXT BUSINESS
DAY AFTER WE RECEIVE YOUR REQUEST.
See "Where You Can Find More Information" on page 58 for more information
about the documents referred to in this document.
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT. IT MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO
WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE
58. WE HAVE INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO MORE
COMPLETE DESCRIPTIONS OF THE TOPICS PRESENTED IN THIS SUMMARY.
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS DOCUMENT. WE ENCOURAGE
YOU TO READ THE MERGER AGREEMENT, AS IT IS THE LEGAL DOCUMENT THAT GOVERNS THE
MERGER. THE EXACT LANGUAGE OF THE MERGER AGREEMENT WILL PREVAIL OVER THE MORE
GENERAL, ABBREVIATED DESCRIPTION IN THIS PROXY STATEMENT/PROSPECTUS.
THE COMPANIES
LUNAR CORPORATION
726 Heartland Trail
Madison, Wisconsin, 53717-1915
(800) 445-8627
Lunar is a leading developer and manufacturer of innovative technology for
the assessment of osteoporosis and metabolic bone disease and orthopedic
surgery. Lunar's technology includes x-ray and ultrasound bone densitometers for
the diagnosis and monitoring of osteoporosis and other metabolic bone diseases.
These diseases are generally associated with aging and characterized by
excessive loss of bone mineral, resulting in decreased bone density over time.
Lunar also develops and sells medical imaging equipment used by orthopedists
and radiologists for imaging extremities. Lunar's diagnostic products include
x-ray densitometry systems, ultrasound densitometry systems, orthopedic imaging
systems, magnetic resonance imaging systems and fluoroscopic c-arm imaging
systems. Lunar's products are sold to hospitals, clinics and pharmaceutical
companies active in the field of bone mineral metabolism and orthopedic clinics.
GENERAL ELECTRIC COMPANY
3135 Easton Turnpike
Fairfield, Connecticut 06431-0001
(203) 373-2211
GE is one of the world's largest and most diversified industrial
corporations. GE has engaged in developing, manufacturing and marketing a wide
variety of products for the generation, transmission, distribution, control and
utilization of electricity since its incorporation in 1892. Over the years, GE
has developed or acquired new technologies or services that have broadened
considerably the scope of its activities.
GE's products include major appliances; lighting products; industrial
automation products; medical diagnostic imaging equipment; motors; electrical
distribution and control equipment; locomotives; power generation and delivery
products; nuclear power support services and fuel assemblies; commercial and
military aircraft jet engines; and engineered materials, such as plastics,
silicones and superabrasive industrial diamonds.
GE's services include product services; electrical product supply houses;
electrical apparatus installation, engineering, repair and rebuilding services;
and computer-related information services. Through its affiliate, the National
Broadcasting Company, Inc., GE delivers network television services, operates
television stations, and provides cable programming and distribution services.
Through another affiliate, General Electric Capital Services, Inc., GE offers a
broad array of financial and other services, including consumer financing,
commercial and industrial financing, real estate financing, asset management and
leasing, mortgage services, consumer savings and insurance services, specialty
insurance and reinsurance, and satellite communications.
TOPAZ MERGER CORP.
3135 Easton Turnpike
Fairfield, Connecticut 06431-0001
(203) 373-2211
Topaz Merger Corp. is a company formed by GE on May 25, 2000 solely for use
in the merger.
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WHAT YOU WILL RECEIVE IN THE MERGER
(PAGE 33)
If the merger is completed, for each share of Lunar common stock you own
immediately prior to the merger, you will be entitled to approximately $17.00
worth of GE common stock. You will receive cash instead of fractional shares of
GE common stock. The number of shares of GE common stock to which you will be
entitled for each Lunar share will be determined by dividing $17.00 by the
average of the daily volume-weighted sales prices per share of GE common stock
on the NYSE for the 10 consecutive trading days ending on the trading day which
is five calendar days prior to the date on which the merger occurs and then
rounding to the nearest thousandth. The price of GE common stock at the time of
completion of the merger may be higher or lower than the average GE price on
which the merger exchange ratio is based. As a result, the value of the shares
of GE common stock to which you become entitled on the date the merger closes
may be more or less than $17.00 per share of Lunar common stock.
EXAMPLE: If you own 100 shares of Lunar common stock when the merger is
consummated and if the average GE price on which the exchange ratio is based
is $ (using the closing price of GE common stock on , 2000
for purposes of this example), then after the merger you would be entitled
to receive shares of GE common stock, plus $ in cash instead of
fractional shares.
You may call, toll-free, (800) 250-7979 for information concerning the
estimated number of shares of GE common stock that will be issued in exchange
for your Lunar common stock as of the week you call.
THE SPECIAL MEETING
(PAGE 16)
At the special meeting, the holders of Lunar common stock will be asked to
approve and adopt the merger agreement. The close of business on [RECORD DATE],
2000 is the record date for determining if you are entitled to vote at the
special meeting. On that date, there were approximately shares of
Lunar common stock outstanding. Each share of Lunar common stock is entitled to
one vote at the special meeting. A majority of the outstanding shares is
required to approve and adopt the merger agreement. On the record date,
directors and executive officers of Lunar owned and had the right to vote
shares of Lunar common stock (approximately % of the shares of
Lunar common stock then outstanding). Richard B. Mazess, Ph.D. and his spouse
have agreed to cause 2,854,845 shares owned or controlled by them to be voted in
favor of the merger.
SHAREHOLDER AGREEMENT
(PAGE 46)
To induce GE to enter into the merger agreement, Dr. Mazess and his spouse
entered into a shareholder agreement with GE. They have agreed, without any
additional consideration being paid to them, to vote 2,854,845 shares of Lunar
common stock owned by them, which represent approximately 33% of the outstanding
shares of Lunar common stock, in favor of the merger.
LUNAR'S REASONS FOR THE MERGER
(PAGE 21)
The Lunar board has approved the merger agreement and recommends that you
vote to approve and adopt the merger agreement and to approve the merger. The
Lunar board believes that the merger is in the best interests of Lunar and its
shareholders. In reaching its decision, the Lunar board considered a number of
factors, including the following (to which no relative weights were assigned):
- the strategic and other benefits of the merger including the complementary
product lines between the businesses of Lunar and GE Medical Systems and the
access that Lunar will have to the substantial resources of GE Medical Systems
and its distribution channels to enhance the growth and profitability of
Lunar's business;
- information and presentations with respect to the financial condition, results
of operations and prospects for Lunar and the combined
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companies, on both a historical and prospective basis;
- current industry, economic, market and other conditions, including the
strategic alternatives available to Lunar;
- the presentations from and discussions with Donaldson, Lufkin & Jenrette
Securities Corporation or DLJ, Lunar's financial advisor, and the opinion of
DLJ (a copy of which is attached as Annex B to this proxy statement/
prospectus) that as of the date thereof and based on and subject to the
assumptions, limitations and qualifications included in the written opinion,
the consideration to be received by the shareholders of Lunar pursuant to the
merger agreement was fair to such shareholders from a financial point of view;
- the structure of the merger, which is intended to permit Lunar shareholders to
exchange their Lunar common stock for GE common stock on a tax-free basis,
except to the extent they receive cash for fractional interests;
- the trading prices of Lunar common stock and the trading volume of Lunar
common stock compared to the trading volume of GE common stock and the
additional possibility for increased liquidity represented thereby;
- the opportunity for Lunar shareholders to become shareholders of GE, which the
Lunar board views as a large, diversified and well managed company;
- the relative certainty of receiving consideration valued at $17.00 per share
of Lunar common stock, regardless of stock market fluctuations prior to the
closing of the merger;
- the terms and conditions of the merger agreement and the merger; and
- the interests of constituencies other than the Lunar shareholders, such as
employees, customers and suppliers.
To review Lunar's reasons for the merger in greater detail, see "The
Merger--Recommendation of the Lunar Board of Directors; Reasons for the Merger"
on page 21.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
(PAGE 27)
In considering the recommendation of the Lunar board regarding the merger,
you should be aware of the interests which executive officers and directors of
Lunar have in the merger that are different from your interests as shareholders.
On June 2, 2000, an aggregate of approximately 566,500 shares of Lunar
common stock were subject to options granted to executive officers and directors
of Lunar under the Amended and Restated Stock Option Plan.
After consultation with GE, Lunar agreed to enter into retention agreements,
to be effective only if the merger is consummated, with four executive officers
of Lunar. These agreements provide for bonuses of 50% of the employee's salary
to be paid to the employee if the employee continues to be employed full-time by
Lunar or GE Medical Systems for one year after the closing of the merger, and
another bonus of 50% to be paid to the employee if the employee continues to be
so employed two years after the closing of the merger.
The Lunar board recognized all the interests described above and concluded
that these interests did not detract from the fairness of the merger to the
holders of Lunar common stock who are not executive officers or directors of
Lunar. Please refer to page 27 for more information concerning the retention
agreements and other arrangements for Lunar's executive officers and directors.
REGULATORY APPROVALS
(PAGE 48)
In order to complete the merger, we must obtain the approval of federal and
foreign regulatory authorities. We have filed, or soon will file, all of the
required applications or notices with these regulatory authorities. The initial
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 were made
on June 16, 2000. As of the date of this proxy statement/prospectus, we have not
yet received all of the required approvals. Although we expect to obtain the
necessary approvals, we cannot be certain we will obtain them.
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CONDITIONS TO THE MERGER
(PAGE 38)
GE and Lunar will not complete the merger unless a number of conditions are
satisfied or waived by them, the most significant of which are:
- the holders of a majority of the shares of Lunar common stock must approve and
adopt the merger agreement and the Merger;
- the GE registration statement with respect to the GE common stock to be issued
to Lunar shareholders must be declared effective by the SEC and all necessary
authorizations imposed by state securities laws must have been received;
- the parties must have received legal opinions from their respective tax
counsel to the effect that the merger will qualify as a tax-free
reorganization under the Internal Revenue Code, and that each of GE, Lunar and
Topaz Merger Corp. will be parties to that reorganization within the meaning
of the Internal Revenue Code;
- there must be no law, injunction or order that prohibits the merger;
- the representations and warranties of each of GE and Lunar contained in the
merger agreement must be true and correct in all material respects as of the
time given and as of the closing; and
- there must have been no material adverse change with respect to Lunar.
The party entitled to the benefit of some of these conditions may waive
these conditions.
TERMINATION OF THE MERGER AGREEMENT
(PAGE 39)
Lunar and GE can agree at any time to terminate the merger agreement without
completing the merger, and the merger agreement may be terminated by either
party if any of the following events occur:
- the other party materially breaches any of its representations, warranties or
obligations under the merger agreement and does not cure the breach within
five business days after receiving notice of the breach;
- the merger is not completed by March 31, 2001;
- a court or other governmental authority permanently prohibits the merger;
- the holders of Lunar common stock do not approve the merger agreement; or
- Lunar enters into an agreement to effect a more favorable business combination
(subject to various conditions).
In addition, GE may terminate the merger agreement if the Lunar board
changes its recommendation in favor of the merger, recommends in favor of a
business combination other than the merger with GE or fails to recommend against
the acceptance of any tender offer or exchange offer for Lunar common stock.
TERMINATION FEES
(PAGE 40)
To compensate GE if the merger is not consummated, the merger agreement
provides for termination fees plus expenses under a variety of circumstances.
Such fees shall not exceed a total of $6.5 million, including amounts received
by GE pursuant to the stock option agreement between GE and Lunar in connection
with Lunar's completion of a transaction with a party other than GE.
NO SOLICITATION OF COMPETING TRANSACTIONS
(PAGE 36)
The merger agreement imposes conditions on Lunar's ability to solicit,
encourage or participate in discussions with respect to any alternative
acquisition transactions with third parties beyond what is required by the Lunar
board's fiduciary duties. Lunar must promptly notify GE if it receives offers or
proposals for any such alternative transactions.
STOCK OPTION AGREEMENT
(PAGE 43)
Also as a condition to GE's entering into the merger agreement, GE and Lunar
entered into a stock option agreement, whereby Lunar
7
<PAGE>
has granted to GE an option to purchase up to 2,014,067 shares (approximately
19.9% of Lunar's outstanding shares of common stock) of Lunar common stock at an
exercise price of $17.00 per share, payable in cash. The option becomes
exercisable by GE only if specified events occur. The stock option agreement and
the termination fees may discourage persons from making a competing offer for
Lunar common stock.
APPRAISAL RIGHTS
(PAGE 32)
Under Wisconsin law, Lunar shareholders have no right to an appraisal of the
value of their shares of Lunar common stock in connection with the merger. This
is because the Lunar shares are listed on the Nasdaq National Market System.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
(PAGE 31)
The consummation of the Merger is conditioned upon the receipt by Lunar and
GE of legal opinions from their respective tax counsel, to the effect that the
merger will constitute a reorganization for federal income tax purposes.
Accordingly, among other things, no gain or loss will be recognized by the
shareholders of Lunar solely on the exchange of their shares of Lunar common
stock for shares of GE common stock pursuant to the merger, except to the extent
of any gain or loss attributable to cash received instead of fractional shares
of GE stock.
The tax consequences of the merger to you will depend on your particular
facts and circumstances. We urge you to consult your tax advisor to understand
fully the tax consequences of the merger to you. See "The Merger--Material
United States Federal Income Tax Consequences" on page 31.
COMPARISON OF RIGHTS OF LUNAR SHAREHOLDERS AND GE STOCKHOLDERS
(PAGE 49)
After the merger, Lunar shareholders will become GE stockholders and their
rights as stockholders will be governed by the certificate of incorporation and
bylaws of GE and the New York corporate law. There are a number of differences
between the articles of incorporation and bylaws of GE and the New York
corporate law and the certificate of incorporation and bylaws of Lunar and the
Wisconsin corporate law. These differences are discussed under "Comparison of
Rights of Lunar Shareholders and GE Stockholders."
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
(PAGE 30)
GE and Lunar have made forward-looking statements in this document and in
documents to which we have referred you. These statements are subject to risks
and uncertainties, and we cannot assure you that these statements will prove to
be correct. Forward-looking statements include assumptions as to how GE and
Lunar may perform in the future. You will find many of these statements in the
following sections:
- "The Merger--Recommendation of the Lunar Board of Directors; Reasons for the
Merger" on page 21; and
- "The Merger--Opinion of Donaldson, Lufkin & Jenrette Securities Corporation"
on page 22.
Also, when we use words like "believes," "expects," "anticipates" or similar
expressions, we are making forward-looking statements. For those statements, GE
and Lunar claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You should
understand that the following important factors, in addition to those discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect the future results of GE and Lunar and could cause those
results to differ materially from those expressed in our forward-looking
statements. These factors include:
- the ability to timely and fully realize the expected cost savings and
revenues;
8
<PAGE>
- material adverse changes in economic conditions and in the markets served by
GE and Lunar;
- regulatory, legal, economic and other changes in the healthcare industry
generally;
- a significant delay in the expected completion of the merger;
- competitive pressures;
- GE's and Lunar's ability to attract and retain key personnel;
- changes in the financial condition of major Lunar customers;
- variability of quarterly results;
- uncertainty of entrance into new markets; and
- integration of the acquired business.
9
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
Lunar and GE are providing the following financial information to help you
in your analysis of the financial aspects of the merger. The annual selected
historical financial data presented below have been derived from the audited
consolidated financial statements of each company. The interim selected
historical financial data presented below have been derived from the unaudited
consolidated financial statements of each company. As this information is only a
summary, you should read it in conjunction with the historical financial
statements and related notes of GE contained in the annual reports and other
information that GE has filed with the SEC. See "Where You Can Find More
Information" on page 58. You should also read this in conjunction with the
historical financial statements and related notes of Lunar contained in the
annual reports and other information that Lunar has filed with the SEC.
Lunar and GE report quarterly and annual earnings results using methods
required by generally accepted accounting principles. GE prepares its financial
statements on the basis of a fiscal year beginning on January 1 and ending on
December 31. Lunar prepares its financial statements on the basis of a fiscal
year beginning on July 1 and ending on June 30.
10
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF LUNAR
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
LUNAR CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, MARCH 31,
---------------------------------------------------- -------------------
1999 1998 1997 1996 1995 2000 1999
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $88,062 $79,177 $80,891 $66,426 $44,349 $68,686 $65,984
Operating expenses.................... 86,711 69,689 62,912 54,591 37,137 62,227 65,434
Income from operations................ 1,351 9,488 17,979 11,835 7,212 6,459 550
Interest income....................... 1,600 1,813 1,533 1,549 1,312 1,522 1,136
Income before income taxes............ 3,031 10,186 21,527 13,146 8,852 8,781 1,477
Net income............................ 2,355 6,862 14,286 9,236 6,701 6,146 1,066
Basic earnings per share.............. $ .27 $ 0.78 $ 1.66 $ 1.13 $ 0.85 $ 0.72 $ 0.12
Diluted earnings per share............ $ .27 $ 0.75 $ 1.57 $ 1.04 $ 0.76 $ 0.70 $ 0.12
Weighted average number of common
shares.............................. 8,617 8,774 8,615 8,195 7,905 8,594 8,624
Weighted average number of common and
dilutive potential common shares.... 8,779 9,112 9,106 8,908 8,824 8,778 8,793
Cash dividends declared per common
share............................... -- -- -- -- -- -- --
Working capital....................... $44,810 $40,606 $45,535 $38,987 $33,140 $45,498 $45,908
Total assets.......................... 96,164 90,060 83,269 62,860 56,700 99,811 91,028
Long-term liabilities................. -- -- -- -- -- -- --
Shareholders' equity.................. 76,345 75,557 70,229 52,393 48,096 82,308 75,239
</TABLE>
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF GE
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
---------------------
1999 1998 1997 1996 1995 2000 1999
--------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. 111,630 $ 100,469 $ 90,840 $ 79,179 $ 70,028 29,996 24,165
Earnings from continuing
operations.............. 10,717 9,296 8,203 7,280 6,573 2,592 2,155
Net earnings.............. 10,717 9,296 8,203 7,280 6,573 2,592 2,151
Dividends declared........ 4,786 4,081 3,535 3,138 2,838 1,351 1,145
Earned on average share
owner's equity.......... 26.8% 25.7% 25.0% 24.0% 23.5% 6.0% 5.5%
Per Share
Earnings from continuing
operations basic
(post-split)............ $ 1.09 $ .95 $ .83 $ .73 $ .65 .26 .22
Net earnings basic
(post-split)............ 1.09 .95 .83 .73 .65 .26 .22
Net earnings diluted
(post-split)............ 1.07 .93 .82 .72 .64 .26 .22
Dividends declared
(post-split)............ .48 2/3 .41 2/3 .36 .31 2/3 .28 8/50 .13 2/3 .11 2/3
Total assets of continuing
operations.............. 405,200 355,935 304,012 272,402 228,035 421,637 361,736
Long-term borrowings...... 71,427 59,663 46,603 49,246 51,027 73,413 60,502
Shares outstanding average
(in thousands)
(post-split)............ 9,833,478 9,806,955 9,824,075 9,922,182 10,102,871 9,870,345 9,816,728
</TABLE>
SIGNIFICANT FACTORS AFFECTING OPERATING RESULTS
Sometimes financial results reported in accordance with GAAP include unusual
or infrequent events and factors which are not expected to occur regularly in
the future. Examples of these events and factors include gains or losses on the
sale of businesses, the costs of completing major acquisitions and of other
business development activities, and the costs of business restructurings.
Certain unusual or infrequent events and transactions, as well as other
significant factors and trends, which may be helpful in understanding the past
performance and future prospects of Lunar and GE, are described briefly below.
The following discussion should be read with the "Summary Selected Financial
Data" of Lunar and GE included on the previous pages and with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
Lunar contained in the annual reports and other information that Lunar has filed
with the SEC, and with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of GE contained in the annual reports and
other information that GE has filed with the SEC. See "Where You Can Find More
Information" on page 58.
In considering the Selected Historical Financial Data of GE, you should be
aware that:
- the consolidated financial statements represent the combined results of
all companies that GE directly or indirectly controls;
12
<PAGE>
- results of associated companies--generally companies that are 20% to 50%
owned by GE and over which GE, directly or indirectly, has significant
influence--are included in the financial statements on a "one-line" basis;
and
- the consolidated financial statements have been restated to reflect a
two-for-one stock split, which took effect on April 28, 1997, and a
three-for-one stock split, which took effect on April 27, 2000.
COMPARATIVE PER SHARE DATA
The following tables present historical per share data of Lunar and GE. The
data presented below should be read in conjunction with the historical financial
statements of GE and Lunar incorporated by reference in this document. Only the
earnings per share data are calculated using the diluted weighted average of
shares outstanding. Because the number of shares of GE common stock to be issued
in the merger will not be known until five calendar days prior to the completion
of the merger, Lunar equivalent per share data cannot be computed at this time.
That information will be available via telephone, toll-free, at (800) 250-7979.
Hypothetical Lunar equivalent per share data is presented below using the
closing sale price of a share of GE common stock on June , 2000 which was
$ and a resulting hypothetical exchange ratio of . The hypothetical
Lunar equivalent per share data was calculated by multiplying the actual GE per
share data by the hypothetical exchange ratio of .
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED ENDED
MARCH 31, 2000 JUNE 30, 1999
-------------- -------------
<S> <C> <C>
LUNAR HISTORICAL:
Earnings per share, diluted....................... $0.70 $0.27
Dividends per share, net.......................... -- --
Book value per share.............................. $9.55 $8.88
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR
THREE MONTHS ENDED
ENDED DECEMBER 31,
MARCH 31, 2000 1999
--------------- ---------------
<S> <C> <C>
GE HISTORICAL:
Earnings per share, diluted....................... $ 0.26 $ 1.07
Dividends per share, net.......................... $ 0.13 2/3 $ .48 2/3
Book value per share.............................. $ 4.51 $ 4.33
HYPOTHETICAL LUNAR EQUIVALENT:
Earnings per share, diluted.......................
Dividends per share, net..........................
Book value per share..............................
</TABLE>
13
<PAGE>
COMPARATIVE MARKET PRICE DATA
The following tables present certain historical trading and dividend
declaration information for the Lunar common stock and GE common stock. No
dividends have been paid on shares of Lunar common stock.
<TABLE>
<CAPTION>
LUNAR COMMON
STOCK
-------------------
HIGH LOW
-------- --------
(IN $)
<S> <C> <C>
FISCAL 2000
Third Quarter............................................. 12.00 6.25
Second Quarter............................................ 7.63 5.63
First Quarter............................................. 9.25 6.88
FISCAL 1999
Fourth Quarter............................................ 8.44 5.38
Third Quarter............................................. 10.75 6.38
Second Quarter............................................ 11.81 9.25
First Quarter............................................. 18.00 10.69
FISCAL 1998
Fourth Quarter............................................ 20.00 16.25
Third Quarter............................................. 24.50 19.75
Second Quarter............................................ 22.88 18.50
First Quarter............................................. 24.50 19.00
FISCAL 1997
Fourth Quarter............................................ 34.50 15.00
</TABLE>
<TABLE>
<CAPTION>
GE COMMON STOCK
---------------------------------
HIGH LOW DIV
-------- -------- -----------
(IN $)(1)
<S> <C> <C> <C>
2000
First Quarter............................................. 54.96 41.67 .13 2/3
1999
Fourth Quarter............................................ 53.17 38.21 .13 2/3
Third Quarter............................................. 40.83 34.19 .11 2/3
Second Quarter............................................ 39.15 33.27 .11 2/3
First Quarter............................................. 38.06 31.42 .11 2/3
1998
Fourth Quarter............................................ 34.65 23.00 .11 2/3
Third Quarter............................................. 32.29 24.21 .10
Second Quarter............................................ 30.67 26.90 .10
First Quarter............................................. 29.21 23.42 .10
1997
Fourth Quarter............................................ 25.52 19.67 .10
Third Quarter............................................. 24.87 20.44 .08 2/3
Second Quarter............................................ 22.75 16.19 .08 2/3
</TABLE>
------------------------
1. Reflects a three-for-one stock split effective April 27, 2000.
GE common stock is principally traded in the United States on the NYSE under
the symbol "GE." Lunar common stock is currently traded on the Nasdaq National
Market under the symbol "LUNR."
14
<PAGE>
GE declared dividends of $4.786 billion in 1999, or approximately 44.7% of
GE's 1999 consolidated earnings. Per share dividends declared of $.48 2/3 in
fiscal year 1999 increased 16% from 1998, its 24th consecutive annual increase.
Following the merger, payment of cash dividends by GE in respect of GE common
stock will depend on GE's financial condition, results of operations and any
other factor GE's board of directors may consider relevant.
At year-end 1999, GE had purchased and placed into treasury a total of 304
million shares having an aggregate cost of $15.440 billion under a share
repurchase program begun in December 1994. In December 1999, GE's board of
directors increased the authorization to repurchase GE common stock to
$22 billion and authorized the program to continue through 2002. Such shares are
from time to time reissued upon the exercise of employee stock options,
conversion of convertible securities and for other corporate purposes. GE
intends to continue repurchases of shares in the ordinary course under its
ongoing repurchase program between the date of this document and the merger, and
during the valuation period for the merger.
Set forth below are the last reported sale prices of GE common stock and
Lunar common stock on June 1, 2000, the last trading day prior to the public
announcement of the execution of the merger agreement, and on ,
2000, the last trading day prior to the date of this proxy statement/
prospectus. The GE common stock price is as reported on the NYSE, and the Lunar
common stock price is as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
JUNE 1, 2000 , 2000
------------ ---------
<S> <C> <C>
GE common stock...................................... $52.375
Lunar common stock................................... $11.125
</TABLE>
15
<PAGE>
THE SPECIAL MEETING
GENERAL
We are sending you this proxy statement/prospectus as part of a solicitation
of proxies by the board of directors of Lunar for use at the special meeting of
Lunar shareholders. We are first mailing this proxy statement/prospectus,
including a notice of the special meeting and a form of proxy, on or about
, 2000.
The special meeting is scheduled to be held on:
[MEETING DATE], 2000
9:00 a.m., local time
at the Lunar Executive Offices
726 Heartland Trail
Madison, Wisconsin 53717-1915
PURPOSE OF THE SPECIAL MEETING
The purpose of the special meeting is to vote on a proposal to approve and
adopt the merger agreement. As a result of the merger, each share of Lunar's
outstanding common stock will be converted into a fraction of a share of GE
common stock, and Lunar will become a wholly-owned subsidiary of GE.
We know of no other matters to be brought before the special meeting.
However, if any other matters are properly presented for action at the Lunar
special meeting, including a motion to adjourn the meeting to another time or
place, the persons named in the enclosed proxy card will have the discretion,
unless otherwise noted on any proxy form, to vote on those matters, subject to
applicable law. No proxy card that is voted against the merger will be voted in
favor of any adjournment or postponement.
RECOMMENDATION OF THE LUNAR BOARD
Lunar's board of directors has unanimously approved the merger agreement.
LUNAR'S BOARD HAS DETERMINED THAT THE MERGER AGREEMENT IS ADVISABLE AND FAIR TO
AND IN THE BEST INTERESTS OF LUNAR AND ITS SHAREHOLDERS AND RECOMMENDS THAT
LUNAR'S SHAREHOLDERS VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT. See "The
Merger--Reasons for the Merger; Recommendation of the Lunar Board of Directors."
REQUIRED VOTE
Adoption of the merger agreement requires the affirmative vote of a majority
of the outstanding shares of Lunar common stock entitled to vote at the special
meeting. Each share of outstanding Lunar common stock entitles its holder to one
vote.
RECORD DATE
Lunar's board of directors has fixed the close of business on [RECORD DATE],
2000 as the record date for the special meeting. At that date, there were
shares of Lunar common stock outstanding. Only shareholders of
record on the record date will receive notice of and be entitled to vote at the
meeting. No other voting securities of Lunar are outstanding.
As of the record date, directors and executive officers of Lunar
beneficially owned and had the right to vote shares of Lunar common
stock entitling them to exercise approximately % of the voting power of
the Lunar common stock
16
<PAGE>
Additionally, as a condition to GE's willingness to enter into the merger
agreement, Richard B. Mazess, Ph.D. and his spouse have entered into a
shareholder agreement which requires them, among other things, to vote 2,854,845
of the shares of Lunar common stock owned or controlled by them (representing
approximately 33% of the outstanding shares on the record date) in favor of
approving and adopting the merger agreement at the special meeting.
QUORUM
A majority of the shares of Lunar common stock entitled to vote must be
present at the special meeting, either in person, or by proxy, in order for
there to be a quorum at the special meeting. There must be a quorum in order for
the vote on the merger agreement to be held.
We will count the following shares of Lunar common stock as present at the
special meeting for purposes of determining whether or not there is a quorum:
- shares held by persons who attend or are represented at the Lunar special
meeting whether or not the shares are voted;
- shares for which Lunar received properly executed proxies; and
- shares held by brokers in nominee or street name for beneficial owners who
have not given their brokers specific instructions on how to vote shares.
PROXIES
You should complete and return the accompanying proxy card whether or not
you plan to attend the special meeting in person. All properly executed proxies
received by Lunar before the special meeting that are not revoked will be voted
at the special meeting in accordance with the instructions indicated on the
proxies or, if no direction is indicated, FOR approval of the merger agreement.
Properly executed proxies also will be voted for any adjournment or postponement
of the Lunar special meeting for the purpose of soliciting additional votes to
approve the merger agreement, if necessary.
Proxies marked "Abstain" will not be voted at the special meeting. In
addition, under Nasdaq rules, your broker cannot vote Lunar common shares
without specific instructions from you. You should follow the directions your
broker provides to you regarding how to instruct your broker to vote your
shares. Abstentions and broker non-votes will have the same effect as votes
against adoption of the merger agreement. Accordingly, Lunar's board of
directors urges you to complete, date and sign the accompanying proxy card and
return it promptly in the enclosed envelope.
REVOCATION
Your grant of a proxy on the enclosed proxy card does not prevent you from
voting in person or otherwise revoking your proxy at any time before it is voted
at the special meeting. To revoke your proxy, either:
- deliver a signed notice of revocation or properly executed new proxy
bearing a later date to:
Lunar Corporation
726 Heartland Trail
Madison, Wisconsin 53717-1915
Attention: Corporate Secretary
- attend the Lunar special meeting and vote your shares in person.
17
<PAGE>
SOLICITATION OF PROXIES
GE and Lunar will share equally all expenses related to printing and filing
the proxy statement/ prospectus and all the regulatory filing fees incurred in
connection with the proxy statement/prospectus. See "The Merger Agreement
Termination of the Merger Agreement--FEES AND EXPENSES--EXPENSES." In addition
to soliciting proxies by mail, officers, directors and employees of Lunar,
without receiving additional compensation, may solicit proxies by telephone,
telegraph, in person or by other means. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward proxy
solicitation materials to the beneficial owners of Lunar common stock held of
record by those persons, and GE and Lunar will reimburse these brokerage firms,
custodians, nominees and fiduciaries for related, reasonable out-of-pocket
expenses they incur. MacKenzie Partners, Inc., a proxy solicitation firm, will
assist Lunar in soliciting proxies and will be paid a fee of approximately
$4,000 plus out-of-pocket expenses.
18
<PAGE>
THE MERGER
GENERAL
The Lunar board of directors has approved the merger agreement, which
provides for the acquisition by GE of Lunar through a merger that will result in
Lunar becoming a wholly-owned subsidiary of GE and you becoming a GE
stockholder. Upon completion of the merger, each share of your Lunar stock will
be converted into a fraction of a share of GE common stock, plus cash in lieu of
fractional shares. The conversion will be based on a conversion ratio determined
by dividing $17.00 by the average of the daily volume-weighted sales prices per
share of GE common stock on the NYSE for the 10 consecutive trading days ending
on the trading day which is 5 calendar days prior to the date on which the
merger occurs and then rounding to the nearest thousandth. The result of this
equation is the fractional share of GE common stock to be exchanged for each
share of Lunar common stock. You will have your shares aggregated and will
receive whole shares of GE common stock plus cash instead of fractional shares,
if any.
BACKGROUND OF THE MERGER
From time to time over the years Lunar and GE Medical Systems, a division of
GE, have discussed the possibility of forming strategic alliances or otherwise
engaging in corporate transactions. In early 1998, at the direction of Lunar and
its board of directors, representatives of Donaldson, Lufkin & Jenrette
Securities Corporation or DLJ, Lunar's financial advisor, had discussions with
representatives of GE Medical Systems regarding a possible strategic combination
between the companies. In addition, at that time Richard B. Mazess, Ph.D., the
Chairman, President and Chief Executive Officer of Lunar (who also owns or
controls shares of Lunar common stock representing approximately 33% of the
total outstanding shares), and Robert A. Beckman, the Vice President of Finance
of Lunar, met with Jeffrey R. Immelt, CEO of GE Medical Systems, Adam T. Miller,
Manager of Business Development--GE Medical Systems and Michael A. Jones,
General Manager, Global Business Development, of GE Medical Systems. At that
meeting, Dr. Mazess and Mr. Beckman gave a presentation regarding Lunar's
businesses. GE subsequently informed the representatives of DLJ that GE was not
prepared at that time to proceed with a business combination or other strategic
transaction.
In mid-year 1998, representatives of GE had conversations with
representatives of Lunar with respect to a distribution arrangement between
Lunar and GE. GE proposed the terms on which it would be willing to distribute
certain of Lunar's products. At a meeting of the board of directors of Lunar
held on July 29, 1998, the board considered the proposal and decided not to
proceed with the proposal. Dr. Mazess subsequently informed GE of the board's
determination.
From time to time Mr. Immelt and Dr. Mazess had conversations on a variety
of topics including potential business alliances between the companies. On
November 4, 1999, Dr. Mazess and Messrs. Beckman, Immelt and Jones met to update
GE with respect to Lunar's business and to discuss Lunar's interest in a
potential transaction with GE. Dr. Mazess informed GE that the Lunar board was
not at that time interested in such a transaction.
In early April 2000, Mr. Immelt telephoned Dr. Mazess and asked to meet with
Dr. Mazess to further explore the possibility of a business combination between
GE and Lunar. On April 28, 2000, Dr. Mazess and Mr. Beckman met with
Messrs. Immelt and Jones. They discussed in general Lunar's businesses and the
overall market and industry conditions in the densitometry and orthopedic
businesses. Mr. Immelt expressed an interest in pursuing a possible business
combination with Lunar. Dr. Mazess told Mr. Immelt that he would present GE's
expression of interest to the Lunar board, but that, although the preliminary
price indicated by GE represented a premium over the then current market price
of Lunar's common stock, Dr. Mazess' view was that it was unlikely that a
transaction would proceed at that level. Mr. Jones also described GE's recent
business combinations with other
19
<PAGE>
medical equipment manufacturers, and indicated that GE would expect that any
transaction with Lunar would be structured along similar lines. Mr. Jones
subsequently supplied to Dr. Mazess copies of publicly available documents
relating to those prior transactions. Dr. Mazess subsequently informed each of
the Lunar board members of GE's indication of interest.
On May 9, 2000, Mr. Immelt telephoned Dr. Mazess and indicated that GE
continued to be interested in a business combination with Lunar and indicated
that if Lunar were willing to proceed, GE would be prepared to pay as much as
$17.00 per share in GE common stock for each share of common stock of Lunar.
Dr. Mazess indicated that he would support a transaction at that level and would
recommend the transaction to Lunar's board. Mr. Immelt and Dr. Mazess discussed
the basis on which they would proceed further.
On May 10, 2000, Mr. Jones telephoned Dr. Mazess and Mr. Beckman to discuss
how to proceed with the consideration of a transaction and GE's due diligence
review of Lunar. Mr. Jones indicated that GE would provide to Lunar an outline
of information that GE and its representatives would need to review as part of
that investigation, which Mr. Jones provided on May 15, 2000. Dr. Mazess
subsequently updated the Lunar board members on the conversations with GE, and
subsequently met with representatives of DLJ and counsel for Lunar.
At a meeting of the board of directors of Lunar held on May 18, 2000, the
board considered, with the assistance of financial and legal advisors, the
indication of interest from GE. Members of management updated the board as to
the status of discussions with GE. Counsel to Lunar advised the board as to the
board's duties if a business combination were to be considered. In addition,
counsel reviewed with the board the structure and terms of prior acquisitions by
GE of other medical equipment manufacturers. Representatives of DLJ reviewed
with the board their prior discussions with representatives of GE. The board
authorized the retention of DLJ as the financial advisor to Lunar in connection
with a possible transaction. Dr. Mazess reviewed with the board a proposed
timetable for further discussions and for GE's due diligence review of Lunar.
The board authorized management to continue discussions with GE.
On May 22, 2000, counsel for GE and counsel for Lunar exchanged drafts of a
proposed confidentiality agreement between Lunar and GE. On May 22 and 23 the
parties negotiated the terms of the proposed confidentiality agreement and
entered into a confidentiality agreement. Thereafter, representatives of GE
began their due diligence review of Lunar and on May 23, 2000 counsel for GE
presented to Lunar and its counsel drafts of the merger agreement, the stock
option agreement and the shareholder agreement.
Commencing on May 23, 2000, Lunar made available to GE and its counsel a
data room of confidential information with respect to Lunar. On May 24, 2000
through May 26, 2000, members of management of Lunar and representatives of DLJ
and counsel for Lunar met with representatives of GE and its counsel and
presented to and discussed with those representatives certain business,
personnel, legal and financial information relating to Lunar.
The board of directors of Lunar met again on May 24, 2000 to review the
indication of interest. Dr. Mazess updated the board on the discussions and the
board reviewed the terms of the confidentiality agreement as well as a proposed
modification to the confidentiality agreement. The board ratified the execution
of the confidentiality agreement and authorized the execution of the modified
confidentiality agreement (which was subsequently executed by GE and Lunar on
May 24, 2000). Representatives of DLJ made a preliminary financial presentation
to the board regarding GE and Lunar, other selected publicly traded medical
imaging companies, comparable merger and acquisition transactions and a
discounted cash flow analysis. Counsel for Lunar reviewed the terms of the draft
agreements that had been prepared by counsel for GE.
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<PAGE>
Over the holiday weekend of May 27 through May 29, 2000, representatives of
GE visited certain facilities of Lunar and due diligence continued during that
period through June 1, 2000. In addition, between May 27 and June 1, 2000,
representatives of GE and Lunar and their respective counsel negotiated the
terms of the merger agreement and the stock option agreement. Between May 31 and
June 1, 2000 representatives of GE and its counsel negotiated the terms of
shareholder agreement with Dr. Mazess and his counsel. The Acquisition Committee
of GE's Board of Directors approved the transaction on June 1, 2000.
On June 1, 2000, the board of directors of Lunar met again to consider the
proposed transaction. Lunar's counsel reviewed the terms of the proposed merger
agreement, stock option agreement and shareholder agreement, including changes
to those agreements since the drafts sent to the board in advance of the
meeting. Counsel described the remaining unresolved issues with respect to
agreements, primarily the shareholder agreement. Dr. Mazess indicated that he
believed that the remaining issues with respect to the shareholder agreement
could be resolved to his satisfaction. Representatives of DLJ made a
presentation regarding the proposed financial terms of the merger, as well as a
financial presentation regarding DLJ's valuation analysis of Lunar, including an
analysis of other selected publicly traded medical imaging companies, comparable
merger and acquisition transactions and a discounted cash flow analysis. DLJ
delivered its oral opinion (which was subsequently confirmed in writing) that as
of that date and based on and subject to the assumptions, limitations and
qualifications set forth in the written opinion, the consideration to be
received by the shareholders of Lunar pursuant to the merger agreement was fair
to such shareholders from a financial point of view. Accordingly, upon
management's recommendation, the board unanimously approved the merger agreement
and the stock option agreement in the form presented to the board subject to
such final revisions as management might approve and subject to GE and
Dr. Mazess resolving the remaining issues with respect to the shareholder
agreement. The board also authorized the transaction for purposes of
Section 180.1141 of the Wisconsin business corporation law and authorized
management to take certain actions in furtherance of the transaction.
Following the meeting, during the evening of June 1, 2000 and early morning
of June 2, 2000 representatives of GE, Lunar and Dr. Mazess satisfactorily
resolved all remaining issues and Lunar, GE and Topaz Merger Corp. executed the
merger agreement, Lunar and GE executed the stock option agreement and GE and
Dr. Mazess, his wife and entities controlled by them executed the shareholder
agreement. The proposed merger was publicly announced prior to the opening of
trading on June 2, 2000.
RECOMMENDATION OF THE LUNAR BOARD OF DIRECTORS; REASONS FOR THE MERGER
At a meeting held on June 1, 2000, the board of directors of Lunar
unanimously approved and adopted the merger agreement, approved the merger and
determined that the merger is advisable and fair to and in the best interests of
Lunar and its shareholders. The Lunar board unanimously recommends adoption of
the merger agreement by Lunar shareholders.
The recommendation of the Lunar board is based on a number of factors
including the following:
- the strategic and other benefits of the merger including the complementary
product lines between the businesses of Lunar and GE Medical Systems and
the access that Lunar will have to the substantial resources of GE Medical
Systems and its distribution channels to enhance the growth and
profitability of Lunar's business;
- information and presentations with respect to the financial condition,
results of operations and prospects for Lunar and the combined companies,
on both a historical and prospective basis;
- current industry, economic, market and other conditions, including the
strategic alternatives available to Lunar;
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<PAGE>
- the presentations from and discussions with DLJ, Lunar's financial
advisor, and the written opinion of DLJ (a copy of which is attached as
Annex B to this proxy statement/prospectus) that as of the date thereof
and based on and subject to the assumptions, limitations and
qualifications included in the written opinion the consideration to be
received by the shareholders of Lunar pursuant to the merger agreement was
fair to such shareholders from a financial point of view;
- the structure of the merger, which is intended to permit Lunar
shareholders to exchange their Lunar common stock for GE common stock on a
tax-free basis, except to the extent they receive cash for fractional
interests;
- the trading prices of Lunar common stock and the trading volume of Lunar
common stock compared to the trading volume of GE common stock and the
additional possibility for increased liquidity represented thereby;
- the opportunity for Lunar shareholders to become shareholders of GE, which
the Lunar board views as a large, diversified and well managed company;
- the relative certainty of receiving consideration valued at $17.00 per
share of Lunar common stock, regardless of stock market fluctuations prior
to the closing of the merger;
- the terms and conditions of the merger agreement and the merger; and
- the interests of constituencies other than the Lunar shareholders, such as
employees, customers and suppliers.
The Lunar board did not find it necessary to and did not quantify or
otherwise assign relative weights to the foregoing factors or determine that any
factor was of particular importance. Rather, the Lunar board views its
recommendation as being based on the totality of the information presented to
and considered by it.
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
A COPY OF THE DLJ OPINION IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT/PROSPECTUS. YOU ARE URGED TO READ THE DLJ OPINION CAREFULLY IN ITS
ENTIRETY FOR THE ASSUMPTIONS MADE, THE PROCEDURES FOLLOWED, THE MATTERS
CONSIDERED AND THE LIMITS OF THE REVIEW MADE BY DLJ IN CONNECTION WITH ITS
OPINION.
Lunar asked DLJ, in its role as financial advisor to Lunar, to render an
opinion to the Lunar board of directors as to the fairness to the Lunar
stockholders, from a financial point of view, of the consideration to be
received by such stockholders in the merger. On June 1, 2000, DLJ delivered to
the Lunar board of directors its oral opinion, subsequently confirmed in writing
on June 2, 2000, to the effect that, as of that date, and based on and subject
to the assumptions, limitations and qualifications included in the written
opinion, the consideration to be received by the stockholders of Lunar in the
merger was fair to such stockholders from a financial point of view. The full
text of DLJ's opinion is attached as Annex B to this proxy statement/prospectus.
Lunar selected DLJ as its financial advisor because DLJ is an
internationally recognized investment banking firm that has substantial
experience providing strategic advisory services. DLJ was not retained as an
advisor or agent to the stockholders of Lunar or any other person. As part of
its investment banking business, DLJ is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
In arriving at its opinion, DLJ:
- reviewed the draft dated May 23, 2000 of the merger agreement and the
exhibits thereto which DLJ assumed would not differ materially from the
final merger agreement;
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<PAGE>
- reviewed financial and other information that was publicly available or
furnished to it by Lunar, including information provided during
discussions with its management. Included in the information provided
during discussions with the Lunar management were certain financial
projections of Lunar for the period beginning April 1, 2000 and ending
June 30, 2005, prepared by the management of Lunar;
- compared certain financial and securities data of Lunar with various other
companies whose securities are traded in public markets;
- reviewed the historical stock prices and trading volumes of Lunar common
stock and GE common stock;
- reviewed prices in certain other business combinations;
- conducted other financial studies, analyses and investigations as DLJ
deemed appropriate for purposes of rendering its opinion; and
- reviewed financial and other information that was publicly available to it
regarding GE.
DLJ was not requested to, nor did DLJ, solicit the interest of any other
party in acquiring Lunar. In rendering its opinion, DLJ relied upon and assumed
the accuracy and completeness of all of the financial and other information that
was available to it from public sources, that Lunar or its representatives
provided it, or that DLJ otherwise reviewed. With respect to the financial
projections supplied to DLJ, DLJ relied on representations that the projections
were reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of Lunar as to the future operating
and financial performance of Lunar. DLJ expressed no opinion with respect to
these projections or the assumptions upon which they were based. DLJ did not
assume responsibility for making any independent evaluation of the assets or
liabilities, or for making any independent verification of the information
reviewed by DLJ. DLJ relied as to certain legal matters on advice of counsel to
Lunar, such as to the tax free status of the transaction including that the
merger will be free of federal tax to Lunar.
DLJ's opinion was necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available to DLJ as
of, the date of its opinion. DLJ states in its opinion that, although subsequent
developments may affect the conclusions reached in its opinion, DLJ does not
have any obligation to update, revise or reaffirm its opinion. DLJ expressed no
opinion as to the prices at which GE common stock would actually trade at any
time. DLJ's opinion did not address the relative merits of the merger and the
other business strategies considered by the Lunar board of directors nor did it
address the Lunar board of directors' decision to proceed with the merger. The
consideration to be received by the stockholders of Lunar was determined in
arm's length negotiations between Lunar and GE, in which DLJ advised Lunar.
SUMMARY OF FINANCIAL ANALYSES PERFORMED BY DLJ
The following is a summary of the financial analyses presented by DLJ to the
Lunar board of directors on June 1, 2000 in connection with the preparation of
DLJ's opinion. No company or transaction used in the analyses described below is
directly comparable to Lunar or the contemplated transaction. In addition,
mathematical analysis such as determining the mean or median is not in itself a
meaningful method of using selected company or transaction data. The analyses
performed by DLJ are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
these analyses. The information summarized in the tables which follow should be
read in conjunction with the accompanying text.
COMMON STOCK TRADING HISTORY. DLJ examined the historical closing prices of
Lunar common stock from May 28, 1999 to May 30, 2000. During this time period,
Lunar common stock reached a
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<PAGE>
high of $14.63 per share, a low of $5.63 per share and averaged $8.66. DLJ also
examined the historical closing prices of GE common stock from May 28, 1999 to
May 30, 2000. During this time period, GE common stock reached a high of $55.33
per share, a low of $33.67 per share and averaged $44.05 per share.
COMPARABLE PUBLICLY TRADED COMPANY ANALYSIS. DLJ analyzed the market values
and trading multiples of selected publicly traded medical imaging companies that
DLJ believed were reasonably comparable to Lunar. These comparable companies
consisted of:
- Acuson Corporation
- ADAC Laboratories
- Analogic Corporation
- Hologic, Inc.
- Trex Medical Corporation
In examining each comparable company, DLJ analyzed:
- the stock price, equity value and enterprise value as of May 31, 2000,
where the enterprise value is defined as diluted equity value plus debt,
preferred stock and minority interest, if any, minus cash and the value of
certain other equity investments in other entities;
- the enterprise value as a multiple of (i) revenue, (ii) earnings before
interest expense, taxes, depreciation and amortization, or EBITDA, and
(iii) earnings before interest expense and taxes, or EBIT, for the last
twelve-month period for which financial data for the company at issue has
been reported, or LTM; and
- the stock price as a multiple of estimated earnings per share, or EPS, for
the calendar years 2000 and 2001, where the earnings per share estimates
were based upon First Call Research Network consensus research analyst
estimates.
DLJ's analysis of enterprise value as a multiple of LTM revenue of
comparable medical imaging companies yielded a range of multiples of 0.3x to
1.4x with an average of 0.8x. Based on LTM EBITDA, the comparable companies
yielded a range of multiples of 2.2x to 18.4x with an average of 9.2x. Based on
LTM EBIT, the comparable companies yielded a range of multiples of 2.9x to 80.1x
with an average of 27.9x.
DLJ's analysis of stock price as a multiple of calendar year 2000 EPS of
comparable medical imaging companies yielded a range of multiples of 18.6x to
30.2x with an average of 24.4x. Based on calendar year 2001 EPS, the comparable
companies yielded a range of multiples of 11.1x to 28.5x with an average of
19.0x.
DLJ then applied to Lunar's LTM revenue, LTM EBITDA, LTM EBIT, calendar year
2000 EPS and calendar year 2001 EPS a range of selected multiples, or reference
range, which DLJ derived by comparing the growth characteristics of Lunar to the
comparable medical imaging companies. DLJ's analysis of the enterprise value and
stock price multiples of the comparable companies yielded the
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<PAGE>
following reference ranges of enterprise value multiples and stock price
multiples, and from such multiples, DLJ derived the following implied per share
equity value range:
<TABLE>
<CAPTION>
IMPLIED EQUITY
VALUE
REFERENCE RANGE PER SHARE FOR LUNAR
------------------- ---------------------
<S> <C> <C>
Enterprise value as a multiple of:
LTM revenue................................. 0.5x- 0.8x $ 8.51-$11.51
LTM EBITDA.................................. 7.0x-10.0x $ 10.97-$14.17
LTM EBIT.................................... 11.0x-15.0x $ 12.31-$15.52
Stock price as a multiple of:
Calendar year 2000 EPS...................... 18.0x-22.0x $ 19.62-$23.98
Calendar year 2001 EPS...................... 11.0x-15.0x $ 13.17-$17.96
</TABLE>
Based on an analysis of this data and Lunar's projected results for
comparable periods, DLJ estimated a value per share of Lunar common stock
ranging from $11.00 to $16.00, compared to the consideration to be received by
the stockholders of Lunar of $17.00 per share.
PRECEDENT MERGER AND ACQUISITION TRANSACTION ANALYSIS. DLJ reviewed
selected acquisitions involving companies in the medical imaging industry that
DLJ believed are reasonably comparable to the merger. These transactions
consisted of:
Target/Acquiror
Thermo Trex Corporation/Thermo Electron Corporation
Vivid Technologies Inc./PerkinElmer Inc.
Circon Corporation/Maxxim Medical, Inc.
OEC Medical Systems Inc./GE Medical Systems
Elscint Ltd./GE Medical Systems
Marquette Medical Systems/GE Medical Systems
ATL Ultrasound, Inc./Royal Philips Electronics NV
Trophy Radiologie (UK) Ltd./Trex Medical Corporation
Diasonics Vingmed Ultrasound/GE Medical Systems
In examining each acquisition, DLJ analyzed:
- the equity purchase price and implied enterprise value at the date of
announcement;
- the implied enterprise value as a multiple of (i) revenue, (ii) EBITDA,
and (iii) EBIT, for the last twelve-month period for which financial data
for the target company at issue has been reported prior to announcement of
a transaction, or LTM; and
- the equity purchase price as a multiple of LTM net income.
DLJ's analysis of the implied enterprise value as a multiple of LTM revenue
of comparable acquisitions in the medical imaging industry yielded a range of
multiples of 0.5x to 2.3x with an average of 1.4x and a median of 1.6x. Based on
LTM EBITDA, the comparable acquisitions yielded a range of multiples of 9.1x to
16.9x with an average of 13.3x and a median of 13.5x. Based on LTM EBIT, the
comparable acquisitions yielded a range of multiples of 17.6x to 27.2x with an
average of 19.6x and a median of 19.1x.
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<PAGE>
DLJ's analysis of the equity purchase price as a multiple of LTM net income
of comparable acquisitions in the medical imaging industry yielded a range of
multiples of 27.2x to 47.5x with an average of 30.8x and a median of 31.0x.
DLJ then applied to Lunar's LTM revenue, LTM EBITDA, LTM EBIT and LTM net
income a reference range, which DLJ derived by comparing the growth
characteristics of Lunar to those of the target companies of the comparable
acquisitions in the medical imaging industry. DLJ's analysis of the implied
enterprise value and equity purchase multiples of these comparable acquisitions
yielded the following reference ranges of enterprise value multiples and equity
purchase price multiples, and from such multiples, DLJ derived the following
implied per share equity value range:
<TABLE>
<CAPTION>
IMPLIED EQUITY
VALUE
REFERENCE RANGE PER SHARE FOR LUNAR
------------------- ---------------------
<S> <C> <C>
Implied enterprise value as a multiple of:
LTM revenue................................. 0.5x- 1.4x $ 8.51-$17.52
LTM EBITDA.................................. 9.0 -14.0x $ 13.10-$18.44
LTM EBIT.................................... 17.0x-22.0x $ 17.12-$21.12
Equity purchase price as a multiple of:
LTM Net Income.............................. 20.0x-25.0x $ 16.29-$20.36
</TABLE>
Based on an analysis of this data and Lunar's historical and projected
operating results, DLJ estimated a value per share of Lunar common stock ranging
from $13.00 to $19.00, compared to the consideration to be received by the
stockholders of Lunar of $17.00 per share.
DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a discounted cash flow, or
DCF, analysis of the projected cash flows of Lunar for the fiscal years ending
June 30, 2001 through June 30, 2005, using projections and assumptions provided
by the management of Lunar. The DCFs for Lunar were estimated using discount
rates ranging from 13.0% to 15.0%, based on estimates related to the weighted
average costs of capital of Lunar, and terminal multiples of estimated EBITDA
for Lunar's fiscal year ending June 30, 2005 ranging from 7.0x to 10.0x. DLJ's
analysis of the projected cash flow of Lunar yielded an implied equity value per
share range from $12.94 to $16.68. Based on an analysis of this data and Lunar's
historical and projected operating results, DLJ estimated a value per share of
Lunar common stock ranging from $13.00 to $16.50, compared to the consideration
to be received by the stockholders of Lunar of $17.00 per share.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ but describes, in summary form, the material
elements of the presentation made by DLJ to the Lunar board of directors on
June 1, 2000 in connection with the preparation of DLJ's fairness opinion. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Each of the analyses conducted
by DLJ was carried out in order to provide a different perspective on the
transaction and to add to the total mix of information available. DLJ did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to fairness from a
financial point of view. Rather, in reaching its conclusion, DLJ considered the
results of the analyses in light of each other and ultimately reached its
opinion based on the results of all analyses taken as a whole. DLJ did not place
any particular reliance or weight on any individual analysis, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, DLJ has
indicated to Lunar that it believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. The analyses performed by
DLJ
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<PAGE>
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by these analyses.
ENGAGEMENT LETTER
Lunar selected DLJ as its financial advisor because DLJ is an
internationally recognized investment banking firm that has substantial
experience providing strategic advisory services. DLJ was not retained as an
advisor or agent to the stockholders of Lunar or any other person in connection
with the merger. Pursuant to the terms of an engagement agreement dated May 26,
2000, Lunar has agreed to pay a fee that is customary in transactions of this
nature, a substantial portion of which is contingent upon the consummation of
the merger. In addition, Lunar agreed to reimburse DLJ, upon request by DLJ from
time to time, for all out-of-pocket expenses (including the reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement
thereunder and to indemnify DLJ and certain related persons against certain
liabilities in connection with its engagement, including liabilities under U.S.
federal securities laws. DLJ and Lunar negotiated the terms of the fee
arrangement.
OTHER RELATIONSHIPS
In the ordinary course of business, DLJ and its affiliates may own or
actively trade the securities of Lunar and GE for their own accounts and for the
accounts of their customers and, accordingly, may at any time hold a long or
short position in Lunar or GE securities. DLJ has performed investment banking
and other services for GE in the past and has received usual and customary
compensation for such services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
In considering the merger, you should be aware of the interests executive
officers and directors of Lunar have in the merger that are different from your
interests as shareholders. In this regard, you should consider, among other
things, the stock option modifications and the agreements described below.
STOCK OPTIONS. When the merger occurs, each employee stock option and each
director stock option whether or not currently exercisable will become a right
to receive shares of GE common stock. Each Lunar stock option outstanding
immediately prior to the merger will become a right to receive the number of
shares of GE common stock (with cash in lieu of fractional shares) determined by
multiplying the number of shares of Lunar common stock subject to such Lunar
stock option immediately prior to the merger by an amount equal to the product
of (A) a fraction, the numerator of which is $17.00 minus the sum of (i) the
exercise or purchase price of the Lunar stock option per share and (ii) all
taxes required to be held in connection with the stock option per share, and the
denominator of which is $17.00, and (B) the amount determined by dividing $17.00
by the average of the daily volume-weighted sales prices per share of GE common
stock on the NYSE for the ten consecutive trading days ending on the trading day
which is five calendar days prior to the closing of the merger.
The following table indicates for each person who is one of Lunar's current
executive officers or directors and who holds stock options:
- the number of shares of Lunar's common stock subject to those options that
were vested as of June 9, 2000;
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<PAGE>
- the number of shares of Lunar's common stock subject to those options that
were not vested as of June 9, 2000; and
- the aggregate value, net of the exercise price, for vested options based
on a per share price of $17.00.
<TABLE>
<CAPTION>
VALUE OF GE
NET VALUE COMMON STOCK
OF VESTED TO BE RECEIVED
VESTED UNVESTED OPTIONS IN THE
NAME OPTIONS OPTIONS AT $17.00 MERGER(1)
---- -------- -------- ----------- --------------
<S> <C> <C> <C> <C>
Richard B. Mazess, Ph.D........................... 0 0 $ 0.00
Chairman, President and Chief Executive Officer
Samuel E. Bradt................................... 5,500 20,000 $ 42,625
Director
John W. Brown..................................... 33,000 21,000 $ 250,215
Director
J. Reed Coleman................................... 33,000 21,000 $305,362.50
Director
Gary E. Nei....................................... 0 19,000 $ 0.00
Director
James W. Nellen, II............................... 3,667 16,333 $ 28,416.66
Director
Robert A. Beckman................................. 0 88,000 $ 0.00
Vice President of Finance
John Comerford.................................... 10,000 55,000 $ 96,900
Corporate General Counsel and Secretary
James A. Hanson................................... 47,500 18,000 $ 735,705
Vice President of Marketing
Peter Peemans..................................... 25,900 64,600 $ 246,190
Vice President of International Operations
James V. Pietropaolo.............................. 14,000 71,000 $ 127,900
Vice President of Domestic Sales
</TABLE>
------------------------
(1) The value of GE shares in this column is estimated based on a GE per share
price of $ which was the closing price of GE common stock on June ,
2000.
RETENTION AGREEMENTS. After consultation with GE and after the execution of
the merger agreement but before the closing, Lunar plans to enter into retention
agreements with the following executive officers of Lunar: Messrs. Beckman,
Comerford, Pietropaolo and Peemans. These agreements become effective when the
merger occurs, but if the merger agreement is terminated, the retention
agreements will terminate. These agreements are intended to induce these
executives to remain employed by Lunar. The executive officers entered into
substantially similar retention agreements. These agreements are summarized
below.
RETENTION AGREEMENTS FOR EXECUTIVE OFFICERS. Under these retention
agreements, if the employee remains continuously employed by Lunar or by an
organization within GE's medical systems business
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<PAGE>
on a full-time basis for one year following the merger, Lunar will pay to him a
retention bonus of 50% of his total annual compensation in effect at the time of
the merger. If the employee remains employed for two years following the merger,
Lunar will pay to him an additional retention bonus of 50% of his total annual
compensation in effect at the time of the merger. If his employment is
terminated within the first year following the merger (i) by the Employee upon
the occurrence of (A) an involuntary and substantial diminution in the nature or
scope of the Employee's authority or duties as existed at the time of the merger
or (B) the relocation of the employee's office more than 50 miles from the
location of the employee's office immediately prior to the merger, or (ii) by
Lunar without "cause" (as defined below) or for death or disability, Lunar will
pay him a termination payment equal to his total annual compensation in effect
at the time of the merger. Additionally, under these retention agreements if the
employee is terminated by Lunar without "cause" after the first year following
the merger but before the second year following the merger, Lunar will pay to
the employee a bonus of 50% of his total annual compensation at the time of the
merger.
For purposes of these retention agreements, "cause" means conviction of a
criminal offense, theft, fraud, breach of trust, willful violation of GE's
integrity policies, or refusal to perform services reasonably assigned following
notice and an opportunity to cure.
Under each of these retention agreements, the executives agreed to be
subject to certain prohibitions on competition with the business of Lunar or
GE's Medical Systems business until the later of one year from the merger, or,
if the employee is terminated by Lunar without cause or for by him for good
reason within the first two years following completion of the merger, one year
after the date of termination. In addition, each executive has agreed not to
disclose confidential information of Lunar or GE and, as of the date of
termination of employment, to release any claims he may then have against Lunar
or GE. Payment to the employee of any severance amounts under these agreements
is conditioned on the employee executing such a release.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The merger agreement
provides that, after the merger, GE will, as permitted by law, indemnify persons
who were Lunar's directors or officers before the merger who suffer liabilities
or losses from any threatened or actual claim or proceeding based on the merger
agreement or on the fact that the person was a Lunar director or officer. The
merger agreement further requires that GE provide coverage under a director and
officer liability insurance policy for the people who were Lunar officers and
directors immediately prior to the merger.
PROCEDURES FOR EXCHANGE OF LUNAR COMMON STOCK CERTIFICATES
GE will deposit with its exchange agent, certificates representing the
shares of GE common stock and cash instead of any fractional shares that would
otherwise be issued to shareholders under the merger agreement in exchange for
the outstanding shares of Lunar common stock.
As soon as practicable after the merger occurs, the exchange agent will mail
to Lunar shareholders a letter of transmittal. The letter of transmittal will
contain instructions for the surrender of certificates representing Lunar common
stock.
PLEASE DO NOT RETURN LUNAR COMMON STOCK CERTIFICATES WITH THE ENCLOSED PROXY
AND DO NOT FORWARD YOUR CERTIFICATES TO THE EXCHANGE AGENT UNLESS AND UNTIL YOU
HAVE RECEIVED A LETTER OF TRANSMITTAL FOLLOWING THE MERGER.
Upon surrender of the certificates representing Lunar common stock after the
merger, you will be paid cash instead of any fractional shares of GE common
stock you would otherwise receive. The amount of cash you receive instead of a
fractional share will be equal to:
- the fraction of a share you would otherwise receive, multiplied by
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<PAGE>
- the average of daily volume weighted prices per share of GE common stock
sold during the ten-day trading period which ends on the trading day five
calendar days prior to the close of the merger.
GE will pay dividends or other distributions declared on GE common stock
only after the merger has occurred and after you have surrendered your Lunar
certificates.
If a certificate for Lunar common stock has been lost, stolen or destroyed,
the exchange agent will issue your shares of GE common stock and any cash
instead of a fractional share only after you have delivered an affidavit as to
the loss, theft or destruction of the certificate and as to your ownership of
the certificate. Lunar or the exchange agent may require you to post a bond in
an amount as GE or the exchange agent may determine is necessary as an indemnity
against any claim that may be made against GE with respect to the lost, stolen
or destroyed certificate.
ANTICIPATED ACCOUNTING TREATMENT
GE will account for the merger under the "purchase" method of accounting in
accordance with generally accepted accounting principles. Therefore, the total
merger consideration paid by GE in connection with the merger, together with the
direct costs of the merger, will be allocated to Lunar's assets and liabilities
based on their fair market values with any excess being treated as goodwill. The
assets and liabilities and results of operations of Lunar will be consolidated
into the assets and liabilities and results of operations of GE after the
merger.
CHANGES IN STOCK RIGHTS
If we complete the merger, Lunar common stock will stop trading on the
Nasdaq National Market. In addition, Lunar will deregister the Lunar common
stock under the Securities Exchange Act of 1934, and, accordingly, will no
longer file periodic reports.
After the merger, shareholders of Lunar will become stockholders of GE.
After the merger, the rights of all former shareholders of Lunar will be
governed by applicable New York law (instead of the Wisconsin corporate law),
including the New York corporate law, and by the certificate of incorporation
and bylaws of GE. For a description of the differences between the rights of GE
and Lunar shareholders, see "Comparison of Rights of Lunar Shareholders and GE
Stockholders."
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
GE and Lunar have made forward-looking statements in this proxy
statement/prospectus and the documents to which we have referred you that are
subject to risks and uncertainties. These forward-looking statements represent
expectations or beliefs of GE and Lunar concerning future events, and we cannot
assure you that the results described will be achieved. Forward-looking
statements include information concerning possible or assumed future results of
operations of GE and Lunar set forth under "Reasons for the Merger;
Recommendation of the Lunar Board of Directors" and "Opinion of Donaldson,
Lufkin & Jenrette Securities Corporation." Forward-looking statements can
generally be identified by the use of the words "believes," "expects,"
"anticipates," "projects," "foresee," "will," or similar expressions.
GE and Lunar caution you that these forward-looking statements are subject
to risks, uncertainties and other factors, many of which are outside of our
control. Our actual results may therefore differ from those forward-looking
statements. Such risks and uncertainties include, among other things:
- material adverse changes in economic conditions and in the markets served
by GE and Lunar;
- regulatory, legal, economic and other changes in the healthcare industry
generally;
- a significant delay in the expected completion of the merger;
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- competitive pressures;
- GE's and Lunar's ability to attract and retain key personnel;
- changes in the financial condition of major Lunar customers;
- variability of quarterly results;
- uncertainty of entrance into new markets; and
- integration of the acquired business.
Forward-looking statements are not guarantees of performance. By their
nature, they involve risks, uncertainties and assumptions. You are cautioned not
to put undue reliance on any forward-looking statement. Any such statement
speaks only as of the date of this proxy statement/prospectus, and we do not
have any intention or obligation to revise or update forward-looking statements,
even if new information, future events, or other circumstances have made them
incorrect or misleading.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of material income tax consequences of
the merger. This discussion is based on the Internal Revenue Code, the related
Treasury regulations promulgated thereunder, existing administrating
interpretations and court decisions, all of which are subject to change,
possibly with retroactive effect. Any such change could affect the accuracy of
the statements and the conclusions discussed herein and the tax consequences of
the merger to GE, Lunar and Topaz Merger Corp. This discussion also assumes that
Lunar shareholders hold their shares of Lunar common stock as capital assets
within the meaning of Section 1221 of the Internal Revenue Code. No attempt has
been made to comment on all federal income tax consequences of the merger that
may be relevant to particular holders, including holders that are subject to
special tax rules. Some examples of holders that are subject to special tax
rules are:
- dealers in securities;
- financial institutions;
- insurance companies;
- tax-exempt organizations;
- holders of shares of Lunar stock as part of a position in a "straddle" or
as part of a "hedging" transaction;
- holders who have a "functional currency" other than the U.S. dollar;
- holders who are foreign persons; and
- holders who acquired their shares of Lunar stock through stock option or
stock purchase programs or otherwise as compensation.
In addition, we are not addressing any consequences arising under the laws
of any state, local or foreign jurisdiction. LUNAR SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS AND OF CHANGES IN APPLICABLE TAX LAWS.
The obligations of Lunar and GE to complete the merger are conditioned upon
the delivery of opinions to GE from Gibson, Dunn & Crutcher LLP and to Lunar
from Sidley & Austin, in each case substantially to the effect that, for federal
income tax purposes, the merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code, and Lunar, Topaz Merger
Corp. and GE will each be a party to that reorganization within the meaning of
Section 368(b)
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of the Internal Revenue Code. These opinions of counsel will be given in
reliance on representations and covenants including those contained in
certificates executed by officers of Lunar, GE and others. These opinions are
not binding on the courts or the Internal Revenue Service, nor do they preclude
the Internal Revenue Service from adopting a position contrary to that expressed
in the opinions. No assurance can be given that contrary positions will not
successfully be asserted by the Internal Revenue Service or adopted by a court
if the issues are litigated. Neither of Lunar and GE intends to obtain a ruling
from the Internal Revenue Service with respect to the federal income tax
consequences of the merger.
Assuming that the merger qualifies as a reorganization under Section 368(a)
of the Internal Revenue Code and, accordingly, the following material federal
income tax consequences will result from the Merger:
- none of GE, Topaz Merger Corp. or Lunar will recognize any gain or loss
solely as a result of the merger;
- the shareholders of Lunar will not recognize any gain or loss upon the
exchange of their shares of Lunar common stock solely for shares of GE
common stock pursuant to the merger, except with respect to any gain or
loss attributable to cash received instead of fractional shares of GE
common stock;
- the aggregate tax basis of the shares of GE common stock received solely
in exchange for shares of Lunar common stock pursuant to the merger
(including a fractional share of GE common stock for which cash is paid)
will be the same as the aggregate tax basis of the shares of Lunar common
stock surrendered in the merger;
- the holding period for shares of GE common stock received solely in
exchange for shares of Lunar common stock pursuant to the merger will
include the holding period for the Lunar common stock surrendered in
exchange therefor; and
- cash payments received by Lunar shareholders instead of a fractional share
of GE common stock will be treated as received in exchange for that
fractional share interest, and gain or loss will be recognized for federal
income tax purposes on receipt of the cash payment, measured by the
difference between the amount of cash received and the portion of the
basis of the Lunar common stock allocable to the fractional share
interest. The gain or loss will be long term capital gain or loss if the
Lunar common stock is considered to have been held for more than one year
at the time of the merger.
If the Internal Revenue Service determines successfully that the merger is
not a reorganization within the meaning of Section 368(a) of the Code, Lunar
shareholders would be required to recognize gain or loss with respect to each
share of Lunar stock surrendered in the merger in an amount equal to the
difference between the tax basis in that share of stock and the fair market
value of the GE common stock received in exchange therefor. In such event, a
Lunar shareholder's aggregate tax basis in the GE common stock received in the
merger would equal its fair market value, and the shareholder's holding period
for the GE common stock would begin the day after the merger.
APPRAISAL RIGHTS
Wisconsin corporate law provides that in some mergers, shareholders who
oppose a proposed merger or do not vote in favor of the merger and who comply
with a series of statutory requirements can request a court to order a fair
valuation of the merger consideration. Under the terms of the merger and in
accordance with Wisconsin corporate law, however, the Lunar shareholders are not
entitled to these rights, called appraisal or dissenters' rights.
No appraisal or dissenters' rights are available under the merger because
the Lunar common stock is listed on the Nasdaq National Market.
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THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF SOME OF THE PROVISIONS OF THE MERGER
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, WHICH IS INCORPORATED BY REFERENCE IN ITS ENTIRETY AND ATTACHED TO
THIS PROXY STATEMENT/PROSPECTUS AS ANNEX A. WE URGE YOU TO READ THE MERGER
AGREEMENT IN ITS ENTIRETY.
FORM OF THE MERGER
If the holders of Lunar common stock approve and adopt the merger agreement
and all other conditions to the merger are satisfied or waived, Lunar will be
merged with a subsidiary of GE, with Lunar surviving the merger and becoming a
wholly-owned subsidiary of GE. GE and Lunar anticipate that the closing of the
merger will occur as promptly as practicable after the approval of the Lunar
shareholders at the special meeting.
MERGER CONSIDERATION
As a result of the merger, each share of Lunar common stock will
automatically be converted into the right to receive from GE a fraction of a
share of GE common stock. The exact fraction of a GE common share to be
exchanged will be equal to $17.00 divided by the average of the daily volume-
weighted sales prices per share of GE common stock on the NYSE for the ten
consecutive trading days ending on the trading day which is five calendar days
prior to the closing of the merger. Shareholders will receive shares of GE
common stock plus cash instead of fractional shares of GE common stock.
The merger consideration generally is intended to provide shares of GE
common stock valued at $17.00, based upon the average GE share price during the
ten-day valuation period, and, therefore, a higher average GE share price would
result in fewer shares of GE common stock constituting the merger consideration,
and a lower average GE share price would result in more shares of GE common
stock constituting the merger consideration. For example, if the average GE
share price during the ten-day valuation period were equal to $ per share,
one Lunar share would become shares of GE common stock. An average GE
share price during the ten-day valuation period greater than $ would result
in fewer than shares of GE common stock constituting the merger
consideration and an average GE share price less than $ would result in
more than shares of GE common stock constituting the merger consideration.
The merger agreement provides that the ten-day valuation period will end on
the trading day which is five calendar days prior to the date of the merger. As
a result, the number of shares of GE common stock constituting the merger
consideration will be fixed five calendar days before the merger. Because the
market price of GE common stock fluctuates, the value of GE common stock that
Lunar shareholders will receive in the merger may increase or decrease during
the five-day period between the end of the valuation period and the date of the
merger. You may call, toll-free, (800) 250-7979 for information concerning the
estimated number of shares of GE common stock that will be issued in exchange
for each share of Lunar common stock as of the date you call. As part of its
ongoing stock repurchase program, GE may reacquire shares of its common stock
during the valuation period. For additional information see "Summary Selected
Financial Data--Comparative Market Price Data."
Shares of Lunar common stock held by GE and all treasury shares will be
cancelled in the merger.
If, between the date of the merger agreement and the merger, the outstanding
shares of GE common stock have been changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the merger agreement provides that the merger consideration will be
correspondingly adjusted to the extent appropriate to reflect such changes.
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EFFECTIVE TIME
The merger will become effective when articles of merger are received by the
Wisconsin Department of Financial Institutions. GE and Lunar anticipate that the
certificate of merger will be filed immediately after the closing. The closing
will occur after all the conditions to the merger have been waived or satisfied.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties by Lunar
relating to a number of matters, including the following:
- organization, valid existence, good standing and qualification to do
business of Lunar and its subsidiaries;
- the capital structure of Lunar;
- the authorization, execution, delivery and enforceability of the merger
agreement, the stock option agreement and related matters;
- the absence of any conflict with Lunar's or its subsidiaries' charters and
bylaws, with any agreement of Lunar or its subsidiaries, except as
disclosed, or under any governmental order or law as a result of the
execution of the merger agreement and related matters;
- subject to exceptions set forth in the merger agreement, no governmental
filings and approvals will be necessary to complete the merger;
- the filing of documents and financial statements by Lunar with the SEC and
the accuracy of information contained therein;
- the accuracy of information supplied by Lunar for the registration
statement and this proxy statement/prospectus;
- the absence of certain changes or events in Lunar's business or condition,
except as disclosed;
- Lunar's possession of all material permits and regulatory approvals
necessary to conduct its business;
- the lack of violations by Lunar or its subsidiaries under its charter and
bylaws, under applicable laws and regulations and under orders of
governmental entities;
- the absence of defaults under certain agreements;
- tax matters and the payment of taxes;
- the absence of material pending or threatened litigation;
- compensation agreements, distribution contracts and other significant
contracts of Lunar;
- the absence of changes to, and the qualification, operation and liability
under, employee benefit plans;
- the compliance with worker safety laws;
- product development and the absence of certain liabilities;
- labor matters;
- ownership and validity of intellectual property rights;
- the receipt of the opinion of Lunar's financial advisor as to the
fairness, from a financial point of view, of the merger consideration to
Lunar's shareholders;
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- the inapplicability of Sections 180.1140 through 108.1144 of the Wisconsin
corporate law to the transactions contemplated by the merger agreement;
- the vote required for approval of the merger agreement by shareholders of
Lunar;
- the absence of actions that would prevent the merger from constituting a
reorganization qualifying under Section 368(a) of the Internal Revenue
Code;
- accounts receivable;
- the quality of inventories;
- environmental matters;
- relations with suppliers and distributors;
- insurance policies maintained and the absence of defaults under those
policies;
- interested party transactions;
- title to and sufficiency of Lunar's assets;
- brokers and finders;
- Year 2000 compliance; and
- the inapplicability of certain hospital-physician gainsharing
restrictions.
The merger agreement also contains representations and warranties by GE and
Topaz Merger Corp. relating to a number of matters, including:
- organization, valid existence and good standing of GE and Topaz Merger
Corp.;
- the authorization, execution, delivery and enforceability of the merger
agreement by GE and Topaz Merger Corp., and the stock option agreement and
the shareholder agreement by GE, and related matters;
- the absence of any conflict with GE's or its subsidiaries' charters and
bylaws, with any agreement of GE or its subsidiaries or under any
governmental order or law as a result of the execution of the merger
agreement and related matters;
- subject to exceptions set forth in the merger agreement, no governmental
filings and approvals will be necessary to effect the merger;
- that the GE common stock to be issued in the merger will be duly
authorized, fully paid, non-assessable, validly issued and free of
preemptive rights;
- the filing of documents and financial statements by GE with the SEC and
the accuracy of information contained therein;
- the accuracy of information supplied by GE for the registration statement
and this proxy statement/prospectus;
- the absence of certain changes or events in GE's business or condition;
- the absence of actions that would prevent the merger from constituting a
reorganization qualifying under Section 368(a) of the Internal Revenue
Code;
- the absence of operations of Topaz Merger Corp;
- brokers and finders; and
- the ownership by GE and its affiliates of Lunar common stock.
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COVENANTS AND AGREEMENTS
CONDUCT OF BUSINESS OF LUNAR. Lunar has agreed that, between the date of
the merger agreement and the closing of the merger, it will carry on its
business in the ordinary course and use its reasonable best efforts to maintain
its current business organizations, retain its current officers and key
employees and preserve its relationships with customers, suppliers and others
having business dealings with it. In addition, the merger agreement limits
Lunar's ability, without GE's prior written consent, to:
- pay any dividends or otherwise make any payments to its shareholders;
effect a stock split, combination or reclassification or authorize the
issuance of any other securities in respect of shares of its capital
stock; or acquire any shares of its capital stock or any rights to acquire
any such shares;
- subject to exceptions set forth in the merger agreement, issue, sell or
otherwise encumber capital stock or any related warrants or options;
- amend its charter or bylaws;
- acquire, merge or consolidate with, or purchase a substantial portion of
the assets of, any other business organization or otherwise acquire,
outside of the ordinary course of business, any material assets of any
business organization;
- sell, lease or otherwise dispose of any of its material assets, other than
sales of inventory in the ordinary course of business consistent with past
practice;
- incur or guarantee any indebtedness for borrowed money other than in the
ordinary course of business consistent with past practices and
indebtedness between Lunar and any of its wholly-owned subsidiaries or
between any wholly-owned subsidiaries;
- alter the corporate structure or ownership of Lunar or any subsidiary;
- subject to exceptions set forth in the merger agreement, enter into or
amend any severance plan, employment agreement or consulting agreement
outside of the ordinary course of business;
- subject to exceptions set forth in the merger agreement, increase the
compensation payable to its directors, officers or employees or enter into
or amend any employment agreement or collective bargaining agreement;
- knowingly violate any applicable material law;
- make any change to accounting policies or procedures;
- take any position with respect to taxes that is inconsistent with
positions taken in prior periods;
- make any tax election or settle any material income tax liability;
- commence any litigation or settle any material claims or litigation;
- subject to exceptions set forth in the merger agreement, enter into or
amend any material agreement or contract, purchase any real property or
agree to make any new capital expenditure in excess of an aggregate of
$5 million;
- discharge liabilities and obligations outside of the ordinary course of
business; or
- authorize any of the foregoing.
NO SOLICITATION. The merger agreement prohibits Lunar, its subsidiaries,
officers, directors, employees, financial advisors or attorneys or other advisor
or representative of Lunar from soliciting, initiating or encouraging the
submission of a takeover proposal, entering into any agreement with respect to
or approve or recommend any takeover proposal, or providing information to
(other than
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referring a third party to this covenant in the agreement or providing them with
a copy of this covenant) or having discussions or negotiations with anyone other
than GE for any takeover proposal, unless:
- done in compliance with Rule 14e-2 of the Securities Exchange Act of 1934
with regard to a tender or exchange offer; or
- Lunar's board reasonably determines the takeover proposal constitutes a
superior proposal, in which case Lunar may, to the extent required by the
fiduciary obligations of Lunar's board, as determined in good faith by a
majority of the board after consultation with independent counsel, furnish
non-public information and participate in discussions or negotiations
regarding the superior proposal and enter into an agreement with respect
to or approve or recommend to its shareholders a superior proposal.
Under the merger agreement, a takeover proposal is defined as any proposal
for a merger, tender offer, or other business combination involving Lunar or any
of its subsidiaries or any proposal or offer to acquire in any manner, directly
or indirectly, an equity interest in, any voting securities of, or a substantial
portion of the assets of Lunar or any of its subsidiaries, other than the merger
with GE. Under the merger agreement, a superior proposal is defined as a bona
fide proposal made by a third party to acquire Lunar pursuant to a tender or
exchange offer, a merger, a sale of all or substantially all its assets or
otherwise on terms which a majority of the disinterested members of the board of
directors of Lunar determines at a duly constituted meeting of the board of
directors or by unanimous written consent, in its reasonable good faith
judgment, after consultation with its financial advisor, to be more favorable to
the Lunar shareholders than the merger with GE and for which financing, to the
extent required, is then committed or reasonably capable of being obtained.
Lunar has agreed to advise GE orally and in writing within twenty-four hours
of
- its receipt of any takeover proposal, expression of interest or inquiry
regarding a potential takeover proposal received by any officer or
director of Lunar or, to the knowledge of Lunar, any financial advisor,
attorney or other advisor or representative of Lunar;
- the material terms of such takeover proposal, including a copy of any
written proposal; and
- the identity of the person making any such takeover proposal or inquiry.
If Lunar intends to participate in discussions with or furnish any
information to another party with respect to any inquiry or takeover proposal,
Lunar will advise GE in writing of such intention not less than forty-eight
hours in advance of providing such information.
THIRD PARTY STANDSTILL AGREEMENTS. From the date of the merger agreement
through the closing of the merger, Lunar has agreed not to terminate, amend,
modify or waive any provision of any confidentiality or standstill agreement to
which Lunar is a party, except those involving GE, and to enforce those
agreements to the fullest extent permitted by law.
REORGANIZATION. From the date of the merger agreement through the closing
of the merger, all the parties to the merger have agreed not to take or fail to
take any action with actual knowledge that such action would jeopardize the
qualification of the merger as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. Additionally, the parties have
further agreed to use all reasonable best efforts to refrain from taking any
action or failing to take any action which would cause, or would be reasonably
likely to cause, the merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
STOCK OPTION PLANS. The parties have agreed that at the effective time of
the merger, each Lunar stock option outstanding immediately prior to the merger
will become a right to receive the number of shares of GE common stock (with
cash in lieu for fractional shares) determined by multiplying the
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number of shares of Lunar common stock subject to such Lunar stock option
immediately prior to the merger by an amount equal to the product of (A) a
fraction, the numerator of which is $17.00 minus the sum of (i) the exercise or
purchase price of the Lunar stock option per share and (ii) all taxes required
to be held in connection with the stock option per share, and the denominator of
which is $17.00 and (B) the amount determined by dividing $17.00 by the average
of the daily volume-weighted sales prices per share of GE common stock on the
NYSE for the ten consecutive trading days ending on the trading day which is
five calendar days prior to the closing of the merger.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. After the merger, GE
has agreed to cause the surviving corporation to indemnify and hold harmless all
past and present officers and directors of Lunar to the same extent they were
indemnified as of the date of the merger agreement by Lunar pursuant to the
Wisconsin corporate law, the Lunar charter or the Lunar bylaws for acts or
omissions occurring at or before the merger.
GE has also agreed to cause the surviving corporation to provide, for three
years after the merger, Lunar's current directors and officers a directors and
officers insurance and indemnification policy that provides coverage for events
occurring prior to the merger that is substantially similar to Lunar's policy
before the merger. GE will not be required to pay an annual premium for this
insurance policy in excess of $232,500.
GE also agrees that, after the merger, it will guarantee the obligations of
the surviving corporation under the preceding two paragraphs.
EMPLOYEE BENEFIT PLANS. The merger agreement provides that for the first
year following the closing of the merger, while employed by Lunar, employees of
Lunar will receive base wages and salaries at rates not less favorable to those
employees than the rates of wages and salaries paid by Lunar on the date of the
merger agreement. For a period of one year following the closing of the merger,
GE shall or shall cause Lunar to maintain in effect employee benefit plans and
arrangements which provide benefits which have a value which is substantially
comparable, in the aggregate, to the benefits provided by Lunar's U.S. benefit
plans not taking into account the value of any plans which are equity based. For
purposes of determining eligibility to participate, vesting and accrual or
entitlement to benefits where length of service is relevant, Lunar employees
will receive service credit for service with Lunar and its subsidiaries to the
same extent that credit was granted under Lunar's benefit plans, subject to
offsets for previously accrued benefits and no duplication of benefits.
CONDITIONS PRECEDENT TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The obligations
of GE and Lunar to complete the merger depend on the following conditions being
fulfilled:
- Lunar shareholders have approved the merger agreement;
- the GE stock to be issued in the merger and in respect of Lunar options
has been listed on the NYSE;
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act has expired or terminated and all other
necessary material government consents have been obtained;
- the GE registration statement has been declared effective and no stop
order has been given; and
- no act, rule or order has been made or entered that would prohibit the
merger.
CONDITIONS TO OBLIGATION OF LUNAR TO EFFECT THE MERGER. The obligation of
Lunar to complete the merger depends on the following additional conditions
being fulfilled:
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- GE and Topaz Merger Corp. have performed in all material respects all
their covenants in the merger agreement, and their representations and
warranties remain true in all material respects on the closing date;
- Lunar has received an opinion of Sidley & Austin, counsel to Lunar,
stating that the merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and Lunar, Topaz Merger Corp. and GE will each be a party to
that reorganization within the meaning of Section 368(b) of the Internal
Revenue Code;
- there has been no material adverse change with respect to GE; and
- GE has taken all action required to implement the provisions described
under "--Covenants and Agreements--STOCK OPTION PLANS" above.
CONDITIONS TO OBLIGATIONS OF GE AND TOPAZ MERGER CORP. TO EFFECT THE
MERGER. The obligations of GE and Topaz Merger Corp. to complete the merger
depend on the following additional conditions being fulfilled:
- Lunar has performed in all material respects all its covenants in the
merger agreement, and its representations and warranties remain true in
all material respects on the closing date;
- GE has received an opinion of Gibson, Dunn & Crutcher LLP, special counsel
to GE, stating that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and Lunar, Topaz Merger Corp. and GE will each be a
party to that reorganization within the meaning of Section 368(b) of the
Internal Revenue Code;
- Lunar has obtained all required material consents or approvals;
- GE has received a signed agreement from each of Lunar's affiliates
intended to ensure the affiliate's compliance with the Securities Act of
1933;
- there has been no material adverse change with regard to Lunar;
- Lunar has taken all action required to be taken by it to implement the
provisions described under "--Covenants and Agreements--STOCK OPTION
PLANS" above; and
- all of the directors of Lunar and all officers of Lunar designated by GE
shall have provided their written resignations to GE.
TERMINATION OF THE MERGER AGREEMENT
TERMINATION. The merger agreement may be terminated at any time prior to
the merger, whether before or after approval by the Lunar shareholders:
- by the mutual written consent of GE and Lunar;
- by either GE or Lunar if: the other party has failed to comply in any
material respect with its covenants or agreements contained in the merger
agreement and the failure to comply has not been cured within five
business days after receiving written notice of the failure to comply;
there has been a breach by the other party of any representation or
warranty which has the effect of making such representation or warranty
not true and correct in all material respects and the breach has not been
cured within five business days after receiving written notice of the
breach; the merger has not closed on or prior to the close of business on
March 31, 2001 or the date that is 75 days after the Hart-Scott-Rodino
waiting period has expired unless the terminating party caused the delay;
any court or other governmental entity having jurisdiction over a party to
the merger agreement has issued an order, decree or ruling or taken any
other action
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prohibiting the merger; the Lunar shareholders do not approve the merger
agreement at the special meeting or at any adjournment or postponement of
the special meeting; or Lunar enters into a merger, acquisition or other
agreement with another party that qualifies as a superior proposal, or the
board resolves to do so; except that Lunar may not terminate the merger
agreement for this reason unless: Lunar has delivered to GE a written
notice of Lunar's intent to enter into such an agreement; forty-eight
hours have elapsed following delivery to GE of such written notice by
Lunar; and during that period, Lunar has fully cooperated with GE,
including informing GE of the terms and conditions of the takeover
proposal and the identity of the person making the takeover proposal, with
the intent of enabling GE to agree to a modification of the terms and
conditions of the merger agreement so that the transactions contemplated
thereby may be effected; and Lunar may not terminate the merger agreement
unless at the end of the forty-eight hour period the Lunar board still
reasonably believes that the takeover proposal is a superior proposal when
compared to the GE merger, taking into account any such modification as
may be proposed by GE, and concurrently with such termination Lunar pays
to GE the amounts specified under "FEES AND EXPENSES" below.
- by GE if: the Lunar board has not recommended, or has resolved not to
recommend, or has qualified, modified or withdrawn its recommendation of
the merger or its declaration that the merger is advisable and fair to and
in the best interest of Lunar and its shareholders, or has resolved to do
so; the Lunar board has recommended to the Lunar shareholders any takeover
proposal or has resolved to do so; or a tender offer or exchange offer for
20% or more of the outstanding shares of Lunar common stock is made by a
third party that is not an affiliate of GE, and the Lunar board does not
recommend against acceptance of such tender offer or exchange offer by its
shareholders.
- by either GE or Lunar if the Hart-Scott-Rodino waiting period has not
expired or been terminated by March 31, 2001.
EFFECT OF TERMINATION. If the merger agreement is terminated as described
above, the agreement will be null and void, and there will be no liability for
any party or its officers and directors except as to confidentiality and fees
and expenses.
FEES AND EXPENSES
TERMINATION FEE. Lunar has agreed to pay GE a termination fee of up to
$4 million if the merger agreement is terminated because Lunar enters into a
merger, acquisition or other agreement related to a superior proposal, or:
- by Lunar due to the failure of the merger to close by March 31, 2001 after
receipt by Lunar of a superior proposal;
- due to Lunar's failure to comply in any material respect with the
covenants of the merger agreement;
- due to the failure by the Lunar board of directors to recommend the merger
agreement, its approval of another takeover proposal, or its failure to
recommend against a tender or exchange offer as described above in
"--TERMINATION";
- due to Lunar's material breach of a representation or warranty after the
receipt of a superior proposal; or
- due to the failure of the Lunar shareholders to approve the merger at the
special meeting or any adjournment or postponement, after the receipt of a
superior proposal or after the failure by the Lunar board of directors to
recommend the merger agreement, its approval of another
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takeover proposal, or its failure to recommend against a tender or
exchange offer as described above in "--TERMINATION"; and
within twelve months of the termination of the merger agreement for one of
these reasons, one of the following events occurs:
- any person, entity or group acquires or becomes the beneficial owner of
20% or more of the outstanding shares of Lunar common stock;
- any group is formed which beneficially owns 20% or more of the outstanding
shares of Lunar common stock;
- Lunar enters into, or announces that it proposes to enter into, any
agreement providing for a merger or other business combination involving
Lunar or the acquisition of a substantial interest in, or a substantial
portion of the assets, business or operations of, Lunar, other than the
transaction contemplated in the merger agreement;
- any person, entity or group is granted any option or right, conditional or
otherwise, to acquire or otherwise become the beneficial owner of shares
of Lunar common stock which, together with all shares of Lunar common
stock beneficially owned by that person, entity or group, results or would
result in such person being the beneficial owner of 20% or more of the
outstanding shares of Lunar common stock; or
- there is a public announcement with respect to a plan or intention by
Lunar to effect any of the foregoing transactions.
The $4,000,000 termination fee will be reduced by the amount realized or
realizable by GE under the stock option agreement in excess of $2,500,000. In
addition, the total of the termination fee and the net amount actually realized
by GE under the stock option agreement (after netting out the exercise price)
will not exceed $6,500,000.
EXPENSES. Whether the merger is completed, all costs and expenses incurred
in connection with the merger agreement, including the costs of counsel,
financial advisors and accountants, will be paid by the party incurring those
costs and expenses. Printing expenses and all filing fees, including filing fees
under the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, will be divided equally
between GE and Lunar. However, Lunar has agreed to pay GE's costs and expenses
up to a maximum of $2 million if the merger agreement is terminated:
- by Lunar due to the failure of the merger to close by March 31, 2001 after
receipt by Lunar of a superior proposal;
- due to Lunar's failure to comply in any material respect with the
covenants of the merger agreement;
- due to Lunar's material breach of a representation or warranty;
- due to the failure by the Lunar board of directors to recommend the merger
agreement, its approval of another takeover proposal, or its failure to
recommend against a tender or exchange offer as described above in
"--TERMINATION";
- due to the failure of the Lunar shareholders to approve the merger at the
special meeting after a superior proposal is made by a third party or
after the failure by the Lunar board of directors to recommend the merger
agreement, its approval of another takeover proposal, or its failure to
recommend against a tender or exchange offer as described above in
"--TERMINATION"; or
- due to Lunar's agreement to a merger, acquisition or other agreement to
effect a superior proposal.
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GE has agreed to pay Lunar's costs and expenses up to a maximum of
$2 million if Lunar terminates the merger agreement due to:
- GE's failure to comply in any material respect with the covenants of the
merger agreement; or
- GE's material breach of a representation or warranty.
AMENDMENT; WAIVER
AMENDMENT. The merger agreement may be changed by GE and Lunar at any time
prior to the approval of the merger agreement by the Lunar shareholders. Any
change made after the approval of the merger agreement by the Lunar shareholders
by law must be approved by the Lunar shareholders. The merger agreement may only
be amended in a writing signed by GE, Lunar and Topaz Merger Corp.
WAIVER. At any time prior to the merger, GE and Lunar may agree to:
- extend the time for the performance of any obligation or other act of the
other party;
- waive any inaccuracy in the representations and warranties contained in
the merger agreement or in any document delivered under the terms of the
merger agreement; and
- waive compliance with any agreement or condition contained in the merger
agreement which may be legally waived.
Any extension or waiver will be valid only if made in writing and signed on
behalf of the waiving party.
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THE STOCK OPTION AGREEMENT
THE FOLLOWING IS A SUMMARY OF SOME OF THE PROVISIONS OF THE STOCK OPTION
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE STOCK
OPTION AGREEMENT, WHICH IS INCORPORATED BY REFERENCE IN ITS ENTIRETY AND
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX C. WE URGE YOU TO READ THE
STOCK OPTION AGREEMENT IN ITS ENTIRETY.
Concurrently with the execution of the merger agreement, GE and Lunar
entered into the stock option agreement pursuant to which Lunar granted to GE an
option to purchase up to 2,014,067 shares of Lunar common stock. These shares
represent approximately 19.9% of the Lunar common stock on a fully diluted basis
after issuance based on the Lunar common stock outstanding on May 31, 2000. The
option has an exercise price of $17.00 per share, payable in cash.
EXERCISABILITY
The option is exercisable only if one or more of the following events
occurs:
- any person, entity or group acquires or becomes the beneficial owner of
20% or more of the outstanding shares of Lunar common stock;
- any group is formed which beneficially owns 20% or more of the outstanding
shares of Lunar common stock;
- any person, entity or group commences a tender or exchange offer for 20%
or more of the outstanding Lunar common stock or publicly proposes any
merger, consolidation or acquisition of all or substantially all the
assets of Lunar or other business combination involving Lunar;
- Lunar enters into, or announces that it proposes to enter into, any
agreement providing for a merger or other business combination involving
Lunar or any significant subsidiary of Lunar or the acquisition of a
substantial interest in, or a substantial portion of the assets, business
or operations of, Lunar or a significant subsidiary of Lunar, other than
the transactions contemplated in the merger agreement;
- any person, entity or group is granted any option or right, conditional or
otherwise, to acquire or otherwise become the beneficial owner of shares
of Lunar common stock which, together with all shares of Lunar common
stock beneficially owned by that person, entity or group, results or would
result in such person, entity or group being the beneficial owner of 20%
or more of the outstanding shares of Lunar common stock; or
- there is a public announcement with respect to a plan or intention by
Lunar to effect any of the foregoing transactions.
Additionally, GE may not exercise the option if:
- GE or Topaz Merger Corp. has breached any of its material obligations
under the merger agreement;
- an injunction or other order issued by any federal or state court which
invalidates the grant or prohibits the exercise of the option is in
effect;
- the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
has not expired or been terminated; or
- the purchase of the shares will violate Rule 10b-13 promulgated under the
Securities Exchange Act of 1934.
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PUT RIGHT
At any time before the termination of the option, under the circumstances
described below, GE has the right to require Lunar to purchase the option from
GE at a cash purchase price equal to the product determined by multiplying
(A) the number of shares as to which the option has not yet been exercised by
(B) the per share cash value of the option as determined in accordance with the
stock option agreement.
GE can require Lunar to purchase the option if any of the following events
occur:
- any person, entity or group other than GE acquires or becomes the
beneficial owner of 50% or more of the outstanding shares of Lunar common
stock; or
- Lunar consummates a merger or other business combination with a third
party.
REPURCHASE RIGHT
For 90 days after the termination of the option, Lunar has the right to
repurchase from GE all of the optioned shares acquired by GE, and with respect
to which GE then has beneficial ownership, at a price per share equal to the
greater of:
- the average of the daily volume-weighted quoted on Nasdaq National Market
of Lunar common stock during the five trading days immediately before
Lunar provides written notice of its intent to repurchase; and
- $17.00, plus interest at a rate per annum equal to the costs of funds to
GE at the time of the repurchase.
REGISTRATION RIGHTS
If GE exercises the option, it will have the following registration rights
with respect to the option shares:
- subject to certain restrictions set forth in the stock option agreement,
piggy-back registration rights which allow GE to participate in any
registration of Lunar shares initiated by Lunar so long as GE is
requesting participation with respect to at least 20% of the option
shares; and
- subject to certain restrictions set forth in the stock option agreement,
demand registration rights which allow GE to request that Lunar register
GE's shares so long as GE is demanding registration of at least 20% of the
option shares.
TERMINATION
The stock option agreement and the option terminate upon the earlier of:
- the closing of the merger; and
- the termination of the merger agreement in accordance with its terms.
However, the option will not terminate until 12 months after a termination under
certain circumstances related to a third party acquisition attempt, and, in such
case, Lunar's repurchase right will not terminate until 90 days after the
termination of GE's option.
MAXIMUM AMOUNT REALIZABLE BY GE
If GE exercises the option and then sells the stock received by GE under the
option or if GE exercises its put right, GE may be required to give some of the
money it makes on that sale to Lunar. If the sum of the gross proceeds from the
sale of the option shares or the exercise of the put right and
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the amount of the termination fee received by GE exceeds the sum of $6,500,000,
GE must pay to Lunar the amount in excess of $6,500,000 less the exercise price
and the cost of discounts and commissions.
EFFECT OF THE STOCK OPTION AGREEMENT
The option might increase the likelihood of closing the merger by
discouraging competing offers to acquire Lunar. Lunar entered into the stock
option agreement to induce GE to enter into the merger agreement. The stock
option agreement may discourage persons who may be interested in acquiring all
of or a significant interest in Lunar from considering or proposing an
acquisition, even if they were prepared to offer to pay a higher price than
$17.00 per share.
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THE SHAREHOLDER AGREEMENT
THE FOLLOWING IS A SUMMARY OF SOME OF THE PROVISIONS OF THE SHAREHOLDER
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
SHAREHOLDER AGREEMENT, WHICH IS INCORPORATED BY REFERENCE IN ITS ENTIRETY AND
ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS ANNEX D. WE URGE YOU TO READ THE
SHAREHOLDER AGREEMENT IN ITS ENTIRETY.
Concurrently with the execution of the merger agreement, in order to induce
GE to enter into the merger agreement, certain shareholders entered into the
shareholder agreement with GE.
SHARES SUBJECT TO THE SHAREHOLDER AGREEMENT
The following shareholders entered into the shareholder agreement with
respect to the number of shares next to their names:
<TABLE>
<S> <C>
Richard B Mazess, Ph.D. .................................... 913,010
Richard B. Mazess, Ph.D. and Marilyn Mazess
as joint tenants with right of survivorship............... 1,334,335
Richard B. Mazess, Ph.D.
as custodian for his minor children....................... 607,500
</TABLE>
COVENANTS
The shareholder agreement provides, among other things, that the
shareholders subject to the agreement:
- will attend the special meeting in person or by proxy, and vote the shares
subject to the agreement in favor of the approval and adoption of the
merger agreement and each of the other transactions contemplated by the
merger agreement;
- will vote the shares subject to the agreement against: any merger
agreement or merger other than the GE merger or other business combination
or any other takeover proposal, or any amendment of the Lunar certificate
of incorporation or the bylaws or other proposal or transaction which
would in any manner impede, frustrate, prevent or nullify the GE merger,
the merger agreement or any of the other transactions contemplated by the
merger agreement;
- will not, with certain exceptions, sell, transfer, pledge, assign or
otherwise dispose of or enter into any arrangement to transfer the shares
subject to the agreement, or enter into any voting arrangement, whether by
proxy, voting agreement or otherwise, in relation to the shares subject to
the agreement;
- will not directly or through a representative solicit, initiate or
encourage a third party to make a takeover proposal to Lunar, or take any
action to facilitate any third party takeover proposal, except in their
capacity as representatives or agents of Lunar in accordance with the
terms of the merger agreement;
- will use their reasonable best efforts to take all actions and to do all
things necessary, proper or advisable to support and to close the merger,
except in their capacity as representatives and agents of Lunar in
accordance with the terms of the merger agreement;
- will notify GE in writing of the nature and amount of any acquisition by
them of any voting securities of Lunar acquired by them after the date of
the shareholder agreement;
- will not knowingly take or fail to take any action which would cause the
merger not to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code; and
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- will revoke any and all prior proxies or powers of attorney in respect to
any shares subject to the agreement.
LIQUIDATED DAMAGES
If one or more of the shareholders subject to the shareholder agreement
breach the agreement, the shareholders subject to the agreement shall be
obligated to pay to GE $2,000,000. Furthermore, on the occurrence of certain
triggering events, the shareholders shall be required to pay to GE an amount
equal to the product of the excess of the market price for Lunar stock over
$17.00 multiplied by the number of shares subject to the agreement minus the sum
of (A) the amount of taxes actually payable by the shareholders subject to the
agreement related to the sale of those shares in connection with the related
triggering event and (B) $2,000,000. The events which trigger this additional
payment are:
- any person, entity or group acquires or becomes the beneficial owner of
20% or more of the outstanding shares of Lunar common stock;
- any group is formed which beneficially owns 20% or more of the outstanding
shares of Lunar common stock;
- any person, entity or group commences a tender or exchange offer for 20%
or more of the outstanding Lunar common stock or publicly proposes any
merger, consolidation or acquisition of all or substantially all the
assets of Lunar or other business combination involving Lunar and any
shareholder tenders the shares subject to the shareholder agreement in
response to that offer or breaches their obligations to vote against that
public proposal;
- Lunar enters into, or announces that it proposes to enter into, any
agreement providing for a merger or other business combination involving
Lunar or any significant subsidiary of Lunar or the acquisition of a
substantial interest in, or a substantial portion of the assets, business
or operations of, Lunar or a significant subsidiary of Lunar, other than
the transactions contemplated in the merger agreement;
- any person, entity or group is granted any option or right, conditional or
otherwise, to acquire or otherwise become the beneficial owner of shares
of Lunar common stock which, together with all shares of Lunar common
stock beneficially owned by that person, entity or group, results or would
result in such person, entity or group being the beneficial owner of 20%
or more of the outstanding shares of Lunar common stock; or
- there is a public announcement with respect to a plan or intention by
Lunar to effect any of the foregoing transactions.
TERMINATION
The shareholder agreement terminates on the earlier of
- nine months after the termination of the merger agreement; and
- the effective time of the merger.
However, if the merger agreement is terminated by Lunar because of a breach
by GE of a covenant in the merger agreement, a material breach of a
representation or warranty, or the failure of the merger to close by March 31,
2001 unless it follows receipt of a superior proposal, then the shareholder
agreement terminates immediately upon the termination of the merger agreement.
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REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules
of the Federal Trade Commission, the merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the United States Department of Justice and
specified waiting period requirements have been satisfied. GE and Lunar each
filed notification and report forms with the FTC and the Department of Justice
on June 16, 2000.
GE and Lunar have also made, or expect to make, filings with regulatory
authorities pursuant to antitrust laws in countries where such filing is
required. It is currently anticipated that necessary clearances under these laws
will be obtained prior to the special meeting.
GE and Lunar are not aware of any material governmental or regulatory
approvals required to be obtained in order to consummate the merger, other than
compliance with the Hart-Scott-Rodino Antitrust Improvements Act, mentioned
above and applicable federal and state securities and corporate laws.
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS
Due to the contemplated closing of the merger, Lunar does not currently
expect to hold a 2000 annual meeting of shareholders because, following the
merger, Lunar will not be a publicly-traded company. If the merger is not
consummated and the meeting is held, to be eligible for inclusion in Lunar's
proxy statement and form of proxy relating to the meeting, shareholders'
proposals must be delivered to the Secretary of the Corporation at the principal
executive offices not less than 90 nor more than 120 calendar days in advance of
the anniversary date of the preceding year's annual meeting of shareholders.
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COMPARISON OF RIGHTS OF LUNAR SHAREHOLDERS AND GE STOCKHOLDERS
THE STATEMENTS SET FORTH UNDER THIS HEADING WITH RESPECT TO THE WISCONSIN
BUSINESS CORPORATION LAW, LUNAR'S ARTICLES OF INCORPORATION, LUNAR'S BYLAWS, NEW
YORK CORPORATE LAW, GE'S CERTIFICATE OF INCORPORATION, AND GE'S BYLAWS, AS
AMENDED, ARE BRIEF SUMMARIES AND DO NOT PURPORT TO BE COMPLETE. THE STATEMENTS
IN THIS SECTION ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO AND ARE SUBJECT
TO THE DETAILED PROVISIONS OF THE NEW YORK BUSINESS CORPORATION LAW, WISCONSIN
BUSINESS CORPORATION LAW, THE LUNAR ARTICLES OF INCORPORATION, THE LUNAR BYLAWS,
THE GE CERTIFICATE OF INCORPORATION AND THE GE BYLAWS.
After the merger, shareholders of Lunar will become stockholders of GE.
Since GE is a New York corporation, the rights of the stockholders of GE are
governed by the applicable laws of the State of New York, including the New York
Business Corporation Law, and by the GE charter and the GE bylaws. Since Lunar
is a Wisconsin corporation, the rights of the shareholders of Lunar are governed
by the applicable laws of the State of Wisconsin, including the Wisconsin
Business Corporation Law, and by the Lunar articles of incorporation and the
Lunar bylaws.
While there are similarities between the New York corporate law and the
Wisconsin corporate law as well as between the charters and bylaws of GE and
Lunar, a number of differences exist. The following is a summary of some of
these differences between the current rights of GE stockholders and Lunar
shareholders under the New York corporate law and the Wisconsin corporate law,
and under the charters and bylaws of GE and Lunar.
AUTHORIZED CAPITAL STOCK
GE. The authorized capital stock of GE currently consists of 13,250,000,000
shares of capital stock, consisting of (i) 13,200,000,000 shares of GE common
stock, par value $0.06 per share, and (ii) 50,000,000 shares of preferred stock,
par value $1.00 per share.
LUNAR. The authorized capital stock of Lunar currently consists of
25,000,000 shares of capital stock, consisting of (i) 25,000,000 shares of
common stock, par value $0.01 per share and (ii) no shares of preferred stock.
SHAREHOLDER VOTING RIGHTS
Under the New York and Wisconsin corporate laws, with respect to matters
other than the election of directors, unless a greater number of affirmative
votes is required by statute, the certificate of incorporation or bylaws, if a
quorum exists, action on any matter generally is approved by the stockholders if
the votes cast favoring the action exceed the votes cast opposing the action.
Under both Wisconsin and New York corporate laws, unless otherwise provided in
the certificate or articles of incorporation, directors are elected by a
plurality of the votes cast by the shares entitled to vote at which a quorum is
present.
Neither GE common stock nor Lunar common stock is divided into classes and
each entitles holders to one vote for each share on each matter upon which
shareholders have the right to vote.
The New York corporate law requires that, for corporations in existence on
February 22, 1998 whose certificates of incorporation do not expressly provide
otherwise, the affirmative vote of two-thirds of a corporation's outstanding
shares entitled to vote is required in order to authorize a merger,
consolidation, dissolution or disposition of all or substantially all of the
corporation's assets. The GE charter does not expressly provide otherwise.
The Wisconsin corporate law, unless a greater number of affirmative votes is
required by statute, the articles of incorporation or bylaws, requires the
affirmative vote of a majority of the outstanding shares entitled to vote to
authorize a merger or share exchange, except that, unless required by the
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articles of incorporation, no authorizing shareholder vote is required of a
corporation surviving a merger if:
- the corporation's articles of incorporation is not amended by the merger
and each shareholder will continue to hold the same number of shares,
- each share of stock of the corporation will be an identical share of the
surviving corporation after the merger and each shareholder will continue
to hold the same number of shares,
- the number of voting shares outstanding immediately after the merger, plus
the voting shares issuable as a result of the merger will not exceed by
more than 20% the total number of voting shares of the surviving
corporation outstanding immediately prior to the merger, and
- the number of participating shares outstanding immediately after the
merger, plus the number of participating shares issuable as a result of
the merger, will not exceed by more than 20% the number of participating
shares of the surviving corporation outstanding immediately prior to the
merger.
The New York corporate law requires that any amendment to the certificate of
incorporation specifying a higher vote requirement than that required by law for
the transaction of specified items of business must be authorized by a
two-thirds vote of all outstanding shares entitled to vote thereon and present
at a meeting.
The GE charter may be amended if the amendment is approved by a majority
vote of the board of directors of GE and the affirmative vote of at least a
majority of outstanding shares of GE common stock. The GE charter confers upon
the GE board the power to amend or repeal the GE bylaws, except that the GE
board does not have the authority to amend or repeal any bylaw which is adopted
by the GE stockholders after April 20, 1948, unless such authority is granted to
the GE board by the specific provisions of a bylaw adopted by the GE
stockholders. The GE bylaws also may be altered, amended or repealed, at any
time, in the manner provided in the GE charter.
The Lunar articles of incorporation may be amended in any manner permitted
under Wisconsin law. Under the Wisconsin corporate law and the Lunar articles of
incorporation, the Lunar bylaws may be altered, amended or repealed or new
bylaws may be adopted by the Lunar board or by the affirmative vote of a
majority of the outstanding shares at any annual or special meeting of the
shareholders, if notice of such alteration, amendment, repeal or adoption is
contained in the notice of such meeting or waiver of notice. Bylaws adopted by
the Lunar board may be amended or repealed by the shareholders of Lunar.
SPECIAL MEETINGS OF SHAREHOLDERS; CONSENT TO ACTIONS OF SHAREHOLDERS IN LIEU OF
MEETING
SPECIAL MEETINGS. Under the New York corporate law, a special meeting of
stockholders may be called by the board of directors or by any person authorized
to do so in the certificate or articles of incorporation or bylaws. Under
Wisconsin corporate law, a special meeting of the shareholders may be called by
the board of directors or any person authorized by the articles or incorporation
or bylaws, or any holder of 10% of the outstanding shares.
The GE bylaws provide that special meetings of stockholders may be called by
the GE board, or by the written request of stockholders holding 40% of the then
issued stock of GE.
The Lunar bylaws provide that special meetings of the shareholders of Lunar
may be called at any time by a majority of the board, the chairman of the board,
the president, at the written request of holders of not less than 10% of all
outstanding shares of Lunar, and that shareholders are entitled to not less than
10 and no more than 50 days notice of any special meeting.
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CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. The New York corporate law
requires the unanimous consent in writing of the holders of all outstanding
shares entitled to vote thereon for any action requiring a vote of stockholders,
if such action is taken without a meeting, unless otherwise provided in the
corporation's charter or bylaws. Neither the GE charter nor the GE bylaws
contains any provision with respect to actions by stockholders by written
consent.
Under the Wisconsin corporate law, any action required or permitted to be
taken by shareholders at any annual or special meeting of shareholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, is signed by all of the holders
of outstanding stock, or, if the articles of incorporation so provide, by the
holders of not less than the minimum number of votes necessary to authorize such
action at a meeting at which all shares entitled to vote thereon were present
and voting.
The Lunar bylaws provide that the Lunar shareholders may act by consent, in
writing, setting forth the action to be taken and signed by all of the holders
of outstanding stock.
BUSINESS COMBINATIONS
The New York corporate law generally prohibits a resident domestic
corporation (as that term is defined in the New York Business Corporation Law)
from engaging in a business combination with an "interested stockholder" (the
beneficial owner of 20% or more of the corporation's stock) for a period of five
years from the time the stockholder acquired the stock in such resident domestic
corporation, unless certain conditions are met.
The resident domestic corporation may engage in a business combination with
the interested stockholder within the five-year period if the interested
stockholder's stock purchase was approved by the corporation's board of
directors prior to the purchase. The business combination is also permitted if
any of the following criteria are met:
- the business combination was approved by the board of directors prior to
the interested stockholder's stock acquisition date;
- the combination was approved by the majority of disinterested stockholders
at a meeting called no earlier than five years after the interested
stockholder's stock acquisition date; or
- the price paid to all the stockholders meets statutory criteria
establishing a formula price. The formula price is the higher of the price
paid by the interested stockholder or the market value of the stock,
computed as the higher of the value when acquired or when the announcement
of the business combination was made.
The Wisconsin corporate law regulates a broad range of business combinations
between a corporation and an interested shareholder. Business combinations are
generally defined to include a merger or a share exchange, an asset sale, the
issuance of stock or rights to purchase stock and certain related party
transactions, in each case involving an interested shareholder. An interested
shareholder is a person who beneficially owns, directly or indirectly, 10% or
more of the outstanding voting stock of a resident domestic corporation (as
defined in the Wisconsin Business Corporation Law), or a person who is an
affiliate or associate of the corporation and has beneficially owned 10% or more
of the voting stock within the last three years. The Wisconsin corporate law
generally prohibits a corporation from engaging in a business combination with
an interested shareholder for a period of three years following the date on
which the interested shareholder first acquired 10% or more of the outstanding
voting stock unless the board of directors approved the business combination or
the acquisition of stock prior to the date that person first acquired 10% or
more of the voting stock. After three years from
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that date, the Wisconsin corporate law continues to generally prohibit a
business combination with an interested shareholder unless:
- the board of directors approved the business combination or the
acquisition of stock prior to the stock acquisition date (as that term is
defined in the Wisconsin Business Corporation Law),
- the business combination is approved by a majority of the outstanding
voting stock not owned by the interested shareholder,
- the consideration to be received by shareholders meets certain
requirements of the statute with respect to form and amount, or
- the business combination is of a type specifically excluded from the
coverage of the statute.
While a takeover offer is being made, or after a take over offer (as that
term is defined in the Wisconsin Business Corporation Law) has been publicly
announced and before it is concluded, the Wisconsin corporate law requires the
approval of the holders of a majority of shares entitled to vote before a public
corporation may acquire more than 5% of its voting shares at a price above
market value from a person who holds more than 3% of its voting shares and has
held such shares for less than two years, unless at least an "equal" offer is
made to acquire all voting shares and all securities which may be converted into
voting shares. Similar approval is required before a public corporation may sell
or option assets which amount to at least 10% of its market value unless the
corporation has at least three directors who are not either officers or
employees of the corporation and a majority of the directors who are not either
officers or employees vote not to be governed by this provision.
The Wisconsin corporate law provides that in certain circumstances the
voting rights of shares of a resident public corporation held by any person in
excess of 20% of the voting power of such corporation is limited to 10% of the
full voting power of such excess shares. Full voting power may be restored if a
majority of the voting power of shares represented at a meeting, are voted in
favor of such restoration.
BUSINESS CONDUCTED AT SHAREHOLDERS' MEETINGS
Under both the New York corporate law and the Wisconsin corporate law, the
business permitted to be conducted at any special meeting of shareholders is
limited to the matters stated in the notice of meeting of shareholders.
DIVIDENDS
Under the New York corporate law, a corporation may pay dividends out of
surplus. Under Wisconsin corporate law, no distribution may be made if, after
the distribution of dividends, either of the following would occur:
- the corporation would not be able to pay its debts as they become due in
the usual course of business, or
- the corporation's total assets would be less than the sum of its total
liabilities plus, unless the articles of incorporation permit otherwise,
the amount that would be needed, if the corporation were to be dissolved
at the time of the distribution, to satisfy any preferential rights upon
dissolution that would need to be first satisfied.
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DISSENTERS' APPRAISAL RIGHTS
The New York corporate law provides that, upon strict compliance with the
applicable statutory requirements and procedures, a dissenting stockholder has
the right to receive payment of the fair value of such stockholder's shares if
such stockholder objects to:
- mergers;
- consolidations;
- dispositions of assets requiring stockholder approval;
- specified share exchanges; or
- amendments to the certificate of incorporation which adversely affect the
rights of such stockholder.
Under Wisconsin corporate law, a shareholder of a corporation is generally
entitled to receive payment of the fair value of such shareholder's stock if
such shareholder dissents from a proposed merger or stock exchange or sale or
exchange of all or substantially all of the property and assets of the
corporation. However, except for business combinations involving significant
shareholders (as discussed above), dissenters' rights are not available to
holders of shares that are registered on a national securities exchange or
quoted on Nasdaq. Currently, Lunar common stock is quoted on Nasdaq.
WARRANTS OR OPTIONS
The New York corporate law requires the approval of the holders of a
majority of the votes cast for the issuance of any rights or options to
directors, officers or other employees or for a plan to issue such rights or
options.
Wisconsin corporate law does not specifically limit or require special
approval procedures in connection with the issuance of rights or options to
directors, officers or other employees of a corporation.
NUMBER AND TERM OF DIRECTORS
Under the New York corporate law, the number of directors may be fixed by
the bylaws or by action of the shareholders or of the board of directors under
the specific provisions of a bylaw adopted by the shareholders. The number of
directors may be increased or decreased by amendment of the bylaws or by action
of the shareholders or of the board of directors under the specific provisions
of a bylaw adopted by the shareholders; provided that, if the board of directors
is authorized by the bylaws to change the number of directors, whether by
amending the bylaws or by taking action under the specific provisions of a bylaw
adopted by the shareholders, such amendment or action will require the vote of a
majority of the entire board of directors.
Under Wisconsin corporate law, the authorized number of directors
constituting the board of directors is specified in, or fixed in accordance
with, the articles of incorporation or by-laws and may be increased or decreased
by amendment to, or in a manner provided in, the articles of incorporation or
the by-laws.
The GE charter provides that the GE board may not consist of less than 10
directors, the exact number to be determined pursuant to the procedures set
forth in the GE bylaws. The GE bylaws provide that the exact number of directors
will be determined by a vote of the majority of the entire GE board, except that
the number of directors for any year will be fixed by the stockholders of GE at
any annual statutory meeting of the stockholders by a majority vote of the
outstanding shares entitled to vote thereon. Directors of GE hold office until
the next statutory meeting of the stockholders and
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until their successors are duly elected and have qualified. The number of
directors of GE is currently fixed at fifteen.
Under the Lunar articles of incorporation, the number of directors shall be
between six and twelve. Under the Lunar bylaws, the number of directors is
currently fixed at six. Lunar's board of directors is divided into three
classes. Directors of Lunar hold office until the third succeeding annual
meeting and until their successors are elected and qualified.
ELECTION OF DIRECTORS
Under both the New York and Wisconsin corporate law, except as otherwise
provided in the certificate of incorporation, directors are elected by a
plurality of the votes cast at a meeting of stockholders by the holders of
shares entitled to vote in the election.
The GE bylaws provide that directors of GE shall be elected each year at the
annual statutory meeting of the stockholders of GE, and that any vacancy
occurring in the GE board may be filled for the unexpired term by the GE board.
Neither the GE charter nor the GE bylaws allows cumulative voting for the
election of directors.
The Lunar charter provides that directors of Lunar hold office until his or
her successor has been elected and qualified. Any vacancy may be filled, until
the next succeeding annual meeting of shareholders, by the Lunar board by the
affirmative vote of the majority of the directors then in office, even if less
than a quorum, provided that in the case of a vacancy created by the removal of
a director by vote of the shareholders, the shareholders shall have the right to
fill such vacancy at the same meeting by the affirmative vote of 80% of the
outstanding shares entitled to vote for the election of such directors. Neither
the Lunar articles of incorporation nor the Lunar bylaws provides for cumulative
voting in the election of directors.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The New York corporate law provides that a corporation's certificate of
incorporation or bylaws may provide that the directors be divided into either
two, three or four classes; as long as all classes will be as nearly equal in
number as possible, and no class may include less than three directors. The
Wisconsin corporate law provides that a corporation's board of directors may be
divided into two or three classes with staggered terms of office if the
corporation's articles of incorporation provide for it. The GE charter does not
contain a classified board provision. The Lunar articles of incorporation
provides that the board of directors shall be divided into three classes of not
less than two directors with staggered three-year terms of office.
REMOVAL OF DIRECTORS
The New York corporate law provides that any or all of the directors of a
corporation may be removed for cause and, if the certificate of incorporation or
bylaws of the corporation provide, without cause by vote of the stockholders.
Under Wisconsin corporate law, a director may generally be removed by the
shareholders, with or without cause, if the number of votes cast to remove the
director exceeds the number of votes cast not to remove him or her, unless the
articles of incorporation, or by-laws provide for a greater voting requirement
or provide that directors may only be removed for cause.
Under Wisconsin corporate law, the circuit court for the county where a
corporation's principal office or registered office is located may remove a
director of the corporation from office in a proceeding brought either by the
corporation or by shareholders holding at least 10% of the outstanding shares of
any class, if the court finds that the director engaged in fraudulent or
dishonest
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conduct or gross abuse of authority or discretion with respect to the
corporation and that removal is in the best interests of the corporation.
Neither the GE charter nor the GE bylaws provides for removal of GE
directors. Consequently, GE directors may be removed only for cause by vote of
the stockholders of GE.
The Lunar bylaws provide that directors of Lunar may be removed with or
without cause upon the vote of 80% of the outstanding shares entitled to vote at
an election of directors.
STATUTORY SHAREHOLDER LIABILITY
The Wisconsin corporate law provides that the shareholders of a Wisconsin
corporation are personally liable in certain circumstances for debts to
employees of the corporation for services performed for such corporation, but
not exceeding six months' service in any case. The New York corporate law does
not have a similar provision.
INDEMNIFICATION
The New York corporate law allow a corporation to indemnify a director or
officer for certain expenses, liabilities and other amounts incurred by such
person in connection with legal proceedings. The statute requires that, prior to
making any such indemnification, either a quorum of disinterested directors, an
independent legal counsel or the company's shareholders must determine that such
person has met the applicable statutory standard of conduct. The New York
corporate law limits the corporation's ability to provide indemnification in
connection with legal proceedings brought by or in the right of the corporation.
New York also allows for the advance payment of expenses prior to the final
disposition of an action upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the company. The New York
corporate law refers to indemnification of attorneys' fees only in the context
of indemnification by court action.
The GE charter provides that a person who is or was a director of GE will
have no personal liability to GE or its stockholders for damages for any breach
of duty in such capacity except that the foregoing shall not eliminate or limit
liability where such liability is imposed under the New York corporate law. The
GE bylaws provide that GE shall, to the fullest extent permitted by applicable
law, indemnify any person who is or was or has agreed to become a director of GE
against damages; provided that no indemnification may be provided to any person
if a judgment or other final adjudication adverse to the director establishes
that
- his or her acts were committed in bad faith or were the result of active
and deliberate dishonesty and, in either case, were material to the cause
of action so adjudicated, or
- he or she personally gained in fact a financial profit or other advantage
to which he or she was not legally entitled.
The Wisconsin corporate law provides that a director is not liable to the
corporation, its shareholders, or any person asserting rights on behalf of the
corporation or its shareholders for liabilities arising from a breach of, or
failure to perform, any duty resulting solely from his or her status as
director, unless the breach or failure to perform resulted from:
- willful failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the director has a material conflict of
interest;
- a violation of criminal law, unless the director had reasonable cause to
believe that the conduct was lawful or no reasonable cause to believe that
the conduct was unlawful;
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- a transaction from which the director derived an improper personal profit;
or
- willful misconduct.
Although Wisconsin law permits a corporation to limit the statutory immunity
from director liability in its articles of incorporation, the Lunar charter and
bylaws do not contain such a limitation.
The Wisconsin corporate law provides that a corporation shall indemnify a
director or officer, to the extent that he or she has been successful on the
merits or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if the director or officer was a party because of his
or her status as a director or officer. Additionally, a corporation shall
indemnify a director or officer against liability incurred by a director or
officer in a proceeding to which the director or officer was a party because he
or she is a director or officer of the corporation, unless the liability arose
from a breach or failure to perform of the duties discussed above. Further, a
court of law may order that the corporation provide indemnification to a
director or officer if it finds that the director or officer is entitled thereto
under the applicable statutory provision or is fairly and reasonably entitled to
such indemnification.
Wisconsin corporate law permits a corporation to provide additional rights
to indemnification under its articles of incorporation or by-laws, by written
agreement, by resolution of its board of directors or by a vote of the holders
of a majority of its outstanding shares, so long as a corporation does not
indemnify a director or officer unless it is determined that the director or
officer did not breach or fail to perform one of the duties discussed above. The
Lunar Bylaws provide for indemnification and reimbursement or advancement of
expenses to directors and officers to the same extent permitted by the Wisconsin
corporate law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling GE
pursuant to the foregoing provisions, GE has been informed that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
TRANSACTIONS WITH INTERESTED DIRECTORS
Generally, under the New York corporate law and Wisconsin corporate law, a
contract or transaction between a corporation and one or more of its directors,
or between a corporation and any other entity in which one or more of its
directors are directors or officers, or have a financial interest, is not void
or voidable solely because of such relationship or interest, if any of the
following is true:
- the material facts of the contract or transaction and the director's
interest are disclosed or known to the board of directors or a committee
of the board of directors and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors (even though less than a quorum),
or, under the New York corporate law, if the votes of the disinterested
directors are insufficient to constitute an act of the board, by unanimous
vote of the disinterested directors;
- the material facts of the transaction and the director's interest are
disclosed or known to shareholders entitled to vote thereon, and such
contract or transaction is approved in good faith by a vote of such
shareholders; or
- the contract or transaction is fair to the corporation as of the time it
was approved by the board, a committee or the shareholders.
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DESCRIPTION OF GE'S CAPITAL STOCK
SET FORTH BELOW IS A DESCRIPTION OF THE GE COMMON STOCK. THE FOLLOWING
STATEMENTS ARE BRIEF SUMMARIES OF, AND ARE SUBJECT TO THE DETAILED PROVISIONS
OF, THE GE CHARTER, THE GE BYLAWS AND THE RELEVANT PROVISIONS OF THE NEW YORK
CORPORATE LAW.
GE currently is authorized to issue up to 13,200,000,000 shares of common
stock, par value $.06 per share. GE is also authorized to issue up to 50,000,000
shares of preferred stock, par value $1.00 per share, in series. GE has not
issued any of this preferred stock. If preferred stock is issued, GE's board of
directors may fix the designation, relative rights, preferences and limitations
of the shares of each series.
Dividends may be paid on the GE common stock out of funds legally available
for dividends, when and if declared by GE's board of directors.
Holders of the GE common stock are entitled to share ratably in any
dividends and in any assets available for distribution on liquidation,
dissolution or winding up, subject, if preferred stock of GE is then
outstanding, to any preferential rights of such preferred stock. Each share of
GE common stock entitles the holder thereof to one vote at all meetings of share
owners, and the votes are noncumulative. The GE common stock is not redeemable,
has no subscription or conversion rights and does not entitle the holder thereof
to any preemptive rights.
LEGAL MATTERS
Robert E. Healing, Corporate Counsel of GE, will pass upon the validity of
the GE common stock to be issued in connection with the merger. Mr. Healing
beneficially owns or has rights to acquire an aggregate of less than 1% of GE's
common stock. Gibson, Dunn & Crutcher LLP, counsel to GE, and Sidley & Austin,
counsel to Lunar, will deliver opinions concerning the federal income tax
consequences of the merger. Sidley & Austin represents GE, including GE Medical
Systems, a division of GE, from time to time.
EXPERTS
The consolidated financial statements of Lunar as of and for the year ended
June 30, 1999 incorporated by reference in this proxy statement/prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and is included herein in
reliance upon the authority of said firm as experts in giving said report.
KPMG LLP, independent certified public accountants, audited Lunar's
consolidated financial statements as of June 30, 1998, and for each of the three
years in the three-year period ended June 30, 1998. This proxy
statement/prospectus includes these financial statements and the auditor's
report, relying on KPMG LLP's authority as experts in accounting and auditing.
KPMG LLP, independent certified public accountants, audited GE's
consolidated financial statements as of December 31, 1999 and 1998, and for each
of the years in the three-year period ended December 31, 1999. GE's Annual
Report on Form 10-K includes these financial statements and the auditor's
report. This proxy statement/prospectus incorporates the financial statements
and report by reference, relying on KPMG LLP's authority as experts in
accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
Lunar and GE file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information filed by GE or Lunar at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. GE's and Lunar's SEC filings are also available to the public
from commercial document retrieval services. The website maintained by the SEC
is "HTTP://WWW.SEC.GOV". You may also access the SEC filings of GE and Lunar
through the websites maintained by GE and Lunar, which are "HTTP://WWW.GE.COM"
and "HTTP://WWW.LUNARCORP.COM".
GE has filed with the SEC a registration statement on Form S-4 to register
the GE common stock to be issued pursuant to the merger agreement. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of GE in addition to being a proxy statement of Lunar for the special
meeting. As allowed by SEC rules, this proxy statement/prospectus does not
contain all the information you can find in the registration statement and the
exhibits to the registration statement.
The SEC allows GE to "incorporate by reference" information into this proxy
statement/ prospectus, which means that we can disclose important information to
you by referring you to other documents filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information in
this proxy statement/prospectus. This proxy statement/prospectus incorporates by
reference the documents set forth below that GE has previously filed with the
SEC. These documents contain important information about GE and its finances.
<TABLE>
<CAPTION>
GE COMMISSION FILINGS (FILE NO. 1-00035) PERIOD
---------------------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarter ended March 31, 2000
Current Report on Form 8-K Dated April 27, 2000
</TABLE>
GE also hereby incorporates by reference all additional documents that GE
files with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 between the date of this proxy
statement/prospectus and the date of the special meeting.
The SEC allows Lunar to "incorporate by reference" certain information into
this proxy statement/ prospectus, which means that we can disclose important
information to you by referring you to other documents filed separately with the
SEC. The information incorporated by reference is deemed to be part of this
proxy statement/prospectus, except for any information superseded by information
in this proxy statement/prospectus. This proxy statement/prospectus incorporates
by reference the document set forth below that Lunar has previously filed with
the SEC. This document contains important information about Lunar.
<TABLE>
<CAPTION>
LUNAR COMMISSION FILINGS (FILE NO. 000-18643) PERIOD
--------------------------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended June 30, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000,
December 31, 1999, and September 30, 1999
Current Report on Form 8-K Filed on June 7, 2000
</TABLE>
Lunar also hereby incorporates by references all additional documents that
Lunar files with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act between the date of this proxy statement/prospectus and the
date of the special meeting.
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If you are a shareholder of Lunar or GE, Lunar or GE may have sent you some
of the documents incorporated by reference, but you can obtain any of them
through Lunar, GE or the SEC. Documents incorporated by reference are available
from Lunar or GE without charge, excluding all exhibits unless such exhibits
have been specifically incorporated by reference in this proxy
statement/prospectus. Shareholders may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or by
telephone from the appropriate party at the following address:
<TABLE>
<S> <C>
General Electric Company Lunar Corporation
Attention: Investor Relations Attention: Corporate Secretary
3135 Easton Turnpike 726 Heartland Trail
Fairfield, Connecticut 06431-0001 Madison, Wisconsin 53717-1915
(203) 373-2816 (608) 828 2663
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM GE, PLEASE DO SO BY [5 BUSINESS
DAYS BEFORE MTG], 2000 TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
The board of directors of Lunar does not intend to bring any other matters,
and does not know of any other matters to be brought, before the special
meeting.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF LUNAR OR GE SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS. NEITHER GE NOR LUNAR HAS AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. ALL INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO LUNAR AND ITS
SUBSIDIARIES HAS BEEN PROVIDED BY LUNAR, AND ALL INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO GE
AND ITS SUBSIDIARIES HAS BEEN PROVIDED BY GE. NEITHER GE NOR LUNAR WARRANTS THE
ACCURACY OF INFORMATION RELATING TO THE OTHER PARTY. THIS PROXY
STATEMENT/PROSPECTUS IS DATED , 2000. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OF GE COMMON STOCK IN THE MERGER SHALL
CREATE ANY IMPLICATION TO THE CONTRARY.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
GE MEDICAL SYSTEMS,
A DIVISION OF
GENERAL ELECTRIC COMPANY
TOPAZ MERGER CORP.
AND
LUNAR CORPORATION
DATED AS OF JUNE 2, 2000
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I THE MERGER........................................ A-1
Section 1.1 THE MERGER........................ A-1
Section 1.2 EFFECTIVE TIME.................... A-1
Section 1.3 EFFECTS OF THE MERGER............. A-2
Section 1.4 CHARTER AND BYLAWS; DIRECTORS AND
OFFICERS...................................... A-2
Section 1.5 CONVERSION OF SECURITIES.......... A-2
Section 1.6 PARENT TO MAKE CERTIFICATES
AVAILABLE..................................... A-3
Section 1.7 DIVIDENDS; TRANSFER TAXES;
WITHHOLDING................................... A-3
Section 1.8 NO FRACTIONAL SECURITIES.......... A-4
Section 1.9 RETURN OF EXCHANGE FUND........... A-4
Section 1.10 NO FURTHER OWNERSHIP RIGHTS IN
COMPANY COMMON STOCK.......................... A-4
Section 1.11 CLOSING OF COMPANY TRANSFER
BOOKS......................................... A-4
Section 1.12 LOST CERTIFICATES................. A-5
Section 1.13 FURTHER ASSURANCES................ A-5
Section 1.14 CLOSING........................... A-5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB....................................................... A-5
Section 2.1 ORGANIZATION, STANDING AND
POWER......................................... A-5
Section 2.2 AUTHORITY......................... A-5
Section 2.3 CONSENTS AND APPROVALS; NO
VIOLATION..................................... A-6
Section 2.4 PARENT COMMON STOCK TO BE ISSUED
IN THE MERGER................................. A-7
Section 2.5 SEC DOCUMENTS AND OTHER REPORTS... A-7
Section 2.6 REGISTRATION STATEMENT AND PROXY
STATEMENT..................................... A-7
Section 2.7 ABSENCE OF CERTAIN CHANGES OR
EVENTS........................................ A-8
Section 2.8 REORGANIZATION.................... A-8
Section 2.9 OPERATIONS OF SUB................. A-8
Section 2.10 BROKERS........................... A-8
Section 2.11 OWNERSHIP OF COMPANY COMMON
STOCK......................................... A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY... A-8
Section 3.1 ORGANIZATION, STANDING AND
POWER......................................... A-8
Section 3.2 CAPITAL STRUCTURE................. A-9
Section 3.3 AUTHORITY......................... A-10
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 3.4 CONSENTS AND APPROVALS; NO
VIOLATION..................................... A-10
Section 3.5 SEC DOCUMENTS AND OTHER REPORTS... A-11
Section 3.6 REGISTRATION STATEMENT AND PROXY
STATEMENT..................................... A-11
Section 3.7 ABSENCE OF CERTAIN CHANGES OR
EVENTS........................................ A-12
Section 3.8 PERMITS AND COMPLIANCE............ A-12
Section 3.9 TAX MATTERS....................... A-13
Section 3.10 ACTIONS AND PROCEEDINGS........... A-14
Section 3.11 CERTAIN AGREEMENTS................ A-15
Section 3.12 ERISA............................. A-16
Section 3.13 COMPLIANCE WITH WORKER SAFETY
LAWS.......................................... A-17
Section 3.14 LIABILITIES; PRODUCTS............. A-18
Section 3.15 LABOR MATTERS..................... A-18
Section 3.16 INTELLECTUAL PROPERTY............. A-18
Section 3.17 OPINION OF FINANCIAL ADVISOR...... A-19
Section 3.18 STATE TAKEOVER STATUTES........... A-19
Section 3.19 REQUIRED VOTE OF COMPANY
SHAREHOLDERS.................................. A-19
Section 3.20 REORGANIZATION.................... A-20
Section 3.21 ACCOUNTS RECEIVABLE............... A-20
Section 3.22 INVENTORIES....................... A-20
Section 3.23 ENVIRONMENTAL MATTERS............. A-20
Section 3.24 SUPPLIERS AND DISTRIBUTORS........ A-21
Section 3.25 INSURANCE......................... A-21
Section 3.26 TRANSACTIONS WITH AFFILIATES...... A-22
Section 3.27 TITLE TO AND SUFFICIENCY OF
ASSETS........................................ A-22
Section 3.28 BROKERS........................... A-23
Section 3.29 YEAR 2000......................... A-23
Section 3.30 NO CONSULTING ACTIVITIES SUBJECT
TO HOSPITALPHYSICIAN GAINSHARING
RESTRICTIONS.................................. A-23
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS........ A-24
Section 4.1 CONDUCT OF BUSINESS BY THE COMPANY
PENDING THE MERGER............................ A-24
Section 4.2 NO SOLICITATION................... A-25
Section 4.3 THIRD PARTY STANDSTILL
AGREEMENTS.................................... A-27
Section 4.4 REORGANIZATION.................... A-27
ARTICLE V ADDITIONAL AGREEMENTS............................. A-27
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 5.1 SHAREHOLDER MEETING............... A-27
Section 5.2 PREPARATION OF THE REGISTRATION
STATEMENT AND THE PROXY STATEMENT............. A-27
Section 5.3 ACCESS TO INFORMATION............. A-28
Section 5.4 RULE 145 LETTERS.................. A-28
Section 5.5 FEES AND EXPENSES................. A-28
Section 5.6 COMPANY STOCK OPTIONS............. A-30
Section 5.7 REASONABLE BEST EFFORTS........... A-30
Section 5.8 PUBLIC ANNOUNCEMENTS.............. A-31
Section 5.9 STATE TAKEOVER LAWS............... A-31
Section 5.10 INDEMNIFICATION; DIRECTORS AND
OFFICERS INSURANCE............................ A-31
Section 5.11 NOTIFICATION OF CERTAIN MATTERS... A-32
Section 5.12 EMPLOYEE BENEFIT PLANS............ A-32
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER............... A-33
Section 6.1 CONDITIONS TO EACH PARTY'S
OBLIGATION TO EFFECT THE MERGER............... A-33
Section 6.2 CONDITIONS TO OBLIGATION OF THE
COMPANY TO EFFECT THE MERGER.................. A-33
Section 6.3 CONDITIONS TO OBLIGATIONS OF
PARENT AND SUB TO EFFECT THE MERGER........... A-34
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............... A-35
Section 7.1 TERMINATION....................... A-35
Section 7.2 EFFECT OF TERMINATION............. A-36
Section 7.3 AMENDMENT......................... A-37
Section 7.4 WAIVER............................ A-37
ARTICLE VIII GENERAL PROVISIONS............................. A-37
Section 8.1 NONSURVIVAL OF REPRESENTATIONS AND
WARRANTIES; NO OTHER REPRESENTATIONS AND
WARRANTIES.................................... A-37
Section 8.2 NOTICES........................... A-37
Section 8.3 INTERPRETATION.................... A-38
Section 8.4 COUNTERPARTS...................... A-38
Section 8.5 ENTIRE AGREEMENT; NO THIRDPARTY
BENEFICIARIES................................. A-38
Section 8.6 GOVERNING LAW..................... A-39
Section 8.7 ASSIGNMENT........................ A-39
Section 8.8 SEVERABILITY...................... A-39
Section 8.9 ENFORCEMENT OF THIS AGREEMENT..... A-39
Section 8.10 PERFORMANCE BY SUB................ A-39
Section 8.11 DEFINED TERMS..................... A-39
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
DESCRIPTION
-----------
<S> <C>
Exhibit A Stock Option Agreement........................... Recital C
Exhibit B Shareholder Agreement............................ Recital C
Exhibit C Certificate of Incorporation..................... Section 1.4
Exhibit D Rule 145 Letter.................................. Section 5.4
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 2, 2000 (this
"AGREEMENT"), is among GE Medical Systems, a division of General Electric
Company, a New York corporation ("PARENT"), Topaz Merger Corp., a Wisconsin
corporation and a whollyowned subsidiary of Parent ("SUB"), and Lunar
Corporation, a Wisconsin corporation (the "COMPANY") (Sub and the Company being
hereinafter collectively referred to as the "CONSTITUENT CORPORATIONS").
RECITALS:
A. The respective Boards of Directors of Parent, Sub and the Company have
approved and declared advisable the merger of Sub with and into the Company upon
the terms and subject to the conditions of this Agreement (the "MERGER"), and
the respective Boards of Directors of Parent, Sub and the Company have approved
and adopted this Agreement;
B. The respective Boards of Directors of Parent and the Company have
determined that the Merger is in the best interest of their respective
shareholders;
C. In order to induce Parent and Sub to enter into this Agreement,
concurrently herewith (i) Parent and the Company are entering into the Stock
Option Agreement dated as of the date hereof (the "STOCK OPTION AGREEMENT") in
the form of the attached EXHIBIT A and (ii) Parent and a shareholder of the
Company are entering into the Shareholder Agreement dated as of the date hereof
(the "SHAREHOLDER AGREEMENT") in the form of the attached EXHIBIT B; and
D. For federal income tax purposes, it is intended by the parties hereto
that the Merger shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the Wisconsin Business Corporation Law (the
"WBCL"), Sub shall be merged with and into the Company at the Effective Time (as
defined in Section 1.2). Following the Merger, the separate corporate existence
of Sub shall cease and the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the WBCL. Notwithstanding anything to the
contrary herein, at the election of Parent, any direct whollyowned Subsidiary
(as hereinafter defined) of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties agree to execute an
appropriate amendment to this Agreement, in form and substance reasonably
satisfactory to Parent and the Company, in order to reflect such substitution.
SECTION 1.2 EFFECTIVE TIME. The Merger shall become effective when the
articles of merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of the WBCL, are received by the Wisconsin Department of
Financial Institutions; PROVIDED, HOWEVER, that, upon mutual consent of the
Constituent Corporations, the Articles of Merger may provide for a later date of
effectiveness of the Merger not more than 30 days after the date the Articles of
Merger are received. When used in this Agreement, the term "EFFECTIVE TIME"
shall mean the date and time at which the Articles of Merger are accepted for
filing or such later time established by the Articles of Merger. The filing of
the Articles of Merger shall be made on the date of the Closing (as defined in
Section 1.14). At the option of Parent, the Surviving Corporation may choose to
file a plan of merger ("PLAN OF MERGER")
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containing only the terms required by Section 180.1101(2) of the WBCL with the
Articles of Merger in lieu of filing this Agreement with the Articles of Merger.
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and applicable provisions of the WBCL.
SECTION 1.4 CHARTER AND BYLAWS; DIRECTORS AND OFFICERS. (a) The Articles of
Incorporation of the Company in effect at the Effective Time will be amended in
its entirety at the Effective Time to read as set forth in EXHIBIT C hereto and
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. The
Bylaws of Sub in effect at the Effective Time will be the Bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(b) The directors of the Sub at the Effective Time shall automatically,
and without further action, be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be. The officers
of the Sub at the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be.
SECTION 1.5 CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01
per share, of Sub shall be converted into one validly issued, fully paid and
nonassessable (except to the extent otherwise provided in Section
180.0622(2)(b) of the WBCL) share of common stock of the Surviving
Corporation.
(b) All shares of Company Common Stock that are held in the treasury of
the Company and any shares of Company Common Stock owned by Parent or Sub
shall automatically be canceled and retired and shall cease to exist and no
capital stock of Parent or other consideration shall be delivered in
exchange therefor.
(c) Subject to the provisions of Section 1.8 hereof, each share of
Common Stock, par value $0.01 per share, of the Company ("COMPANY COMMON
STOCK") issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 1.5(b)) shall
be converted into the right to receive the number of shares of common stock,
par value $0.16 per share, of the Parent ("PARENT COMMON STOCK") determined
by dividing $17.00 by the Average Parent Share Price (as defined below) and
rounding the result to the nearest one thousandth of a share (the "MERGER
CONSIDERATION"); provided, however, that if between the first day of the
Valuation Period (as defined below) and the Effective Time, the outstanding
shares of Parent Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Merger Consideration shall be correspondingly
adjusted to the extent appropriate to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares. The "AVERAGE PARENT SHARE PRICE" means the average of
the daily volumeweighted sales prices per share of Parent Common Stock on
the New York Stock Exchange, Inc. for each of the 10 consecutive trading
days ending on the trading day which is five calendar days prior to the
Closing Date, or, if such ending date does not fall on a trading day, then
the trading day immediately preceding the fifth calendar day prior to the
Closing Date (the "VALUATION PERIOD"). All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive any dividends and other distributions
in accordance with Section 1.7,
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certificates representing the shares of Parent Common Stock into which such
shares are converted and any cash, without interest, in lieu of fractional
shares to be issued or paid in consideration therefor upon the surrender of
such certificate in accordance with Section 1.6.
SECTION 1.6 PARENT TO MAKE CERTIFICATES AVAILABLE.
(a) EXCHANGE OF CERTIFICATES. Parent shall authorize a bank, trust
company, or such other person or persons as shall be reasonably acceptable
to Parent and the Company, to act as Exchange Agent hereunder (the "EXCHANGE
AGENT"). As soon as practicable after the Effective Time, Parent shall
deposit with the Exchange Agent, in trust for the holders of shares of
Company Common Stock converted in the Merger, certificates representing the
shares of Parent Common Stock issuable pursuant to Section 1.5(c) in
exchange for outstanding shares of Company Common Stock and cash, as
required to make payments in lieu of any fractional shares pursuant to
Section 1.8 (such cash and shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred
to as the "EXCHANGE FUND"). The Exchange Agent shall deliver the Parent
Common Stock contemplated to be issued pursuant to Section 1.5(c) out of the
Exchange Fund. Except as contemplated by Section 1.9, the Exchange Fund
shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each record holder of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock converted in the Merger (the
"CERTIFICATES") a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall
pass, only upon actual delivery of the Certificates to the Exchange Agent,
and shall contain instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock and cash in lieu of fractional shares). Upon surrender for
cancellation to the Exchange Agent of a Certificate held by any record
holder of a Certificate, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock into which the shares represented by the surrendered
Certificate shall have been converted at the Effective Time pursuant to this
Article I, cash in lieu of any fractional share in accordance with Section
1.8 and certain dividends and other distributions in accordance with Section
1.7, and any Certificate so surrendered shall forthwith be canceled.
SECTION 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time, will be paid to any person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock until such person surrenders the
related Certificate or Certificates, as provided in Section 1.6, and no cash
payment in lieu of fractional shares will be paid to any such person pursuant to
Section 1.8 until such person shall so surrender the related Certificate or
Certificates. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such Parent Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other
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distributions. If any cash or certificate representing shares of Parent Common
Stock is to be paid to or issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Parent Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
SECTION 1.8 NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a security holder of Parent. In lieu of any such fractional share, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to this Article I will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the
Average Parent Share Price by (ii) the fractional interest to which such holder
would otherwise be entitled. As promptly as practicable after the determination
of the amount of cash, if any, to be paid to holders of fractional share
interests, the Exchange Agent shall so notify the Parent, and the Parent shall
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional share interests subject to and
in accordance with the terms of Section 1.7 and this Section 1.8.
SECTION 1.9 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the former shareholders of the Company for six months
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such former shareholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of Company Common Stock for any such shares of Parent Common Stock, cash
and dividends and distributions held in the Exchange Fund which is delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Sections 1.7 and 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
SECTION 1.11 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
canceled and exchanged as provided in this Article I.
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SECTION 1.12 LOST CERTIFICATES. If any 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, if required by
Parent or the Exchange Agent, the posting by such person of a bond, in such
reasonable amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
SECTION 1.13 FURTHER ASSURANCES. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
SECTION 1.14 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Gibson, Dunn & Crutcher LLP,
200 Park Avenue, New York, New York 101660193, at 10:00 a.m., local time, no
later than the second business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived (if
permissible) (the "CLOSING DATE") or at such other time and place as Parent and
the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
SECTION 2.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its place of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent and
Sub are duly qualified to do business, and are in good standing, in each
jurisdiction where the character of their properties owned or held under lease
or the nature of their activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, when
used with respect to Parent, any change or effect that is or could reasonably be
expected (as far as can reasonably be foreseen at the time) to be materially
adverse to the business, operations, properties, assets, liabilities, employee
relationships, customer or supplier relationships, earnings or results of
operations, or the business prospects and condition of Parent and its
Subsidiaries, taken as a whole.
SECTION 2.2 AUTHORITY. On or prior to the date of this Agreement, the
respective Boards of Directors of Parent and Sub have declared the Merger
advisable and have approved and adopted this Agreement in accordance with the
WBCL. Each of Parent and Sub has all requisite corporate power and authority to
enter into this Agreement, Parent has all requisite corporate power and
authority to
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enter into the Stock Option Agreement and the Shareholder Agreement, and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement by Parent and Sub, the execution and delivery of the
Stock Option Agreement and the Shareholder Agreement by Parent and the
consummation by Parent and Sub of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action (including
all Board action) on the part of Parent and Sub, subject to the filing of
appropriate Articles of Merger as required by the WBCL. This Agreement has been
duly executed and delivered by Parent and Sub, the Stock Option Agreement and
the Shareholder Agreement have been duly executed and delivered by Parent, and
(assuming the valid authorization, execution and delivery of this Agreement and
the Stock Option Agreement by the Company, the valid authorization, execution
and delivery of the Shareholder Agreement by the shareholder of the Company that
is a party thereto and the validity and binding effect hereof and thereof on the
Company and such shareholder) this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms and the Stock Option Agreement and the Shareholder Agreement
constitute the valid and binding obligation of Parent enforceable against Parent
in accordance with its terms. The filing of a registration statement on Form S4
with the Securities and Exchange Commission (the "SEC") by Parent under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "SECURITIES ACT"), for the purpose of registering
the shares of Parent Common Stock to be issued in the Merger (together with any
amendments or supplements thereto, whether prior to or after the effective date
thereof, the "REGISTRATION STATEMENT") has been duly authorized by Parent's
Board of Directors.
SECTION 2.3 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.3 have been obtained and all filings and obligations described in this Section
2.3 have been made, the execution and delivery of this Agreement, the Stock
Option Agreement and the Shareholder Agreement do not, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give to others a
right of termination, cancellation or acceleration of any obligation or result
in the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its Subsidiaries under, any provision of (i) the Certificate of
Incorporation or the Bylaws of Parent, each as amended to date, (ii) any
provision of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or (iv) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights, losses, liens, security interests, charges or encumbrances
that, individually or in the aggregate, would not have a Material Adverse Effect
on Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or under the Stock Option Agreement or the
Shareholder Agreement or prevent the consummation of any of the transactions
contemplated hereby or thereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "GOVERNMENTAL ENTITY") is required by or with respect
to Parent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement, the Stock Option Agreement or the Shareholder
Agreement by Parent or Sub or is necessary for the consummation of the Merger
and the other transactions contemplated by this Agreement, the Stock Option
Agreement or the Shareholder Agreement, except for (i) in connection, or in
compliance, with the provisions of the HartScottRodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "EXCHANGE ACT"), (ii) the filing of the Articles of
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Merger with the Secretary of State of the State of Wisconsin and appropriate
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement,
the Stock Option Agreement, or the Shareholder Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover laws
(the "STATE TAKEOVER APPROVALS"), (v) applicable requirements, if any, of state
securities or "blue sky" laws ("BLUE SKY LAWS") and the New York Stock Exchange
(the "NYSE"), (vi) as may be required under foreign laws and (vii) such other
consents, orders, authorizations, registrations, declarations, approvals and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform its obligations hereunder or under the
Stock Option Agreement or the Shareholder Agreement or prevent the consummation
of any of the transactions contemplated hereby or thereby.
SECTION 2.4 PARENT COMMON STOCK TO BE ISSUED IN THE MERGER. All of the
shares of Parent Common Stock issuable in exchange for Company Common Stock at
the Effective Time in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights created by statute, Parent's Certificate of Incorporation or
Bylaws or any agreement to which Parent is a party or by which Parent is bound
and will, when issued, be registered under the Securities Act and the Exchange
Act and registered or exempt from registration under applicable Blue Sky laws.
SECTION 2.5 SEC DOCUMENTS AND OTHER REPORTS. Parent has filed all required
documents with the SEC since January 1, 1995 (the "PARENT SEC DOCUMENTS"). As of
their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and, at the respective times they were filed, none of the Parent
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of Parent included in the Parent SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting principles
(except, in the case of the unaudited statements, as permitted by Form 10Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of Parent and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
yearend audit adjustments and to any other adjustments described therein).
Except as disclosed in the Parent SEC Documents or as required by generally
accepted accounting principles, Parent has not, since March 31, 2000, made any
change in the accounting practices or policies applied in the preparation of
financial statements.
SECTION 2.6 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied in writing by Parent or Sub for inclusion or
incorporation by reference in the Registration Statement or the proxy
statement/prospectus included therein (together with any amendments or
supplements thereto, the "PROXY STATEMENT") relating to the Shareholder Meeting
(as defined in Section 5.1) will (i) in the case of the Registration Statement,
at the time it becomes effective, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading or (ii) in the
case of the Proxy Statement, at the time of the mailing of the Proxy Statement,
at the time of the Shareholder Meeting and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material
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fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent, its officers and directors or any of its Subsidiaries shall occur which
is required to be described in the Proxy Statement or the Registration
Statement, such event shall be so described, and an appropriate amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of the Company. The Registration Statement will
comply (with respect to Parent) as to form in all material respects with the
provisions of the Securities Act, and the Proxy Statement will comply (with
respect to Parent) as to form in all material respects with the provisions of
the Exchange Act.
SECTION 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Parent SEC Documents filed with the SEC prior to the date of this Agreement,
since March 31, 2000, there has been no event causing a Material Adverse Effect
on Parent, nor any development that would, individually or in the aggregate,
result in a Material Adverse Effect on Parent.
SECTION 2.8 REORGANIZATION. To the actual knowledge of the Vice President
and Senior Counsel, Taxes of Parent, (i) neither Parent nor any of its
Subsidiaries has taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code, and (ii) there are no facts
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 2.9 OPERATIONS OF SUB. Sub is a direct, whollyowned subsidiary of
Parent, 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.
SECTION 2.10 BROKERS. No broker, investment banker or other person, is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
SECTION 2.11 OWNERSHIP OF COMPANY COMMON STOCK. Neither Parent nor any of
its Affiliates is the beneficial owner (as defined in Rule 13d3 promulgated
under the Exchange Act) of, nor has Parent or any of its Affiliates within the
last three years been the beneficial owner of, Company Common Stock equal to or
greater than ten percent (10%) of the aggregate outstanding Company Common
Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 3.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation
duly organized and validly existing under the laws of the State of Wisconsin,
has filed with the Wisconsin Department of Financial Institutions the most
recent annual report required to be filed by it, has not filed articles of
dissolution, has a perpetual period of existence and has the requisite corporate
power and authority to carry on its business as now being conducted. Each
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate power and authority to carry on its business as now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. The Company and
each of its Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their properties owned or
held under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. For purposes
of this Agreement, "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" mean,
when used with respect to the Company, any change or effect that is or could
reasonably be expected (as far as
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can reasonably be foreseen at the time) to be materially adverse to the
business, operations, properties, assets, liabilities, employee relationships,
customer or supplier relationships, earnings or results of operations, or the
business prospects and condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.
SECTION 3.2 CAPITAL STRUCTURE. (a) As of the date hereof, the authorized
capital stock of the Company consists of 25,000,000 shares of Company Common
Stock. At the close of business on May 31, 2000, (i) 8,594,455 shares of Company
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable (except to the extent otherwise provided in Section
180.0622(2)(b) of the WBCL) and free of preemptive rights, (ii) no shares of
Company Common Stock were held in the treasury of the Company, (iii) 2,488,000
shares of Company Common Stock were reserved for future issuance pursuant to the
Company's Amended and Restated Stock Option Plan, any other option grants or
plans, or pursuant to any plans assumed by the Company in connection with any
acquisition, business combination or similar transaction (collectively, the
"COMPANY STOCK OPTION PLANS"). No shares of Company Common Stock are held by any
Subsidiary of the Company.
(b) Section 3.2 (b) of the letter dated the date hereof and delivered on the
date hereof by the Company to Parent, which relates to this Agreement and is
designated therein as the Company Letter (the "COMPANY LETTER"), contains a
correct and complete list as of the date of this Agreement of each outstanding
option to purchase shares of Company Common Stock issued under the Company Stock
Option Plans (collectively, the "COMPANY STOCK OPTIONS"), including the holder,
date of grant, term, acceleration of vesting or exercisability, if any, exercise
price and number of shares of Company Common Stock subject thereto. Except as
set forth on Section 3.2(b) of the Company Letter and except for the Company
Stock Options, there are no options, warrants, calls, rights or agreements to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of the Company or any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement.
(c) Except as set forth in Section 3.2 of the Company Letter, there are no
outstanding contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of or any equity interests in the Company or any Subsidiary.
Each outstanding share of capital stock of each Subsidiary of the Company is
duly authorized, validly issued, fully paid and nonassessable (except to the
extent otherwise provided in Section 180.0622(2)(b) of the WBCL) and, except as
disclosed in the Company SEC Documents (defined below) filed prior to the date
of this Agreement, each such share is owned by the Company or another Subsidiary
of the Company, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances of any nature whatsoever. The Company
does not have any outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or are convertible into or exercisable
for securities having the right to vote) with the shareholders of the Company on
any matter. Section 3.2(c) of the Company Letter contains a correct and complete
list as of the date of this Agreement of each of the Company's Subsidiaries.
Except as set forth on Section 3.2(c) of the Company Letter, as of the date
hereof, neither the Company nor any of its Subsidiaries is party to or bound by
(x) any agreement or commitment pursuant to which the Company or any Subsidiary
of the Company is or could be required to register any securities under the
Securities Act or (y) any debt agreements or instruments which grant any rights
to vote (contingent or otherwise) on matters on which shareholders of the
Company may vote.
(d) Section 3.2(d) of the Company Letter contains a correct and complete
list as of the date of this Agreement of each entity in which the Company owns
an equity interest (other than a Subsidiary),
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including the number of outstanding shares of the stock of each such entity, the
percentage interest represented by the Company's ownership in the entity, and
the date of acquisition of the ownership interest in any such entity.
SECTION 3.3 AUTHORITY. On or prior to the date of this Agreement, the Board
of Directors of the Company has unanimously declared the Merger advisable and
fair to and in the best interest of the Company and its shareholders, approved
and adopted this Agreement in accordance with the WBCL, resolved to recommend
the adoption of this Agreement by the Company's shareholders and directed that
this Agreement be submitted to the Company's shareholders for adoption. The
Company has all requisite corporate power and authority to enter into this
Agreement and the Stock Option Agreement, to consummate the transactions
contemplated by the Stock Option Agreement and, subject, in the case of the
consummation of the Merger, to approval and adoption by the shareholders of the
Company of this Agreement, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the Stock Option Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of this Agreement, to (x)
approval and adoption of this Agreement by the shareholders of the Company and
(y) the filing of the Articles of Merger as required by the WBCL. This Agreement
and the Stock Option Agreement have been duly executed and delivered by the
Company and (assuming the valid authorization, execution and delivery of this
Agreement by Parent and Sub and the Stock Option Agreement by Parent and the
validity and binding effect of the Agreement on Parent and Sub and the Stock
Option Agreement on Parent) constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. The filing
of the Proxy Statement with the SEC and the issuance of up to 2,014,067 shares
of Company Common Stock pursuant to the Stock Option Agreement have been duly
authorized by the Company's Board of Directors.
SECTION 3.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this Section
3.4 have been made, and except as set forth in Section 3.4 of the Company
Letter, the execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not,
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or result in the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the articles of incorporation of the
Company (as amended from time to time, the "COMPANY CHARTER") or the Bylaws of
the Company, (ii) any provision of the comparable charter or organization
documents of any of the Company's Subsidiaries, (iii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
losses, liens, security interests, charges or encumbrances that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or under the Stock Option Agreement or prevent the consummation of any
of the transactions contemplated hereby or thereby. No filing or registration
with, or authorization, consent or approval of, any Governmental Entity is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the Stock Option
Agreement by the Company or is necessary for the consummation of the Merger and
the other transactions contemplated by this Agreement or the Stock Option
Agreement, except for (i) in connection, or in compliance, with the provisions
of the HSR Act, the Securities Act and the Exchange Act, (ii) the filing of
Articles of
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Merger with the Secretary of State of the State of Wisconsin and appropriate
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement or
the Stock Option Agreement, (iv) such filings, authorizations, orders and
approvals as may be required to obtain the State Takeover Approvals,
(v) applicable requirements, if any, of Blue Sky Laws or the Nasdaq National
Market, (vi) as may be required under foreign laws and (vii) such other
consents, orders, authorizations, registrations, declarations, approvals and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or under
the Stock Option Agreement or prevent the consummation of any of the
transactions contemplated hereby or thereby.
SECTION 3.5 SEC DOCUMENTS AND OTHER REPORTS. The Company has filed all
required documents with the SEC since June 30, 1995 (the "COMPANY SEC
DOCUMENTS"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the Company SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with United States
generally accepted accounting principles (except, in the case of the unaudited
statements, to the extent permitted by Form 10Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly presented in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal yearend audit
adjustments and to any other adjustments described therein). Except as disclosed
in the Company SEC Documents or as required by generally accepted accounting
principles, the Company has not, since June 30, 1999, made any change in the
accounting practices or policies applied in the preparation of financial
statements.
SECTION 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company in writing for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement, at the time of the Shareholder
Meeting and at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any of
its Subsidiaries shall occur which is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the shareholders of the Company. The
Registration Statement will comply (with respect to the Company) as to form in
all material respects with the provisions of the Securities Act, and the Proxy
Statement will comply (with respect to the Company) as to form in all material
respects with the provisions of the Exchange Act.
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SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.7 of the Company Letter or as disclosed in the Company SEC Documents
filed with the SEC prior to the date of this Agreement, since June 30, 1999
(i) the Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would result in a Material Adverse Effect on the Company,
(ii) the Company and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had a
Material Adverse Effect on the Company, (iii) there has been no change in the
capital stock of the Company except for the issuance of shares of the Company
Common Stock pursuant to Company Stock Options and no dividend or distribution
of any kind declared, paid or made by the Company on any class of its stock,
(iv) there has not been (A) any adoption of a new Company Plan (as hereinafter
defined), (B) any amendment to a Company Plan materially increasing benefits
thereunder, (C) any granting by the Company or any of its Subsidiaries to any
executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Company SEC Documents, (D) any granting by the
Company or any of its Subsidiaries to any such executive officer or other key
employee of any increase in severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the Company
SEC Documents or (E) except as set forth in Section 3.7(iv) of the Company
Letter, any entry by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such executive officer or other key
employee, (v) there has not been any material changes in the amount or terms of
the indebtedness of the Company and its Subsidiaries from that described in the
Company's 1999 Annual Report on Form 10K, and (vi) there has been no event
causing a Material Adverse Effect on the Company, nor any development that
would, individually or in the aggregate, result in a Material Adverse Effect on
the Company.
SECTION 3.8 PERMITS AND COMPLIANCE. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "COMPANY PERMITS"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the Company
nor any of its Subsidiaries is in violation of (A) its charter, bylaws or other
organizational documents, (B) any applicable law, ordinance, administrative, or
governmental rule or regulation, including any consumer protection, equal
opportunity, patient confidentiality, health, health care industry regulation
and thirdparty reimbursement laws including under any Federal Health Care
Program (as defined in Section 1128B(f) of the U.S. Federal Social Security Act
(together with all regulations promulgated thereunder, the "SSA")), (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
the Company or any of its Subsidiaries or (D) any Company Permits, except, in
the case of clauses (A), (B), (C) and (D) for any violations that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.
Without limiting the foregoing, the Company is in compliance, in all material
respects, with all current applicable statutes, rules, regulations or orders
administered or issued by the United States Food and Drug Administration (the
"FDA") or comparable foreign Governmental Entity; the Company does not have
Knowledge of any facts which furnish any reasonable basis for any warning
letters from the FDA, Section 305 notices, or other similar communications from
the FDA or comparable foreign entity; and since April 30, 1997, there have been
no recalls, field notifications, alerts or seizures requested in
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writing, or to the Knowledge of the Company, either requested orally or
threatened relating to the Company's products, except as set forth in Section
3.8 of the Company Letter. The Company's products, where required, are being
marketed under valid 510(k) or PreMarket Approval Applications. To the Knowledge
of the Company, there is no false information or significant omission in any
product application or productrelated submission to the FDA or comparable
foreign Governmental Entity. The Company has obtained all necessary regulatory
approvals from any foreign regulatory agencies related to the products
distributed and sold by the Company. Neither the Company nor any Subsidiary, nor
the officers, directors, managing employees or agents (as those terms are
defined in 42 C.F.R. ss.1001.1001) of the Company or any Subsidiary: (i) have
engaged in any activities which are prohibited under, or are cause for civil
penalties or mandatory or permissive exclusion from, any Federal Health Care
Program under Sections 1128, 1128A, 1128B, or 1877 of SSA or related state or
local statutes, including knowingly and willfully offering, paying, soliciting
or receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind in return for,
or to induce, the purchase, lease, or order, or the arranging for or
recommending of the purchase, lease or order, of any item or service for which
payment may be made in whole or in part under any such program; (ii) have had a
civil monetary penalty assessed against them under Section 1128A of SSA;
(iii) have been excluded from participation under any Federal Health Care
Program; or (iv) have been convicted (as defined in 42 C.F.R. ss. 1001.2) of any
of the categories of offenses described in Sections 1128(a) or 1128(b)(1),
(b)(2), or (b)(3) of SSA. Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement, there are no contracts or agreements of the
Company or its Subsidiaries having terms or conditions which would have a
Material Adverse Effect on the Company or having covenants not to compete that
materially impair the ability of the Company to conduct its business as
currently conducted or would reasonably be expected to materially impair
Parent's ability to conduct its businesses. Except as set forth in the Company
SEC Documents filed prior to the date of this Agreement, no event of default or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by the Company
of the transactions contemplated by this Agreement or the Stock Option
Agreement, will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee of any agreement
or instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any such Subsidiary is bound or to which any of
the properties, assets or operations of the Company or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. "KNOWLEDGE OF THE COMPANY"
means the actual knowledge of the directors and executive officers of the
Company.
SECTION 3.9 TAX MATTERS. Except as otherwise set forth in Section 3.9 of
the Company Letter, (i) the Company and each of its Subsidiaries have timely
filed (taking account of extensions to file that have been properly obtained)
all material Tax Returns (as hereinafter defined) required to have been filed by
it, and such Tax Returns are correct and complete in all material respects; (ii)
the Company and each of its Subsidiaries have timely paid (taking account of
extensions to pay that have been properly obtained) all Taxes (as hereinafter
defined) required to be paid by it that are material (either individually or in
the aggregate) and that have been due and will timely pay (taking account of
such extensions) all Taxes required to be paid by it that are material (either
individually or in the aggregate) and that will be due on or prior to the
Effective Time (other than Taxes that are being timely and properly contested in
good faith), or where payment is not yet due or is being contested in good
faith, has established in accordance with United States generally accepted
accounting principles an adequate reserve, which such reserve is adequate
notwithstanding the items set forth in the Company Letter, for the payment of
such Taxes; (iii) the Company and each of its Subsidiaries have complied in all
material respects with all rules and regulations relating to the withholding of
Taxes and the remittance of withheld Taxes; (iv) neither the Company nor any of
its Subsidiaries has waived any statute of limitations in respect of its Taxes;
(v) no federal, state, local, or foreign audits or administrative
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proceedings, of which the Company or its Subsidiaries has written notice, or to
the Knowledge of the Company, oral notice, are pending with regard to any
material Taxes or material Tax Returns of the Company or its Subsidiaries and
none of them has received a written notice of any proposed audit or proceeding
from the Internal Revenue Service ("IRS") or any other taxing authority; (vi) no
issues that have been raised by the relevant taxing authority in connection with
the examination of Tax Returns required to have been filed by or with respect to
the Company and each of its Subsidiaries are currently pending, other than
issues that, if resolved against the Company or its Subsidiaries, would not
result in the imposition of Taxes that are material (either individually or in
the aggregate); (vii) all deficiencies asserted or assessments made as a result
of any examination of such Tax Returns by any taxing authority have been paid in
full; (viii) to the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has engaged in any transaction that would constitute a "tax
shelter" within the meaning of Section 6111 or 6662 of the Code and that has not
been disclosed on an applicable Tax Return; (ix) neither the Company nor any of
its Subsidiaries has submitted a request for a ruling to the IRS or a State tax
authority; (x) neither the Company nor any of its subsidiaries has made or
rescinded any express or deemed material election relating to Taxes for any
period the statute of limitations with respect to which has not expired; (xi)
neither the Company nor any of its Subsidiaries has changed any of its methods
of reporting income or deductions for Tax purposes from those employed in the
preparation of its Tax Returns; (xii) neither Company nor any of its
Subsidiaries has been a member of an affiliated group of corporations (within
the meaning of Section 1504(a)) filing a consolidated federal income tax return
(or a group of corporations filing a consolidated, combined, or unitary income
tax return under comparable provisions of state, local, or foreign tax law) for
any taxable period, other than a group the common parent of which is Company;
(xiii) neither Company nor any of its Subsidiaries has any obligation under any
agreement or arrangement with any other person with respect to material Taxes of
such other person (including pursuant to Treasury Regulations Section 1.15026 or
comparable provision of state, local or foreign tax law) including any liability
for Taxes of any predecessor entity; and (xiv) to the Knowledge of the Company,
there are no facts that would prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code (xv) Company
has furnished to Parent true and complete copies of all Tax Returns for all
periods, the statute of limitations for the assessment of Tax with respect to
which has not expired, (xvi) neither the Company nor any of its Subsidiaries is
a party to any agreement, contract, arrangement, or plan that has resulted or
would result, individually or in the aggregate, in connection with this
Agreement or any change of control of the Company or any of its Subsidiaries, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; and (xvii) the Company has not made any payments, and is not
party to an agreement that could require it to make any payments (including any
deemed payment of compensation upon exercise of any option), that would not be
fully deductible by reason of Section 162(m) of the Code.. For purposes of this
Agreement: (i) "TAXES" means any federal, state, local, foreign or provincial
income, gross receipts, property, sales, use, license, franchise, employment,
payroll, withholding, alternative or added minimum, ad valorem, valueadded,
transfer, excise, capital, or net worth tax, or other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest thereon or penalty imposed with respect thereto by
any Governmental Entity, whether computed on a separate, consolidated, unitary,
combined, or any other basis, and shall include any transferee or secondary
liability in respect of any tax (whether imposed by law, contractual agreement,
or otherwise), and (ii) "TAX RETURN" means any return, report or similar
statement (including the attached schedules) required to be filed with respect
to any Tax, including any information return, claim for refund, amended return
or declaration of estimated Tax.
SECTION 3.10 ACTIONS AND PROCEEDINGS. Except as set forth in the Company
SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its Subsidiaries,
or against or involving any of the present or former directors, officers,
employees, consultants, agents or shareholders of the Company or any of its
Subsidiaries, as such, any of its or their properties, assets or
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business or any Company Plan (as hereinafter defined) that, individually or in
the aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder or under
the Stock Option Agreement. Except as set forth in Section 3.10 of the Company
Letter, there are no actions, suits or claims or legal, administrative or
arbitrative proceedings or investigations (including claims for workers'
compensation) pending or, to the Knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries or any of its or their present
or former directors, officers, employees, consultants, agents or shareholders,
as such, or any of the Company's or the Subsidiaries' properties, assets or
business or any Company Plan that, individually or in the aggregate, would have
a Material Adverse Effect on the Company or materially impair the ability of the
Company to perform its obligations hereunder or under the Stock Option
Agreement. There are no actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental investigations pending or,
to the Knowledge of the Company, threatened against or affecting the Company or
any of its Subsidiaries or any of its or their present or former officers,
directors, employees, consultants, agents or shareholders, as such, or any of
its or their properties, assets or business relating to the transactions
contemplated by this Agreement and the Stock Option Agreement.
SECTION 3.11 CERTAIN AGREEMENTS. (a) Except as set forth in Section
3.11(a) of the Company Letter, neither the Company nor any of its Subsidiaries
is a party to any oral or written agreement or plan relating to the compensation
of employees of the Company or its Subsidiaries, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, pension plan (as defined in
Section 3(2) of ERISA) or welfare plan (as defined in Section 3(1) of ERISA)
(collectively the "COMPENSATION AGREEMENTS"), any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
Stock Option Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or the Stock Option Agreement. No holder of any option to purchase
shares of Company Common Stock, or shares of Company Common Stock granted in
connection with the performance of services for the Company or its Subsidiaries,
is or will be entitled to receive cash from the Company or any Subsidiary in
lieu of or in exchange for such option or shares as a result of the transactions
contemplated by this Agreement or the Stock Option Agreement except as provided
in Section 5.6. Section 3.11(a) of the Company Letter sets forth (i) for each
officer, director or employee who is a party to, or will receive benefits under,
any Compensation Agreement as a result of the transactions contemplated herein,
the total amount that each such person may receive, or is eligible to receive,
assuming that the transactions contemplated by this Agreement are consummated on
the date hereof, and (ii) the total amount of indebtedness owed to the Company
or its Subsidiaries from each officer, director or employee of the Company and
its Subsidiaries.
(b) Set forth in Section 3.11(b) of the Company Letter is a list of all
contracts that are material to the business of the Company and its Subsidiaries
taken as a whole (whether oral or written), including all distribution
contracts, solesource supply contracts, national accounts contracts, any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any material lease, contractual license or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the Company
or any such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject (collectively,
"SIGNIFICANT CONTRACTS"). Prior to the date hereof, the Company has provided
true and complete copies of all such contracts to Parent.
(c) Except as set forth on Section 3.11(c) of the Company Letter, each
Significant Contract is a legal, valid and binding agreement of the Company or
its Subsidiaries, neither the Company nor any of its Subsidiaries (or to the
Knowledge of the Company, any other party thereto) is in default under any
Significant Contract, and none of such Significant Contracts has been canceled
by the other party
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thereto; each Significant Contract is in full force and effect and no event has
occurred which, with the passage of time or the giving of notice or both, would
constitute a default, event of default or other breach by the Company or any
Subsidiary party thereto which would entitle the other party to such Significant
Contract to terminate the same or declare a default or event of default
thereunder; the Company and the Subsidiaries are not in receipt of any claim of
default under any such agreement; in each instance, except where it would not
have a Material Adverse Effect on the Company.
SECTION 3.12 ERISA (a) Each Company Plan is listed in Section 3.12(a) of
the Company Letter. With respect to each Company Plan that is maintained in the
United States for the benefit of employees who are not primarily nonresident
aliens (a "U.S. PLAN"), the Company has made available to Parent a true and
correct copy of (i) the three most recent annual reports (Form 5500) filed with
the IRS, (ii) each such U.S. Plan that has been reduced to writing and all
amendments thereto, (iii) each trust agreement, insurance contract or
administration agreement relating to each such U.S. Plan, (iv) a written summary
of each unwritten U.S. Plan, (v) the most recent summary plan description or
other written explanation of each U.S. Plan provided to participants, (vi) the
three most recent actuarial reports or valuations relating to a U.S. Plan
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (vii) the most recent determination letter and request
therefor, if any, issued by the IRS with respect to any U.S. Plan intended to be
qualified under section 401(a) of the Code, (viii) any request for a
determination currently pending before the IRS, (ix) all correspondence with the
IRS, the Department of Labor, the SEC or Pension Benefit Guaranty Corporation
relating to any outstanding controversy and (x) all forms and certificate
samples used to comply with Sections 4980, 9801 and 9802 of the Code. Except as
would not have a Material Adverse Effect on the Company, each U.S. Plan complies
in all respects with ERISA, the Code and all other applicable statutes and
governmental rules and regulations. Except as set forth in Section 3.12(a) of
the Company Letter, no "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any U.S. Plan for which the 30day notice
requirement has not been waived. Neither the Company nor any of its Subsidiaries
or ERISA Affiliates (as hereinafter defined) has withdrawn from any Company
Multiemployer Plan (as hereinafter defined) and would not incur any withdrawal
liability if it withdrew from all such Company Multiemployer Plans on the date
of this Agreement. No action has been taken, or is currently being considered,
to terminate or withdraw from any U.S. Plan subject to Title IV of ERISA and, to
the Knowledge of the Company, there is no reason to believe the Pension Benefit
Guaranty Corporation would initiate the termination of any such Plan. No U.S.
Plan, nor any trust created thereunder, has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived.
(b) Except as listed in Section 3.12(b) of the Company Letter, with respect
to the U.S. Plans, no event has occurred and, to the Knowledge of the Company,
there exists no condition or set of circumstances in connection with which the
Company or any Subsidiary or ERISA Affiliate or U.S. Plan fiduciary could be
subject to any liability under the terms of such U.S. Plans, ERISA, the Code or
any other applicable law which would have a Material Adverse Effect on the
Company. All U.S. Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the IRS to be so qualified, or a
timely application for such determination is now pending and to the Knowledge of
the Company, there is no reason why any such U.S. Plan is not so qualified in
operation. Neither the Company nor any of its Subsidiaries or ERISA Affiliates
has been notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of ERISA.
No event has occurred and, to the Knowledge of the Company, there exists no
condition or set of circumstances that would result in a material increase in
the contributions required to be made to any Company Multiemployer Plan by the
Company or any Subsidiary or ERISA Affiliate. Except as disclosed in Section
3.12(b) of the Company Letter, neither the Company nor any of its Subsidiaries
or ERISA Affiliates has any liability or obligation under any welfare U.S. Plan
to provide benefits after
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termination of employment to any employee or dependent other than as required by
Section 4980B of the Code.
(c) As used herein, (i) "COMPANY PLAN" means a "pension plan" (as defined in
Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a "welfare
plan" (as defined in Section 3(1) of ERISA), or any other written or oral bonus,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, restricted stock, stock
appreciation right, holiday pay, vacation, severance, medical, dental, vision,
disability, death benefit, sick leave, fringe benefit, personnel policy,
insurance or other plan, arrangement or understanding, in each case established
or maintained by the Company or any of its Subsidiaries or ERISA Affiliates or
as to which the Company or any of its Subsidiaries or ERISA Affiliates has
contributed or otherwise may have any liability, (ii) "COMPANY MULTIEMPLOYER
PLAN" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any of its Subsidiaries or ERISA Affiliates is or has
been obligated to contribute or otherwise may have any liability that is
maintained in the United States for the benefit of employees who are not
primarily nonresident aliens, and (iii) "ERISA AFFILIATE" means any trade or
business (whether or not incorporated) which would be considered a single
employer with the Company pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to Section
4001(b) of ERISA and the regulations promulgated thereunder.
(d) Section 3.12(d) of the Company Letter contains a list of all (i)
severance and employment agreements with employees of the Company and each
Subsidiary and ERISA Affiliate, (ii) severance programs and policies of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees and (iii) plans, programs, agreements and other arrangements of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees containing change of control or similar provisions.
(e) Except as set forth in Section 3.12(e) of the Company Letter, with
respect to each Company Plan not subject to United States law (a "COMPANY
FOREIGN BENEFIT PLAN"), except as would not have a Material Adverse Effect on
the Company, (i) the fair market value of the assets of each funded Company
Foreign Benefit Plan, the liability of each insurer for any Company Foreign
Benefit Plan funded through insurance or the reserve shown on the Company's
consolidated financial statements for any unfunded Company Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or provide for
the projected benefit obligations, as of the Effective Time, with respect to all
current and former participants in such plan in accordance with generally
accepted country specific actuarial assumptions and valuations and no
transaction contemplated by this Agreement shall cause such assets or insurance
obligations or book reserve to be less than such projected benefit obligations;
and (ii) each Company Foreign Benefit Plan required to be registered has been
registered and has been maintained in good standing with the appropriate
regulatory authorities.
SECTION 3.13 COMPLIANCE WITH WORKER SAFETY LAWS. The properties, assets and
operations of the Company and its Subsidiaries are in compliance with all
applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "WORKER SAFETY LAWS"), except for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans (other than those taken by subsequent owners of such
properties, assets or operations) of the Company or any of its Subsidiaries that
may interfere with or prevent compliance or continued compliance with applicable
Worker Safety Laws, other than any such interference or prevention as would not,
individually or in the aggregate with any such other interference or prevention,
have a Material Adverse Effect on the Company.
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SECTION 3.14 LIABILITIES; PRODUCTS. (a) Except as fully reflected or
reserved against in the financial statements included in the Company's 1999
Annual Report on Form 10K, or disclosed in the footnotes thereto and as
disclosed in Section 3.14(a) of the Company Letter, the Company and its
Subsidiaries had no liabilities (including Tax liabilities) at the date of such
financial statements, absolute or contingent, other than liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, and had no liabilities (including Tax liabilities) that were not
incurred in the ordinary course of business. As of the date hereof, the Company
had less than $250,000 indebtedness for borrowed money.
(b) Except as set forth in Section 3.14(b) of the Company Letter, since
June 30, 1999, neither the Company nor any Subsidiary has received a written, or
to the Knowledge of the Company, oral claim for or based upon breach of product
or service warranty or guaranty or similar claim (other than warranty or
guaranty claims in the ordinary course of business not material in amount or
significance), strict liability in tort, negligent design of product, negligent
provision of services or any other allegation of liability, including or arising
from the materials, design, testing, manufacture, packaging, labeling (including
instructions for use), or sale of its products or from the provision of
services; and, to the Knowledge of the Company, there is no basis for any such
claim which, if asserted, would likely have a Material Adverse Effect on the
Company.
(c) The Company has provided in Section 3.14(c) of the Company Letter a
schedule of products in development and planned introductions. The Company
reasonably expects the goals set forth therein to be achieved in all material
respects, except for such deviations as would not have a Material Adverse Effect
on the Company. The product and service engineering, development, manufacturing
and quality control processes which have been and are being followed by the
Company are reasonably designed to produce products and services which (i) are
consistent with the claims made about them in the Company's sales brochures and
other statements made about them by or on behalf of the Company, (ii) otherwise
meet the reasonable expectations of customers, (iii) comply with applicable
regulatory requirements and (iv) avoid claims of the type described in Section
3.14(b).
SECTION 3.15 LABOR MATTERS. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or labor contract. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practice
with respect to any persons employed by or otherwise performing services
primarily for the Company or any of its Subsidiaries (the "COMPANY BUSINESS
PERSONNEL"), and there is no unfair labor practice complaint or grievance
against the Company or any of its Subsidiaries by any person pursuant to the
National Labor Relations Act or any comparable state agency or foreign law
pending or threatened in writing with respect to the Company Business Personnel,
except where such unfair labor practice, complaint or grievance would not have a
Material Adverse Effect on the Company. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries which may interfere
with the respective business activities of the Company or any of its
Subsidiaries, except where such dispute, strike or work stoppage would not have
a Material Adverse Effect on the Company.
SECTION 3.16 INTELLECTUAL PROPERTY. "COMPANY INTELLECTUAL PROPERTY" means
all United States and foreign trademarks, trademark registrations, trademark
rights and renewals thereof, trade names, trade name rights, trade dress,
patents, patent rights, patent applications, industrial models, inventions,
invention disclosures, author's rights, designs, utility models, inventor
rights, software, copyrights, copyright registrations and renewals thereof,
servicemarks, servicemark registrations and renewals thereof, servicemark
rights, trade secrets, applications for trademark and servicemark registrations,
knowhow, data, confidential information and other proprietary rights, and any
data and information of any nature or form used or held for use in connection
with the businesses of the Company and/or its Subsidiaries as currently
conducted or as currently contemplated by the Company, together with all
applications currently pending or in process for any of the foregoing. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date
hereof, the Company and its
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Subsidiaries own, or possess adequate licenses or other valid rights to use
(including the right to sublicense to customers, suppliers or others as needed),
all of the material Company Intellectual Property that is necessary for the
conduct or contemplated conduct of the Company's or Subsidiaries' businesses.
Section 3.16 of the Company Letter lists each material license or other
agreement pursuant to which the Company or any Subsidiary has the right to use
Company Intellectual Property utilized in connection with any product of, or
service provided by, the Company and its Subsidiaries, the cancellation or
expiration of which would have a Material Adverse Effect on the Company (the
"COMPANY LICENSES"). Except as set forth in Section 3.16 of the Company Letter,
there are no pending, and between the date hereof and the Effective Time, there
shall not be any pending, or to the Knowledge of the Company, threatened
interferences, reexaminations, oppositions or cancellation proceedings involving
any patents or patent rights, trademarks or trademark rights, or applications
therefor, of the Company or any Subsidiary, except such as may be commenced by
Parent or any Subsidiary of Parent and except such as would not, individually or
in the aggregate, have a Material Adverse Effect on the Company. There is no
breach or violation by the Company or by any Subsidiary under, and, to the
Knowledge of the Company, there is no breach or violation by any other party to,
any Company License that is reasonably likely to give rise to any termination or
any loss of rights thereunder. To the Knowledge of the Company, there has been
no unauthorized disclosure or use of confidential information, trade secret
rights, processes and formulas, research and development results and other
knowhow of the Company or any Subsidiary, the value of which to the Company and
its Subsidiaries is dependent upon the maintenance of the confidentiality
thereof. The conduct of the business of the Company and the Subsidiaries as
currently conducted or contemplated in connection with the introduction of
planned new products and services does not and will not infringe upon or
conflict with, in any way, any license, trademark, trademark right, trade name,
trade name right, patent, patent right, industrial model, invention, service
mark, service mark right, copyright, trade secret or any other intellectual
property rights of any third party. Except as disclosed in the Company SEC
Documents filed with the SEC prior to the date hereof or in Section 3.16 of the
Company Letter, to the Knowledge of the Company there are no infringements of,
or conflicts with, any Company Intellectual Property. Except as set forth in
Section 3.16 of the Company Letter, neither the Company nor any Subsidiary has
licensed or otherwise permitted the use by any third party of any proprietary
information or Company Intellectual Property on terms or in a manner which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company.
SECTION 3.17 OPINION OF FINANCIAL ADVISOR. The Company will have received
the written opinion of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") dated the date hereof to the effect that, as of the date hereof, the
Merger Consideration is fair to the Company's shareholders from a financial
point of view, a copy of which opinion has been delivered to Parent.
SECTION 3.18 STATE TAKEOVER STATUTES. The Board of Directors of the Company
has, to the extent such statute is applicable, taken all action (including
appropriate approvals of the Board of Directors of the Company) necessary to
render the provisions of Section 180.1140 through Section 180.1144 of the WBCL
inapplicable to the Merger, this Agreement, the Stock Option Agreement, the
Shareholder Agreement, and the transactions contemplated hereby and thereby. To
the Knowledge of the Company, no other state takeover statute or similar charter
or bylaw provisions are applicable to the Merger, this Agreement, the Stock
Option Agreement, and the Shareholder Agreement and the transactions
contemplated hereby and thereby.
SECTION 3.19 REQUIRED VOTE OF COMPANY SHAREHOLDERS. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock is
required to adopt this Agreement. No other vote of the security holders of the
Company is required by law, the Company Charter or the Bylaws of the Company or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby and in the Stock Option Agreement.
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SECTION 3.20 REORGANIZATION. To the Knowledge of the Company, neither it
nor any of its Subsidiaries has taken any action or failed to take any action
which action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.21 ACCOUNTS RECEIVABLE. All of the accounts and notes receivable
of the Company and its Subsidiaries set forth on the books and records of the
Company (net of the applicable reserves, which such reserves are adequate
notwithstanding the items set forth in the Company Letter, reflected on the
books and records of the Company and in the financial statements included in the
Company SEC Documents) (i) represent sales actually made or transactions
actually effected in the ordinary course of business for goods or services
delivered or rendered to unaffiliated customers in bona fide arm's length
transactions, (ii) except as set forth on Section 3.21(ii) of the Company
Letter, constitute valid claims, and (iii) except as set forth on Section
3.21(iii) of the Company Letter, are good and collectible at the aggregate
recorded amounts thereof (net of such reserves, which such reserves are adequate
notwithstanding the items set forth in the Company Letter,) without right of
recourse, defense, deduction, return of goods, counterclaim, or offset and have
been or will be collected in the ordinary course of business and consistent with
past experience.
SECTION 3.22 INVENTORIES. Except as set forth in Section 3.22 of the
Company Letter, all inventories of the Company and its Subsidiaries consist of
items of merchantable quality and quantity usable or saleable in the ordinary
course of business, are saleable at prevailing market prices that are not less
than the book value amounts thereof or the price customarily charged by the
Company or the applicable Subsidiary therefor, conform to the specifications
established therefor, and have been manufactured in accordance with applicable
regulatory requirements, except to the extent that the failure of such
inventories so to consist, be saleable, conform, or be manufactured would not
have a Material Adverse Effect on the Company. Except as set forth in Section
3.22 of the Company Letter, the quantities of all inventories, materials, and
supplies of the Company and each Subsidiary (net of the obsolescence reserves,
which such reserves are adequate notwithstanding the items set forth in the
Company Letter, therefor shown in the financial statements included in the
Company SEC Documents and determined in the ordinary course of business
consistent with past practice) are not obsolete, damaged, slowmoving, defective,
or excessive, except to the extent that the failure of such inventories to be in
such conditions would not have a Material Adverse Effect on the Company.
SECTION 3.23 ENVIRONMENTAL MATTERS. (a) For purposes of this Agreement, the
following terms shall have the following meanings: (i) "HAZARDOUS SUBSTANCES"
means (A) petroleum and petroleum products, by-products or breakdown products,
radioactive materials, asbestos-containing materials and polychlorinated
biphenyls, and (B) any other chemicals, materials or substances regulated as
toxic or hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law; (ii) "ENVIRONMENTAL LAW" means any law, past, present or
future (up until the Effective Time) and as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, or common law, relating to pollution or
protection of the environment, health or safety or natural resources, including
those relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Substances; and (iii) "ENVIRONMENTAL
PERMIT" means any permit, approval, identification number, license or other
authorization required under any applicable Environmental Law.
(b) The Company and the Subsidiaries are and have been in compliance with
all applicable Environmental Laws, have obtained all Environmental Permits and
are in compliance with their requirements, and have resolved all past
non-compliance with Environmental Laws and Environmental Permits without any
pending, on-going or future obligation, cost or liability, except in each case
for the notices set forth in Section 3.21 of the Company Letter or where such
non-compliance or obligation would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
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(c) Except as set forth in Section 3.23 of the Company Letter, neither the
Company nor any of its Subsidiaries has (i) placed, held, located, released,
transported or disposed of any Hazardous Substances on, under, from or at any of
the Company's or any of its Subsidiaries' properties or any other properties,
other than in a manner that would not, in all such cases taken individually or
in the aggregate, result in a Material Adverse Effect on the Company, (ii) any
Knowledge of either the presence of or of any reason to know of any Hazardous
Substances on, under, emanating from, or at any of the Company's or any of its
Subsidiaries' properties or any other property but arising from the Company's or
any of its Subsidiaries' current or former properties or operations, other than
in a manner that would not result in a Material Adverse Effect on the Company,
or (iii) any Knowledge of any reason to know, nor has it received any written
notice (A) of any violation of or liability under any Environmental Laws,
(B) of the institution or pendency of any suit, action, claim, proceeding or
investigation by any Governmental Entity or any third party in connection with
any such violation or liability, (C) requiring the investigation of, response to
or remediation of Hazardous Substances at or arising from any of the Company's
or any of its Subsidiaries' current or former properties or operations or any
other properties, (D) alleging noncompliance by the Company or any of its
Subsidiaries with the terms of any Environmental Permit in any manner reasonably
likely to require material expenditures or to result in material liability or
(E) demanding payment for response to or remediation of Hazardous Substances at
or arising from any of the Company's or any of its Subsidiaries' current or
former properties or operations or any other properties, except in each case for
the notices or matters set forth in Section 3.23 of the Company Letter.
(d) Except as set forth in Section 3.23 of the Company Letter, no
Environmental Law imposes any obligation upon the Company or any of its
Subsidiaries arising out of or as a condition to any transfer or transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any Environmental Permit or license, any requirement to file any notice
or other submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree.
(e) Except as set forth in Schedule 3.23 (e) of the Company Letter, there
are no environmental assessments or audit reports or other similar studies or
analyses in the possession or control of the Company or any of its Subsidiaries
relating to any real property currently or formerly owned, leased or occupied by
the Company or any of its Subsidiaries.
SECTION 3.24 SUPPLIERS AND DISTRIBUTORS. (a) Neither the Company nor any
Subsidiary has received any written notice, or to the Knowledge of the Company,
oral notice, or has any reason to believe that any significant supplier,
including without limitation any sole source supplier, will not sell raw
materials, supplies, merchandise and other goods to the Company or any
Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those used in its current sales to the Company and its
Subsidiaries, subject only to general and customary price increases, unless
comparable raw materials, supplies, merchandise, or other goods are readily
available from other sources on comparable terms and conditions.
(b) Neither the Company nor any Subsidiary has received any written notice,
or to the Knowledge of the Company, oral notice, or has any reason to believe
that any distributors, sales representatives, sales agents, or other third party
sellers, will not sell or market the products or services of the Company or any
Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those used in the current sales and distribution
contracts of the Company and its Subsidiaries.
SECTION 3.25 INSURANCE. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Company or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of the Company and the Subsidiaries and their
respective
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properties and assets, and are in character and amount similar to that carried
by persons engaged in similar businesses and subject to the same or similar
perils or hazards, except for any such failures to maintain insurance policies
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Company. The Company and each Subsidiary have made any and all payments
required to maintain such policies in full force and effect. Neither the Company
nor any Subsidiary has received notice of default under any such policy, and has
not received written notice or, to the Knowledge of the Company, oral notice of
any pending or threatened termination or cancellation, coverage limitation or
reduction or material premium increase with respect to such policy.
SECTION 3.26 TRANSACTIONS WITH AFFILIATES. (a) For purposes of this Section
3.26, the term "AFFILIATED PERSON" means (i) any holder of 2% or more of the
Company Common Stock, (ii) any director, officer or senior executive of the
Company or any Subsidiary, (iii) any person, firm or corporation that directly
or indirectly controls, is controlled by, or is under common control with, any
of the Company or any Subsidiary or (iv) any member of the immediate family or
any of such persons.
(b) Except as set forth in Section 3.26 of the Company Letter or in the
Company SEC Reports filed with the SEC prior to the date hereof, since
March 31, 2000, the Company and its Subsidiaries have not, in the ordinary
course of business or otherwise, (i) purchased, leased or otherwise acquired any
material property or assets or obtained any material services from, (ii) sold,
leased or otherwise disposed of any material property or assets or provided any
material services to (except with respect to remuneration for services rendered
in the ordinary course of business as director, officer or employee of the
Company or any Subsidiary), (iii) entered into or modified in any manner any
contract with, or (iv) borrowed any money from, or made or forgiven any loan or
other advance (other than expenses or similar advances made in the ordinary
course of business) to, any Affiliated Person.
(c) Except as set forth in the Company SEC Reports filed with the SEC prior
to the date hereof, (i) the contracts of the Company and its Subsidiaries do not
include any material obligation or commitment between the Company or any
Subsidiary and any Affiliated Person, (ii) the assets of the Company or any
Subsidiary do not include any receivable or other obligation or commitment from
an Affiliated Person to the Company or any Subsidiary and (iii) the liabilities
of the Company and its Subsidiaries do not include any payable or other
obligation or commitment from the Company or any Subsidiary to any Affiliated
Person.
(d) To the Knowledge of the Company and except as set forth in the Company
SEC Reports filed with the SEC prior to the date hereof, no Affiliated Person of
any of the Company or any Subsidiary is a party to any contract with any
customer or supplier of the Company or any Subsidiary that affects in any
material manner the business, financial condition or results of operation of the
Company or any Subsidiary.
SECTION 3.27 TITLE TO AND SUFFICIENCY OF ASSETS. (a) As of the date hereof,
the Company and its Subsidiaries own, and as of the Effective Time the Company
and its Subsidiaries will own, good and marketable title to all of their assets
constituting personal property which is material to their business (excluding,
for purposes of this sentence, assets held under leases), free and clear of any
and all mortgages, liens, encumbrances, charges, claims, restrictions, pledges,
security interests or impositions (collectively, "LIENS"), except as set forth
in the Company SEC Documents filed with the SEC prior to the date hereof, or
Section 3.27 of the Company Letter. Such assets, together with all assets held
by the Company and its Subsidiaries under leases, include all tangible and
intangible personal property, contracts and rights necessary or required for the
operation of the businesses of the Company as presently conducted.
(b) As of the date hereof, the Company and its Subsidiaries will own, good
and marketable title to all of their Real Estate (as defined below) which is
material to such persons (excluding, for purposes of this sentence, Real Estate
leases) free and clear of any and all Liens, except as set forth in the Company
SEC Documents filed with the SEC prior to the date hereof or in Section 3.27 of
the
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Company Letter or such other Liens on Real Estate which would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. The Real
Estate assets (including, for the purpose of this sentence, Real Estate leases)
held by the Company and its Subsidiaries, are adequate for the operation of the
businesses of the Company as presently conducted. The leases to all Real Estate
occupied by the Company and the Subsidiaries which are material to the operation
of the businesses of the Company are in full force and effect and no event has
occurred which with the passage of time, the giving of notice, or both, would
constitute a default or event of default by the Company or any Subsidiary or, to
the Knowledge of the Company, any other person who is a party signatory thereto,
other than such defaults or events of default which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. For purposes
of this Agreement, "REAL ESTATE" means, with respect to the Company or any
Subsidiary, as applicable, all of the fee, if any, or leasehold ownership right,
title and interest of such person, in and to all real estate and improvement
owned or leased by any such person and which is used by any such person in
connection with the operation of its business.
SECTION 3.28 BROKERS. No broker, investment banker or other person, other
than DLJ, the fees and expenses of each of which will be paid by the Company (as
reflected in an agreement between DLJ, and the Company, a copy of each of which
has been furnished to Parent), is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement and by the Stock Option Agreement based upon arrangements made by
or on behalf of the Company.
SECTION 3.29 YEAR 2000. Except as set forth in Section 3.29 of the Company
Letter, the current and previously sold products of the Company and its
Subsidiaries and software, operations, systems and processes (including, to the
Knowledge of the Company, software, operations, systems and processes obtained
from third parties) used in the conduct of the business of the Company and its
Subsidiaries, are Year 2000 Compliant and the Company has delivered to Parent
true and correct copies of any consultant or other third-party reports prepared
on behalf of the Company with respect to such compliance. For purposes of this
Agreement, "YEAR 2000 COMPLIANT" means the ability to process (including
calculate, compare, sequence, display or store), transmit or receive data or
data/time data from, into and between the twentieth and twenty-first centuries,
and the years 1999 and 2000, and leap year calculations without error or
malfunction in all material respects. Except as set forth in Section 3.29 of the
Company Letter, neither the Company nor any of its Subsidiaries have any
obligations under any warranty agreements, agreements, or otherwise to remedy
any information technology defect relating to a failure to be Year 2000
Compliant, except where any such warranty agreements, agreements or obligations
to remedy would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
SECTION 3.30 NO CONSULTING ACTIVITIES SUBJECT TO HOSPITAL-PHYSICIAN
GAINSHARING RESTRICTIONS. Neither the Company nor its Subsidiaries have ever
provided any clinical consulting services, including advice, suggestions or
recommendations concerning physician partnership strategies and models, which
would have been subject to the requirements of 42 U.S.C. sec.
1320a-7a(b)(1) and (2).
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except as
expressly permitted by clauses (i) through (xvii) of this Section 4.1, during
the period from the date of this Agreement through the Effective Time, the
Company shall, and shall cause each of its Subsidiaries to, in all material
respects carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement or as set forth in the
Company Letter (with specific reference to the applicable subsection below), the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent:
(i) (A) other than dividends paid by wholly-owned Subsidiaries, declare,
set aside or pay any dividends on, or make any other actual, constructive or
deemed distributions in respect of, any of its capital stock, or otherwise
make any payments to its shareholders in their capacity as such, (B) other
than in the case of any Subsidiary, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(C) purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options (including options under the Company Stock Option Plans) to acquire
any such shares, voting securities, equity equivalent or convertible
securities, other than (A) the issuance of shares of Company Common Stock
upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their current terms and (B) the issuance of
shares of Company Common Stock pursuant to the Stock Option Agreement;
(iii) amend the Company Charter or by-laws;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, limited liability company,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than sales of inventory that
are in the ordinary course of business consistent with past practice;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) in the ordinary
course of business consistent with past practices and (B) indebtedness,
loans, advances, capital contributions and investments between the Company
and any of its wholly-owned Subsidiaries or between any of such wholly-owned
Subsidiaries, in each case in the ordinary course of business consistent
with past practice;
(vii) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company
or any Subsidiary;
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(viii) except as provided in Section 4.1(viii) of the Company Letter,
enter into or adopt any, or amend any existing, severance plan, agreement or
arrangement or enter into or amend any Company Plan, employment, or any
consulting agreement;
(ix) except as provided in Section 4.1(ix) of the Company Letter,
increase the compensation payable or to become payable to its directors,
officers or employees (except for increases in the ordinary course of
business consistent with past practice in salaries or wages of employees of
the Company or any of its Subsidiaries who are not officers of the Company
or any of its Subsidiaries) or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director or
officer of the Company or any of its Subsidiaries, or establish, adopt,
enter into, or, except as may be required to comply with applicable law,
amend in any material respect or take action to enhance in any material
respect or accelerate any rights or benefits under, any labor, collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any obligation or
duty imposed upon it or any Subsidiary by any applicable material federal,
state or local law, rule, regulation, guideline or ordinance;
(xi) make any change to accounting policies or procedures (other than
actions required to be taken by generally accepted accounting principles);
(xii) prepare or file any Tax Return inconsistent with its past practice
in preparing or filing similar Tax Returns in prior periods or, on any such
Tax Return, take any position, make any election, or adopt any method that
is inconsistent with positions taken, elections made or methods used in
preparing or filing similar Tax Returns in prior periods;
(xiii) make or rescind any express or deemed election relating to Taxes
or change any of its methods of reporting income or deductions for Tax
purposes;
(xiv) commence any litigation or proceeding with respect to any material
Tax liability or settle or compromise any material Tax liability without
Parent's consent (which consent should not be unreasonably withheld) or
commence any other litigation or proceedings or settle or compromise any
other material claims or litigation;
(xv) except as provided in Section 4.1(xv) of the Company Letter, enter
into, renew, terminate or amend any agreement or contract material to the
Company and its Subsidiaries, taken as a whole, including any Significant
Contract; or purchase any real property or make or agree to make any new
capital expenditure or expenditures which in the aggregate are in excess of
$5 million;
(xvi) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent financial statements (or the notes thereto) of the Company included
in the Company SEC Documents or incurred in the ordinary course of business
consistent with past practice; or
(xvii) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
SECTION 4.2 NO SOLICITATION. (a) The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any financial advisor, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, (i) solicit,
initiate or encourage the submission of, any Takeover Proposal (as hereafter
defined), (ii) enter into
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any agreement with respect to or approve or recommend any Takeover Proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to the Company or any Subsidiary in
connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Takeover Proposal; PROVIDED, HOWEVER, that nothing contained in this
Section 4.2(a) shall prohibit the Company or its directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer or (ii) referring a third party to this Section 4.2(a) or making
a copy of this Section 4.2(a) available to any third party; and PROVIDED,
FURTHER, that prior to the Shareholder Meeting, if the Board of Directors of the
Company reasonably determines the Takeover Proposal constitutes a Superior
Proposal (as defined below), then, to the extent required by the fiduciary
obligations of the Board of Directors of the Company, as determined in good
faith by a majority thereof after consultation with independent counsel (who may
be the Company's regularly engaged independent counsel), the Company may, in
response to an unsolicited request, furnish non-public information, and afford
access to the properties, books, records, officers, employees and
representatives of the Company, participate in discussions or negotiations
regarding the Superior Proposal and, provided that the Company has complied with
the provisos to its rights to terminate this Agreement pursuant to Section
7.1(g) hereof, enter into an agreement with respect to or approve or recommend
to its shareholders a Superior Proposal (and, to the extent permitted by Section
5.1 hereof, withdraw, modify or change its recommendation of this Agreement) .
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer or director of
the Company or any of its Subsidiaries or any financial advisor, attorney or
other advisor or representative of the Company or any of its Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or any
of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section
4.2(a) by the Company. Nothing in this Section 4.2(a) shall limit the Company's
obligations set forth in Sections 4.2(b) and 5.1 hereof. For purposes of this
Agreement, "TAKEOVER PROPOSAL" means any proposal for a merger, tender offer or
other business combination involving the Company or any of its Subsidiaries or
any proposal or offer to acquire in any manner, directly or indirectly, an
equity interest in, any voting securities of, or a substantial portion of the
assets of the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement and the Stock Option Agreement, and "SUPERIOR
PROPOSAL" means a bona fide proposal made by a third party to acquire the
Company pursuant to a tender or exchange offer, a merger, a sale of all or
substantially all its assets or otherwise on terms which a majority of the
disinterested members of the Board of Directors of the Company determines, at a
duly constituted meeting of the Board of Directors or by unanimous written
consent, in its reasonable good faith judgment (after consultation with its
financial advisor) to be more favorable to the Company's shareholders than the
Merger and for which financing, to the extent required, is then committed or
which, in the reasonable good faith judgment of a majority of such disinterested
members of the Board of Directors of the Company, as expressed in a resolution
adopted at a duly constituted meeting of such directors, is reasonably capable
of being obtained by such third party.
(b) The Company shall advise Parent orally and in writing within 24 hours of
its receipt of any Takeover Proposal or any inquiry with respect to or which
could lead to any expression of interest regarding a potential Takeover Proposal
that is received by or communicated to any officer or director of the Company
or, to the Knowledge of the Company, any financial advisor, attorney or other
advisor or representative of the Company, such notice to include (i) the
material terms of such Takeover Proposal or inquiry (including a copy of any
written proposal), and (ii) the identity of the person making any such Takeover
Proposal or inquiry. If the Company intends to participate in discussions or
negotiations with and/or furnish any Person with any information with respect to
any inquiry or Takeover Proposal in accordance with Section 4.2(a), the Company
shall advise Parent orally and in writing of such intention not less than 48
hours in advance of providing such information. The Company will keep Parent
fully informed of the status and details of any such Takeover Proposal or
inquiry.
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SECTION 4.3 THIRD PARTY STANDSTILL AGREEMENTS. During the period from the
date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent). During such period, the Company agrees to
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreements, including, but not limited to, obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
SECTION 4.4 REORGANIZATION. During the period from the date of this
Agreement through the Effective Time, unless the other party shall otherwise
agree in writing, none of Parent, the Company or any of their respective
Subsidiaries shall take or fail to take any action with the actual knowledge of
those taking or failing to take such action (or those directing such action or
failure to take action) that such action or failure will cause the Merger to not
qualify as a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 SHAREHOLDER MEETING. The Company will, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of shareholders (the "SHAREHOLDER MEETING") for the purpose of
considering the approval and adoption of this Agreement and at such meeting call
for a vote and cause proxies to be voted in respect of the approval and adoption
of this Agreement. The Company will, through its Board of Directors, recommend
to its shareholders the adoption and approval of this Agreement and shall not
withdraw, modify or change such recommendation; provided, however, that the
Board of Directors of the Company may withdraw, modify or change such
recommendation if it (i) has not breached Section 4.2 and (ii) enters into a
merger, acquisition or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors resolves to do so, provided
that the Company has complied with the provisos to its right to terminate this
Agreement in Section 7.1(g) of this Agreement. Notwithstanding the Company's
rights regarding a Superior Proposal in the preceding sentence, the Company
agrees that its obligations pursuant to the first sentence of this Section 5.1
shall not be affected by the commencement, public proposal, public disclosure or
communication to the Company of a Takeover Proposal or Superior Proposal.
SECTION 5.2 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT. (a) The Company and Parent shall promptly prepare and file with the
SEC the Proxy Statement and Parent shall prepare and promptly file with the SEC
the Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use its reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. As promptly as practicable after
the Registration Statement shall have become effective, the Company shall mail
the Proxy Statement to its shareholders. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is now not
so qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger and upon the
exercise of the Substitute Shares (as defined in Section 5.6), and the Company
shall furnish all information concerning the Company and the holders of Company
Common Stock as may be reasonably requested in connection with any such action.
(b) Parent and the Company promptly will notify each other of the receipt of
comments from the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement or the Proxy Statement or for
additional information, and promptly will supply each other with copies of all
correspondence between the parties and the SEC with respect thereto. If, at any
time prior to the Shareholder Meeting, any event should occur relating to or
affecting the Company, Parent or Sub, or
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to their respective Subsidiaries, officers or directors, which event should be
described in an amendment or supplement to the Registration Statement or the
Proxy Statement, the parties promptly will inform each other and cooperate in
preparing, filing and having declared effective or clearing with the SEC and, if
required by applicable state securities laws, distributing to the Company's
shareholders such amendment or supplement.
SECTION 5.3 ACCESS TO INFORMATION. Subject to currently existing contractual
and legal restrictions applicable to the Company or any of its Subsidiaries, the
Company shall, and shall cause each of its Subsidiaries to, afford to the Parent
and its Subsidiaries and each of their accountants, counsel, financial advisors
and other representatives of Parent reasonable access, and permit them to make
such inspections as they may reasonably require of, during the period from the
date of this Agreement through the Effective Time, all of their respective
properties, books, contracts, commitments and records (including engineering
records and Tax Returns and the work papers of independent accountants, if
available and subject to the consent of such independent accountants) and,
during such period, the Company shall, and shall cause each of its Subsidiaries
to (i) furnish promptly to Parent a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws, (ii) consistent with its legal
obligations, furnish promptly to Parent all other information concerning its
business, properties and personnel as Parent may reasonably request,
(iii) promptly make available to Parent all personnel of the Company and its
Subsidiaries knowledgeable about matters relevant to such inspections as
reasonably requested by Parent and (iv) provide reasonable access to the
Company's facilities and operations to enable Parent to conduct a health and
safety review of the business, including the right to take samples. No
investigation pursuant to this Section 5.3 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Parent pursuant
to this Section 5.3 shall be kept confidential in accordance with the
Confidentiality Agreement, dated May 24, 2000 between Parent and the Company
(the "CONFIDENTIALITY AGREEMENT") and Parent and Company hereby agree that
Paragraphs 7, 8 and 9 of the Confidentiality Agreement shall be terminated and
of no further effect.
SECTION 5.4 RULE 145 LETTERS. On the date hereof, the Company shall cause to
be prepared and delivered to Parent a list (reasonably satisfactory to counsel
for Parent) identifying all persons who, at the time of the Shareholder Meeting,
may be deemed to be "affiliates" of the Company as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "RULE 145
AFFILIATES"). The Company shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such list to deliver to
Parent within 30 days of the date hereof a written agreement in substantially
the form of EXHIBIT D hereto, executed by each of such persons identified in the
foregoing list.
SECTION 5.5 FEES AND EXPENSES. (a) Except as provided in this Section 5.5,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and all filing fees (including filing fees
under the Securities Act, the Exchange Act and the HSR Act) shall be divided
equally between Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary, if this
Agreement is terminated (A) by the Company pursuant to Section 7.1(d)(i) after
receipt of a Superior Proposal, (B) by Parent pursuant to Section 7.1(b),
(c) or (f), (C) by Parent or the Company pursuant to Section 7.1(e) (after
receipt of a Superior Proposal or after the occurrence of any of the events
described in clause (i), (ii) or (iii) of Section 7.1(f)) or (g), then, in each
case, the Company shall (without prejudice to any other rights of Parent against
the Company) reimburse Parent upon demand for all out-of-pocket fees and
expenses incurred or paid by or on behalf of Parent or any Affiliate (as
hereinafter defined) of Parent in connection with this Agreement, the Stock
Option Agreement and the
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transactions contemplated herein or therein, including all fees and expenses of
counsel, investment banking firms, accountants and consultants (collectively,
"PARENT FEES") up to a maximum of $2,000,000. As used herein, "AFFILIATE" shall
have the meaning set forth in Rule 405 under the Securities Act.
(c) Notwithstanding any provision in this Agreement to the contrary:
(i) if this Agreement is terminated:
(A) by the Company pursuant to Section 7.1(d)(i) after receipt of a
Superior Proposal, or
(B) by Parent pursuant to Section 7.1(b) or (f), or
(C) by Parent pursuant to Section 7.1(c) or by Parent or the Company
pursuant to Section 7.1(e) in either case after receipt of a Superior
Proposal or after the occurrence of any of the events described in clause
(i), (ii) or (iii) of Section 7.1(f),
and, in the case of (A), (B) or (C), prior to, concurrently with or within
twelve months after such a termination a Third Party Acquisition Event (as
defined below) occurs, then the Company shall (in addition to any obligation
under Section 5.5(b) and without prejudice to any other rights of Parent
against the Company) pay to Parent the Termination Fee (as defined below) in
cash, such payment to be made promptly, but in no event later than the
second business day following, the later to occur of such termination and
such Third Party Acquisition Event; or
(ii) if this Agreement is terminated by Parent or the Company pursuant
to Section 7.1(g), then the Company shall (in addition to any obligation
under Section 5.5(b) and without prejudice to any other rights of Parent
against the Company) pay to Parent the Termination Fee in cash, such payment
to be made by the Company concurrently with such termination if the
termination is by the Company, or no later than the second business day
following such termination if the termination is by Parent.
"TERMINATION FEE" means $4,000,000, provided, however, that (i) such amount
shall be reduced to an amount not less than zero by subtracting from $4,000,000
the amount realized or realizable (based on the facts as they exist on the date
such fee shall become due) by Parent under the Stock Option Agreement which is
in excess of $2,500,000, and (ii) the total of the Termination Fee and the net
amount actually realized by Parent under the Stock Option Agreement, after
netting out the aggregate Exercise Price (as defined therein) paid by Parent,
shall not exceed $6,500,000; provided further that if such Fee shall be so
reduced by the net amount so realizable by Parent and thereafter the Stock
Option Agreement shall terminate without receipt by Parent of such amount, then
an additional payment shall be made to Parent in the amount by which the
Termination Fee was reduced hereunder promptly following such termination.
A "THIRD PARTY ACQUISITION EVENT" means any of the following events:
(A) any person (other than Parent or its Affiliates) acquires or becomes the
beneficial owner of 20% or more of the outstanding shares of Company Common
Stock; (B) any group (other than a group which includes or may reasonably be
deemed to include Parent or any of its Affiliates) is formed which, at the time
of formation, beneficially owns 20% or more of the outstanding shares of Company
Common Stock; (C) the Company enters into, or announces that it proposes to
enter into, an agreement, including an agreement in principle, providing for a
merger or other business combination involving the Company or a "significant
subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as promulgated by the
SEC) of the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the Company or a
significant subsidiary (other than the transactions contemplated by this
Agreement); (D) any person (other than Parent or its Affiliates) is granted any
option or right, conditional or otherwise, to acquire or otherwise become the
beneficial owner of shares of Company Common Stock which, together with all
shares of Company Common Stock beneficially owned by such person, results or
would result in such person being the beneficial owner of 20% or
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more of the outstanding shares of Company Common Stock; or (E) there is a public
announcement with respect to a plan or intention by the Company to effect any of
the foregoing transactions. For purposes of this Section 5.5(c), the terms
"group" and "beneficial owner" shall be defined by reference to Section
13(d) of the Exchange Act.
(d) Notwithstanding any provision in this Agreement to the contrary, if this
Agreement is terminated (i) by the Company pursuant to Section 7.1(b) or (c),
then Parent shall (without prejudice to any other rights of the Company against
Parent) reimburse the Company upon demand for all out-of-pocket fees and
expenses incurred or paid by or on behalf of the Company or any Affiliate of the
Company in connection with this Agreement, the Stock Option Agreement and the
transactions contemplated herein or therein, including all fees and expenses of
counsel, investment banking firms, accountants and consultants (collectively,
"COMPANY FEES"), PROVIDED, HOWEVER, that (A) in no event shall the amount paid
pursuant to this Section 5.5(d) in reimbursement of the Company Fees exceed
$2,000,000.
SECTION 5.6 COMPANY STOCK OPTIONS. (a) At the Effective Time, each Company
Stock Option which is outstanding immediately prior to the Effective Time shall
become and represent a right to receive the number of shares of Parent Common
Stock (each a "SUBSTITUTE SHARE"), in an amount equal to:
A x {[ B--(C + T)] / B} x D
A = number of shares of Company Common Stock subject or related to such
Company Stock Option
B = $17.00
C = exercise or purchase price per share of Company Common Stock subject or
related to such Company Stock Option
T = all applicable federal, state and local taxes required to be withheld by
the Parent per share of Company Common Stock subject or related to such
Company Stock Option
D = the Merger Consideration
Parent shall pay cash to holders of Substitute Shares in lieu of issuing
fractional shares of Parent Common Stock.
(b) The Company shall take all action necessary in implementing the
provisions of this Section 5.6, including, for avoidance of doubt, amendment of
the Company Stock Option Plans pursuant to a resolution of the Board of
Directors in form and substance satisfactory to Parent, and to ensure that,
after giving effect to the foregoing, no Company Stock Option shall be
exercisable for Company Common Stock or Parent Common Stock following the
Effective Time.
(c) Parent shall use its reasonable best efforts to list on the NYSE, upon
official notice of issuance, any shares of Parent Common Stock to be issued in
connection with the Merger or in connection with Substitute Shares which have
not been previously listed.
SECTION 5.7 REASONABLE BEST EFFORTS. (a) Upon the terms and subject to the
conditions set forth in this Agreement, including without limitation Section 4.2
hereof, each of the parties agrees to use reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including: (i) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from all Governmental Entities and the making of
all necessary registrations and filings (including filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid or vigorously defend an action or
proceeding by, any Governmental Entity (including those in connection with the
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HSR Act and State Takeover Approvals), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, the Stock Option Agreement or the consummation of
the transactions contemplated hereby and thereby, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement. No party to this Agreement shall consent to any voluntary delay
of the consummation of the Merger at the behest of any Governmental Entity
without the consent of the other parties to this Agreement, which consent shall
not be unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any action,
or enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of any
covenant made by it in this Agreement.
(c) Prior to and following the Effective Time, each party shall use all
reasonable best efforts to refrain from taking any action or failing to take any
action, which action or failure to act would cause, or would be reasonably
likely to cause, the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code.
(d) Notwithstanding anything to the contrary contained in this Agreement, in
connection with any filing or submission required or action to be taken by
either Parent or the Company to effect the Merger and to consummate the other
transactions contemplated hereby, the Company shall not, without Parent's prior
written consent, commit to any divestiture transaction, and neither Parent nor
any of its Affiliates shall be required to divest or hold separate or otherwise
take or commit to take any action that limits its freedom of action with respect
to, or its ability to retain, the Company or any of the businesses, product
lines or assets of Parent or any of its Subsidiaries or that otherwise would
have a Material Adverse Effect on Parent.
(e) The Company will use its reasonable efforts to cause the persons listed
in Section 5.7(e) of the Company Letter to execute and deliver retention,
employment or consulting agreements in form and substance reasonably
satisfactory to the Parent.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. Parent and the Company will not issue any
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such transactions
without prior consultation with the other party, except as may be required by
applicable law or by obligations pursuant to any listing agreement with or
rules of any national securities exchange.
SECTION 5.9 STATE TAKEOVER LAWS. If any "fair price," "business combination"
or "control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby or in the Stock
Option Agreement, Parent and the Company and their respective Boards of
Directors shall use their best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to minimize the effects of any such statute
or regulation on the transactions contemplated hereby and thereby.
SECTION 5.10 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. (a) From and
after the Effective Time, Parent shall cause the Surviving Corporation to
indemnify and hold harmless all past and present officers and directors of the
Company and of its Subsidiaries to the same extent and in the same manner such
persons are indemnified as of the date of this Agreement by the Company pursuant
to the WBCL, the Company's articles of incorporation and the Company's By-laws
for acts or omissions occurring at or prior to the Effective Time (including
indemnifying and holding harmless such persons for acts or omissions occurring
at or prior to the Effective Time in respect of the Merger and the transactions
contemplated thereby) to the same extent and in the manner as such persons are
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indemnified as of the date of this Agreement by the Company pursuant to the
WBCL, the Company's articles of incorporation and the Company's By-laws.
(b) Parent shall cause the Surviving Corporation to provide, for an
aggregate period of not less than three years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O INSURANCE") that is substantially similar to the Company's existing policy
at the Effective Time or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, that neither the
Parent nor the Surviving Corporation shall be required to pay an annual premium
for the D&O Insurance in excess of one hundred fifty percent (150%) of the
amount of the last annual premiums paid prior to the date hereof (which premiums
the Company represents and warrants to be not more than $155,000 per annum), but
in such case shall purchase as much coverage as possible for such amount.
(c) Parent hereby agrees that, effective at the Effective Time, Parent will
guarantee the obligations of the Surviving Corporation under Section
5.10(a) and (b).
(d) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the indemnified parties and their respective heirs and
legal representatives.
SECTION 5.11 NOTIFICATION OF CERTAIN MATTERS. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement and made by it to
be untrue or inaccurate in any material respect or (y) any covenant, condition
or agreement contained in this Agreement and made by it not to be complied with
or satisfied in all material respects, (ii) any failure of Parent or the
Company, as the case may be, to comply in a timely manner with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or (iii) any change or event which would be reasonably likely to have
a Material Adverse Effect on Parent or the Company, as the case may be;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 5.11
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 5.12 EMPLOYEE BENEFIT PLANS. For the first year following the
Closing Date while employed by the Surviving Corporation, employees of the
Surviving Corporation will receive base wages and salaries at rates no less
favorable to such employees than the rates of wages and salaries paid by the
Company or its Subsidiaries to such employees on the date of this Agreement. For
a period of one year immediately following the Effective Time, Parent shall or
shall cause the Surviving Corporation to maintain in effect employee benefit
plans and arrangements which provide benefits which have a value which is
substantially comparable, in the aggregate, to the benefits provided by the U.S.
Plans (not taking into account the value of any benefits under any such plans
which are equity based). For purposes of determining eligibility to participate,
vesting and accrual or entitlement to benefits where length of service is
relevant under any employee benefit plan or arrangement of the Surviving
Corporation, employees of the Company and its Subsidiaries as of the Effective
Time shall receive service credit for service with the Company and its
Subsidiaries to the same extent such credit was granted under the Company Plans,
subject to offsets for previously accrued benefits and no duplication of
benefits.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been duly approved by
the requisite vote of shareholders of the Company in accordance with applicable
law, the Company Charter and the Company's By-laws.
(b) STOCK EXCHANGE LISTINGS. The Parent Common Stock issuable in the Merger
and upon exercise of Substitute Shares and not previously listed shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
(c) HSR AND OTHER APPROVALS/CONSENTS OR WAIVERS. (i) The waiting period (and
any extension thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals of, or
filings with, or terminations or expirations of waiting periods imposed by, any
Governmental Entity, which the failure to obtain, make or occur would have the
effect of, directly or indirectly, restraining, prohibiting or restricting the
Merger or any of the transactions contemplated hereby or would have,
individually or in the aggregate, a Material Adverse Effect on Parent (assuming
the Merger had taken place), shall have been obtained, shall have been made or
shall have occurred.
(d) REGISTRATION STATEMENT. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated
or, to the knowledge of Parent or the Company, threatened by the SEC. All
necessary state securities or blue sky authorizations (including State Takeover
Approvals) shall have been received.
(e) NO ORDER. No court or other Governmental Entity having jurisdiction over
the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of,
directly or indirectly, restraining, prohibiting or restricting the Merger or
any of the transactions contemplated hereby; provided, however, that the
provisions of this Section 6.1(e) shall not be available to any party whose
failure to fulfill its obligations pursuant to Section 5.7 shall have been the
cause of, or shall have resulted in, the enforcement or entering into of any
such law, rule, regulation, executive order, decree, injunction or other order.
SECTION 6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of each of the following
additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. (i) Each of
Parent and Sub shall have performed in all material respects each of its
agreements and covenants contained in this Agreement required to be performed on
or prior to the Effective Time, (ii) each of the representations and warranties
of Parent and Sub contained in this Agreement that is qualified by materiality
shall have been true and correct when made, and shall be true and correct on and
as of the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct as of such certain date) and (iii) each of the
representations and warranties that is not so qualified shall have been true and
correct in all material respects when made, and shall be true and correct in all
material respects on and as of the Effective
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Time as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company shall
have received certificates signed on behalf of each of Parent and Sub by one of
its officers to such effect.
(b) TAX OPINION. The Company shall have received an opinion of Sidley &
Austin, counsel to the Company, in form and substance reasonably satisfactory to
the Company, dated the Effective Time, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time substantially to the effect that, for
federal income tax purposes, the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Company, Sub, and
Parent will each be a party to that reorganization within the meaning of Section
368(b) of the Code.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to Parent. The Company shall
have received a certificate signed on behalf of Parent by an officer of Parent
to such effect.
(d) COMPANY STOCK OPTION PLANS. Parent shall have taken all action required
to be taken by it to implement the provisions of Section 5.6.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. (i) The
Company shall have performed in all material respects each of its covenants and
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, (ii) each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall have
been true and correct when made, and shall be true and correct on and as of the
Effective Time as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date) and (iii) each of the representations and
warranties that is not so qualified shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such date
(other than representations and warranties which address matters only as of a
certain date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement. Parent shall have received a certificate signed on behalf of the
Company by its Chief Executive Officer or its Chief Financial Officer to such
effect.
(b) TAX OPINION. Parent shall have received an opinion of Gibson, Dunn &
Crutcher LLP, counsel to Parent, in form and substance reasonably satisfactory
to Parent, dated the Effective Time, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time substantially to the effect that, for
federal income tax purposes, the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Company, Sub, and
Parent will each be a party to that reorganization within the meaning of Section
368(b) of the Code.
(c) CONSENTS. (i) The Company shall have obtained the consent or approval of
each person or Governmental Entity whose consent or approval shall be required
in connection with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or instrument,
except as to which the failure to obtain such consents and approvals would not,
in the reasonable opinion of Parent, individually or in the aggregate, have a
Material Adverse Effect on the Company or Parent or upon the consummation of the
transactions contemplated in this Agreement or the Stock Option Agreement or the
Shareholder Agreement.
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(ii) In obtaining any approval or consent required to consummate any of the
transactions contemplated herein, in the Stock Option Agreement or the
Shareholder Agreement, no Governmental Entity shall have imposed or shall have
sought to impose any condition, penalty or requirement which, in the reasonable
opinion of Parent, individually or in aggregate would have a Material Adverse
Effect on the Company or Parent.
(d) AFFILIATE AGREEMENTS. Parent shall have received the written agreements
from Rule 145 Affiliates of the Company described in Section 5.4.
(e) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to the Company. Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive Officer or the Chief Financial Officer of the Company to such effect.
(f) COMPANY STOCK OPTION PLANS. The Company shall have taken all action
required to be taken by it to implement the provisions of Section 5.6.
(g) DIRECTOR AND OFFICER RESIGNATIONS. All of the Directors of the Company
and its Subsidiaries and any officers thereof designated by Parent, shall have
tendered their resignation in form and substance satisfactory to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have failed
to comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within five
business days following receipt by such other party of written notice of
such failure to comply;
(c) by Parent if (x) there has been a breach of a representation or
warranty of the Company that gives rise to a failure of the fulfillment of a
condition of the Parent's and Sub's obligations to effect the Merger
pursuant to Section 6.3(a)(ii) or by Company if (y) there has been a breach
of a representation or warranty of the Parent or Sub that gives rise to a
failure of the fulfillment of a condition of the Company's obligations to
effect the Merger pursuant to Section 6.2(a)(ii), in each case which breach
has not been cured within five business days following receipt by the
breaching party of written notice of the breach;
(d) by either Parent or the Company if: (i) the Merger has not been
effected on or prior to the close of business on the later of March 31, 2001
or the date 75 days after the waiting period applicable to the consummation
of the Merger under the HSR Act has expired or been terminated; PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant to this Section
7.1(d)(i) shall not be available to any party whose failure to fulfill any
of its obligations contained in this Agreement has been the cause of, or
resulted in, the failure of the Merger to have occurred on or prior to the
aforesaid date; or (ii) any court or other Governmental Entity having
jurisdiction over a party hereto shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties shall have used their reasonable efforts to resist,
resolve or lift, as applicable, subject to the provisions of Section 5.7)
permanently
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enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable;
(e) by either Parent or the Company if the shareholders of the Company
do not approve this Agreement at the Shareholder Meeting or at any
adjournment or postponement thereof;
(f) by Parent if (i) the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or shall have
qualified, changed, modified or withdrawn its recommendation of the Merger
or declaration that the Merger is advisable and fair to and in the best
interest of the Company and its shareholders, or shall have resolved to do
so, (ii) the Board of Directors of the Company, shall have recommended to
the shareholders of the Company any Takeover Proposal or shall have resolved
to do so or (iii) a tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of the Company is commenced by a third
party that is not an Affiliate of Parent, and the Board of Directors of the
Company fails to recommend against acceptance of such tender offer or
exchange offer by its shareholders (including by taking no position with
respect to the acceptance of such tender offer or exchange offer by its
shareholders);
(g) by Parent or the Company if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors of the Company resolves
to do so; PROVIDED, HOWEVER, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless (i) the Company has
delivered to Parent a written notice of the Company's intent to enter into
such an agreement to effect the Superior Proposal, (ii) 48 hours have
elapsed following delivery to Parent of such written notice by the Company
and (iii) during such 48-hour period the Company has fully cooperated with
Parent, including informing Parent of the terms and conditions of the
Takeover Proposal and the identity of the person making the Takeover
Proposal, with the intent of enabling Parent to agree to a modification of
the terms and conditions of this Agreement so that the transactions
contemplated hereby may be effected; PROVIDED, FURTHER, that the Company may
not terminate this Agreement pursuant to this Section 7.1(g) unless at the
end of such 48 hour period the Board of Directors of the Company continues
reasonably to believe that the Takeover Proposal constitutes a Superior
Proposal when compared to the Merger (taking into account any such
modification as may be proposed by Parent) and concurrently with such
termination the Company pays to Parent the amounts specified under Sections
5.5(a), (b) and (c);
(h) by Company if the waiting period applicable to the consummation of
the Merger under the HSR Act has not expired or been terminated on or prior
to March 31, 2001; or
(i) by Parent if the waiting period applicable to the consummation of
the Merger under the HSR Act has not expired or been terminated on or prior
to March 31, 2001.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.3 and the entirety of
Section 5.5, which shall survive the termination); PROVIDED, HOWEVER, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
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SECTION 7.3 AMENDMENT. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, in the
case of Sub or the Company, or a Senior Vice President of Parent, at any time
before or after approval of the matters presented in connection with the Merger
by the shareholders of the Company, but, after any such approval, no amendment
shall be made which by law or the rules of the Nasdaq National Market requires
further approval by such shareholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
SECTION 7.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. No delay
on the part of any party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party hereto of any right, power or privilege hereunder operate as a waiver
of any other right, power or privilege hereunder, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. Unless otherwise provided, the rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
the parties hereto may otherwise have at law or in equity. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES; NO OTHER
REPRESENTATIONS AND WARRANTIES. The representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
terminate at the Effective Time. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, none of the Company,
Parent or Sub makes any other representations and warranties, and each hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement,
the documents and the instruments referred to herein, or the transactions
contemplated hereby or thereby, notwithstanding the delivery or disclosure to
the other party or the other party's representatives of any documentation or
other information with respect to any one or more of the foregoing.
SECTION 8.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Topaz Merger Corp.
c/o GE Medical Systems
P.O. Box 414, W-410
Milwaukee, WI 53201
Attn: General Counsel
Fax: 414-544-3575
with copies to:
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GE Medical Systems
3000 North Grandview Blvd.
Waukesha, WI 53188
Attn: General Counsel
and:
General Electric Company
3135 Easton Turnpike
Fairfield, CT 06431-0001
Attn: Vice President and Senior Counsel--Transactions
and
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166-0193
Attention: Steve Shoemate
Facsimile No.: 212-351-4035
(b) if to the Company, to:
Lunar Corporation
726 Heartland Trail
Madison, WI 53717
Attn: General Counsel
Fax: 608-826-7106
with a copy to:
Sidley & Austin
Banc One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attn: Steven Sutherland
Fax: 312-853-7036
SECTION 8.3 INTERPRETATION. (a) When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." (b) "SUBSIDIARY" means any
corporation, partnership, limited liability company, joint venture or other
legal entity of which Parent or Company, as the case may be (either alone or
through or together with any other Subsidiary), owns or controls, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity.
SECTION 8.4 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
SECTION 8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
except for the Stock Option Agreement and as provided in the last sentence of
Section 5.3, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
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respect to the subject matter hereof. This Agreement, except for the provisions
of Section 5.10, is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 8.6 GOVERNING LAW. Except to the extent that the laws of the State
of Wisconsin are mandatorily applicable to the Merger, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
SECTION 8.7 ASSIGNMENT. Subject to Section 1.1, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors or assigns.
SECTION 8.8 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
SECTION 8.9 ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof such remedy being in
addition to any other remedy to which any party is entitled at law or in equity.
Each party hereto irrevocably submits to the exclusive jurisdiction of the
United States District Court for the Southern District of New York. Each party
hereto waives any right to a trial by jury in connection with any such action,
suit or proceeding and waives any objection based on FORUM NON CONVENIENS or any
other objection to venue thereof.
SECTION 8.10 PERFORMANCE BY SUB. Parent hereby agrees to cause Sub to comply
with its obligations hereunder and to cause Sub to consummate the Merger as
contemplated herein and whenever this Agreement requires Sub to take any action,
such requirement shall be deemed to include an undertaking of Parent to cause
Sub to take such action.
SECTION 8.11 DEFINED TERMS. Each of the following terms is defined in the
Section identified below:
<TABLE>
<S> <C>
Affiliate................................................... Section 5.5(b)
Affiliated Person........................................... Section 3.26
Agreement................................................... Preamble
Agreement of Merger......................................... Section 1.2
Average Parent Share Price.................................. Section 1.5(c)
Blue Sky Laws............................................... Section 2.3
Certificates................................................ Section 1.6(b)
Closing..................................................... Section 1.14
Closing Date................................................ Section 1.14
Company..................................................... Preamble
Company Business Personnel.................................. Section 3.15
Company Charter............................................. Section 3.4
</TABLE>
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<TABLE>
<S> <C>
Company Common Stock........................................ Section 1.5(c)
Company Foreign Benefit Plan................................ Section 3.12(d)
Company Intellectual Property............................... Section 3.16
Company Letter.............................................. Section 3.2(b)
Company Licenses............................................ Section 3.16
Company Multiemployer Plan.................................. Section 3.12(c)
Company Permits............................................. Section 3.8
Company Plan................................................ Section 3.12(c)
Company SEC Documents....................................... Section 3.5
Company Stock Option Plans.................................. Section 3.2(a)
Company Stock Options....................................... Section 3.2(b)
Compensation Agreements..................................... Section 3.11(a)
Confidentiality Agreement................................... Section 5.3
Constituent Corporations.................................... Preamble
D&O Insurance............................................... Section 5.10(b)
DLJ......................................................... Section 3.17
Effective Time.............................................. Section 1.2
Environmental Law........................................... Section 3.23(a)(ii)
Environmental Permit........................................ Section 3.23(a)(iii)
ERISA....................................................... Section 3.12(a)
ERISA Affiliate............................................. Section 3.12(c)
Exchange Act................................................ Section 2.3
Exchange Agent.............................................. Section 1.6(a)
Exchange Fund............................................... Section 1.6(a)
FDA......................................................... Section 3.8
Governmental Entity......................................... Section 2.3
Hazardous Substances........................................ Section 3.23(a)(i)
HSR Act..................................................... Section 2.3
IRS......................................................... Section 3.9
Knowledge of the Company.................................... Section 3.8
Liens....................................................... Section 3.27
Material Adverse Change..................................... Section 2.1, 3.1
Material Adverse Effect..................................... Section 2.1, 3.1
Merger...................................................... Recitals
Merger Consideration........................................ Section 1.5(c)
NYSE........................................................ Section 2.3
Parent...................................................... Preamble
Parent Common Stock......................................... Section 1.5(c)
Parent Fees................................................. Section 5.5(b)
Parent SEC Documents........................................ Section 2.5
Plan of Merger.............................................. Section 1.2
Proxy Statement............................................. Section 2.6
Real Estate................................................. Section 3.27(b)
Registration Statement...................................... Section 2.2
reorganization.............................................. Recitals
</TABLE>
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<TABLE>
<S> <C>
Rule 145 Affiliates......................................... Section 5.4
SEC......................................................... Section 2.2
Securities Act.............................................. Section 2.2
Shareholder Meeting......................................... Section 5.1
Significant Contracts....................................... Section 3.11(b)
SSA......................................................... Section 3.8
State Takeover Approvals.................................... Section 2.3
Stock Option Agreement...................................... Recitals
Stockholder Agreement....................................... Recitals
Sub......................................................... Preamble
Substitute Share............................................ Section 5.6(a)
Superior Proposal........................................... Section 4.2(a)
Surviving Corporation....................................... Section 1.1
Takeover Proposal........................................... Section 4.2(a)
Tax Return.................................................. Section 3.9
Taxes....................................................... Section 3.9
U.S. Plan................................................... Section 3.12(a)
Valuation Period............................................ Section 1.5(c)
WBCL........................................................ Section 1.1
Worker Safety Laws.......................................... Section 3.13
Year 2000 Compliant......................................... Section 3.29
</TABLE>
A-41
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
GENERAL ELECTRIC COMPANY,
A NEW YORK CORPORATION
By: /s/ J. Keith Morgan
--------------------------------------
Name: J. Keith Morgan
Title: Vice President and General
Counsel GE Medical Systems
TOPAZ MERGER CORP.,
A WISCONSIN CORPORATION
By: /s/ J. Keith Morgan
--------------------------------------
Name: J. Keith Morgan
Title: President
LUNAR CORPORATION,
A WISCONSIN CORPORATION
By: /s/ Richard B. Mazess
--------------------------------------
Name: Richard B. Mazess
Title: President
A-42
<PAGE>
ANNEX B
June 2, 2000
Board of Directors
Lunar Corporation
726 Heartland Trail
Madison, Wisconsin 53717
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of Lunar Corporation (the "Company") of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of June 2, 2000 (the "Agreement"), among
General Electric Company ("GE"), Topaz Merger Corp., a wholly owned subsidiary
of GE, and the Company, pursuant to which Topaz Merger Corp. will be merged (the
"Merger") with and into the Company.
Pursuant to the Agreement, each share of common stock, par value $.01 per
share ("Company Common Stock"), of the Company will be converted into the right
to receive the number of shares of common stock, $0.16 par value per share ("GE
Common Stock"), of GE determined by dividing $17.00 by the average share price
(represented by the average daily volume-weighted sales prices per share of GE
common stock on the New York Stock Exchange) for GE during the ten day trading
period ending on the day which is five days prior to the closing of the Merger.
In arriving at our opinion, we have reviewed the draft dated May 23, 2000 of
the Agreement and the exhibits thereto, which we assume will not differ
materially from the final Agreement. We also have reviewed financial and other
information that was publicly available or furnished to us by the Company
including information provided during discussions with management. Included in
the information provided during discussions with management were certain
financial projections of the Company for the period beginning April 1, 2000 and
ending June 30, 2005 prepared by the management of the Company. In addition, we
have compared certain financial and securities data of the Company with various
other companies whose securities are traded in public markets, reviewed the
historical stock prices and trading volumes of Company Common Stock and GE
Common Stock, reviewed prices in certain other business combinations and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion. We also have reviewed financial and
other information that was publicly available to us regarding GE. We were not
requested to, nor did we, solicit the interest of any other party in acquiring
the Company.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have relied on representations that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
future operating and financial performance of the Company. We have not assumed
any responsibility for making an independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have relied as to certain legal matters on advice of counsel
to the Company, such as to the tax free status of the transaction including that
the Merger will be free of Federal tax to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect the conclusion reached in this opinion, we do not
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<PAGE>
have any obligation to update, revise or reaffirm this opinion. We are
expressing no opinion herein as to the prices at which GE Common Stock will
actually trade at any time. Our opinion does not address the relative merits of
the Merger and the other business strategies being considered by the Company's
Board of Directors, nor does it address the Board's decision to proceed with the
Merger. Our opinion does not constitute a recommendation to any stockholder as
to how such stockholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for GE in the past and has received usual and
customary compensation for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the stockholders of the
Company pursuant to the Agreement is fair to such stockholders from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Carlos R. DelCristo
-----------------------------------
Carlos R. DelCristo
Vice President
B-2
<PAGE>
ANNEX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 2, 2000 (the "AGREEMENT"), between
GE Medical Systems, a division of General Electric Company, a New York
corporation ("PARENT"), and Lunar Corporation, a Wisconsin corporation (the
"COMPANY").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Parent, Topaz Merger Corp., a newly formed Wisconsin corporation and a direct
wholly owned subsidiary of Parent ("SUB"), and the Company are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "MERGER
AGREEMENT"), which provides for the merger of Sub with and into the Company (the
"MERGER");
WHEREAS, as a condition to Parent's willingness to enter into the Merger
Agreement, Parent has requested that the Company grant to Parent an option to
purchase up to 19.9% shares of Company Common Stock, upon the terms and subject
to the conditions hereof; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement, the
Company has agreed to grant Parent the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS. The Company hereby grants to Parent
an irrevocable option (the "OPTION") to purchase from time to time up to
2,014,067 Common Shares, $0.01 par value per share, of the Company (the "COMPANY
COMMON STOCK"), upon the terms and subject to the conditions set forth herein
(the "OPTIONED SHARES"). Subject to the conditions set forth in Section 2, the
Option may be exercised by Parent in whole or from time to time in part, at any
time following the occurrence of a Triggering Event (as defined below) and prior
to the termination of the Option in accordance with Section 19. In the event
Parent wishes to exercise the Option, Parent shall send a written notice to the
Company (the "STOCK EXERCISE NOTICE") specifying the total number of Optioned
Shares it wishes to purchase and a date (not later than 20 business days and not
earlier than two business days from the date such notice is given) for the
closing of such purchase (the "CLOSING DATE"). Parent may revoke an exercise of
the Option at any time prior to the Closing Date by written notice to the
Company. In the event of any change in the number of issued and outstanding
shares of Company Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Company, the number of Optioned Shares subject to the Option
and the Exercise Price (as hereinafter defined) per Optioned Share shall be
appropriately adjusted. In the event that any additional shares of Company
Common Stock are issued after the date of this Agreement (other than pursuant to
an event described in the preceding sentence or pursuant to this Agreement), the
number of Optioned Shares subject to the Option shall be adjusted so that, after
such issuance, it equals (but does not exceed) 19.9% of the voting power of
shares of capital stock of the Company then issued and outstanding, after
reduction, to the extent necessary to comply with the exception to the
shareholder approval requirements of the Nasdaq National Market ("NASDAQ"), for
any shares issued pursuant to the Option.
2. CONDITIONS TO EXERCISE OF OPTION AND DELIVERY OF OPTIONED
SHARES. (a) Parent's right to exercise the Option is subject to the following
conditions:
(i) Neither Parent nor Sub shall have breached any of its material
obligations under the Merger Agreement;
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(ii) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
invalidating the grant or prohibiting the exercise of the Option or the delivery
of the Optioned Shares shall be in effect;
(iii) All applicable waiting periods under the HSR Act (as defined below)
shall have expired or been terminated; and
(iv) One or more of the following events (a "TRIGGERING EVENT") shall have
occurred on or after the date hereof: (A) any person, corporation, partnership,
limited liability company or other entity or group (such person, corporation,
partnership, limited liability company or other entity or group, other than
Parent or an affiliate of Parent, being referred to hereinafter, singularly or
collectively, as a "PERSON"), acquires or becomes the beneficial owner of 20% or
more of the outstanding shares of Company Common Stock; (B) any group is formed
which beneficially owns 20% or more of the outstanding shares of Company Common
Stock; (C) any Person shall have commenced a tender or exchange offer for 20% or
more of the then outstanding shares of Company Common Stock or publicly proposed
any bona fide merger, consolidation or acquisition of all or substantially all
the assets of the Company, or other similar business combination involving the
Company; (D) the Company enters into, or announces that it proposes to enter
into, an agreement, including, without limitation, an agreement in principle,
providing for a merger or other business combination involving the Company or a
"significant subsidiary" (as defined in Rule 1.02(w) of Regulation S-X as
promulgated by the Securities and Exchange Commission (the "SEC")) of the
Company or the acquisition of a substantial interest in, or a substantial
portion of the assets, business or operations of, the Company or a significant
subsidiary (other than the transactions contemplated by the Merger Agreement);
(E) any Person is granted any option or right, conditional or otherwise, to
acquire or otherwise become the beneficial owner of shares of Company Common
Stock which, together with all shares of Company Common Stock beneficially owned
by such Person, results or would result in such Person being the beneficial
owner of 20% or more of the outstanding shares of Company Common Stock; or
(F) there is a public announcement with respect to a plan or intention by the
Company, other than Parent or its affiliates, to effect any of the foregoing
transactions. For purposes of this subparagraph (iv), the terms "group" and
"beneficial owner" shall be defined by reference to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
rules and regulations promulgated thereunder.
(b) Parent's obligation to purchase the Optioned Shares following the
exercise of the Option, and the Company's obligation to deliver the Optioned
Shares, are subject to the conditions that:
(i) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Optioned Shares shall be in effect;
(ii) The purchase of the Optioned Shares will not violate Rule 10b-13
promulgated under the Exchange Act; and
(iii) All applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), shall have expired or been
terminated.
3. EXERCISE PRICE FOR OPTIONED SHARES. At any Closing Date, the Company
will deliver to Parent a certificate or certificates representing the Optioned
Shares in the denominations designated by Parent in its Stock Exercise Notice
and Parent will purchase the Optioned Shares from the Company at a price per
Optioned Share equal to $17.00 (the "EXERCISE PRICE"), payable in cash. Payment
made by Parent to the
Company pursuant to this Agreement shall be made by wire transfer of federal
funds to a bank designated by the Company or a check payable in immediately
available funds. After payment of the Exercise Price for the Optioned Shares
covered by the Stock Exercise Notice, the Option shall be
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deemed exercised to the extent of the Optioned Shares specified in the Stock
Exercise Notice as of the date such Stock Exercise Notice is given to the
Company.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Parent that (a) the execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company and this Agreement has been duly executed and delivered by the Company
and (assuming the valid authorization, execution and delivery of this Agreement
by Parent and the validity and binding effect of this Agreement on Parent)
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally and by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); (b) the Company has taken all necessary corporate action to
authorize and reserve the Optioned Shares for issuance upon exercise of the
Option, and the Optioned Shares, when issued and delivered by the Company to
Parent upon exercise of the Option, will be duly authorized, validly issued,
fully paid and nonassessable (except to the extent otherwise provided in Section
180.0622(2)(b) of the Wisconsin Business Corporation Law ("WBCL")) and free of
preemptive rights; (c) except as otherwise required by the HSR Act and, except
for filings required under the blue sky laws of any states and routine filings
and subject to Section 7, the execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby do
not require the consent, approval or authorization of, or filing with, any
person or public authority and will not (i) violate or conflict with any
provision of the articles of incorporation or the Bylaws of the Company, or
(ii) result in the acceleration or termination of, or constitute a default
under, any indenture, license, approval, agreement, understanding or other
instrument, or (iii) violate or conflict with any statute, rule, regulation,
judgment, order or other restriction binding upon or applicable to the Company
or any of its subsidiaries or any of their respective properties or assets,
other than, in the case of clauses (ii) and (iii) of this sentence, any such
violations, defaults, rights, losses, liens, security interest, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company; (d) the Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Wisconsin
and has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; and (e) the
Company has taken all appropriate actions so that the restrictions on business
combinations contained in Section 180.1140 through Section 180.1144 of the WBCL
will not apply with respect to or as a result of the transactions contemplated
hereby.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Company that (a) the execution and delivery of this Agreement by
Parent and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent and
this Agreement has been duly executed and delivered by Parent and constitutes a
valid and binding agreement of Parent; and (b) Parent is acquiring the Option
and, if and when it exercises the Option, will be acquiring the Optioned Shares
issuable upon the exercise thereof, for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and will not sell or
otherwise dispose of the Optioned Shares except pursuant to an effective
registration statement under the Securities Act or a valid exemption from
registration under the Securities Act.
6. THE CLOSING. Any closing hereunder shall take place on the Closing Date
specified by Parent in its Stock Exercise Notice pursuant to Section 1 at 10:00
A.M., local time, or the first business day thereafter on which all of the
conditions in Section 2 are met, at the principal executive office of the
Company, or at such other time and place as the parties hereto may agree.
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7. FILINGS RELATED TO OPTIONED SHARES. The Company will make such filings
with the SEC as are required by the Exchange Act, and will use its best efforts
to effect all necessary filings by the Company under the HSR Act and to have the
Optioned Shares approved for quotation on NASDAQ.
8. REGISTRATION RIGHTS. (a) If the Company effects any registration or
registrations of shares of Company Common Stock under the Securities Act for its
own account or for any other shareholder of the Company at any time after the
exercise of the Option (other than a registration on Form S-4, Form S-8 or any
successor forms), it will allow Parent to participate in such registration or
registrations with respect to any or all of the Optioned Shares acquired upon
the exercise of the Option; PROVIDED, HOWEVER, that any request of Parent
pursuant to this Section 8(a) shall be with respect to at least 20% of the
Optioned Shares and PROVIDED, FURTHER, that if the managing underwriters in such
offering advise the Company that, in their written opinion, the number of
Optioned Shares requested by Parent to be included in such registration exceeds
the number of shares of Company Common Stock which can be sold in such offering,
the Company may exclude from such registration all or a portion, as may be
appropriate, of the Optioned Shares requested for inclusion by Parent.
(b) At any time after the exercise of the Option, upon the request of
Parent, the Company will promptly file and use its reasonable best efforts to
cause to be declared effective a registration statement under the Securities Act
(and applicable Blue Sky statutes) with respect to any or all of the Optioned
Shares acquired upon the exercise of the Option; PROVIDED, HOWEVER, that any
request of Parent pursuant to this Section 8(b) shall be with respect to at
least 20% of the Optioned Shares and PROVIDED, FURTHER, that the Company shall
not be required to have declared effective more than two registration statements
hereunder and shall be entitled to delay the effectiveness of each such
registration statement, for a period not to exceed 90 days in the aggregate, if
the commencement of such offering would, in the reasonable good faith judgment
of the Board of Directors of the Company, require premature disclosure of any
material corporate development or otherwise materially interfere with or
materially adversely affect any pending or proposed offering of securities of
the Company. In connection with any such registration requested by Parent, the
costs of such registration (other than fees of Parent's counsel and underwriting
fees and commissions) shall be borne by the Company, and the Company and Parent
each shall provide the other and any underwriters with customary indemnification
and contribution agreements.
9. OPTIONAL PUT; OPTIONAL REPURCHASE. (a) Prior to the termination of the
Option in accordance with Section 19, if a Put Event has occurred, Parent shall
have the right, upon three business days' prior written notice to the Company,
to require the Company to purchase the Option from Parent (the "PUT RIGHT") at a
cash purchase price (the "PUT PRICE") equal to the product determined by
multiplying (A) the number of Optioned Shares as to which the Option has not yet
been exercised by (B) the Spread (as defined below). As used herein, "PUT EVENT"
means the occurrence on or after the date hereof of any of the following:
(i) any Person (other than Parent or its affiliates) acquires or becomes the
beneficial owner of 50% or more of the outstanding shares of Company Common
Stock or (ii) the Company consummates a merger or other business combination
involving the Company or a "significant subsidiary" (as defined in Rule 1.02(w)
of Regulation S-X as promulgated by the SEC) of the Company or the acquisition
of a substantial interest in, or a substantial portion of the assets, business
or operations of, the Company or a significant subsidiary (other than the
transactions contemplated by the Merger Agreement). As used herein, the term
"SPREAD" shall mean the excess, if any, of (i) the greater of (x) the highest
price (in cash or fair market value of securities or other property) per share
of Company Common Stock paid or to be paid within 12 months preceding the date
of exercise of the Put Right for any shares of Company Common Stock beneficially
owned by any Person who shall have acquired or become the beneficial owner of
20% or more of the outstanding shares of Company Common Stock after the date
hereof or (y) the average of the daily volume-weighted sales prices quoted on
NASDAQ of the Company Common Stock during the five trading days immediately
preceding the written notice of exercise of the Put Right over (ii) the Exercise
Price.
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(b) At any time after the termination of the Option granted hereunder
pursuant to Section 19 and for a period of 90 days thereafter, the Company shall
have the right, upon three business days' prior written notice, to repurchase
from Parent (the "REPURCHASE RIGHT"), all (but not less than all) of the
Optioned Shares acquired by the Parent hereby and with respect to which the
Parent then has beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) at a price per share equal to the greater of (i) the average of
the daily volume-weighted sales price quoted on NASDAQ of the Company Common
Stock during the five trading days immediately preceding the written notice of
exercise of the Repurchase Right and (ii) the Exercise Price, plus interest at a
rate per annum equal to the costs of funds to Parent at the time of exercise of
the Repurchase Right, subject to paragraph (c) below.
(c) Parent shall deliver to the Company all "Excess Compensation" realized
upon the sale of any Optioned Shares or the exercise of the Put Right. "Excess
Compensation" shall mean the amount, if any, by which the sum of (i) the
aggregate gross proceeds received upon the sale of any Optioned Shares or the
exercise of the Put Right, and (ii) any Termination Fee paid by the Company
under Section 5.6 of the Merger Agreement, exceeds the sum of (x) $6,500,000,
(y) the aggregate Exercise Price paid, and (z) any underwriters discount or
selling commission incurred by Parent in connection with the acquisition and
disposition of the Optioned Shares.
10. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise provided in Section 8 or as
specified in the Merger Agreement.
11. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, such remedy being in addition to any other
remedy to which they are entitled at law or in equity.
12. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or if sent by
telex or telecopier (and also confirmed in writing) to the person at the address
set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
(a) if to Parent or Sub, to:
Topaz Merger Corp.
c/o GE Medical Systems
P.O. Box 414, W-410
Milwaukee, WI 53201
Attn: General Counsel
Fax: 414-544-3575
with copies to:
GE Medical Systems
3000 North Grandview Blvd.
Waukesha, WI 53188
Attn: General Counsel
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and:
General Electric Company
3135 Easton Turnpike
Fairfield, CT 06431-0001
Attn: Vice President and Senior Counsel--Transactions
and
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166-0193
Attention: Steve Shoemate
Facsimile No.: 212-351-4035
(b) if to the Company, to:
Lunar Corporation
726 Heartland Trail
Madison, WI 53717
Attn: General Counsel
Fax: 608-826-7106
with a copy to:
Sidley & Austin
Banc One Plaza
10 South Deerborn Street
Chicago, IL 60603 Attn: Steven Sutherland
Fax: 312-853-7036
13. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any Person other than Parent or the Company, or their permitted successors
or assigns, any rights or remedies under or by reason of this Agreement.
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger
Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings, oral
or written, with respect to such transactions. This Agreement may not be
changed, amended or modified orally, but only by an agreement in writing signed
by the party against whom any waiver, change, amendment, modification or
discharge may be sought.
15. ASSIGNMENT. No party to this Agreement may assign any of its rights or
delegate any of its obligations under this Agreement (whether by operation of
law or otherwise) without the prior written consent of the other party hereto,
except that Parent may, without a written consent, assign its rights and
delegate its obligations hereunder in whole or in part to one or more of its
direct or indirect wholly owned subsidiaries.
16. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
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17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York. Each party hereto waives any right to a trial by jury in connection
with any action, suit or proceeding and waives any objection based on FORUM NON
CONVENIENS or any other objection to venue thereof.
19. TERMINATION. This Agreement and the Option shall terminate upon the
earlier of (i) the Effective Time and (ii) the termination of the Merger
Agreement in accordance with its terms; PROVIDED, HOWEVER, the Option shall not
terminate until 12 months after a termination pursuant to clause (ii)
immediately above if (A) the Merger Agreement is terminated by Parent pursuant
to Section 7.1(b), (c) or (f) thereof, (B) the Merger Agreement is terminated by
Parent or the Company pursuant to Section 7.1(e) or (g) thereof or (C) the
Merger Agreement is terminated by the Company pursuant to Section 7.1(d)(i)
thereof after receipt of a Superior Proposal; PROVIDED, FURTHER, that this
Agreement shall not terminate with respect to the Repurchase Right set forth in
Section 9(b) until 90 days after the termination of the Option pursuant to the
foregoing proviso. Notwithstanding the foregoing, the provisions of Section 8
shall survive the termination of this Agreement for the period until the date
that the Parent is permitted to sell shares of Company Common Stock without any
restrictions (including volume and manner of sale) under Rule 144 as promulgated
by the SEC under the Securities Act of 1933.
20. CAPITALIZED TERMS. Capitalized terms not otherwise defined in this
Agreement shall have the meanings set forth in the Merger Agreement.
21. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
C-7
<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
duly executed and delivered on the day and year first above written.
<TABLE>
<S> <C> <C>
GENERAL ELECTRIC COMPANY,
a New York corporation
By: /s/ J. KEITH MORGAN
-----------------------------------------
Name: J. Keith Morgan
TITLE: VICE PRESIDENT AND GENERAL COUNSEL
GE MEDICAL SYSTEMS
LUNAR CORPORATION
a Wisconsin corporation
By: /s/ RICHARD B. MAZESS
-----------------------------------------
Name: Richard B. Mazess
TITLE: PRESIDENT
</TABLE>
C-8
<PAGE>
ANNEX D
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of June 2, 2000 (this "Agreement"), by the
undersigned shareholders (collectively, the "SHAREHOLDERS") of Lunar
Corporation, a Wisconsin corporation (the "COMPANY"), for the benefit of GE
Medical Systems, a division of General Electric Company, a New York corporation
("PARENT").
RECITALS
A. Parent, Topaz Merger Corp., a Wisconsin corporation and a direct wholly
owned subsidiary of Parent ("SUB"), and the Company are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "MERGER
AGREEMENT"), whereby, upon the terms and subject to the conditions set forth in
the Merger Agreement, each issued and outstanding share of Common Stock, par
value $0.01 per share, of the Company ("COMPANY COMMON STOCK"), not owned
directly or indirectly by Parent or the Company, will be converted into shares
of Common Stock, par value $0.16 per share, of Parent ("PARENT COMMON STOCK");
B. As of the date hereof, each Shareholder owns that number of shares of
Company Common Stock appearing opposite his name on SCHEDULE A (such shares of
Company Common Stock together with any other shares of capital stock of the
Company acquired by such Shareholder, individually, after the date hereof during
the term of this Agreement, whether upon the exercise of options or by means of
purchase, dividend, distribution or otherwise, being collectively referred to
herein as the "SUBJECT SHARES"); and
C. As a condition to its willingness to enter into the Merger Agreement,
Parent has required that the Shareholders agree, and in order to induce Parent
to enter into the Merger Agreement the Shareholders have agreed, to enter into
this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows, the
obligations of the shareholders hereunder to be several and not joint or joint
and several (except as otherwise set forth in Section 3 hereof):
1. COVENANTS OF SHAREHOLDERS. Until the termination of this Agreement in
accordance with Section 8, the Shareholders agree as follows:
(a) The Shareholders shall attend the Shareholder Meeting, in person or
by proxy, and at the Shareholder Meeting (or at any adjournment thereof) or
in any other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought, the Shareholders
shall vote (or cause to be voted) the Subject Shares in favor of the Merger,
the adoption of the Merger Agreement and the approval of the terms thereof
and each of the other transactions contemplated by the Merger Agreement.
(b) At any meeting of shareholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Shareholders' vote,
consent or other approval is sought, the Shareholders shall vote (or cause
to be voted) the Subject Shares against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation,
combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company or any
Subsidiary or any Takeover Proposal or (ii) any amendment of the Company's
Restated Certificate of Incorporation, or By-laws or other proposal or
transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement or change in any
manner the voting
D-1
<PAGE>
rights of any class of capital stock of the Company. The Shareholders
further agrees not to commit or agree to take any action inconsistent with
the foregoing.
(c) The Shareholders agree not to (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, "TRANSFER"), or
enter into any contract, option or other arrangement (including any
profit-sharing arrangement) with respect to the Transfer of the Subject
Shares to any person or (ii) enter into any voting arrangement, whether by
proxy, voting agreement or otherwise, in relation to the Subject Shares, and
agree not to commit or agree to take any of the foregoing actions; provided,
however, that the Shareholder may (A) Transfer up to 2% of the Subject
Shares by gift to charitable organizations and up to 2% of the Subject
Shares by gift to members of the "immediate family" (as defined in
Rule 16a-1(e) of the Exchange Act) of the Shareholder; and (B) pledge as
collateral up to 2% of the Subject Shares in connection with the exercise of
Company Stock Options held by the Shareholder pursuant to the Company Stock
Option Plans; provided, that in each case any transferee or pledgee of such
Subject Shares agrees in writing to be bound by the terms of this Agreement
to the same degree as the Shareholders as transferors.
(d) The Shareholders shall not, nor shall the Shareholders authorize any
investment banker, attorney or other advisor or representative of the
Shareholders to, directly or indirectly (i) solicit, initiate or encourage
the submission of, any Takeover Proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to the Company or any Subsidiary in connection
with, or take any other action to facilitate any inquiries or the making of
any proposal that constitutes or may reasonably be expected to lead to, any
Takeover Proposal, except in their capacity as representatives or agents of
the Company, as permitted by the terms and conditions of the Merger
Agreement.
(e) The Shareholders shall use the Shareholders' reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with Parent in doing, all things necessary,
proper or advisable to support and to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement, except in their capacity as
representatives or agents of the Company, as permitted by the terms and
conditions of the Merger Agreement.
(f) The Shareholders agree to promptly notify Parent in writing of the
nature and amount of any acquisition by such Shareholder of any voting
securities of the Company acquired by such Shareholder hereinafter.
(g) The Shareholders shall not knowingly take or fail to take any action
which would cause the Merger to not qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
(h) The Shareholder hereby revokes any and all prior proxies or powers
of attorney in respect of any of Subject Shares.
2. REPRESENTATIONS AND WARRANTIES. Each Shareholder represents and
warrants with respect to himself to Parent as follows:
(a) Except for the Shareholder that is indicated as a record as well as
a beneficial owner of certain shares as indicated on Schedule A hereto, the
record owner of the Subject Shares is a member firm of the New York Stock
Exchange which holds such shares in street name for the convenience of such
Shareholder. The Shareholder does not own, of record or beneficially, any
shares of capital stock of the Company other than the Subject Shares. The
Shareholder has the sole right to vote, and the sole power of disposition
with respect to, the Subject Shares, and none of the Subject Shares is
subject to any voting trust, proxy or other agreement, arrangement or
D-2
<PAGE>
restriction with respect to the voting or disposition of such Subject
Shares, except as contemplated by this Agreement.
(b) This Agreement has been duly executed and delivered by the
Shareholder. Assuming the due authorization, execution and delivery of this
Agreement by Parent, this Agreement constitutes the valid and binding
agreement of the Shareholder enforceable against the Shareholder in
accordance with its terms. The execution and delivery of this Agreement by
the Shareholder does not and will not conflict with any agreement, order or
other instrument binding upon the Shareholder, nor require any regulatory
filing or approval, other than pursuant to the HSR Act (as defined below).
3. BREACH; LIQUIDATED DAMAGES. In the event of a breach by one or more
Shareholders, and in lieu of any other monetary damages for breach of this
Agreement, the Shareholders, jointly and severally, shall (i) pay to the Parent
as liquidated damages the Fixed Damages Payment and (ii) upon the occurrence of
a Triggering Event, in addition to the occurrence of such breach, the
Shareholders shall pay the Parent the Variable Damages Payment. In connection
with the calculation of the amount of any Variable Damages Payment, in the event
of any change in the number of issued and outstanding shares of Subject Shares
by reason of any stock dividend, stock split, split-up, recapitalization, merger
or other change in the corporate or capital structure of the Company, the number
of Subject Shares subject to the calculation of the Variable Damages Payment and
the Exercise Price per Subject Share shall be appropriately adjusted. The
capitalized terms used in this Section 3 and not otherwise defined have the
meaning set forth in Section 4 below.
4. DEFINITIONS.
(a) A "Triggering Event" shall mean one or more of the following events
shall have occurred on or after the date hereof: (A) any person,
corporation, partnership, limited liability company or other entity or group
(such person, corporation, partnership, limited liability company or other
entity or group, other than Parent or an affiliate of Parent, being referred
to hereinafter, singularly or collectively, as a "Person"), acquires or
becomes the beneficial owner of 20% or more of the outstanding shares of
Company Common Stock; (B) any group is formed which beneficially owns 20% or
more of the outstanding shares of Company Common Stock; (C) any Person shall
have commenced a tender or exchange offer for 20% or more of the then
outstanding shares of Company Common Stock or publicly proposed any bona
fide merger, consolidation or acquisition of all or substantially all the
assets of the Company, or other similar business combination involving the
Company, and any Shareholder shall have tendered Subject Shares in response
to such offer or breached Section 1(b) in relation to any such public
proposal; (D) the Company enters into, or announces that it proposes to
enter into, an agreement, including, without limitation, an agreement in
principle, providing for a merger or other business combination involving
the Company or a "significant subsidiary" (as defined in Rule 1.02(w) of
Regulation S-X as promulgated by the Securities and Exchange Commission (the
"SEC")) of the Company or the acquisition of a substantial interest in, or a
substantial portion of the assets, business or operations of, the Company or
a significant subsidiary (other than the transactions contemplated by the
Merger Agreement); (E) any Person is granted any option or right,
conditional or otherwise, to acquire or otherwise become the beneficial
owner of shares of Company Common Stock which, together with all shares of
Company Common Stock beneficially owned by such Person, results or would
result in such Person being the beneficial owner of 20% or more of the
outstanding shares of Company Common Stock; or (F) there is a public
announcement with respect to a plan or intention by the Company, other than
Parent or its affiliates, to effect any of the foregoing transactions. For
purposes of this subparagraph (iii), the terms "group" and "beneficial
owner" shall be defined by reference to Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the rules and
regulations promulgated thereunder.
D-3
<PAGE>
(b) The "Fixed Damages Payment" is defined as $2,000,000.
(c) The "Variable Damages Payment" is an amount (not less than zero)
equal to the product of the excess of the Market Price over the Exercise
Price multiplied by the number of Subject Shares minus the sum of (A) the
aggregate amount of the actual taxes (including the tax benefit of the
amounts paid to Parent), if any, payable by the Shareholders with respect to
the sale, if any, of the Subject Shares in connection with the Triggering
Event and (B) $2,000,000.
(d) The "Market Price" is the highest price at which any Person is
offering to purchase a share of Common Stock of the Company (or, for all
purposes in this definition, equivalents thereof) or being offered the
opportunity to purchase Common Stock of the Company in connection with a
Triggering Event.
(e) The "Exercise Price" shall mean a price per Subject Share equal to
$17.00.
5. PAYMENT OF LIQUIDATED DAMAGES. Payment made by Shareholders to Parent
of liquidated damages pursuant to this Agreement shall be made by wire transfer
of federal funds to a bank designated by Parent or a check payable in
immediately available funds.
6. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Company that the execution and delivery of this Agreement by
Parent and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent and
this Agreement has been duly executed and delivered by Parent and constitutes a
valid and binding agreement of Parent.
7. THE CLOSING. Any closing hereunder shall take place on the Closing Date
specified by Parent in its Stock Exercise Notice pursuant to Section 1 at
10:00 A.M., local time, or the first business day thereafter on which all of the
conditions in Section 2 are met, at the principal executive office of the
Company, or at such other time and place as the parties hereto may agree.
8. TERMINATION. The obligations of the Shareholders hereunder shall
terminate upon the earlier to occur of (i) 9 months after the termination of the
Merger Agreement pursuant to Section 7.1 thereof and (ii) the Effective Time;
PROVIDED, HOWEVER, that if the Merger Agreement is terminated by the Company
pursuant to Section 7.1(b), (c) or (d) thereof (other than a termination
pursuant to Section 7.1(d)(i) following receipt of a Superior Proposal) or if
the Merger Agreement is terminated pursuant to Section 7.1(a) thereof, then such
obligations shall terminate upon the termination of the Merger Agreement. No
such termination of this Agreement shall relieve any party hereto from any
liability for any breach of this Agreement prior to termination.
9. FURTHER ASSURANCES. The Shareholders will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Parent may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
10. SUCCESSORS, ASSIGNS AND TRANSFEREES BOUND. Any successor, assignee or
transferee (including a successor, assignee or transferee as a result of the
death of the Shareholder, such as an executor or heir) shall be bound by the
terms hereof, and the Shareholders shall take any and all actions necessary to
obtain the written confirmation from such successor, assignee or transferee that
it is bound by the terms hereof.
11. AFFILIATE LETTER. The Shareholders agree to execute and deliver on a
timely basis, when and if requested by Parent, a written agreement in
substantially the form of Exhibit D to the Merger Agreement.
12. REMEDIES. The Shareholders acknowledge that money damages would be
both incalculable and an insufficient remedy for any breach of this Agreement by
it, and that any such breach would
D-4
<PAGE>
cause Parent irreparable harm. Accordingly, the Shareholders agree that in the
event of any breach or threatened breach of this Agreement, Parent, in addition
to any other remedies at law or in equity it may have, shall be entitled,
without the requirement of posting a bond or other security, to equitable
relief, including injunctive relief and specific performance.
13. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
14. AMENDMENT. This Agreement may be amended only by means of a written
instrument executed and delivered by both the Shareholders and Parent.
15. JURISDICTION. Each party hereby irrevocably submits to the exclusive
jurisdiction of the U.S. District Court for the Southern District of New York in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
courts (and waives any objection based on FORUM NON CONVENIENS or any other
objection to venue therein). Each party hereto waives any right to a trial by
jury in connection with any such action, suit or proceeding.
16. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
17. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise provided in Section 8 or as
specified in the Merger Agreement. Notwithstanding the foregoing, the Company
shall pay fees and disbursements, in an amount not to exceed $10,000, of Piper
Marbury Rudnick & Wolfe as counsel to the Shareholders for this transaction.
18. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity. Furthermore the parties agree that
the liquidated damages provided for herein are in the nature of compensation for
damages, and not a penalty, and are reasonable in relation to the damages and
losses that Parent is likely to incur as a result of the circumstances under
which they are payable.
19. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or if sent by
telex or telecopier (and also confirmed in writing) to the person at the address
set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
(a) if to Parent, to:
GE Medical Systems
P.O. Box 414, W-410
Milwaukee, WI 53201
Attn: General Counsel
Fax: 414-544-3575
D-5
<PAGE>
with copies to:
GE Medical Systems
3000 North Grandview Boulevard
Waukesha, WI 53188
Attn: General Counsel
and:
General Electric Company
3135 Easton Turnpike
Fairfield, CT 06431-0001
Attn: Vice President and Senior Counsel--Transactions
Fax: 203-373-3008
and:
Gibson Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
Attention: Steven Shoemate
Facsimile No.: 212-351-4035
(b) if to the Shareholder to:
Richard Mazess
3534 Blackhawk Drive
Madison, WI 53705
with a copy to:
Piper Marbury Rudnick & Wolfe
203 North LaSalle Street
Chicago, IL 60601
Attn: Mitchell L. Hollins
Fax: 312-236-7516
20. CAPITALIZED TERMS. Capitalized terms used in this Agreement that are
not defined herein shall have such meanings as set forth in the Merger
Agreement.
21. COUNTERPARTS. For the convenience of the parties, 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.
22. NO LIMITATION ON ACTIONS OF THE SHAREHOLDERS AS
DIRECTOR. Notwithstanding anything to the contrary in this Agreement, nothing
in this Agreement is intended or shall be construed to require the Shareholders
to take or in any way limit any action that the Shareholders may take to
discharge the Shareholders' fiduciary duties as a director of the Company,
including but not limited to the right to vote for or support a Superior
Proposal in accordance with the terms of the Merger Agreement.
23. WAIVER OF APPRAISAL RIGHTS. Each Shareholder hereby waives any rights
of appraisal or rights to dissent from the Merger.
D-6
<PAGE>
24. STOP TRANSFER. The Shareholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Subject Shares, unless such
transfer is made in compliance with this Agreement.
D-7
<PAGE>
IN WITNESS WHEREOF, the Shareholders and Parent have caused this Agreement
to be duly executed and delivered on the day first above written.
SHAREHOLDERS
<TABLE>
<S> <C>
/s/ RICHARD B. MAZESS
---------------------------------------------
Richard B. Mazess
/s/ MARILYN MAZESS
---------------------------------------------
Marilyn Mazess
/s/ RICHARD B. MAZESS
---------------------------------------------
Richard B. Mazess, as custodian
for XXXXXXXX under the
Uniform Gifts to Minors Act
/s/ RICHARD B. MAZESS
---------------------------------------------
Richard B. Mazess, as custodian
for XXXXXXXX under the
Uniform Gifts to Minors Act
GENERAL ELECTRIC COMPANY,
a New York corporation
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ J. KEITH MORGAN
----------------------------------------
Name: J. Keith Morgan
Title: Vice President and General Counsel
GE Medical Systems
</TABLE>
D-8
<PAGE>
LUNAR CORPORATION
SPECIAL MEETING OF SHAREHOLDERS [ ], 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The shareholder of Lunar Corporation, a Wisconsin corporation
("Lunar"), whose name and signature appear on the reverse side of this card,
having received the Notice of Special Meeting of Shareholders and the related
proxy statement/prospectus for Lunar's special meeting of shareholders to be
held at Lunar Corporation, 726 Heartland Trail, Madison, Wisconsin 53717, on
[date], 2000, at 9:00 a.m., hereby appoints Robert A. Beckman and John
Comerford, or either of them, the proxies of the shareholder, each with full
power of substitution, to vote at such meeting, and at any adjournments of
such meeting, all shares of Lunar common stock, par value $.01 per share,
that the shareholder is entitled to vote, in the manner shown on the reverse
side of this card.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS, AND THE SHARES REPRESENTED
HEREBY WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDER'S DIRECTIONS ON THE
REVERSE SIDE OF THIS CARD. IF NO DIRECTION IS GIVEN, THEN THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN THE PROXIES' DISCRETION ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENTS THEREOF, SUBJECT TO LIMITATIONS SET FORTH IN APPLICABLE REGULATIONS
UNDER THE SECURITIES EXCHANGE ACT OF 1934.
--------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOU PLAN TO ATTEND THE MEETING, PLEASE SO INDICATE IN THE SPACE
PROVIDED ON THE REVERSE SIDE.
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
Please mark your
[X] votes as in this
example.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
FOR AGAINST ABSTAIN
1. Approval and adoption of the Agreement [ ] [ ] [ ]
and Plan of Merger, dated as of June 2,
2000, among Lunar Corporation, General
Electric Company and Topaz Merger Corp.
and the transactions contemplated
thereby.
2. The undersigned authorizes the [ ] [ ] [ ]
aforementioned proxies to vote in their
discretion on any other matters that may
properly come before the special meeting
or any adjournments thereof, subject to
limitations set forth in applicable
regulations under the Securities
Exchange Act of 1934.
MARK HERE IF YOU PLAN TO [ ]
ATTEND THE MEETING
---------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED AND DELIVERED, WILL BE VOTED AS
SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
The undersigned hereby revokes any proxy heretofore given to vote with
respect to the Lunar common stock and hereby ratifies and confirms all
that the proxies, their substitutes or any of them may lawfully do by
virtue hereof.
---------------------------------------------------
Dated , 2000
---------------------------------------- -----------------------------
Co-Owner Sign Here Shareholder Sign Here
NOTE: PLEASE SIGN EXACTLY AS NAME(S) APPEAR(S) ON THIS CARD, WHEN SHARES ARE
HELD JOINTLY; BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. WHEN
EXECUTED BY A CORPORATION OR PARTNERSHIP, PLEASE SIGN IN FULL CORPORATE OR
PARTNERSHIP NAME BY A DULY AUTHORIZED OFFICER OR PARTNER, GIVING TITLE. PLEASE
SIGN, DATE AND MAIL THIS PROXY PROMPTLY WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND.
2
