MERGER AGREEMENT
among
GULL LABORATORIES, INC.
MERIDIAN DIAGNOSTICS, INC.,
FRESENIUS AG
and
MERIDIAN ACQUISITION CO.
Dated as of September 15, 1998
TABLE OF CONTENTS
Page
----
1. Definitions............................................................. 1
2. Basic Transaction....................................................... 4
2.1 The Merger....................................................... 4
2.2 The Closing...................................................... 4
2.3 Actions at the Closing........................................... 4
2.4 Effect of Merger................................................. 4
2.5 Procedure for Payment............................................ 5
2.6 Closing of Transfer Records...................................... 6
3. Representations and Warranties of Gull and Fresenius.................... 6
3.1 Organization, Qualification, and Corporate Power................. 6
3.2 Capitalization................................................... 7
3.3 Authorization of Transaction..................................... 7
3.4 Noncontravention................................................. 7
3.5 Filings with the SEC............................................. 8
3.6 Events After December 31, 1997................................... 8
3.7 Undisclosed Liabilities.......................................... 9
3.8 Brokers' Fees.................................................... 9
3.9 Insurance........................................................ 9
3.10 Litigation...................................................... 10
3.11 Product Warranty................................................ 10
3.12 Product Liability............................................... 11
3.13 Employees....................................................... 11
3.14 Employee Benefits............................................... 11
3.15 Guaranties...................................................... 13
3.16 Environment, Health and Safety.................................. 13
3.17 Intellectual Property........................................... 15
3.18 Disclosure...................................................... 18
3.19 Opinion of Financial Advisor.................................... 18
3.20 Proficiency Surveys............................................. 18
3.21 Products, Inventories and Operations............................ 18
3.22 Formulae, Etc., for Products.................................... 20
3.23 Expiration Dates. ............................................. 20
3.24 Subsidiaries and Other Capital Stock............................ 20
3.25 Real Property................................................... 20
3.26 Equipment....................................................... 21
3.27 Contracts and Agreements........................................ 21
3.28 Accounts Receivable............................................. 21
3.29 Licenses and Permits............................................ 22
3.30 Taxes and Tax Returns........................................... 22
3.31 Transactions With Affiliates.................................... 23
3.32 Compliance with Applicable Law.................................. 23
3.33 General Disclosure Matters...................................... 23
3.34 Other Disclosures............................................... 23
4. Representations and Warranties of Meridian
and the Transitory Subsidiary.......................................... 23
4.1 Organization.................................................... 24
4.2 Authorization of Transaction.................................... 24
4.3 Noncontravention................................................ 24
4.4 Brokers' Fees................................................... 24
4.5 Disclosure...................................................... 25
4.6 Litigation...................................................... 25
4.7 Available Funds................................................. 25
5. Representations and Warranties of Fresenius............................ 25
5.1 Organization.................................................... 25
5.2 Authorization of Transaction.................................... 25
5.3 Brokers' Fees................................................... 26
5.4 Disclosure...................................................... 26
5.5 Ownership of Stock of Gull Shares............................... 26
5.6 Transactions with Gull.......................................... 26
6. Covenants.............................................................. 26
6.1 General......................................................... 26
6.2 Notices and Consents............................................ 26
6.3 Regulatory Matters and Approvals................................ 26
6.4 Operation of Business........................................... 27
6.5 Continuance of Operations....................................... 28
6.6 Due Diligence................................................... 29
6.7 Notice of Developments.......................................... 30
6.8 Exclusivity..................................................... 30
6.9 Bylaw Indemnification........................................... 30
6.10 Closing Balance Sheet........................................... 31
6.11 Value of Certain Gull Assets.................................... 31
6.12 WARN Act Compliance; Severence Obligations...................... 32
6.13 Service and Other Arrangements.................................. 32
6.14 Closing Deliveries.............................................. 33
6.15 Further Meridian Obligations.................................... 33
7. Covenants of Fresenius; Indemnification................................ 33
7.1 Voting of Shares................................................ 33
7.2 Indebtedness of Gull to Fresenius............................... 33
7.3 Indemnification for Shareholder Actions......................... 34
7.4 Indemnification by Fresenius.................................... 34
7.5 Indemnifications by Meridian.................................... 35
7.6 Zoning Interruptions............................................ 36
7.7 Indemnification Procedures...................................... 36
7.8 Transition...................................................... 37
7.9 Confidentiality................................................. 37
7.10 Noncompetition and NonSolicitation Covenants.................... 37
7.11 Contribution to Capital......................................... 38
8. Conditions to Obligations to Close..................................... 38
8.1 Conditions to Each Party's Obligation
to Effect the Merger............................................ 38
8.2 Conditions to Obligation of Meridian
and the Transitory Subsidiary................................... 39
8.3 Conditions to Obligation of Gull and Fresenius.................. 41
9. Termination............................................................ 41
9.1 Termination of Agreement........................................ 41
9.2 Effect of Termination........................................... 42
10. Miscellaneous.......................................................... 43
10.1 Survival........................................................ 43
10.2 Press Releases and Public Announcements......................... 43
10.3 No Obligations Upon Fresenius Medical Care AG................... 43
10.4 No Third Party Beneficiaries.................................... 43
10.5 Entire Agreement................................................ 44
10.6 Successors and Assignment....................................... 44
10.7 Counterparts.................................................... 44
10.8 Headings........................................................ 44
10.9 Notices......................................................... 44
10.10 Governing Law................................................... 45
10.11 Amendments and Waivers.......................................... 45
10.12 Severability.................................................... 46
10.13 Expenses........................................................ 46
10.14 Construction.................................................... 46
10.15 Incorporation of Exhibits and Schedules......................... 46
10.16 Jurisdiction. ................................................. 46
LIST OF EXHIBITS
Exhibit A - Articles of Merger
Exhibit B - Legal Opinion of Counsel to Gull
Exhibit C - Legal Opinion of Counsel to Fresenius
Exhibit D - Legal Opinion of Counsel to Meridian
Exhibit E - Fairness Opinion
DISCLOSURE SCHEDULES
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is entered into as of September 15,
1998, among GULL LABORATORIES, INC., a Utah corporation ("Gull"), MERIDIAN
DIAGNOSTICS, INC., an Ohio corporation ("Meridian"), FRESENIUS AG, a German
stock corporation ("Fresenius") and MERIDIAN ACQUISITION CO., a Utah corporation
wholly-owned by Meridian ("Transitory Subsidiary").
R E C I T A L S:
This Agreement contemplates a transaction in which Meridian will acquire
Gull for cash through a reverse subsidiary merger of the Transitory Subsidiary
into Gull.
Now, therefore, in consideration of the premises and the mutual covenants
and undertakings contained hereinafter, the Parties agree as follows.
1. Definitions.
Unless the context otherwise requires, capitalized terms used in this
Agreement shall have the respective meanings ascribed to them in this Section 1.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of Gull and its Subsidiaries that is not already available to the
public or generally known in the businesses in which Gull and its Subsidiaries
are engaged.
"Controlled Group of Corporations" has the meaning set forth in Section
1563 of the Code.
"Disclosure Schedule" has the meaning set forth in Section 3. Information
set forth in any section of the Disclosure Schedule shall be deemed to qualify
each section of this Agreement without the necessity of expressed reference to
such section.
"Dissenting Share" means any Gull Share held of record by a stockholder who
or which has exercised his or its appraisal rights under the Utah Revised
Business Corporation Act.
"Effective Time" has the meaning set forth in Section 2.4.1.
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"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
multiemployer plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fairness Opinion" has the meaning set forth in Section 3.19.
"Fresenius" has the meaning set forth in the preface.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Gull" has the meaning set forth in the preface and includes its
Subsidiaries unless the context requires otherwise.
"Gull Share" means any share of the Common Stock, $0.001 par value per
share, of Gull.
"Gull Stockholder" means any Person who or which is a holder of record of
any Gull Shares.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Intellectual Property Assets" has the meaning set forth in Section 3.17.
"Knowledge" or "to the Knowledge of" means in the case of Gull, the actual
knowledge after reasonable investigation of Dr. Silke Humberg, Michael B. Malan,
Dr. Fred Rachford, Holly Scribner, Frank J. Simon, Andrew Taylor, John Turner,
Dr. Martina Vogel or Dr. Linxian Wu, and in the case of Fresenius, has the
meaning set forth in Section 5.
"Meridian" has the meaning set forth in the preface.
"Meridian Note" The promissory note of Meridian to be issued to Fresenius
at the Closing pursuant to Section 7.2.
"Merger" has the meaning set forth in Section 2.1.
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"1997 10-K" has the meaning set forth in Section 3.5.
"1998 10-Q" has the meaning set forth in Section 3.5.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Paying Agent" has the meaning set forth in Section 2.5.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Products" means all of the products manufactured, produced or distributed
by Gull and its Subsidiaries, including, without limitation, the products
identified in the Disclosure Schedule.
"Proxy Materials" means the proxy materials relating to the special
meeting.
"Public Reports" has the meaning set forth in Section 3.5.
"SEC" means the Securities and Exchange Commission.
"SEC Filings" has the meaning set forth in Section 6.3.1.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, excepting only (a) mechanic's, materialman's and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of securities entitled to vote generally in the
election of directors sufficient to elect a majority of the directors. In the
case of Gull, Subsidiaries includes non-corporate entities, all or a majority of
the equity interest of which are owned by Gull or a Subsidiary of Gull, with the
Subsidiaries being Gull Laboratories International, Inc., Gull Laboratories
GmbH, Gull Europe S.A., Biodesign, Inc., Gull Laboratories S.A., Gull
Laboratories N.V.
"Third Party Offer" has the meaning set forth in Section 6.8.
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"Transitory Subsidiary" has the meaning set forth in the preface.
2. Basic Transaction.
2.1 The Merger. Subject to the terms and conditions of this Agreement,
the Transitory Subsidiary shall merge into Gull at the Effective Time (the
"Merger"). Gull shall be the corporation surviving the Merger.
2.2 The Closing. The closing of the Merger shall take place at the
offices of Keating, Muething & Klekamp, P.L.L., One East Fourth Street,
Cincinnati, Ohio 45202, commencing at 10:00 a.m. Eastern time on the second
business day following the satisfaction or waiver of all conditions set forth in
Section 8 (other than conditions with respect to actions the respective Parties
will take at the closing itself) or such other date and place as the Parties may
mutually determine in writing (the "Closing Date").
2.3 Actions at the Closing. At the closing, Gull will deliver to
Meridian and the Transitory Subsidiary the certificates, instruments and
documents referred to in Section 8.2. Meridian and the Transitory Subsidiary
will deliver to Gull the certificates, instruments and documents referred to in
Section 8.3. On the Closing Date, Gull and the Transitory Subsidiary will file
with the Utah Division of Corporations and Commercial Code Articles of Merger in
the form attached hereto as Exhibit A, and Meridian will deliver the Merger
consideration to the Paying Agent in the manner provided in this Section 2.
2.4 Effect of Merger.
2.4.1 General. The Merger shall become effective at the time Gull
and the Transitory Subsidiary file the properly executed and certified
Articles of Merger with the Utah Division of Corporations and Commercial
Code, or at such later time as the parties shall agree and specify in
the Articles of Merger (the "Effective Time"). The Merger shall have the
effects set forth in the Utah Revised Business Corporation Act. From and
after the Effective Time, Gull, as the surviving corporation in the
Merger, shall possess all of the rights, privileges, powers and
franchises of a public as well as a private nature, and be subject to
all of the restrictions, disabilities and duties of each of Gull and the
Transitory Subsidiary, as the constituent corporations in the Merger,
all as set forth in Section 16-10a-1101, et seq., of the Utah Revised
Business Corporation Act.
2.4.2 Gull Corporate Documents. The Articles of Incorporation and
Bylaws of Gull shall be amended at the Effective Time as set forth in
the Articles of Merger to be identical to the Articles of Incorporation
and Bylaws of the Transitory Subsidiary immediately prior to the
Effective Time, except as provided in Section 6.9.
2.4.3 Directors and Officers. The directors and officers of the
Transitory Subsidiary shall become the directors and officers of Gull at
the Effective Time.
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2.4.4 Conversion of Gull Shares. At the Effective Time, by virtue
of the Merger and without any further action by Gull, Meridian,
Fresenius or the Transitory Subsidiary, each Gull Share then issued and
outstanding, other than any Dissenting Share, shall be converted into
the right to receive Two Dollars and Twenty-Five Cents ($2.25) in cash
without interest, and each Dissenting Share shall be converted into the
right to receive payment from Gull with respect thereto to the extent
provided by, and in accordance with, the provisions of the Utah Revised
Business Corporation Act, provided, however, that the Merger
consideration per Gull Share shall be subject to equitable adjustment in
the event of any stock split, stock dividend, reverse stock split, or
other change in the number of Gull Shares outstanding other than an
increase in the number of outstanding Gull Shares resulting from the
exercise of options to purchase Gull Shares outstanding on the date
hereof. After the Effective Time, no Gull Share shall be deemed to be
outstanding, other than Gull Shares issued pursuant to Section 2.4.5,or
to have any rights other than those set forth in this Section.
2.4.5 Conversion of Capital Stock of the Transitory Subsidiary.
At and as of the Effective Time, each share of Common Stock of the
Transitory Subsidiary shall be converted into one share of Common Stock,
$0.001 par value per share, of Gull.
2.5 Procedure for Payment.
2.5.1 Immediately after the Effective Time, Meridian will deposit
with a commercial bank (the "Paying Agent") a payment fund consisting of
cash sufficient for the Paying Agent to make full payment of the Merger
consideration to the holders of record immediately prior to the
Effective Time of all of the outstanding Gull Shares (other than any
Dissenting Shares). Meridian will cause the Paying Agent to mail a
letter of transmittal in customary form which shall contain instructions
for use in effecting the surrender of such certificates evidencing the
outstanding Gull Shares in exchange for the Merger consideration. Upon
surrender of a certificate to the Paying Agent for cancella tion,
together with a duly executed letter of transmittal and such other
documents as may be reasonably requested by the Paying Agent, the holder
of such certificate shall be entitled to receive in exchange therefor
the amount of cash, without interest, into which Gull Shares theretofore
represented by such certificate shall have been converted at the
Effective Time; and the certificate so surrendered shall be canceled. In
the event of a transfer of ownership of Gull Shares that is not
registered in the transfer records of Gull, payment may be made to a
Person other than the Person in whose name the certificate so
surrendered is registered if such certificate shall be properly endorsed
or otherwise be in proper form for transfer and the Person requesting
such payment shall pay any transfer or other taxes required by reason of
the payment to a Person other than the registered holder of such
certificate or establish to the satisfaction of Gull, as the surviving
corporation, that such tax has been paid or is not applicable. Until so
surrendered, each certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the amount of
cash, without interest, into which Gull Shares theretofore represented
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by such certificate shall have been converted at the Effective Time
pursuant to this Section.
If a certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
certificate to be lost, stolen or destroyed and, if required by Meridian
or Gull, upon the posting by such Person of a bond in such amount as
Meridian or Gull may reasonably direct as indemnity against any claim
that may be made against it with respect to such certificate and upon
such Person's compliance with the other requirements set forth herein,
the Paying Agent will issue in respect of such lost, stolen or destroyed
certificate, the Merger consideration to be received by virtue of the
Merger with respect to Gull Shares represented thereby.
2.5.2 Meridian may cause the Paying Agent to invest the payment
fund in securities of a United States commercial bank or of the
government of the United States or any state thereof, provided, that the
terms and conditions of the investments shall be such as to permit the
Paying Agent to make prompt payment of the Merger consideration as
necessary. Meridian may cause the Paying Agent to pay over to Gull any
net earnings with respect to the investments, and Meridian will deposit
promptly with the Paying Agent any portion of the payment fund which is
lost through investments.
2.5.3 Meridian may cause the Paying Agent to pay over to Gull any
portion of the payment fund including any earnings thereon remaining 180
days after the Effective Time, and thereafter all former Gull
Stockholders shall be entitled to look to Gull, subject to abandoned
property, escheat, and other similar laws, as general creditors thereof
with respect to the Merger consideration payable upon surrender of their
certificates.
2.5.4 Meridian shall pay all charges and expenses of the Paying
Agent.
2.6 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Gull Shares outstanding prior to the Effective Time
shall not be made on the stock transfer books of Gull.
3. Representations and Warranties of Gull and Fresenius. Gull represents
and warrants to Meridian and the Transitory Subsidiary that the statements
contained in this Section 3 and the accompanying Disclosure Schedule are correct
and complete as of the date of this Agreement.
3.1 Organization, Qualification, and Corporate Power. Each of Gull and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization. Each of Gull and its Subsidiaries is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required except where the lack of such qualification would not
have a material adverse effect on the financial condition of Gull and its
Subsidiaries taken as a whole or on the ability of the parties to consummate the
transactions contemplated by this Agreement.
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Each of Gull and its Subsidiaries has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. The minute books containing records of meetings of Gull
Stockholders, directors and committees of directors, Gull stock certificate
books and stock records are each correct and complete. Neither any of Gull nor
any of its Subsidiaries is in default under or in violation of any provision of
its charter or Bylaws.
3.2 Capitalization. The entire authorized capital stock of Gull consists
of 50,000,000 Gull Shares, $0.001 par value per share, and 5,000,000 shares of
Preferred Stock, $0.01 par value per share. As of the date hereof, 8,016,012
Gull Shares are issued and outstanding and no Gull Shares are held in treasury.
No shares of Gull Preferred Stock are outstanding. All of the issued and
outstanding Gull Shares have been duly authorized and are validly issued, fully
paid and non-assessable. Except as set forth in the Disclosure Schedule, there
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Gull or any of its Subsidiaries to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Gull or any of its
Subsidiaries. Except as set forth in the Disclosure Schedule, all issued and
outstanding shares of capital stock of each Subsidiary of Gull have been duly
authorized and are validly issued and fully paid and non-assessable and all of
such shares are owned of record and beneficially by Gull, free, clear and
unencumbered, and Gull or a wholly-owned Subsidiary has sole voting power with
respect to all of such shares.
3.3 Authorization of Transaction. The Board of Directors of Gull, at a
meeting duly called and held, has duly adopted resolutions approving this
Agreement and the Merger, determining that the terms of the Merger are fair to,
and in the best interests of, Gull's Stockholders and recommending that Gull's
Stockholders approve and adopt this Agreement and the Merger. Gull has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder, subject to approval and adoption of this Agreement and
the Merger by the requisite majority-in-interest of Gull Stockholders as
provided by the Utah Revised Business Corporation Act. The execution, delivery
and performance of this Agreement and the consummation by Gull of the Merger and
of the other transactions contemplated hereby have been duly authorized by the
Board of Directors of Gull and no other corporate proceedings on the part of
Gull are necessary to authorize this Agreement or to consummate the transactions
so contemplated other than the requisite stockholder approval. This Agreement
has been duly executed and delivered by Gull and, assuming this Agreement
constitutes a valid and binding obligation of Meridian and the Transitory
Subsidiary, constitutes a valid and binding obligation of Gull enforceable
against Gull in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally and to general principles of equity.
3.4 Noncontravention. Except as set forth in the Disclosure Schedule
and, except for filings, permits, authorizations, consents and approvals as may
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be required under applicable requirements of the Securities Exchange Act, the
Hart-Scott-Rodino Act, the laws of Utah, the laws of other states in which Gull
and its Subsidiaries are qualified to do or are doing business and state
takeover laws, and except for requisite Gull Stockholder approval and the filing
of Articles of Merger with the Utah Division of Corporations and Commercial
Code, neither the execution and the delivery of this Agreement nor the
consummation of the transactions contemplated hereby, will violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of Gull and its Subsidiaries is subject or any provision of
the charter or Bylaws of any of Gull and its Subsidiaries or conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which any of Gull and its Subsidiaries is a party or by
which it is bound or to which any of its assets is subject or result in the
imposition of any Security Interest upon any of its assets, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the financial condition of Gull and its Subsidiaries
taken as a whole or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
3.5 Filings with the SEC. Gull has made all filings with the SEC that it
has been required to make under the Securities Exchange Act, including, without
limitation, Gull's Annual Report on Form 10-K for the year ended December 31,
1997 (the "1997 10-K") and Gull's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 (the "1998 10-Q") (the 1997 10-K and 1998 10-Q being
referred to collectively as the "Public Reports"). At the time filed with the
SEC, each of the Public Reports complied in all material respects with the
Securities Exchange Act and the applicable rules and regulations of the SEC
thereunder. At the time filed with the SEC, the Public Reports, as of their
respective filing dates, did not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Gull has delivered to Meridian a correct and complete copy of each
Public Report.
3.6 Events After December 31, 1997.
3.6.1 Except as disclosed in the Public Reports or in the Disclosure
Schedule, since December 31, 1997 there has not been any material adverse change
in the business, financial condition, cash flows, operations, results of
operations or prospects of Gull and its Subsidiaries, taken as a whole.
3.6.2 Except as set forth in the Disclosure Schedule, since December 31,
1997, neither Gull nor any of its Subsidiaries:
3.6.2.1 has transferred or encumbered assets or entered into any
agreement outside the Ordinary Course of Business or granted any license
or sublicense of any rights with respect to any Intellectual Property
Assets; or
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3.6.2.2 granted any Security Interest or made any loan or entered
into any other transaction with any directors, officers or employees
outside the Ordinary Course of Business; or
3.6.2.3 entered into any employment agreement, modified the terms
of any existing employment agreement; or
3.6.2.4 granted any increase in base compensation to any director,
officer or employee; or
3.6.2.5 adopted, amended or modified any Employee Benefit Plan;
or
3.6.2.6 made any capital expenditures or committed to make such
expenditures in excess of $10,000; or
3.6.2.7 reduced or limited the insurance coverages maintained on
its behalf or the manner in which it uses, operates or maintains its
property; or
3.6.2.8 made any investments or contributions to any other Person
other than in the Ordinary Course of Business, in excess of $10,000,
individually or in the aggregate.
3.7 Undisclosed Liabilities. Except as set forth in the Disclosure
Schedule, none of Gull and its Subsidiaries has any material liability, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated and whether due or to become due,
including any material liability for taxes, except for liabilities set forth in
the Public Reports or for which reasonable reserves are maintained, and
liabilities which have arisen after June 30, 1998 in the Ordinary Course of
Business.
3.8 Brokers' Fees. Except as set forth in the Disclosure Schedule, none
of Gull and its Subsidiaries has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
3.9 Insurance. The Disclosure Schedule sets forth the following
information with respect to each insurance policy, including without limitation
policies providing medical, directors' and officers', property, casualty,
liability and workers' compensation coverage and bond and surety arrangements,
to which any of Gull and its Subsidiaries is a party, a named insured or
otherwise the beneficiary of coverage:
3.9.1 the name, address and telephone number of the agent;
3.9.2 the name of the insurer, the name of the policyholder
and the name of each covered insured;
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3.9.3 the policy number and the period of coverage;
3.9.4 the scope, including an indication of whether the coverage
was on a claims made, occurrence or other basis, and amount, including a
description of how deductibles and ceilings are calculated and operate,
of coverage; and
3.9.5 a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy, to Gull's Knowledge: (A) the policy
is legal, valid, binding, enforceable and in full force and effect; (B) the
policy will continue to be legal, valid, binding, enforceable and in full force
and effect on identical terms following the consummation of the Merger except
that, subject to Section 6.9, coverage of Gull under policies maintained by
Fresenius will terminate at the Effective Time; (C) none of Gull and its
Subsidiaries nor any other party to the policy is in material breach or default
(including with respect to the payment of premiums or the giving of notices) and
no event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification or acceleration,
under the policy; and (D) no party to the policy has repudiated any provision
thereof. Each of Gull and its Subsidiaries has been covered since January 1,
1995 by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. The
Disclosure Schedule describes any self-insurance arrangements affecting any of
Gull and its Subsidiaries.
3.10 Litigation. The Disclosure Schedule sets forth each instance in
which any of Gull and its Subsidiaries is subject to any outstanding injunction,
judgment, order, decree, ruling or charge or is a party or, to Gull's Knowledge
is threatened in writing to be made a party to any action, suit, proceeding,
hearing or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator, an adverse determination of which could reasonably be
expected to result in any material adverse change in the business, financial
condition, cash flows, operations, results of operations or prospects of Gull
and its Subsidiaries, taken as a whole.
3.11 Product Warranty. Except as set forth in the Disclosure Schedule,
to Gull's Knowledge, each product manufactured, distributed, sold, leased or
delivered by Gull or any of its Subsidiaries has been in conformity in all
material respects with all applicable contractual commitments and all expressed
and implied warranties. Except as set forth in the Disclosure Schedule, none of
Gull and its Subsidiaries has any liabilities in excess of the liabilities set
forth in the Public Reports or for which reasonable reserves are maintained for
any guaranty, warranty or other indemnity arising from products manufactured,
sold, leased or delivered by any of Gull and its Subsidiaries, except for
liabilities which are not reasonably expected to result in any material adverse
change in the business, financial condition, cash flows, operations, results of
operations or prospects of Gull and its Subsidiaries, taken as a whole, and
liabilities which have arisen after June 30, 1998 in the Ordinary Course of
Business.
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3.12 Product Liability. Except as reserved for in the consolidated
financial statements contained in the 1997 10-K or as set forth in the
Disclosure Schedule, to Gull's Knowledge, none of Gull and its Subsidiaries has
any liability arising out of any injury to any Person or property as a result of
the ownership, possession or use of any Product manufactured, distributed, sold,
leased or delivered by any of Gull and its Subsidiaries except for any such
liabilities which are not reasonably expected to result in any material adverse
change in the business, financial condition, cash flows, operations, results of
operations or prospects of Gull and its Subsidiaries, taken as a whole.
3.13 Employees. Except as set forth in the Disclosure Schedule, to
Gull's Knowledge, no executive, key employee or group of employees has any plans
to terminate employment with any of Gull and its Subsidiaries other than routine
terminations which are not reasonably expected to result in any material adverse
change in the business, financial condition, cash flows, operations, results of
operations or prospects of Gull and its Subsidiaries, taken as a whole. Except
as set forth in the Public Reports, none of the employees of Gull or its
Subsidiaries are subject to any collective bargaining agreement. Since January
1, 1998, none of Gull or its Subsidiaries have committed an unfair labor
practice as such term is defined in federal labor law or similar action under
non-United States labor laws, or experienced any strikes, charges of unfair
labor practices or other collective bargaining disputes, except for any such
practices, strikes, claims or disputes which are not reasonably expected to
result in any material adverse change in the business, financial condition, cash
flows, operations, results of operations or prospects of Gull and its
Subsidiaries, taken as a whole. Gull has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any of Gull and its Subsidiaries.
3.14 Employee Benefits.
3.14.1 The Disclosure Schedule lists each Employee Benefit Plan
that any of Gull and its Subsidiaries maintains or to which any of Gull
and its Subsidiaries contributes.
3.14.1.1 Each such Employee Benefit Plan (and each related
trust, insurance contract or fund) subject to ERISA substantially
complies in form and in operation in all material respects with
the applicable requirements of ERISA, the Code and other
applicable laws of United States or non-United States
jurisdictions.
3.14.1.2 All required reports and descriptions, including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1s and
Summary Plan Descriptions, have been filed or distributed
appropriately with respect to each Employee Benefit Plan subject
to Title I of ERISA. The requirements of Part 6 of Subtitle B of
Title 1 of ERISA and of Code Section 4980B have materially been
met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
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3.14.1.3 All contributions, including all employer
contributions and employee salary reduction contributions, which
are due prior to the date of this Agreement have been paid to
each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions which are due for any period
ending on or before the Closing Date will have been paid on or
before the Closing Date to each such Employee Pension Benefit
Plan or will have been accrued in accordance with the past custom
and practice of Gull and its Subsidiaries. All premiums or other
payments which are due for all periods ending on or before the
Closing Date will have been paid on or before the Closing Date
with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
3.14.1.4 Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan covering employees in the United
States which is intended to be a "qualified plan" under Code
Section 401(a) substantially meets the requirements of Code
Section 401(a) and has received a favorable determination letter
form the Internal Revenue Service or has pending an application
for a determination letter which was timely filed.
3.14.1.5 The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit Plan
covering employees in the United States, other than any
multiemployer plan, equals or exceeds (or does not fail by an
amount which is material to Gull to equal or exceed) the present
value of all vested and nonvested liabilities thereunder
determined in accordance with PBGC methods, factors and
assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
3.14.1.6 Gull has delivered to Meridian correct and
complete copies of the plan documents and summary plan
description, the most recent determination letter received from
the Internal Revenue Service (for each Employee Pension Benefit
Plan), the most recent Form 5500 Annual Report, if applicable,
and all related trust agreements, insurance contracts and other
funding agreements or other documents which implement each
Employee Benefit Plan.
3.14.2 With respect to each Employee Benefit Plan that any of
Gull, its Subsidiaries and the Controlled Group of Corporations which
includes Gull and its Subsidiaries maintains or ever has maintained,
within the seven years ending on the Closing Date, or to which any of
them contributes, contributed within the seven years ending on the
Closing Date, or ever has been required to contribute, within the seven
years ending on the Closing Date:
3.14.2.1 No such Employee Benefit Plan is an Employee
Pension Benefit Plan that is subject to Title IV of ERISA.
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3.14.2.2 To Gull's Knowledge, there have been no
prohibited transactions (as defined in ERISA Section 406 and Code
Section 4975) with respect to any such Employee Benefit Plan
subject to Title I of ERISA. No Fiduciary (as defined in ERISA
Section 3(21)) has any liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or, to Gull's
Knowledge, threatened. Gull has no Knowledge of any basis for any
such action, suit, proceeding, hearing or investigation.
3.14.3 None of Gull, its Subsidiaries and the other members of
the Controlled Group of Corporations that includes Gull and its
Subsidiaries contributes to, has, within the seven years ending on the
Closing Date, contributed to, or been required to contribute to any
multiemployer plan or has any liability, including withdrawal liability,
under any multiemployer plan as defined in Section 4001(a)(3) of ERISA.
3.14.4 None of Gull and its Subsidiaries contributes or is
required to contribute to any Employee Welfare Benefit Plan providing
medical, health or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses or
their dependents, other than in accordance with Code Section 4980B.
3.15 Guaranties. Except as set forth in the Disclosure Schedule or the
Public Reports, none of Gull and its Subsidiaries is a guarantor or otherwise is
liable for any material liability or obligation, including indebtedness, of any
other Person.
3.16 Environment, Health and Safety.
3.16.1 Except as set forth in the Disclosure Schedule, to the
Knowledge of Gull, all real property owned, leased or controlled by Gull
and the improvements thereon and the soil and groundwater thereunder
("Properties"): (i) do not contain and are not contaminated by any
Hazardous Substance; (ii) do not contain and have not previously
contained underground storage tanks; (iii) have never been used for the
generation, treatment, storage or disposal of any Hazardous Substance
(other than routine storage, use and sale of Hazardous Substances from
time to time in the Ordinary Course of Business and in compliance, in
all material respects, with Environmental, Health and Safety Laws), or
for mining, landfilling, dumping, gasoline station, dry cleaning or
commercial petroleum product storage purposes; (iv) have never been the
subject of any activities representing a violation or alleged violation
of, and are not currently under investigation pursuant to, any
Environmental, Health or Safety Laws or any obligation to report to or
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action by a governmental authority pursuant to any Environmental,
Health or Safety Laws, and are in full compliance with all
Environmental, Health or Safety Laws; (v) have not been subject to any
release of any Hazardous Substance from any nearby property; (vi) have
never been the subject of an environmental audit or assessment, or
remedial action or a lien or encumbrance for an environmental problem;
and (vii) do not contain asbestos, polychlorinated biphenyls (PCBs) or
nuclear fuels or wastes.
3.16.2 Gull: (i) is, and has been, to its Knowledge, in
compliance in all material respects with all applicable Environmental,
Health or Safety Laws; (ii) has not received any notices, demand letters
or requests for information from any governmental entity or any third
party that assert Gull may be in violation of, or liable under, any
Environmental, Health or Safety Laws; (iii) is not subject to any
notice, order or decree of any court, or governmental entity arising
under any Environmental, Health or Safety Laws, except for such matters
as do not, individually or in the aggregate, have a material adverse
effect on Gull, its business, or its Properties; (iv) has not
transported or arranged for the transportation of any Hazardous
Substances to any site listed on EPA's National Priorities List of
Hazardous Substance Sites or comparable state Hazardous Substance Site
List; and (v) is not liable for any Hazardous Substance contamination at
any other site or location under any Environmental, Health and Safety
Laws. To its Knowledge, Gull has timely and accurately filed every
report or notification required to be filed, and has acquired,
maintained and timely submitted renewal applications for all necessary
certificates and permits and has and is in compliance with such
certificates and permits (all of which are listed in the Disclosure
Schedule), and has generated and maintained all data, documentation and
records required under all Environmental, Health or Safety Laws. Copies
of all documents received by Gull from, or submitted by Gull to, any
governmental authority, court, or third party concerning any matters
arising under any Environmental, Health and Safety Laws, and all
reviews, audits, assessments, analyses or other documents pertaining to
Environmental, Health and Safety Laws, have been furnished by Gull to
Meridian.
3.16.3 Except as set forth in the Disclosure Schedule, there are
not now pending or, to Gull's Knowledge, threatened, and during the
preceding five (5) years, there has not occurred any Occupational Safety
and Health Act ("OSHA") inspections, complaints, and/or citations
relating to Gull's business operations or the places where it conducts
its business operations. To Gull's Knowledge, no modifications or
changes in or to any of the Properties or the manner in which Gull
conducts its business are necessary to continue operations in accordance
with applicable OSHA requirements.
3.16.4 Definitions.
3.16.4.1 "Environmental, Health and Safety Laws" means all
foreign, federal, state and local laws, statutes, codes,
ordinances, regulations, rules, policies, consent decrees,
judicial or administrative orders, permits, approvals, or other
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requirements relating to the protection of human health or the
environment, all as amended or modified from time to time,
including without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601, et seq.), the Solid Waste Disposal Act, as
amended (42 U.S.C. Section 6901, et seq.), the Hazardous Waste
Materials Transportation Act, as amended (49 U.S.C. Section 1801,
et seq.), the Clean Air Act, as amended (42 U.S.C. Section 7401,
et seq.), the Federal Water Pollution Control Act, as amended (33
U.S.C. Section 1251, et seq.), the Toxic Substances Control Act,
as amended (15 U.S.C. Section 2601, et seq.), the Safe Drinking
Water Act, as amended (42 U.S.C. Section 300f, et seq.), the
Atomic Energy Act, as amended (42 U.S.C. Section 2014, et seq.),
the Federal Insecticide Fungicide and Rodenticide Act, as amended
(7 U.S.C. Section 136, et seq.), the Oil Pollution Act of 1990,
as amended (33 U.S.C. Section 2701, et seq.), the Emergency
Planning and Community Right-to-Know Act of 1986, as amended (42
U.S.C. Section 11001, et seq.), the Occupational Safety and
Health Act, as amended (29 U.S.C. Section 651, et seq.), and the
regulations adopted and publications promulgated pursuant
thereto, and shall also include any common law theory based on
nuisance, trespass, negligence or other tortious conduct.
3.16.4.2 "Hazardous Substance" means any substance,
material or waste (a) the presence of which requires
investigation or remediation under any Environmental, Health and
Safety Laws; or (b) which is defined, characterized, identified,
or listed as a hazardous waste, hazardous substance, toxic
substance, infectious waste, solid waste, industrial waste, mixed
(hazardous and radioactive) waste, pollutant, contaminant or
similar term under any Environmental, Health and Safety Laws; or
(c) which is toxic, explosive, corrosive, reactive, ignitable,
flammable, infectious, radioactive, toxic, carcinogenic,
mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority as a threat to human health or safety
or the environment; or (d) the presence of which on the property
causes or threatens to cause a nuisance upon the property or to
adjacent property or poses or threatens to pose a hazard to the
health or safety of Persons on or about the property; or (e) the
release of which on adjacent properties could constitute a
trespass; or (f) which is asbestos or asbestos containing
materials; or (g) which is polychlorinated biphenyls; or (h)
which contains petroleum or any petroleum-derived products or
fractions thereof; or (i) which is dioxin; or (j) which may give
rise to liability or is otherwise regulated under any
Environmental, Health and Safety Laws.
3.17 Intellectual Property.
3.17.1 For purposes of this Section 3.17, the following terms
shall have the following meanings:
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3.17.1.1 "Marks" means names "Gull," "Seagull Design,"
"Protectoral," "Sportstaff," ":XTrax," "ONLi" or "GeneSTAR" and
all fictional business names, trading names, registered and
unregistered trademarks, service marks and applications used in
the business or owned, used or licensed by Gull;
3.17.1.2 "Patents" means the patents, patent applications,
and inventions and discoveries that may be patentable that are
used in the business and are owned, used or licensed by Gull;
3.17.1.3 "Copyrights" means all copyrights in both
published works and unpublished works owned, used or licensed by
Gull;
3.17.1.4 "Trade Secrets" means all know-how, trade
secrets, confidential information, customer lists, internally
derived or custom software, technical information, data, process
technology, plans, drawings, and blue prints owned, used, or
licensed by Gull as licensee or licensor;
3.17.1.5 "Software" means the computer software and all
computer software code documentation commentaries, owned,
licensed or used by Gull in the conduct of the business; and
3.17.1.6 "Intellectual Property Assets" means collectively
the Marks, Patents, Copyrights, Trade Secrets and Software.
3.17.2 The Disclosure Schedule contains a complete and accurate
list and summary description, including any royalties paid or received
by Gull, of all agreements relating to its Intellectual Property Assets
to which Gull is a party or by which Gull is bound except for any
license applied by the sale of a product and perpetual, paid-up licenses
for commonly available software programs with a value of less than
$2,000 under which Gull is a licensee. There are no outstanding and, to
Gull's Knowledge, no threatened disputes or disagreements with respect
to any such agreement.
3.17.3 The Disclosure Schedule contains a complete and accurate
list and summary description of all Marks. Except as set forth in the
Disclosure Schedule, all Marks that have been registered with the
applicable Trademark Office are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling due within
90 days after the Closing Date. Except as set forth in the Disclosure
Schedule, Gull has taken all necessary actions in accordance with
applicable law to maintain and protect each Mark. Except as set for in
the Disclosure Schedule, no Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Gull's Knowledge, no
such action is threatened with respect to any of the Marks, nor is there
any potentially interfering trademark or trademark application of any
third party.
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3.17.4 With respect to the Trade Secrets taken as a whole, the
documentation relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to allow
its full and proper use without reliance on the Knowledge or memory of
any individual. Gull has taken all reasonable precautions to protect the
secrecy, confidentiality and value of its Trade Secrets.
3.17.5 Except as listed on the Disclosure Schedule, no action is
pending or, to the Knowledge of Gull, threatened with respect to Gull's
ownership of, or potential infringements of or any other claims of any
nature relating to or arising from its Intellectual Property Assets or
the current products of Gull. None of Gull's Intellectual Property
Assets, including current products manufactured by Gull, infringe,
violate or constitute a misappropriation, or to the Knowledge of Gull in
the past infringed, violated or constituted a misappropriation, of any
intellectual property rights of any other Person or entity. Neither
Fresenius nor Gull has received any complaint, claim or notice and, to
Gull's Knowledge, there is no basis for any such complaint, claim or
notice. Gull has taken all reasonable measures to protect the
proprietary nature and value of each of the Intellectual Property
Assets, and to maintain in confidence all Trade Secrets that it owns or
uses. No other Person or entity has any rights to any of the
Intellectual Property Assets owned or used by Gull, except for licensors
of Intellectual Property Assets to Gull or other licensees of
Intellectual Property Assets to which Gull has not been granted an
exclusive license, and to Gull's Knowledge, no other Person or entity is
infringing, violating or misappropriating any of the Intellectual
Property Assets of Gull.
3.17.6 Except as set forth in the Disclosure Schedule with
respect to "GeneSTAR," Gull does not own or operate any Software
developed by it or developed by others exclusively for its use.
3.17.7 The Software included in the Intellectual Property Assets
performs in accordance with the documentation and other written
materials used in connection with the Software and is free of defects in
programming and operation, is in machine-readable form, contains all
currently available computer programs, materials, tapes, object and
source codes, other written materials, know-how and processes related to
the Software. Gull has made available to Meridian for its review
complete and correct copies of all user and technical documentation
related to the Software.
3.17.8 Fresenius and Gull have each kept secret and neither has
disclosed the source code for the Software to any Person or entity other
than certain employees of Fresenius and Gull who are subject to the
terms of a binding confidentiality agreement with respect thereto.
Fresenius and Gull have each taken all appropriate measures to protect
the confidential and proprietary nature of the Software, including
without limitation the use of confidentiality agreements with all of its
employees having access to the Software source and object code. There
have been no Patents applied for and no Copyrights registered for any
part of the Software. There are no trademark rights of any Person or
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entity in the names "Gull," "Seagull Design," "Protectoral," "Sportstaff,"
"XTrax," "ONLi" or "GeneSTAR."
3.17.9 The Software includes acceptable design and performance
specifications so that the Software will not abruptly end or provide
invalid or incorrect results during the operation of Gull's business on
or after January 1, 2000. The Software is designed to ensure year 2000
compatibility and includes, but is not limited to, date data century
recognition, calculations that accommodate same century and
multi-century formulas and date values, date data interface values that
reflect the century, and includes year 2000 leap year calculations.
3.18 Disclosure. The Proxy Materials will comply in all material
respects with the Securities Exchange Act and the applicable rules and
regulations thereunder. None of the information that Gull will supply that is
included in the Proxy Materials will, at the time the Proxy Materials are first
mailed to Gull's Stockholders or at the time of the meeting of Gull
Stockholders, include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they will be made, not misleading; provided,
however, that Gull makes no representation or warranty with respect to any
information that Meridian and the Transitory Subsidiary supply that is included
in the Proxy Materials.
3.19 Opinion of Financial Advisor. Gull has received the opinion of
Houlihan Valuation Advisors, a true and correct copy of which is attached as
Exhibit E, dated the date of this Agreement (the "Fairness Opinion").
3.20 Proficiency Surveys. Except as set forth in the Disclosure
Schedule, the supply contract pursuant to which Gull provides test specimens to
the College of American Pathologists' Proficiency Surveys will not be adversely
affected by completion of the Merger.
3.21 Products, Inventories and Operations.
3.21.1 Except as set forth in the Disclosure Schedule, the
Products manufactured by Gull have at all times been manufactured in
compliance in all material respects with all rules and regulations with
respect to Good Manufacturing Practices as such may be determined by the
Federal Food and Drug Administration ("FDA") or in compliance with all
other applicable laws of both the United States and non-United States
governments ("GMP Requirements") and in compliance in all material
respects with all representations made in any submissions to the FDA or
similar non-United States authorities concerning or relating to such
Products, including submissions to obtain marketing approval. Gull has
maintained its registration of its manufacturing facilities with FDA at
all times.
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3.21.2 Except as set forth in the Disclosure Schedule, the
finished goods inventories, net of reserves for excess and obsolete
inventories, of the Products at the Closing are in good, usable and
salable condition, free from any defect, whether latent or patent, and
currently of a quality, strength and purity which are in conformity
with applicable FDA regulations or similar non-United States laws and
regulations. Except as set forth in the Disclosure Schedule, no article
in such inventories is adulterated or misbranded within the meaning of
the Federal Food, Drug and Cosmetic Act or similar non-United States
laws or regulations nor is any finished article contained in such
inventories an article which may not, under the provisions of Sections
404 or 505 of the said Act, be introduced into interstate commerce for
the uses thereof previously made by Gull and all written representations
with respect to the Products made by Gull to its customers have been
in all material respects true, correct and complete. The inventories
of finished goods of the Products are packaged for resale in customary
packaging used for those products by Gull.
3.21.3 Except as set forth in the Disclosure Schedule, the
manufacture, use, distribution and sale by Gull of the Products are in
accordance in all material respects with the provisions of the
applicable authorizations, comply in all material respects with all
applicable laws and regulations and do not interfere with the rights of
any Person to know-how or to any property right the existence of which
would materially adversely affect the value of the Products.
3.21.4 Except as set forth in the Disclosure Schedule, since June
30, 1998, Gull has not failed to file any report, data, or other
information with respect to the Products, the materials or the operation
of Gull's plants where the Products are manufactured that is required to
be filed with the FDA or any other federal, state or local government
agency or non-United States government agency, which failure to file
would materially adversely affect the Products, the materials or the
operations of Gull's plants where the Products are manufactured. Except
as disclosed in the Public Reports or the Disclosure Schedule, Gull is
in all material respects in compliance with current federal, state,
state agency and local government and other governmental and non-United
States government reporting requirements, if any, relating to the
Products, the materials and the plant operation where the Products are
manufactured.
3.21.5 All information concerning the Products, the materials and
the operation of Gull's plants where the Products are manufactured,
including published and unpublished data, relating to the safety and
efficacy of the Products, coming to the attention of Gull or Fresenius
within two years prior to the Closing Date not already listed on other
Disclosure Schedules will be promptly disclosed to Meridian prior to
Closing.
3.21.6 Schedule 3.21.6 sets forth all FDA Form 483 inspectional
observations delivered by the FDA to Gull since June 28, 1994. Gull is
currently in full compliance with all FDA Form 483 inspectional
observations delivered by the FDA to Gull, or Gull has delivered plans
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of correction to the FDA for compliance in all material respects with
all observations of objectionable conditions and practices listed on
such FDA Form 483 to the FDA, and such plans of correction have been
completed or are being diligently pursued in accordance with the terms
and conditions agreed between the FDA and Gull to correct such
objectionable practices identified by the FDA on all such FDA Form 483
inspectional reports.
3.22 Formulae, Etc., for Products
3.22.1 The Disclosure Schedule contains a true and correct list
of the Products in inventory, those being manufactured and those being
sold or distributed by Gull and other products or technology related to
the Products.
3.22.2 With respect to the Products currently being manufactured,
Gull has a sufficient combination of manufacturing and testing
instructions, formulae and other documentation sufficient for the
manufacture of such Products in accordance with Gull's current
manufacturing practices.
3.23 Expiration Dates. Except as set forth in the Disclosure Schedule,
all of the Products bear an expiration date suitable for sale of the Products in
the Ordinary Course of Business which is based upon Gull's available data.
3.24 Subsidiaries and Other Capital Stock. The Subsidiaries are listed
in the Disclosure Schedule. Except as set forth in the Disclosure Schedule, Gull
owns all outstanding securities of each of the Subsidiaries. No Subsidiary has
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require such Subsidiary to issue, sell, or otherwise cause to become
outstanding any of its capital stock.
3.25 Real Property. The Disclosure Schedule sets forth a description of
all real property of Gull owned, leased or subject to a purchase contract or
lease commitment, detailing which properties are owned and which are leased,
with a brief description of all buildings and structures thereon (sometimes
collectively the "Real Property"). A list of all such purchase contracts or
leases is contained in the Disclosure Schedule. With respect to the Real
Property that is owned by Gull and identified on the Disclosure Schedule, title
to such Real Property is, and at the Effective Time shall be, except to the
extent identified in the Disclosure Schedule, good and marketable, fee simple,
free and clear of all liens, encumbrances, adverse claims and other matters
affecting Gull's title to or possession of such Real Property, including, but
not limited to, all encroachments, boundary disputes, covenants, restrictions,
easements, rights of way, mortgages, security interests, leases, encumbrances
and title objections, excepting only (i) liens for real estate taxes not yet due
and payable and (ii) such easements, restrictions and covenants presently of
record which will not, in Meridian's sole judgment (which judgment will be
exercised prior to Closing to the extent such easements, restrictions and
- 21 -
covenants have been disclosed in the Disclosure Schedule), interfere with or
impair Meridian's intended use of any of the Real Property or reduce the value
of any of the Real Property, which easements, restrictions and covenants are
listed on the Disclosure Schedule in a manner so that the Real Property to which
they relate is readily identifiable (collectively the "Permitted Encumbrances").
At Closing, title to the Real Property owned by Gull shall be insurable by
Meridian by a title insurance company reasonably satisfactory to Meridian, at
such company's regular rates pursuant to an ALTA 1987 owner's form of policy,
free of all exceptions except the aforesaid easements, restrictions and
covenants to the extent not objectionable to Meridian. A list of existing title
insurance policies is contained in the Disclosure Schedule. Except as set forth
in the Disclosure Schedule, all Real Property and the buildings located thereon
are in compliance in all material respects with applicable zoning laws and
regulations. All buildings and structures owned or leased by Gull, and the
mechanical components (including HVAC systems), roofs, fixtures and equipment
located therein or thereon, are now, and at the Closing Date will be, in good
operating condition and repair, subject only to normal maintenance and repair,
fit for the uses for which they are intended, and no material repairs will need
to be made as of the Closing Date to continue the use of such buildings and
structures as presently used.
3.26 Equipment. Gull shall deliver to Meridian prior to Closing a
computer generated asset register which will list all material items of
machinery, equipment and similar property, including vehicles, owned by Gull on
the Closing Date. All such machinery, equipment and similar property, including
vehicles, shall be in good working order on the Closing Date. Except as set
forth in the Disclosure Schedule, all equipment owned by Gull and placed with
customers has been validated for the specific Gull tests that run on that
equipment.
3.27 Contracts and Agreements. The Disclosure Schedule sets forth a
description of all contracts and agreements, whether written or oral, and all
amendments thereto or modifications thereof to which Gull is a party or by which
it is bound, which involve future payments by or to Gull of $25,000 or more,
other than contracts which are terminable by Gull upon thirty days or less
notice without cost or expense to Gull, and all notes, mortgages, pledges, deeds
of trust, security, loan or credit agreements and similar instruments or
arrangements to which Gull is a party or by which it is bound and all amendments
or modifications thereof (collectively the "Contracts"), together in each case
with copies of all such agreements, contracts and other instruments as Meridian
may reasonably request. Except as set forth in the Disclosure Schedule:
3.27.1 Each Contract is a valid and binding agreement of Gull
and, to the best of Gull's Knowledge, is a valid and binding agreement
of the other parties thereto;
3.27.2 Gull has fulfilled all obligations required pursuant to
each Contract to have been performed by Gull on its part prior to the
date hereof, and Gull has no reason to believe that it will not be able
to fulfill, when due, all of Gull's obligations under the Contracts that
remain to be performed after the date hereof; and
- 22 -
3.27.3 There has not occurred any default under any Contract on
the part of Gull; Gull does not have any Knowledge that any default
under any Contract on the part of the other parties thereto has
occurred; and Gull does not have any Knowledge that any event has
occurred which with the giving of notice or the lapse of time, or both,
would constitute any default under any of the Contracts.
3.28 Accounts Receivable. All accounts receivable of Gull that are
reflected in the financial statements contained in the 1998 10-Q are valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business of Gull. Except as set forth on the Disclosure
Schedule, there is no contest, claim or right of set-off, other than returns in
the ordinary course of business of Gull, under any contract or arrangement with
any obligor of an accounts receivable relating to the amount or validity of such
accounts receivable.
3.29 Licenses and Permits. The Disclosure Schedule sets forth a list of,
and Gull is in possession of, all licenses, permits for the development,
manufacture and marketing of products pursuant to such licenses and permits of
Gull, other than any permit, the absence of which does not have a material
adverse effect upon the business, financial condition or prospects, and states
that the permits are valid and in full force and effect. Except as set forth in
the Disclosure Schedule, Gull is in compliance in all material respects with all
conditions or requirements imposed by or in connection with the permits and with
respect to the conduct of its business. Gull has received no notice of, and
there is not to the Knowledge of Gull, any reason to believe that any authority
intends to cancel, terminate or modify any of the permits or adopt or modify
rules and regulations which would adversely affect the permits.
3.30 Taxes and Tax Returns. Gull will, between the date hereof and the
Closing Date, and through the date of this Agreement has, duly and timely filed
all federal, state and local (United States and all foreign jurisdictions) tax
returns required to be filed by it (unless a valid extension therefore has been
granted), and all such returns are, or will be when filed, true, complete and
correct in all material respects. Gull has, or will have prior to the Closing
Date, duly and timely paid or made adequate provision for the payment of all
taxes, assessments and other governmental charges which have been incurred as
set forth in the aforementioned tax returns or are otherwise due and payable
with respect to periods ending on or prior to the Closing Date. All sales taxes
required through the date of this Agreement to be collected and remitted by Gull
have been properly collected and remitted. All sales taxes will continue to be
properly collected and remitted to the extent required, up to and through the
Closing Date. All necessary sales tax exemption certificates have been obtained
by Gull and all such certificates have been properly completed and maintained.
No tax return, except as set forth in the Disclosure Schedule, filed by Gull is
under audit or examination by any taxing authority and there are no applications
or agreements for the extension of the time for the filing of any tax return or
for the assessment of any amounts of tax nor any consent to an extension of the
period of limitations applicable to such assessment or to the collection of any
tax. No issues have been raised in connection with any prior or pending inquiry
into, or audit of, any tax filings of Gull which may be expected to be raised in
the future by such taxing authorities and no facts exist or have existed which
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would constitute grounds for the assessment of any further tax liabilities,
which individually or in the aggregate are material with respect to the periods
which have not been examined by the taxing authority of the relevant
jurisdiction. Gull has made available to Meridian true and complete copies of
all United States federal, state and local income tax returns and similar tax
returns filed with non-United States jurisdictions which it has filed for each
of the past three years as set forth in the Disclosure Schedule together with
copies of all schedules, work papers, elections, tax depreciation schedules and
other documents which were used in the preparation of each such tax return.
There are no liens for taxes upon the assets of Gull except for liens for taxes
not yet due. As used herein, "taxes" mean all net income, gross income, gross
receipts, value added, sales, use, transfer, franchise, profits, withholding,
payroll, employment, excise, severance, property or windfall profits taxes, or
other taxes of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority, domestic or non-United States, upon Gull with respect to all periods
or portions thereof ending on or before the Effective Time and/or any liability
of Gull for the payment of any amounts of the type described in the immediately
preceding clause as a result of being a member of an affiliated or combined
group or a Controlled Group of Corporations.
3.31 Transactions With Affiliates. Except as set forth in the Public
Reports or the Disclosure Schedule and except for compensation or other
customary employee benefits provided in the Ordinary Course of Business, since
December 31, 1997, Gull has not entered into, or been a party to, any
transaction with a value in excess of $5,000 which provided for payment to or
from, or the transfer of, any property of Gull to or from any Gull Stockholders,
any director, officer or other employee of Gull, to any member of the family of
any such Person or to any corporation, partnership, trust or other entity in
which any such Person has an ownership interest or is an officer, director,
partner or trustee.
3.32 Compliance with Applicable Law. Except as set forth in the
Disclosure Schedule, Gull is conducting and has conducted its business so as to
comply, in all material respects with all applicable laws, ordinances,
regulations, decrees and orders, of any governmental entity, domestic or
non-United States, including without limitation compliance with the National
Labor Relations Act, as amended, the Welfare and Pension Plans Disclosure Act,
the Fair Labor Standards Act and Equal Pay Act, Title 7 of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, and any other law,
ordinance, regulation, decree or order, except, in each case, for any failure to
comply which is not reasonably likely to have a material adverse effect on the
financial condition, business, properties, reputation, results of operations or
prospects of Gull, Meridian and the Transitory Subsidiary.
3.33 General Disclosure Matters. No representation or warranty by Gull
contained in this Agreement, the Disclosure Schedule attached hereto or in any
statement or certification furnished or to be furnished to Meridian pursuant
hereto or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.
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3.34 Other Disclosures. Notwithstanding the foregoing Section 3.1
through Section 3.33, if Meridian has actually received notice of or has actual
knowledge of a fact or matter, such fact or matter shall be deemed to have been
disclosed to Meridian as required by this Agreement.
4. Representations and Warranties of Meridian and the Transitory
Subsidiary. Each of Meridian and the Transitory Subsidiary represents and
warrants to Gull and Fresenius that the statements contained in this Section are
correct and complete as of the date of this Agreement.
4.1 Organization. Meridian and the Transitory Subsidiary are
corporations each duly organized, validly existing, and in good standing under
the laws of Ohio and Utah, respectively. The Transitory Subsidiary was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only as
contemplated hereby. Meridian has full corporate power and authority to carry on
the business in which it is engaged and to own and use the properties owned and
used by it.
4.2 Authorization of Transaction. Each of Meridian and the Transitory
Subsidiary has full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by Meridian and the Transitory Subsidiary and the
consummation by Meridian and the Transitory Subsidiary of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Meridian and the Transitory
Subsidiary. No vote of Meridian's stockholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Meridian and the Transitory Subsidiary and, assuming
this Agreement constitutes a valid and binding obligation of Gull and Fresenius,
constitutes a valid and binding obligation of each of Meridian and the
Transitory Subsidiary enforceable against Meridian and the Transitory Subsidiary
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity.
4.3 Noncontravention. Except for filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Securities Exchange Act, the Hart-Scott-Rodino Act, the
laws of Utah, the laws of other states in which Gull is qualified to do or is
doing business and state takeover laws, and except for the filing of Articles of
Merger with the Utah Division of Corporations and Commercial Code, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which either
Meridian or the Transitory Subsidiary is subject or any provision of the charter
or Bylaws of either Meridian or the Transitory Subsidiary or conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument
- 25 -
or other arrangement to which either Meridian or the Transitory Subsidiary is a
party or by which it is bound or to which any of its assets is subject, except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not have a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
4.4 Brokers' Fees. Neither Meridian nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement for
which any of Gull, Fresenius or their Subsidiaries could become liable or
obligated.
4.5 Disclosure. None of the information that Meridian and the Transitory
Subsidiary will supply specifically for use in the Proxy Materials will contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they will be made, not misleading.
4.6 Litigation. As of the date of this Agreement, there is no suit,
claim, action, proceeding or investigation pending or, to the Knowledge of
Meridian and the Transitory Subsidiary, threatened against Meridian or any of
its Subsidiaries that could reasonably be expected to prevent or materially
delay the consummation of the Merger. As of the date of this Agreement, neither
Meridian nor any of its Subsidiaries is subject to any outstanding order, writ,
injunction or decree that could reasonably be expected to prevent or materially
delay the consummation of the Merger.
4.7 Available Funds. At the closing, Meridian will have sufficient funds
available to pay the Merger consideration and to fulfill and satisfy its other
obligations to Fresenius under this Agreement.
5. Representations and Warranties of Fresenius. Fresenius represents and
warrants to Meridian that the statements contained in this Section and the
representations and warranties of Gull set forth in Section 3 and the
accompanying Disclosure Schedule are correct and complete as of the date of this
Agreement provided that matters represented to Knowledge of Gull shall in this
respect be represented to the Knowledge of Fresenius based on the actual
Knowledge of Rainer Baule or Yorck Schmidt. Nothing in this Section 5 shall
constitute a representation by Fresenius as to the Knowledge of Gull.
5.1 Organization. Fresenius is a corporation duly organized and validly
existing under the laws of Germany.
5.2 Authorization of Transaction. Fresenius has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by
Fresenius and the consummation by Fresenius of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Fresenius and no other corporate proceedings on the part of
- 26 -
Fresenius are necessary to authorize this Agreement or to consummate the
transactions so contemplated, subject to approval by the Supervisory Board of
Fresenius. No vote of Fresenius' stockholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Fresenius and, assuming this Agreement constitutes a
valid and binding obligation of Gull, Meridian and the Transitory Subsidiary,
constitutes a valid and binding obligation of Fresenius enforceable against
Fresenius in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally and to general principles of equity.
5.3 Brokers' Fees. Fresenius has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which any of Gull and its
Subsidiaries could become liable or obligated.
5.4 Disclosure. None of the information that Fresenius will supply
specifically for use in the Proxy Materials will contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, not misleading.
5.5 Ownership of Stock of Gull Shares. Fresenius warrants that it owns
4,930,693 Gull Shares free, clear and unencumbered and has sole voting power
with respect to all of such Gull Shares.
5.6 Transactions with Gull. The Public Reports or the Disclosure
Schedule sets forth all material business arrangements or relationships that
Fresenius or any of its Affiliates have had with Gull or any of its Subsidiaries
since January 1, 1997. Except as set forth in the Disclosure Schedule, neither
Fresenius nor any of its Affiliates owns any asset used in the business of Gull
and its Subsidiaries.
6. Covenants. The Parties agree as follows with respect to the period
from and after the execution of this Agreement.
6.1 General. Each Party will use its reasonable best efforts to take all
actions and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
including satisfaction, but not waiver, of the closing conditions set forth in
Section 8.
6.2 Notices and Consents. Gull will give any notices, and will cause
each of its Subsidiaries to give any notices, to third parties and will use its
reasonable best efforts to obtain, and will cause each of its Subsidiaries to
use its reasonable best efforts to obtain, any third party consents, that
Meridian reasonably may request in connection with the matters referred to in
Section 3.4.
- 27 -
6.3 Regulatory Matters and Approvals. Each of the Parties will, and Gull
will cause each of its Subsidiaries to, give any notices to, make any filings
with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section Section 3.4 and 4.3. Without limiting
the generality of the foregoing:
6.3.1 Securities Exchange Act. Gull will promptly after the
execution of this Agreement prepare and file with the SEC preliminary
proxy materials and any other statements or filings required under the
Securities Exchange Act relating to the special meeting and the
transactions contemplated hereunder (the "SEC Filings"). Gull will use
its reasonable best efforts to respond to the comments of the SEC
thereon and will make any further filings in connection therewith that
may be necessary, proper or advisable. Meridian, the Transitory
Subsidiary and Fresenius will provide Gull with whatever information and
assistance in connection with the foregoing filings that Gull reasonably
may request. Each of Gull, Meridian, the Transitory Subsidiary and
Fresenius shall correct promptly any such information specifically
provided by it which shall have become false or misleading in any
material respect. Gull shall take all steps necessary to file or to
cause to be filed with the SEC and have cleared by the SEC any amendment
or supplement to the preliminary proxy statement so as to correct the
same and to cause the Proxy Statement as so corrected to be disseminated
to Gull Stockholders, in each case as and to the extent required by
applicable law.
6.3.2 Special Meeting. Gull will call a special meeting of Gull
Stockholders, as soon as reasonably practicable in order that Gull
Stockholders may consider and vote upon the adoption of this Agreement
and the approval of the Merger in accordance with the Utah Revised
Business Corporation Act. Gull will mail the Proxy Materials to its
Stockholders as soon as reasonably practicable after clearance thereof
by the SEC. Gull shall, through its Board of Directors, recommend to its
Stockholders adoption of this Agreement and approval of the Merger and
shall not withdraw such recommendation; provided, however, that Gull's
Board of Directors shall not be required to make and shall be entitled
to withdraw such recommendation if the Fairness Opinion shall be
withdrawn or if Gull's Board of Directors reasonably concludes, for any
other reason, in good faith after consultation with, and based on the
advice of, its outside counsel, that the making of or the failure to
withdraw, such recommendation would be inconsistent with the fiduciary
obligations of Gull's Board of Directors under applicable law.
6.3.3 Hart-Scott-Rodino Act. Meridian and Fresenius will file
Notification and Report Forms and related material with the Federal
Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, and each will use
its reasonable best efforts to obtain, an early termination of the
applicable waiting period, and will make any further filings pursuant
thereto that may be necessary, proper, or advisable.
- 28 -
6.4 Operation of Business. Gull will, and will cause its Subsidiaries to,
engage only in practices, and only take actions, or enter into transactions in
the Ordinary Course of Business. In addition, during the period from the date of
this Agreement through the Effective Time, Gull will not and will not cause or
permit any of its Subsidiaries to do any of the following without, in each
instance, the prior written consent of Meridian, which consent shall not be
withheld unreasonably:
6.4.1 none of Gull and its Subsidiaries will authorize or effect
any change in its Articles of Incorporation, Charter or Bylaws;
6.4.2 none of Gull and its Subsidiaries will grant any options,
warrants, or other rights to purchase or obtain any of its capital stock
or issue, sell, or otherwise dispose of any of its capital stock except
upon the exercise of options, warrants, and other rights currently
outstanding;
6.4.3 none of Gull and its Subsidiaries will declare, set aside,
or pay any dividend or distribution with respect to its capital stock,
whether in cash or in kind, or redeem, repurchase, or otherwise acquire
any of its capital stock other than repurchases of outstanding options
to purchase Gull Shares;
6.4.4 none of Gull and its Subsidiaries will issue any note,
bond, or other debt security or, other than in the Ordinary Course of
Business, create, incur, assume or guarantee any indebtedness for
borrowed money or capitalized lease obligation except for financing
provided by Fresenius and except for extensions or refinancings of
existing indebtedness;
6.4.5 none of Gull and its Subsidiaries will impose or permit or
cause to be imposed any Security Interest upon any of its assets outside
the Ordinary Course of Business;
6.4.6 other than purchases of inventory in the Ordinary Course of
Business, none of Gull and its Subsidiaries will make any capital
investment in, make any loan to, or acquire the securities or assets of
any other Person in amounts exceeding $10,000 in any one or related
group of transactions;
6.4.7 none of Gull and its Subsidiaries will make any change in
employment terms, policies or practices for any of its directors or
officers or make any change in employment terms, policies or practices
for its non-officer employees outside the Ordinary Course of Business;
6.4.8 none of Gull and its Subsidiaries will commit to do any of
the foregoing; and
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6.4.9 Gull shall preserve all manufacturing instructions, formulae and
other documentation and all available information concerning the Products
under development and shall disclose to Meridian all manufacturing
processes and Trade Secrets possessed by Gull relating to the Products.
6.5 Continuance of Operations. Gull will, and will cause each of its
Subsidiaries to, use its reasonable efforts to keep its business and property
substantially intact, including its present operations, its physical facilities,
working conditions and relationships with lessors, licensors, suppliers,
customers and employees and operate so as to maintain the levels of finished and
raw goods inventory and sales activity consistent with its practices during the
preceding twelve months. Gull shall take such steps as are appropriate so at the
closing it will have on hand finished goods inventory of the Products listed
below, which represent approximately 80% of Gull's sales on a unit basis, during
the six months ended September 9, 1998, and which will be sufficient to meet
normal sales demand for the next four months following the Closing Date.
The listing of products is:
ANALYTE H2E150-E/EIA HSV 2 IgM
XX715-E/GULLSORB EA101-E/IFA EBV-EA
EBE150/EIA EBV IgM PEMA EB211-E/IFA EBV IgG
4870311/EIA EBV IgG PEMA RBE100-E/EIA RBOLA IgG
EBE150-E/EIA EBV IgM XX710-E/GULLSORB
4870011/IFA EBV IgG PEMA LDE150/EIA LYME IgM
EB100-E/IFA EBV IgG EB251-E/IFA EBV M PCK
4870031/IFA EBV IgM PEMA RUE100-E/EIARBELA IgG
EBE100/EIA EBV IgG H2I101-E/EIA HSVTS IgG
EB150-E/IFA EBV IgM EN100-E/IFA EBNA
XX71AN/GULLSORB PEMA VZE101-E/EIA VZV QQ
4870331/EIA EBNA PEMA CME150-E/EIA CMV IgM
TCE100-E/EIA CHAGAS H2E100-E/EIA HSV IgG
4870321/EIA EBV IgM PEMA CME100/EIA CMV IgG
H1E150-E/EIA HSV 1 IgM
6.6 Due Diligence. Fresenius and Gull will each, and will cause Gull's
Subsidiaries to, permit representatives of Meridian to have reasonable access at
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reasonable times upon reasonable notice to all premises, properties, personnel,
books, records including tax records, contracts, and documents of or pertaining
to each of Gull and its Subsidiaries. Such parties will also furnish Meridian
and its representatives with all such information and data concerning the
affairs of Gull as Meridian reasonably may request for the purpose of verifying
the representations and warranties made herein and further investigating the
business and affairs of Gull. In furtherance thereof, Gull will permit Meridian,
in a manner approved by Gull, to make contact with all members of management of
Gull and its Subsidiaries, with their customers and with such other Persons with
which Gull has been conducting business. The performance of this due diligence
by Meridian will be conducted as expeditiously as practical. Meridian's
performance of due diligence of the acquisition of information by Meridian shall
not relieve Gull or Fresenius from any representation, warranty or covenant made
by either of them in this Agreement. Fresenius or Gull will provide Meridian
with the appropriate occupancy upon commercially reasonable terms in the German
facilities of Fresenius or Gull until the closing. All information obtained by
Meridian or the Transitory Subsidiary pursuant to this Agreement shall be kept
confidential in accordance with the Confidentiality Agreement dated November 18,
1997 between Gull and Meridian (the "Confidentiality Agreement"). Each of Gull,
Meridian and the Transitory Subsidiary hereby expressly affirms the terms of,
and acknowledges that it is bound by, such Confidentiality Agreement and agrees
and acknowledges that such terms and the Confidentiality Agreement shall survive
the termination of this Agreement.
6.7 Notice of Developments. Each Party will give prompt written notice
to the others of any material adverse development causing a breach of any of its
own representations and warranties in Section Section 3, 4 and 5. No disclosure
by any Party pursuant to this Section, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant unless the Party closes the
transaction after receipt of such written disclosure.
6.8 Exclusivity. Each of Fresenius and Gull will not, and will not cause
or permit any of its employees or agents to, solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to a tender or
exchange offer, a merger, consolidation or other business combination involving
Gull or any of its Subsidiaries or any proposal to acquire in any manner a
substantial equity interest in, or substantial portion of the assets of, Gull or
any of its Subsidiaries (a "Third Party Offer"); provided, however, that
Fresenius, Gull and their respective directors and officers may engage in
discussions or negotiations with, or furnish information concerning Gull and its
properties, assets and business to any Person which makes a Third Party Offer if
the Board of Directors of Gull reasonably concludes in good faith after
consultation with, and based on the advice of, its outside counsel, that the
failure to take such action would be inconsistent with the fiduciary obligations
of such Board of Directors under applicable law; and provided further, that
notwithstanding anything to the contrary herein contained, the Board of
Directors of Gull may take and disclose to Gull Stockholders a position
contemplated by Rule 14e-2 promulgated under the Securities Exchange Act, comply
with Rule 14d-9 thereunder and make all disclosures required by applicable law
in connection therewith and such actions shall not be considered a breach of
- 31 -
this Section of this Agreement. Gull shall promptly, but in no case later than
48 hours, notify Meridian of a decision by Gull to engage in discussions or
negotiations with, or furnish information concerning Gull or its properties,
assets or business to, any Person or of the receipt of any Third Party Offer
providing Meridian with a summary of the material terms thereof and the identity
of the offeror. Gull shall afford Meridian two business days to respond with a
counteroffer to any Third Party Offer. Should this process result in a
substantial amount of assets or stock of Gull being sold to another party, Gull
and Fresenius will be jointly and severally obligated to pay Meridian $350,000
to compensate Meridian for its time and costs involved in the transaction
contemplated by this Agreement. Any such payment will be made promptly in
immediately available United States funds.
6.9 Bylaw Indemnification. The Bylaws of Gull, as the surviving
corporation, shall contain the provisions with respect to indemnification set
forth in the Articles of Incorporation and Bylaws of Gull on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of five years after the Effective Time in any manner that would
adversely affect the rights thereunder of Persons who at any time prior to the
Effective Time were prospective indemnitees under the Articles of Incorporation
or Bylaws of Gull in respect of actions or omissions occurring at or prior to
the Effective Time, including, without limitation, the transactions contemplated
by this Agreement, unless such modification is required by law. For a period of
five years after the Effective Time, Meridian will reimburse Fresenius for its
actual out-of-pocket costs for the maintenance of "tail coverage" of Gull's
officers and directors pursuant to Fresenius' existing insurance policy covering
such matters to the extent that such coverage may be purchased with premium
payments for such tail coverage established as of the Closing Date or Meridian
may, at its option, maintain such coverage with a United States
nationally-recognized insurer.
6.10 Closing Balance Sheet. At Meridian's expense, Gull will prepare a
balance sheet as of the Closing Date in accordance with GAAP, except as provided
in Section 6.11, which will be audited by Arthur Andersen LLP in accordance with
generally accepted auditing standards. Matters which are subject to judgment
will be treated in a manner consistent with Gull's historical accounting
practices provided such practices are in accordance with GAAP.
6.11 Value of Certain Gull Assets.
6.11.1 Subject to Section Section 6.11.2 and 6.11.3, Fresenius
and Gull represent and covenant that the balance sheet prepared as of
the Closing Date will contain the values shown for the following assets
adjusted to reflect the proceeds from any realization of such assets
since May 31, 1998 recorded in a manner consistent with Gull's
historical accounting practices:
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ASSETS VALUE
Hodges Accounts Receivable 0 - Gull to write off
Dental Protocol Patent Corp. 0 - Gull to write off
Standard Engineering Purchase Deposit 0 - Gull to write off
Hypreps 0
MRX's 0
Omni's and Components 0 - Gull to write off
Duets Instruments $1,091,000
Duet Components and Miscellaneous $146,000
Equipment, Inventory and Certifications
Bio Lab 300 -200 $320,000
Instrumentation Classed as fixed asset $472,000
Notes Receivable - Instruments $900,000
Bartels Accounts Receivable $180,000
Inventory To be based on physical inventory
in the audited balance sheet
specified in Section 6.10
Deferred Tax Assets and Income Tax Refund 1,000,000
Receivable
6.11.2 Duet Instrument Sales. Commencing on the Closing Date and
continuing through December 30, 1999, Meridian shall use, and shall
cause Gull to use, its and Gull's respective best commercial efforts to
effect sales and rental placements of Duet Instruments. Provided
Meridian shall have satisfied its obligations under this Section 6.11.2,
Meridian shall be entitled to offset against the principal installment
of the Meridian Note due December 31, 1999 an amount equal to $1,091,000
minus the historical acquisition cost of all Duet Instruments sold or
placed under rental agreements by Gull, Meridian and their Subsidiaries
during such period, provided, however, that the maximum amount of such
offset shall be $545,000.
6.11.3 Deferred Tax Assets; Income Tax Refund Receivable.
Meridian shall be entitled to offset against the installment of
principal of the Meridian Note due December 31, 1999 a sum equal to the
amount by which $1,000,000 exceeds the portion of Gull's
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deferred tax assets and income tax refund receivable which, in
accordance with the advice of Arthur Andersen Europe is, was or will be
in the future available for utilization by Meridian or any of its
Subsidiaries prior to December 31, 1999, provided, however, that the
maximum amount of any such offset shall be $500,000. As a condition to
Meridian's right of offset pursuant to this Section 6.11.3, Meridian
shall deliver to Fresenius, on or before December 30, 1999, an opinion
of Arthur Andersen Europe stating that the deferred tax assets and
income tax refund receivable are not, were not and will not be
technically available in the future for utilization by Meridian or its
Subsidiaries.
6.12 WARN Act Compliance; Severence Obligations. Meridian shall comply
with the Worker Adjustment and Retraining Notification Act of 1988 or it shall
pay all wages, benefits and fines and other amounts due as a result of its
failure to do so. Gull shall use its best efforts to cause commitments to be
made by such employees of Gull as Meridian deems necessary to remain employed by
Gull. Meridian shall be responsible for all severance pay, costs to cancel
outstanding options to purchase Gull Common Stock held by Gull employees and by
Eugene Malone or other payments in lieu of compensation due and payable and
required to be paid with respect to any employees of Gull terminated after the
closing.
6.13 Service and Other Arrangements. All service agreements, leases,
licenses and other agreements similar in nature between Fresenius and its
Subsidiaries and Gull and its Subsidiaries will continue in full force and
effect subject to the right, after the Closing Date, of Gull or its Subsidiaries
to cancel any or all such agreements from time to time prior to termination by
their terms upon 30 days written notice to Fresenius. Any inventory of Gull not
relabeled by the Closing Date may continue to be sold with a Fresenius label or
relabeled at Fresenius' expense.
6.14 Closing Deliveries. The Share Pledge Agreement dated July 17, 1997
by and between Gull Laboratories, Inc. and Fresenius AG will be released at the
closing upon Fresenius's receipt of any Meridian Note due pursuant to this
Agreement.
6.15 Further Meridian Obligations. Meridian shall take all reasonable
steps at its expense to provide the College of American Pathologists with the
information necessary for the College of American Pathologists to determine
whether to give its written consents called for in Section 8.2.13 for Meridian's
assumption of control of Gull and to the transfer of the location of production
specified therein.
7. Covenants of Fresenius; Indemnification.
7.1 Voting of Shares. Subject to the receipt by directors of Gull of the
Fairness Opinion and compliance with the Hart-Scott-Rodino Act as stated in
Section 6.3, Fresenius will vote all of the Gull Shares owned by it as stated in
Section 5 in favor of the Merger at the special meeting of Stockholders of Gull
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called to vote upon the Merger. Fresenius shall not be obligated to vote such
shares in favor of the Merger if the Fairness Opinion is withdrawn for reasons
other than the appearance of a Third Party Offer. In addition, Fresenius shall
not be obligated to vote such shares in favor of the Merger if the Fairness
Opinion is withdrawn because of the appearance of a Third Party Offer, but in
such case Fresenius will pay to Meridian the entire amount of consideration
received by Fresenius in excess of $11,094,059 through the consummation of a
transaction pursuant to such Third Party Offer. Fresenius will retain ownership
and all voting rights to the Gull Shares owned by it through the closing.
7.2 Indebtedness of Gull to Fresenius. Upon the closing of the Merger
all amounts then owed by Gull to Fresenius will be reduced by a contribution by
Fresenius to the capital of Gull to the extent of any reductions in the
shareholders' equity of Gull that occurs from December 31, 1997 through the
Closing Date. Any remaining amounts owed by Gull to Fresenius, including accrued
interest, will be represented by a note of Meridian payable to Fresenius to the
extent of 50% of the principal on June 15, 1999 and the balance on December 31,
1999 together in each case with interest on the unpaid balance at 7 1/2% per
annum. Should the reduction in shareholders' equity, including without
limitation reductions established through Section Section 6.11.2 and 6.11.3,
exceed the aforesaid amounts owed by Gull to Fresenius, the balance will be paid
to Meridian by Fresenius at the closing and at the time of determination
provided in Section Section 6.11.2 and 6.11.3. Fresenius will continue to
finance Gull through the closing of the Merger in amounts and to the extent and
on terms and conditions consistent with Fresenius' past practices in financing
Gull. The amount of any such reduction in the shareholder's equity shall be as
determined by the balance sheet prepared as of the Closing Date as called for in
Section 6.10. Should the parties not agree on the closing balance sheet, any
areas of disagreement shall be resolved by an accounting firm jointly picked by
the accounting firms that audited Gull's and Meridian's last annual financial
statements.
7.3 Indemnification for Shareholder Actions. Fresenius will indemnify
and hold harmless Meridian and Gull, and their officers, directors, employees,
agents and Subsidiaries from and against any and all claims and demands brought
by Gull Stockholders or Fresenius shareholders against any of them with respect
to matters arising prior to the Closing Date including, without limitation, the
matters contemplated by this Agreement, other than amounts paid by Meridian or
Gull to dissenting Gull Stockholders and expenses incurred in related appraisal
proceedings. The obligations of Fresenius will be limited to $11,094,059.
Meridian will indemnify and hold harmless Fresenius and Gull, and their
officers, directors, employees, agents and Subsidiaries from and against any and
all claims and demands brought by Meridian shareholders against any of them with
respect to the matters contemplated by this Agreement including, without
limitation, with respect to information provided by Meridian in writing for
inclusion in the proxy statement of Gull for submission to Gull Stockholders to
vote upon the Merger. The obligations of Meridian will be limited to $3 million.
7.3.1 Promptly after receipt by an indemnified party of written
notice of the commencement of any action or proceeding threatened or initiated
with respect to which a claim for indemnification is to be made pursuant to this
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Section, the indemnified party will give written notice to the indemnitor of the
commencement of such action; provided the failure to give notice shall not
relieve the indemnitor of its obligations hereunder except to the extent that
the indemnitor is actually prejudiced by such failure to give notice. Unless in
the indemnified party's reasonable judgment a conflict of interest between the
Persons indemnified and the indemnitor may exist in respect of the claim, the
indemnitor shall be entitled to participate and to assume the defense of such
claim, jointly with any other such claim to the extent that it may desire with
counsel reasonably satisfactory to the indemnified party as the case may be.
After notice from the indemnitor of its election to assume the defense thereof,
the indemnitor will not be liable to the Persons indemnified for any legal or
other expenses subsequently incurred by them in connection with the defense
thereof. The indemnitor will not consent to the entry of any judgment or enter
into any settlement which does not include as an unconditional term given by the
claimant or plaintiff to the Persons indemnified, a release from all liability
with respect to such claim or litigation. The indemnitor shall not be liable for
any settlement of any such claim or action effected without its written consent.
7.3.2 If the matters giving rise to indemnification stated above
become subject to a final judgment of a court of competent jurisdiction which
allocates the relative liability for payment of any such claims or demands by
shareholders of Fresenius, Gull or Meridian, the liability that would otherwise
be that of an indemnitor shall instead be allocated among Fresenius, Gull or
Meridian. The allocation will be in such proportions as is appropriate to
reflect the relative fault of the particular parties in connection with the
statements or omissions or actions or inactions which resulted in such claims or
damages of third parties, as determined in such final judgment.
7.4 Indemnification by Fresenius. Fresenius shall indemnify Meridian
with respect to and hold Meridian harmless from any liability, cost or expense
which Gull or Meridian may directly or indirectly incur or suffer by reason of,
or which results from, arises out of or is based upon the inaccuracy of any
representation, warranties of and failures to comply with covenants made by
Fresenius or Gull herein. Without limiting the generality of the foregoing, the
indemnity obligation of Fresenius with respect to the representations of Gull
contained in Section 3 shall extend to all representations and warranties of
Gull as stated in Section 3 and not be limited to those of which Fresenius has
actual Knowledge. This indemnity shall also cover any liabilities, costs or
expenses reasonably incurred which Gull or Meridian may directly or indirectly
incur or suffer by reason of, or which result from, or arise out of, or are
based upon a bankruptcy matter pending in Germany entitled Gull GmbH v. Bamphi,
a notice given Gull by INCSTAR Corporation on June 5, 1996 relating to patents
dealing with Epstein Barr Virus and with respect to certain validation questions
described in Section 3.26 of the Disclosure Schedule, in each case to the extent
that such liability, cost or expense exceeds the amount accrued therefor on the
closing balance sheet called for by Section 6.10.
The indemnification granted by Fresenius with respect to representations
and warranties and failures to comply with covenants made by, Gull, is not
intended to be a guarantee or surety but rather the direct, unqualified and
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continuing obligation of Fresenius in its capacity as a majority shareholder of
Gull extended to Meridian as an inducement for Meridian to enter into and
perform this Agreement in reliance in part upon the representations, warranties
and covenants of Gull and in consideration of the representations and covenants
made by Meridian herein. The parties recognize that it would be inequitable if
the obligation of Fresenius, as set forth in this Section 7.4, were construed as
a guarantee or surety so as to limit the ability of Meridian to proceed directly
against Fresenius as provided hereafter. Accordingly, the parties acknowledge
that Meridian may proceed against Fresenius in accordance with this Section 7.4
as provided below, with or without proceeding against Gull or any of its
Subsidiaries. Fresenius shall not assert or exercise any, and hereby waives and
disclaims all, rights of subrogation, indemnification or contribution by Gull or
Meridian with respect to any payments made by it to Meridian pursuant to this
Section. Fresenius agrees not to raise as a defense in any proceeding pursuant
to this Section 7.4 as provided hereafter or in any other court or forum, any
defense to the actions of Meridian based upon a theory that the indemnifications
provided herein by Fresenius are in the nature of a guarantee or surety.
The indemnification obligations of Fresenius under this Section 7.4
shall be limited as follows: (a) a limit of $11,094,059 for representations and
warranties concerning taxation contained in Section 3.30, (b) a limit of
$18,036,027 for material undisclosed liabilities of which Fresenius had
Knowledge, (c) a limit of $11,094,059 received by Fresenius for material
undisclosed liabilities of which Gull, but not Fresenius, had Knowledge, and (d)
for all other matters covered by this Section 7.4, $3 million.
7.5 Indemnifications by Meridian. Meridian shall indemnify Fresenius
with respect to and hold Fresenius harmless from any liability, cost or expense
which Fresenius may directly or indirectly incur, suffer by reason of, or which
results from, arises out of or is based upon (i) the inaccuracy of any
representation or warranty or failure to comply with any covenant, other than in
Section 6.12, made by Meridian herein, (ii) any failure by Gull to pay when due
on or after the Closing Date any indebtedness of Gull guaranteed by Fresenius,
(iii) any failure by Meridian to pay when due any installment of interest on or
principal of the Meridian Note, and (iv) any failure by Meridian to comply with
its covenant in Section 6.12. The amount of any such liability on the part of
Meridian pursuant to clause (i) of this Section 7.5 shall be limited to
$3,000,000.
7.6 Zoning Interruptions. If the operations of Gull's facility in Salt
Lake County, Utah in the manner presently being conducted are interrupted during
the twelve months following the Closing Date for reasons related to
non-compliance with applicable zoning laws and regulations, Fresenius will
indemnify Meridian and hold it harmless, subject to a limit of $4 million, from
all liabilities, costs and expenses including, without limitation, consequential
damages resulting from interruption of production which Gull or Meridian may
incur as a result of any such interruption except costs of physical relocation
of the facility. All contacts with zoning authorities relating to this matter
shall be made by Gull and Fresenius prior to the closing and by Fresenius during
such twelve month period following the closing except as may otherwise be
authorized by Fresenius in writing.
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7.7 Indemnification Procedures. The rights of indemnification provided
in Section 7.4, Section 7.5 and Section 7.6 shall be subject to the following
provisions:
7.7.1 No claim for indemnification pursuant to Section 7.4 or
clause (i) of Section 7.5 may be made until the aggregate of all such
claims exceeds $500,000.
7.7.2 The indemnified party shall notify the indemnitor of any
such liability specifying the nature of the liability and the amount or
the estimated amount thereof to the extent then feasible to estimate but
an estimate shall not be conclusive of the final amount of any such
liability. The indemnitor shall have 10 business days from receipt of
such notice to notify the indemnified party whether or not the
indemnitor disputes its obligation to indemnify the indemnified party
with respect to such liability. If such notice is not given by the
indemnitor, the indemnitor shall pay the amount claimed promptly.
7.7.3 Nothing shall prevent the indemnified party from making a
claim with respect to a potential or contingent liability provided the
indemnified party's notice sets forth a specific basis for any such
potential or contingent liability and the estimated amount thereto to
the extent then feasible and the indemnified party has reasonable
grounds to believe that such a liability or impairment will be incurred
or suffered. Any payment to an indemnified party with respect to any
such potential or contingent liability shall be final and binding upon
the indemnified party, regardless of the actual losses incurred by the
indemnified party in respect of such liability when actually asserted or
incurred.
7.7.4 The indemnified party and the indemnitor shall attempt in
good faith to resolve any dispute between them with respect to the
matters covered by this Section promptly by negotiations between
executives that have the authority to settle the dispute. Either party
may give the other written notice of any dispute not resolved in the
normal course. Within 10 business days following delivery of any such
notice, executives of both parties shall meet at a mutually acceptable
time and place thereafter for as long as they deem necessary to exchange
relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within 20 business days following delivery
of such notice or if the parties fail to meet within 10 business days,
either party may initiate mediation of the dispute. Mediation shall take
place under the then current model procedure for mediation of business
disputes at the American Arbitration Association, 140 W. 51st Street,
New York, New York 10020. A neutral third party will be selected from
the Association's panel. The place of mediation shall be New York City.
Any dispute not resolved by mediation within 45 days after the
initiation shall be settled by arbitration conducted expeditiously in
accordance with the rules for arbitration of business disputes conducted
by the American Arbitration Association by a sole arbitrator. If one
party has requested to the other to participate in the procedures
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outlined above and the other has failed, the other may initiate
arbitration before expiration of the 45 day period. Arbitration shall be
governed by the United States Arbitration Act and judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction.
7.8 Transition. Fresenius will not take any action to discourage any
lessor, licensor, customer, supplier, or other business associate of any of Gull
and its Subsidiaries from maintaining the same business relationships with Gull
and its Subsidiaries after the Closing Date as it maintained with them prior to
the Closing Date. Fresenius will refer all customer inquiries relating to the
businesses of Gull and its Subsidiaries to Meridian from and after the Closing
Date. Fresenius will perform in all material respects all agreements now in
force between it and Gull or any of its Subsidiaries until and after the Closing
Date in accordance with the terms of any such agreements. Fresenius will
transmit to Meridian any adverse reaction, adverse experience or quality
complaints pertaining to the Products coming to Fresenius' attention after the
Closing addressed to Meridian at the address set forth hereafter.
7.9 Confidentiality. Fresenius will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to Meridian or
destroy, at the request of Meridian, all tangible embodiments of the
Confidential Information which are in its possession. If Fresenius is requested
or required to disclose any Confidential Information, Fresenius will notify
Meridian promptly at the request or requirement so that Meridian may seek an
appropriate protective order or waive compliance with the provisions of this
Section. If, in the absence of a protective order or the receipt of a waiver
hereunder, Fresenius is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal, Fresenius may disclose the
Confidential Information; provided, however, that Fresenius shall use its
reasonable efforts to obtain, at the reasonable request of Meridian, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as Meridian shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
7.10 Noncompetition and Non-Solicitation Covenants. For a period of
three years after the Closing Date, Fresenius will not initiate a new business
venture or acquire any business which is predominantly engaged in the
manufacture and sale of diagnostic testing kits and reagents in the same field
of application as existing Gull or Meridian products (hereinafter referred to as
"Prohibited Business") in any geographic area in which Gull and its Subsidiaries
or Meridian and its Subsidiaries conducts that business as of the Closing Date,
or solicit directly or indirectly or encourage any person employed by Gull or
any Subsidiary or Meridian to leave such employment when Gull or Meridian
desires to retain that employee. However, notwithstanding the foregoing, this
Section 7.10 shall not prevent or prohibit Fresenius from any of the following:
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(i) acquiring another business that is not predominantly
engaged in the Prohibited Business; and
(ii) distributing any products which are or may be competitive
with products manufactured or sold by Gull or Meridian.
If Fresenius acquires another business pursuant to subsection (i) above which is
also engaged in the Prohibited Business, Fresenius shall use its best efforts to
notify Meridian of such acquisition and to enter into discussions with Meridian
regarding possible business arrangements with respect thereto acceptable to both
Fresenius and Meridian.
If the final judgment of a court of competent jurisdiction declares that
any term or provision of this Section is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed.
7.11 Contribution to Capital. Fresenius shall release its invoice dated
June 30, 1998 in an amount of 856,281.18 German Marks evidencing its claim
against Gull for the reimbursement of certain costs and expenses incurred by
Fresenius on behalf of Gull by contributing such obligation to the capital of
Gull prior to the closing.
8. Conditions to Obligations to Close.
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each Party to effect the Merger shall be subject to the
satisfaction of the following conditions:
8.1.1 The approval of Gull's Stockholders and of the Supervisory
Board of Fresenius shall have been obtained;
8.1.2 The waiting period applicable to the consummation of the
Merger under the Hart-Scott-Rodino Act shall have expired or been
terminated and no objections to the Merger shall have been raised in
connection with such filing;
8.1.3 No statute, rule, regulation, executive order, decree,
temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
governmental entity or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however,
that each of the Parties shall have used reasonable efforts to prevent
the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered;
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8.1.4 There shall not have been instituted or be pending, or
threatened, any suit, action or proceeding by any Person or entity as a
result of this Agreement or any of the transactions contemplated hereby
which, if such Person or entity were to prevail, would reasonably be
expected to prevent the consummation of the Merger or have a material
adverse effect on the business, financial condition or results of
operations of Gull and its Subsidiaries, taken as a whole; and
8.1.5 Gull shall have received a letter from its financial
advisor, dated the Closing Date, stating that the Fairness Opinion is in
full force and effect.
8.2 Conditions to Obligation of Meridian and the Transitory Subsidiary.
The obligation of each of Meridian and the Transitory Subsidiary to consummate
the Merger is subject to satisfaction of the following conditions:
8.2.1 Gull and its Subsidiaries shall have procured all of the
third party consents specified on the date of this Agreement pursuant to
Section 6.2;
8.2.2 The representations and warranties set forth in Section
Section 3 and 5 shall be true and correct in all material respects at
and as of the Closing Date other than to the extent that any such
representation and warranty is, by its terms, expressly limited to a
specific date, in which case such representation and warranty shall be
true and correct as of such date and Gull and Fresenius shall each
represent and warrant to Meridian and the Transitory Subsidiary that the
statements contained in Section Section 3 and 5, respectively, and in
the accompanying Disclosure Schedule are correct and complete as of the
Closing Date and as though the Closing Date were substituted for the
date of this Agreement throughout those sections;
8.2.3 Gull and Fresenius shall each have performed and complied
with all of its covenants hereunder required to be performed or complied
with on or prior to the Closing Date in all material respects;
8.2.4 Since the date of this Agreement, there shall not have been
or occurred any material adverse change in the business, financial
condition, cash flows, results of operations or prospects for the
manufacture and sale of Products and products in development of Gull and
its Subsidiaries, taken as a whole, other than changes relating to
Gull's industry or the economy in general and not specifically related
to Gull and its Subsidiaries and other than reductions in shareholders'
equity contemplated by Section 7.2;
8.2.5 Gull shall have delivered to Meridian a certificate to the
effect that each of the conditions specified in Section Section
8.2.1-8.2.4 is satisfied in all respects;
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8.2.6 Meridian shall have received from counsel to Gull and
Fresenius opinions in form and substance substantially as set forth in
Exhibits B and C attached hereto, addressed to Meridian and the
Transitory Subsidiary, and dated as of the Closing Date;
8.2.7 Meridian shall have received the resignations, effective as
of the closing, of each director and officer of Gull and each of its
Subsidiaries;
8.2.8 All outstanding options to purchase Gull Shares shall have
been canceled on terms satisfactory to Meridian and all shares of Gull
Deutschland GmbH and Gull Europe S.A. owned by Michael Malan or John
Turner shall have been acquired by Meridian or Gull;
8.2.9 Gull and Fresenius shall have furnished to Meridian and the
Transitory Subsidiary such other customary documents, certificates or
instruments as Meridian may reasonably request evidencing compliance by
Gull with the terms of this Agreement;
8.2.10 Meridian shall have entered into employment agreements
with Dr. Fred Rachford and John Turner providing for their employment
for a term of at least two years after the closing, containing
confidentiality and two year noncompetition provisions following
termination of employment and otherwise on terms reasonably satisfactory
to Meridian. Meridian shall have entered into a consulting agreement
with Holly Scribner providing for a term of at least two years of
consultation after the closing, containing confidentiality and two-year
noncompetition provisions following termination of the consulting
relationship and otherwise on terms reasonably satisfactory to Meridian;
8.2.11 Meridian and Fresenius shall have entered into a mutually
satisfactory agreement for the continued manufacture for Gull or
Meridian of the blood group and HLA Products currently being
manufactured in Fresenius' facility and with such agreement expiring no
more than two years after the Closing Date;
8.2.12 The due diligence of Meridian contemplated in Section 6.6
shall have been completed and not have revealed anything of a material
adverse nature as to the assets, liabilities, businesses, operations and
financial condition of Gull which is not the subject of a representation
or warranty contained herein; and
8.2.13 Meridian shall have obtained the written consent of the
College of American Pathologists for the assumption by Meridian of
control of Gull and to the transfer of the location of the production
called for in an agreement dated January 1, 1998 between Gull and the
College of American Pathologists from Gull's facility in Salt Lake
County, Utah to Meridian's facility in Cincinnati, Ohio.
Meridian may waive any condition specified in a writing so
stating at or prior to the closing.
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8.3 Conditions to Obligation of Gull and Fresenius. The obligations of
Gull and Fresenius to consummate the Merger are subject to satisfaction of the
following conditions:
8.3.1 The representations and warranties set forth in Section 4
shall be true and correct in all material respects, at and as of the
Closing Date other than to the extent that any such representation and
warranty is, by its terms, expressly limited to a specific date, in
which case such representation and warranty shall be true and correct as
of such date and Meridian shall represent and warrant to Gull and
Fresenius that the statements contained in Section 4 are correct and
complete as of the Closing Date and as though the Closing Date were
substituted for the date of this Agreement throughout those sections;
8.3.2 Each of Meridian and the Transitory Subsidiary shall have
performed and complied with all of its covenants hereunder required to
be performed or complied with on or prior to the Closing Date in all
material respects through the closing;
8.3.3 Each of Meridian and the Transitory Subsidiary shall have
delivered to Gull a certificate to the effect that each of the
conditions specified in Section 8.3 is satisfied in all respects;
8.3.4 The Fairness Opinion shall not have been withdrawn;
8.3.5 Gull and Fresenius shall have received from counsel to
Meridian and the Transitory Subsidiary an opinion in form and substance
substantially as set forth in Exhibit D attached hereto, addressed to
each of them; and
8.3.6 Meridian and the Transitory Subsidiary shall have furnished
to Gull such other customary documents, certificates or instruments as
Gull may reasonably request evidencing compliance by Meridian and the
Transitory Subsidiary with the terms of this Agreement.
Gull and Fresenius may waive any condition specified in a writing
so stating at or prior to the closing.
9. Termination.
9.1 Termination of Agreement. This Agreement may be terminated at any
time prior to the Effective Time by:
9.1.1 The Parties by mutual written consent;
9.1.2 Meridian and the Transitory Subsidiary by giving written
notice to Gull and Fresenius if the conditions set forth in Section
8.2.12 have not been met or if Fresenius or Gull has breached any
material representation, warranty, or covenant contained in this
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Agreement in any material respect, Meridian or the Transitory
Subsidiary has notified Fresenius or Gull of the breach, and the breach
has continued without cure for a period of 30 days after the notice of
breach or if the closing shall not have occurred on or before December
1, 1998, unless the failure to close results from the failure of Gull
or Fresenius to satisfy conditions set forth in Section Section 8.2.2
and 8.2.3;
9.1.3 Gull by giving written notice to Meridian and the
Transitory Subsidiary if Meridian or the Transitory Subsidiary has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Gull has notified Meridian and
the Transitory Subsidiary of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or if
the closing shall not have occurred on or before December 1, 1998,
unless the failure to close results from the failure of Meridian to
satisfy the conditions set forth in Section Section 8.3.1 and 8.3.2;
9.1.4 Gull, if notwithstanding Gull's compliance with Section
6.8, Gull receives and accepts prior to the Closing Date a Third Party
Offer; provided, however, that, in the event of such acceptance of a
Third Party Offer Gull shall immediately pay to Meridian as called for
in Section 6.8, the sum of $350,000 as liquidated damages and not as a
penalty, any such payment to be made in immediately available United
States funds;
9.1.5 Gull or Meridian notwithstanding Gull's compliance with
Section 6.8, if Gull's Board of Directors prior to the Closing Date
withdraws its recommendation to Gull Stockholders of this Agreement and
the Merger; provided, however, that in the event of such withdrawal Gull
shall immediately pay to Meridian its out-of-pocket expenses incurred in
relation to the transaction. In addition, if within twelve months after
such termination, Gull shall consummate a Third Party Offer, Gull and
Fresenius shall be jointly and severally obligated to pay Meridian the
additional sum of $350,000, as liquidated damages and not as a penalty,
any such payment to be made promptly in immediately available United
States funds;
9.1.6 Any Party by giving written notice to the other Parties if
this Agreement and the Merger fail to receive the approval of Gull's
Stockholders or if any governmental entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the Merger and
such order, decree or ruling or other action shall have become final and
nonappealable; or
9.1.7 Meridian, if Fresenius' Supervisory Board shall not have
duly approved the actions of its officer executing this Agreement.
9.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.1, all rights and obligations of the Parties hereunder
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shall terminate without any liability of any Party to any other Party except for
any liability of any Party then in breach or as set forth in Section 9.1;
subject to Section Section 3.8, 4.4, 5.3 and 7.9, the confidentiality provisions
contained in Section 6.6, this Section 9.2 and Section 10, each of which shall
survive any such termination.
10. Miscellaneous.
10.1 Survival. The representations, warranties and covenants of the
Parties will survive the closing of the Merger for a period of one year
following the delivery to Meridian of audited financial statements for Meridian
and Gull covering the year ended September 30, 1998, but such date of delivery
shall be deemed to be no later than December 30, 1998. This time period shall be
one year following the delivery of audited financial statements from Meridian
and Gull covering the year ended September 30, 1999 but such date of delivery
shall be deemed to be no later than December 30, 1999 with respect to the
matters covered by the following sections of this Agreement: Section 3.5 -
"Filings with the SEC," Section 3.7 - "Undisclosed Liabilities," Section 3.10 -
"Litigation," Section 3.11 - "Product Warranty," Section 3.12 "Product
Liability," Section 3.14 - "Employee Benefits," Section 3.27 - "Contracts and
Agreements," Section 3.28 - "Licenses and Permits," Section 3.30 - "Taxes and
Tax Returns," Section 6.8 - "Exclusivity," Section 7.3 - "Indemnification for
Shareholder Actions," and except that the period of survival shall be five years
after the Closing Date for Section 6.9 - "Bylaw Indemnification," and three
years after the Closing Date for Section 7.10 - "Covenant Not to Compete" and
twelve months after a termination for the matters contemplated by Section 9.1.5.
Section 7.4, Section 7.5 and Section 7.6 shall survive subject to the various
periods of limitations set forth above. Any claim brought under Section 7.4,
Section 7.5 and Section 7.6 shall be presented within 60 days after expiration
of the relevant period of survival with respect to each such claim.
10.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or by any listing or trading agreement
concerning its publicly-traded securities in which case the disclosing Party
will use its reasonable best efforts to advise the other Party prior to making
the disclosure.
10.3 No Obligations Upon Fresenius Medical Care AG. It is expressly
understood among the parties to this Agreement that no representation, warranty,
covenant or any other provision contained in this Agreement shall apply to or be
binding upon Fresenius Medical Care AG or any of its Subsidiaries.
10.4 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided, however, that the provisions in
Section 2 concerning payment of the Merger consideration are intended for the
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benefit of, and shall be enforceable by Gull Stockholders, their heirs and their
respective legal representatives and the provisions in Section 6.9 are intended
for the benefit of, and shall be enforceable by the individuals specified
therein and their heirs and their respective legal representatives and shall be
binding on Meridian, the Transitory Subsidiary and Gull, their respective
Subsidiaries and their respective successors and assigns.
10.5 Entire Agreement. This Agreement including the documents referred
to herein constitutes the entire agreement among the parties and supersedes any
prior or contemporaneous understandings, agreements or representations by or
among the parties, written or oral, to the extent they related in any way to the
subject matter hereof.
10.6 Successors and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties provided, however, that Meridian may assign its rights
hereunder to an affiliated entity without the prior written consent of Gull and
Fresenius provided Meridian executes a written guarantee of the obligations of
any such assignee in a form reasonably acceptable to Gull and Fresenius.
10.7 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
10.8 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.9 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be addressed to the intended recipient as
set forth:
If to Gull: GULL LABORATORIES, INC.
1011 East Murray Holladay Road
Salt Lake City, Utah 84117
Attention: Silke Humberg Ph.D.
Fax: 801-269-8251
With a required PRINCE, YEATES & GELDZAHLER
copy to: City Centre I, Suite 900
175 East 400 South
Salt Lake City, Utah 84111
Attention: Gregory E. Lindley, Esq.
Fax: 801-524-1099
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If to Fresenius FRESENIUS AG
Else-Kroner Str. 1
61346 Bad Homburg, Germany
Attention: Rainer Baule
Fax: 011-49-6172-608-2386
With a required O'MELVENY & MYERS LLP
copy to: Citicorp Center
153 East 53rd Street
New York, New York 10022-4461
Attention: Robert A. Grauman, Esq.
Fax: 212-326-2061
If to Meridian MERIDIAN DIAGNOSTICS, INC.
or the Transitory 3471 River Hills Drive
Subsidiary: Cincinnati, Ohio 45244
Attention: Mr. John A. Kraeutler
Fax: 513-271-3762
Copy to: KEATING, MUETHING & KLEKAMP
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Gary P. Kreider, Esq.
Fax: 513-579-6956
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
by any commercially reasonable means, but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner provided herein.
10.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of Ohio without giving effect
to any choice or conflict of law provision or rule, whether of Ohio or any other
jurisdiction, that would cause or result in the application of the laws of any
jurisdiction other than Ohio.
10.11 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective Boards of Directors; provided, however,
that any amendment effected after obtaining the approval of Gull Stockholders
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will be subject to the restrictions contained in the Utah Revised Business
Corporation Act. Any decrease in the Merger consideration per Gull Share shall
be submitted to Gull's Stockholders for approval. No amendment of any provision
of this Agreement shall be valid unless it is in writing and signed by all of
the Parties. No waiver by any Party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
10.12 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.13 Expenses. Each of the Parties will bear its own costs and expenses
including legal fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. Meridian shall pay filing fees under the
Hart-Scott-Rodino Act.
10.14 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
10.15 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement and the Disclosure Schedule are
incorporated herein by reference and made a part hereof.
10.16 Jurisdiction. All within the meaning of Section 2307.39 of the
Ohio Revised Code, any lawsuit to enforce or interpret this Agreement can be
brought and maintained only in the Court of Common Pleas of Hamilton County,
Ohio or the U.S. District Court for the Southern District of Ohio at Cincinnati,
and the substantive law of the State of Ohio will govern and control every issue
or dispute relating to the interpretation or enforcement of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Merger
Agreement on September 15, 1998.
GULL LABORATORIES, INC.
By: /s/Silke Humberg
_______________________________
Name: Silke Humberg
Title: CEO & President
MERIDIAN DIAGNOSTICS, INC.
By: /s/John A. Kraeutler
_________________________________
Name: John A. Kraeutler
Title: President
FRESENIUS AG
By: /s/Rainer Baule
_________________________________
Name: Ranier Baule
Title: COO, President,
I & H Division
By: /s/M. Schmidt
_________________________________
Name: M. Schmidt
Title: President, Pharma Division
MERIDIAN ACQUISITION CO.
By: /s/John A. Kraeutler
_________________________________
Name: John A. Kraeutler
Title: President