File No. 333-20567
Filed Pursuant to Rule 424(b)(4)

2,489,485 SHARES

LOGO

COMMON STOCK

Of the 2,489,485 Class A Common Shares, par value $0.10 per share (the
"Common Stock"), offered hereby (this "Offering"), 1,000,000 shares are being
offered by Marquette Medical Systems, Inc. (the "Company" or "Marquette") and
1,489,485 shares are being offered by certain shareholders of the Company (the
"Selling Shareholders"). See "Selling Shareholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Shareholders.

The Common Stock is quoted on the Nasdaq National Market ("Nasdaq") under
the symbol "MARQA." On March 5, 1997, the last reported sales price of the
Common Stock on Nasdaq was $18 1/2 per share. See "Price Range of Common Stock
and Dividend Policy."

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 6-9.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

----------------

UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS* COMPANY+ SHAREHOLDERS+

Per Share.................... $18.375 $1.01 $17.365 $17.365
Total++...................... $45,744,287 $2,514,380 $17,365,000 $25,864,907

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* The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
+ Before deducting estimated expenses of this Offering of $400,000, $175,000
of which will be paid by the Company and $225,000 of which will be paid by
the Selling Shareholders.
++ The Company has granted the Underwriters a 30-day option to purchase up to
373,422 additional shares of Common Stock on the same terms per share solely
to cover over-allotments, if any. If such option is exercised in full, the
total price to public will be $52,605,916, the total underwriting discounts
and commissions will be $2,891,536, the total proceeds to the Company will
be $23,849,473 and the total proceeds to the Selling Shareholders will be
$25,864,907. See "Selling Shareholders" and "Underwriting."

----------------

The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of certificates
therefor will be made at the offices of Dillon, Read & Co. Inc., New York, New
York, on or about March 11, 1997. The Underwriters include:

DILLON, READ & CO. INC.
BEAR, STEARNS & CO. INC.
ROBERT W. BAIRD & CO.
INCORPORATED

The date of this Prospectus is March 6, 1997.

IFC

[PHOTOS OF COMPANY PRODUCTS]

Marquette's patient monitoring systems continuously acquire, analyze,
store, display and print patient physiological information, providing attending
medical personnel a means to continuously evaluate a patient's condition.
Patient monitoring systems include bedside, telemetry, anesthetic and
respiratory gas, maternal/fetal, neonatal and home care equipment and clinical
information systems. The Company offers fully integrated, networked, open
architecture clinical information systems that process information obtained from
patient monitors and various other sources, including Marquette's and other
companies' products, to create an interactive electronic patient medical record.

[PHOTOS OF COMPANY PRODUCTS]

Marquette's diagnostic cardiology products are used to diagnose cardiac
disorders through the detection, recording and analysis of electrical signals
and other information relating to the heart. These products include resting,
exercise testing and Holter (ambulatory) ECG equipment, cardiovascular
information systems, cardiac defibrillator's, cardiac catheterization laboratory
monitors, and photo image and digital image processing equipment. The Company
offers an open architecture cardiovascular information system that accepts and
stores data from electrocardiographs and other diagnostic cardiology products to
create a patient-specific cardiology database for comparative and other clinical
purposes.

[DIAGRAM OF UNITY NETWORK DEPICTING CARE AREAS]

The Unity Network is designed to:

. communicate patient information from bedside and telemetry monitors
to central nurses' stations

. allow clinicians to view patient information from various areas of
the hospital or from remote locations via telephone lines and modems

. electronically transfer patient information to care units,
outpatient facilities or physicians' offices

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus or in the documents incorporated in this
Prospectus by reference. All references to the Company herein include the
Company and all of its subsidiaries, except where the context otherwise
indicates. Unless otherwise indicated, the information contained in this
Prospectus assumes that the Underwriters' over-allotment option is not
exercised. References in this Prospectus to the Company's fiscal year refer to
the 12-month period ending on April 30 of each year.

Except for the historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the section entitled "Risk Factors" as well as those discussed elsewhere in
this Prospectus and in the documents incorporated by reference in this
Prospectus.

THE COMPANY

Marquette is a worldwide leader in the development and manufacture of medical
equipment and integrated systems for patient monitoring and diagnostic
cardiology applications. Marquette also develops clinical information systems,
designed to be integrated with medical equipment, consisting of hardware and
software used by integrated health care delivery networks and individual
hospitals to electronically acquire, record, store, analyze and distribute
patient medical data. The Company believes that its ability to offer integrated
clinical information systems and patient monitoring and diagnostic cardiology
equipment provides it with significant competitive advantages over companies
that market only equipment or clinical information systems. The Company has
made a substantial commitment to research and development and is well known for
its technological innovation and quality, dating back to 1965 when it
introduced the first centralized electrocardiograph ("ECG") processing and
storage system.

Patient monitoring systems and diagnostic cardiology products accounted for
approximately 47% and 34% of the Company's net sales, respectively, for the six
months ended October 31, 1996, with the remaining 19% of net sales relating to
supplies and after market services. The Company's products are sold in more
than 65 countries throughout the world, with the U.S. and international markets
accounting for approximately 60% and 40%, respectively, of the Company's net
sales for the six months ended October 31, 1996. The Company's products are
used principally in critical and intensive care units, operating and recovery
rooms, step-down units, labor and delivery units, cardiology departments,
cardiac catheterization laboratories ("Cath Labs") and related areas of acute
care hospitals. In addition, Marquette products are increasingly being used in
smaller hospitals, medical clinics, outpatient surgery centers, physician
offices and homes.

The Company estimates that the annual worldwide market for patient monitoring
systems is approximately $1.3 billion, of which approximately $720 million is
attributable to the U.S. market. Marquette's patient monitoring systems
continuously acquire, analyze, store, display and print patient physiological
information, providing attending medical personnel a means to continuously
evaluate a patient's condition. Patient monitoring systems include bedside,
telemetry, anesthetic and respiratory gas, maternal/fetal, neonatal and home
care equipment and clinical information systems. The Company believes it is one
of the leading manufacturers of maternal/fetal, bedside and telemetry
monitoring systems. The Company offers fully integrated, networked, open
architecture clinical information systems that process information obtained
from patient monitors and various other sources, including Marquette's and
other companies' products, to create an interactive electronic patient medical
record.

diagnostic cardiology products are used to diagnose cardiac disorders through
the detection, recording and analysis of electrical signals and other
information relating to the heart. These diagnostic cardiology products include
resting, exercise testing and Holter (ambulatory) ECG equipment, cardiovascular
information systems, cardiac defibrillators, Cath Lab monitors, and photo image
and digital image processing equipment. The Company believes it is one of the
leading manufacturers of cardiovascular information systems and Cath Lab
monitors. The Company offers an open architecture cardiovascular information
system that accepts and stores data from electrocardiographs and other
diagnostic cardiology products to create a patient-specific cardiology database
for comparative and other clinical purposes.

The Company's objective is to be the premier provider of medical systems for
patient monitoring and diagnostic cardiology across the continuum of care. The
elements of the Company's strategy to achieve this objective are to (i) enter
new care areas, (ii) broaden and enhance its existing product lines, (iii)
continue the development of its clinical information systems, (iv) increase its
penetration of international markets, (v) increase its recurring revenue
streams and (vi) enhance its profit margins.

Marquette differentiates itself from other medical equipment vendors by
addressing market needs with a total solutions approach. First, Marquette
offers its customers a broad product line and the ability to equip and supply
multiple areas along the continuum of care, thereby enabling integrated health
care delivery networks and individual hospitals to gain efficiencies through
standardization with a single vendor. Second, Marquette offers its customers
the ability to construct an information network infrastructure and clinical
information systems to enhance the utilization and clinical value of the
Company's patient monitoring and diagnostic cardiology products as well as
other medical equipment vendors' products. Third, Marquette provides its
customers expertise in clinical problem solving, systems integration and
process improvement to customize the configuration of the Company's products
and systems to optimize clinical applications for the customers' various care
areas and patient management needs.

THE OFFERING

Common Stock offered by the
Company........................... 1,000,000 shares
Common Stock offered by the Selling
Shareholders...................... 1,489,485 shares
Total.......................... 2,489,485 shares
Common Stock to be outstanding
after this Offering............... 17,186,395 shares(1)
Use of proceeds.................... The proceeds from the sale of shares of
Common Stock by the Company will be used to
reduce the Company's long-term
indebtedness. See "Use of Proceeds."
Nasdaq National Market symbol...... MARQA

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(1) Based upon the number of shares outstanding on January 31, 1997. Does not
include (i) 1,989,832 shares of Common Stock reserved for issuance upon the
exercise of outstanding stock options under the Amended and Restated Stock
Option Plan for Employees of Marquette Medical Systems, Inc., the Company's
Directors' (Non-Employee) Stock Option Plan, the E for M Corporation 1991
Stock Option Plan and the E for M Corporation 1991 Key Employee Stock
Option Plan (collectively, the "Plans") and (ii) 1,251,917 shares of Common
Stock available for future grant of stock options under the Plans.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

SIX MONTHS ENDED
FISCAL YEARS ENDED APRIL 30, OCTOBER 31,
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1992 1993 1994 1995 1996 1995 1996
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INCOME STATEMENT DATA:
Net sales............... $233,140 $250,178 $253,808 $342,176 $416,293 $165,638 $261,702
Gross profit............ 119,815 130,443 131,621 175,046 201,346 82,484 126,695
Operating income
(loss)(1).............. 22,434 27,013 27,983 33,896 (13,756) 8,742 16,782
Net income (loss)(1).... 14,575 17,790 18,641 19,557 (24,868) 5,022 8,486
Net income (loss) per
share(1)............... $0.93 $1.11 $1.16 $1.21 $(1.53) $0.31 $0.52
Average shares
outstanding(2)......... 15,648 16,039 16,090 16,172 16,254 16,228 16,305

OCTOBER 31, 1996
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ACTUAL AS ADJUSTED(3)
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BALANCE SHEET DATA:
Working capital......................................... $138,298 $138,298
Total assets............................................ 449,063 449,063
Long-term debt, less current maturities................. 81,211 64,021
Shareholders' equity.................................... 152,554 169,744

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(1) Both operating income and net income in fiscal 1996 included certain non-
recurring charges. In fiscal 1996, the Company acquired E for M
Corporation. This acquisition was accounted for as a purchase and
approximately $35.7 million of the purchase price was allocated to in-
process research and development and was written-off immediately. In
addition, in fiscal 1996 the Company initiated a restructuring of its
worldwide operations and took a non-recurring restructuring charge of
approximately $4.0 million, or approximately $2.5 million net-of-tax
effect. Operating income in fiscal 1996 before non-recurring charges was
approximately $25.9 million and net income in fiscal 1996 before non-
recurring charges was approximately $13.3 million, or $0.82 per share of
Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Fiscal 1996 Compared to Fiscal 1995."
(2) In December 1996, all 26,250,000 outstanding shares of the Company's Class
C Common Shares, $0.01 par value (the "Class C Common Stock"), were
exchanged for 262,500 shares of Common Stock. Consequently, there are
currently no shares of Class C Common Stock outstanding. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview." Historically, the Class C Common Stock participated in net
income with the Common Stock in the ratio of 1:100. Consequently, the
weighted average common shares outstanding for calculating net income of
the Company for each period indicated is equal to the sum of the weighted
average number of shares of Common Stock outstanding for such period plus
1/100th of the weighted average number of shares of Class C Common Stock
outstanding for such period.

(3) Adjusted to give effect to the sale of the shares of Common Stock offered
by the Company pursuant to this Offering and the application of the net
proceeds thereof (at the public offering price of $18.375 per share). See
"Use of Proceeds" and "Capitalization."

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the Common Stock. Except for the historical information contained herein,
the discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in such forward-looking statements. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed below as well as those discussed elsewhere in this
Prospectus and in the documents incorporated by reference in this Prospectus.

UNCERTAINTY RELATED TO HEALTH CARE REFORM AND CHANGING MARKET CONDITIONS

Political, economic and regulatory influences are subjecting the U.S. health
care industry to fundamental change. Although Congress has not enacted
comprehensive health care reform legislation to date, the Company anticipates
that Congress, state legislatures and the private sector will continue to
review and assess alternative health care delivery and payment systems.
Potential approaches that have been considered include mandated basic health
care benefits, controls on health care spending through limitations on the
growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups, price controls
and other fundamental changes to the health care delivery system. Legislative
debate is expected to continue in the future, and market forces are expected
to demand reduced costs. The Company cannot predict what impact the adoption
of any federal or state health care reform measures, future private sector
reform or market forces may have on its business.

The health care industry is in transition with a number of changes that
affect the market for medical equipment and systems. Changes in the health
care delivery system have resulted in major consolidations among hospitals and
the formation of multi-hospital alliances, reducing the number of
institutional customers for the Company's products and increasing price
pressures in the Company's markets. There can be no assurance that the Company
will be able to enter into and/or sustain contractual or other marketing or
distribution arrangements on a satisfactory commercial basis with these
institutional customers.

COMPETITION AND TECHNOLOGICAL CHANGE

The markets for the Company's products have historically been highly
competitive. The consolidation of health care providers in the U.S. and the
national effort to curtail increases in medical care costs have increased the
level of competition. Although the Company competes directly with other
providers of medical equipment, no one company or group of companies competes
with the Company across its full line of products. The Company's primary
competitors in patient monitoring include Hewlett-Packard Corporation, Siemens
Medical Systems, Inc., SpaceLabs Medical, Inc. and Datex Company, and in
diagnostic cardiology include Hewlett-Packard Corporation, Schiller AG and
Quinton Instrument Company, a subsidiary of American Home Products
Corporation. Certain of these competitors are larger, have greater financial
and marketing resources and have a larger installed base than Marquette. In
addition, other technologies may in the future be the basis for competitive
products that could render the Company's products obsolete or non-competitive.
Increased price competition or the introduction of new products by competitors
could have a material adverse effect on the Company's revenues and profit
margins. Any such developments could have a material adverse effect on the
business, financial condition or results of operations of the Company. See
"Business--Competition."

PRODUCT LIABILITY

providers in connection with the treatment of patients, who will, on occasion,
sustain injury or die as a result of their condition or medical treatment. If
a lawsuit is filed because of such an occurrence, the Company, along with
physicians and nurses, hospitals and other medical suppliers, may be named as
a defendant, and whether or not the Company is ultimately determined to be
liable, the Company may incur significant legal expenses. In addition, such
litigation could damage the Company's reputation and therefore impair its
ability to market its products or obtain product liability insurance or cause
the premiums for such insurance to increase. The Company carries product
liability insurance coverage under several policies with an aggregate loss
coverage which the Company believes is sufficient. However, in the future the
Company may be unable to obtain adequate product liability coverage on
acceptable terms, if at all. A successful product liability claim or series of
claims brought against the Company that are not covered by insurance or that
exceed policy limits could have a material adverse effect on the Company's
business, financial condition or results of operations. See "Business--Product
Liability and Insurance."

INTERNATIONAL OPERATIONS

The Company sells its products outside of the U.S. both directly and through
distributors. International sales represented approximately 27%, 27%, 33%, and
40% of the Company's total net sales in fiscal 1994, 1995, 1996 and for the
six months ended October 31, 1996, respectively. The Company believes that
international sales will continue to represent a significant portion of its
net sales and play a significant role in its future growth and success.
Although certain of the Company's international sales are denominated in U.S.
dollars, its international business may be affected by changes in demand and
profitability resulting from fluctuations in currency exchange rates.
Additional risks inherent in the Company's international business activities
include the burdens of monitoring and complying with a wide variety of foreign
laws, regulatory requirements and reimbursement practices, costs of localizing
products for foreign countries, longer accounts receivable payment cycles,
difficulties in collecting payment, export license requirements, political
instability, trade restrictions, changes in tariffs, competition and
potentially reduced protection for intellectual property. There can be no
assurance that such factors will not have a material adverse effect on the
Company's future international sales and, consequently, the Company's
business, financial condition or results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Sales, Distribution and Marketing."

GOVERNMENT REGULATION

The medical devices manufactured and marketed by the Company are subject to
extensive and rigorous regulation by the U.S. Food and Drug Administration
(the "FDA") and in many instances by state and foreign governments. Pursuant
to the federal Food, Drug and Cosmetic Act (the "FDC Act"), the FDA regulates,
among other things, the testing, manufacturing, labeling, distribution and
promotion of medical devices in the U.S. Prior to commercialization in the
U.S., a medical device generally must receive FDA clearance or approval, which
can be an expensive, lengthy and uncertain process. Regulatory agencies in
various foreign countries in which the Company's products are sold may impose
additional or varying regulatory requirements. Noncompliance with applicable
requirements can result in, among other consequences, warning letters,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, refusal to grant pre-market clearance or withdrawal
of marketing authorizations, and criminal prosecution.

In general, before a new medical device may be marketed in the U.S., the
manufacturer must obtain either a pre-market notification clearance under
Section 510(k) of the FDC Act ("510(k)") or a pre-market approval ("PMA").
Although generally believed to be a shorter, less costly regulatory path than
a PMA, the process of obtaining a 510(k) clearance generally requires the
submission of supporting data, which may include data from clinical trials of
the device. It generally takes from four to 12 months from submission to
obtain a 510(k) clearance of a new device, but it may take longer.

The Company is also subject to certain other FDA regulations, including
regulations regarding Good Manufacturing Practices ("GMP") and similar
regulations in other countries, which include testing, control, and
documentation requirements, and the medical device reporting requirements.
Ongoing compliance with

GMP and other applicable regulatory requirements will be monitored through
periodic inspections by state and federal agencies, including the FDA, and by
comparable agencies in other countries. In addition, changes in existing
regulations or adoption of new governmental regulations or policies could
prevent or delay regulatory approval of the Company's products.

Sales of medical devices outside of the U.S. are subject to foreign
regulatory requirements that vary widely from country to country. The time
necessary to obtain approval for sales in foreign countries may be longer or
shorter than that required for FDA approval, and requirements may differ from
FDA requirements.

There can be no assurance that the Company will be able to obtain 510(k)
clearance or, if required, a PMA to market new products in the U.S. on a
timely basis, and delays in receipt of or failure to receive such clearances
or approvals, or failure to comply with existing or future regulatory
requirements, would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Government
Regulation."

THIRD PARTY REIMBURSEMENT

Third party payors (including state and federal governments) are
increasingly concerned about escalating health care costs and can indirectly
affect the pricing and relative attractiveness of the Company's products by
regulating the maximum amount of reimbursement they will provide for the
diagnostic procedures that involve use of the Company's products. If amounts
to be reimbursed to hospitals or physicians for such services are decreased in
the future, such decreases could reduce sales of the Company's products and
could reduce the price the Company can charge for its products, which could
have a material adverse effect on the Company's business, financial condition
or results of operations.

INTEGRATION OF ACQUISITIONS

The Company's strategy to grow and improve its product offerings may include
obtaining product lines through acquisitions. The Company acquired E for M
Corporation in January 1996 and continues the integration of E for M's
operations into the Company. See "Management's Discussion and Analysis of
Results of Financial Condition and Results of Operations." Acquisitions
involve a number of risks, including risks related to the integration of
acquired businesses, the substantial management time devoted to such
activities, undisclosed liabilities, the failure to achieve anticipated
benefits, such as cost savings and synergies, and distribution, engineering,
customer support and other issues related to product integration.

CONCENTRATION OF SHARE OWNERSHIP

Following this Offering, the Company's officers and directors will
beneficially own approximately 23% of the outstanding shares of Common Stock,
including approximately 19% beneficially owned by one of the Company's
founders. Accordingly, these officers and directors will have the ability to
influence significantly the election of directors and most corporate actions.
See "Selling Shareholders."

ANTI-TAKEOVER CONSIDERATIONS

The Company's Restated Articles of Incorporation, as amended, and Amended
and Restated By-laws contain provisions that, among other things, authorize
the Board of Directors to issue preferred stock in one or more series without
shareholder approval, impose procedural requirements in connection with the
calling of special meetings of shareholders, and require advance notice
requirements for nominations and certain other matters to be considered at
meetings of shareholders. The Company has also issued Preferred Share Purchase
Rights ("Rights") under a Rights Agreement, dated December 18, 1996, between
the Company and Firstar Trust Company, as Rights Agent, that entitle holders
to certain rights if a person acquires 20% or more of the Common Stock or
announces a tender offer for 20% or more of the Common Stock. These
provisions, the Rights and the prohibition against certain business
combinations and other provisions contained in the Wisconsin Business
Corporation Law could have the effect of delaying, deferring or preventing a
change in control or the removal of existing management of the Company.

ABSENCE OF DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. See "Price Range
of Common Stock and Dividend Policy."

VOLATILITY OF STOCK PRICE

The Common Stock has experienced price volatility, and such volatility may
occur in the future. In addition, the stock market from time to time has
experienced extreme price and volume fluctuations that have affected the
market price of many companies and have often been unrelated to the operating
performance of particular companies. See "Price Range of Common Stock and
Dividend Policy." Factors including fluctuations in the Company's sales or
operating results (including fluctuations due to seasonality and the
variability of the sales cycle for certain of the Company's products),
announcements of technological innovations or new products by the Company or
its competitors, changes in recommendations of securities analysts and general
market conditions may have a significant effect on the market price of the
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Competition."

RECENT DEVELOPMENTS

On February 10, 1997 the Company announced operating results for its third
fiscal quarter. Net sales for the nine-month period ended January 31, 1997
increased 44.7% to $399.4 million from $275.9 million for the same period in
the previous fiscal year. The results for the nine-month period ended January
31, 1996 include one-month of the operations of E for M, which was acquired in
January 1996. Gross profit for the nine-month period ended January 31, 1997
increased 42.7% to $194.2 million from $136.1 million for the same period in
the previous fiscal year. The increase was primarily attributable to the E for
M acquisition, as well as more efficient utilization of capacity at the
Company's manufacturing facilities and the continued benefits associated with
the integration of E for M's operations into the Company's operations. The
gross margin for the three-month period ended January 31, 1997 increased to
49.0% from 48.6% for the same period in the previous fiscal year. Operating
income for the nine-month period ended January 31, 1997 was $27.4 million,
compared to an operating loss of $17.4 million for the same period in the
previous fiscal year. The loss for the nine-month period ended January 31,
1996 was attributable to a one-time charge of $35.7 million related to the
write-off of in-process research and development associated with the E for M
acquisition. Excluding this one-time charge, operating income for the nine-
month period ended January 31, 1996 was $18.3 million. Net income for the
nine-month period ended January 31, 1997 was $14.4 million or $0.89 per share,
compared to a net loss of $25.6 million or $1.58 per share in the same period
of the previous fiscal year. Excluding the previously mentioned one-time
charge, the net income for the nine-month period ended January 31, 1996 was
$10.1 million, or $0.62 per share.

On February 25, 1997 the Company entered into a strategic alliance agreement
with Physio-Control Corporation to create technological compatibility between
certain of their cardiology products. The two companies will exchange
proprietary technologies and investigate joint development of products using
shared knowledge and techniques. The two companies have agreed to work
together to expand distribution of both companies' products in North America,
including the sale of each other's products in appropriate market segments.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered by the Company hereby, at the public offering price of
$18.375 per share, are estimated to be approximately $17.2 million ($23.7
million if the Underwriters' over-allotment option is exercised in full),
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company. The Company will not receive any
proceeds from the sale of the 1,489,485 shares of Common Stock offered by the
Selling Shareholders hereby.

The Company expects to use all of the net proceeds from the sale of Common
Stock by the Company to repay a portion of the Company's bank term debt.
Amounts borrowed under the bank term debt accrued interest at a weighted
annual rate of approximately 6.5% as of February 3, 1997 and mature beginning
on October 31, 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is traded on the Nasdaq National Market under the symbol
"MARQA." The following table sets forth for the periods indicated the high and
low closing sales prices of the Common Stock as reported by the Nasdaq
National Market.

HIGH LOW
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FISCAL YEAR ENDED APRIL 30, 1995:
First Quarter.......................................... $16 1/2 $ 15
Second Quarter......................................... 20 15 1/2
Third Quarter.......................................... 23 1/2 19
Fourth Quarter......................................... 23 3/4 17
FISCAL YEAR ENDED APRIL 30, 1996:
First Quarter.......................................... $ 19 $ 13
Second Quarter......................................... 18 3/4 15 3/4
Third Quarter.......................................... 21 17 3/4
Fourth Quarter......................................... 20 16 1/2
FISCAL YEAR ENDED APRIL 30, 1997:
First Quarter.......................................... $18 3/4 $15 3/4
Second Quarter......................................... 18 1/2 15 1/2
Third Quarter.......................................... 22 3/8 15
Fourth Quarter (through March 5, 1997)................. 21 18 3/8

On March 5, 1997, the last reported sales price of the Common Stock on the
Nasdaq National Market was $18 1/2 per share. As of January 1, 1997, there
were approximately 710 holders of record of the Common Stock.

The Company has never declared or paid cash dividends on the Common Stock.
The Company intends to retain any future earnings for use in its business and
does not anticipate paying any cash dividends on the Common Stock in the
future.

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company at October 31, 1996, and as adjusted to reflect the sale of the
1,000,000 shares of Common Stock offered by the Company hereby (at the public
offering price of $18.375 per share) and the application of the estimated net
proceeds to the Company therefrom as described in "Use of Proceeds." This
table should be read in conjunction with the consolidated financial statements
and notes thereto included elsewhere in this Prospectus.

OCTOBER 31, 1996
----------------------
ACTUAL(1) AS ADJUSTED
--------- -----------
(DOLLARS IN
THOUSANDS)

Short-term debt:
Notes payable.......................................... $ 47,146 $ 47,146
======== ========
Long-term debt, less current maturities:
Bank debt.............................................. $ 51,211 $ 34,021
7.46% senior debt...................................... 30,000 30,000
Class A Common Shares under repurchase agreements(2)..... 8,000 8,000
Shareholders' equity:
Class A Common Shares, par value $0.10 per share,
30,000,000 shares authorized, 16,115,335 shares
issued; 17,115,335 shares issued, as adjusted......... 1,612 1,712
Class C Common Shares, par value $0.01 per share,
50,000,000 shares authorized, no shares issued........ 0 0
Additional paid in capital............................. 27,918 45,008
Retained earnings...................................... 134,638 134,638
Treasury stock, at cost, 18,900 shares of Class A
Common Shares......................................... (312) (312)
Cumulative translation adjustment...................... (3,302) (3,302)
Class A Common Shares under repurchase agreements(2)... (8,000) (8,000)
-------- --------
Total shareholders' equity........................... $152,554 $169,744
-------- --------
Total capitalization............................... $241,765 $241,765
======== ========

- --------
(1) Adjusted to reflect the December 1996 exchange of all 26,250,000
outstanding shares of Class C Common Stock for 262,500 shares of Common
Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview."
(2) The Company has entered into agreements with Michael J. Cudahy, Chairman
and Chief Executive Officer of the Company, and Warren B. Cozzens, a
retired senior vice president and former director of the Company, to
repurchase up to $4.0 million worth of Common Stock from the estate of
each of them upon their death. The Company has life insurance with a face
value of approximately $6.7 million on the lives of the two shareholders
in order to partially fund these repurchase obligations.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following selected financial information presents the Company's
consolidated results of operations for the five years ended April 30, 1996 and
the six months ended October 31, 1995 and 1996. The summary for each of the
years in the three-year period ended April 30, 1996 has been derived from the
Company's consolidated financial statements which have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
included elsewhere in this Prospectus. The summary for each of the years in
the two-year period ended April 30, 1993 has been derived from separate
audited consolidated financial statements of the Company. The Company's
financial statements and the related selected financial statements for the six
months ended October 31, 1995 and 1996 are unaudited but, in the opinion of
management of the Company, reflect all adjustments (which include only normal
recurring adjustments) necessary to fairly present such information for those
periods. Results of interim operations are not necessarily indicative of
results to be expected for the fiscal year. The following information is
qualified by reference to, and should be read in conjunction with, the
consolidated financial statements and notes thereto included elsewhere in this
Prospectus or incorporated by reference herein and the information included
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

SIX MONTHS ENDED
FISCAL YEARS ENDED APRIL 30, OCTOBER 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Net sales............... $233,140 $250,178 $253,808 $342,176 $416,293 $165,638 $261,702
Cost of sales........... 113,325 119,735 122,187 167,130 214,947 83,154 135,007
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 119,815 130,443 131,621 175,046 201,346 82,484 126,695
-------- -------- -------- -------- -------- -------- --------
Engineering expenses.... 18,210 21,022 22,417 30,716 37,307 16,181 23,787
Selling expenses........ 59,763 63,768 62,397 85,072 105,259 44,035 64,243
General and
administrative
expenses............... 19,408 18,640 18,824 25,362 32,880 13,526 21,883
Restructuring
expenses(1)............ -- -- -- -- 3,956 -- --
Write-off of acquired
in-process research &
development(1)......... -- -- -- -- 35,700 -- --
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses.............. 97,381 103,430 103,638 141,150 215,102 73,742 109,913
-------- -------- -------- -------- -------- -------- --------
Operating income (loss). 22,434 27,013 27,983 33,896 (13,756) 8,742 16,782
Interest expense........ 2,094 1,515 322 2,973 4,386 1,235 4,189
Other (income) expense,
net.................... (1,680) (885) (554) (107) (1,162) (527) (1,118)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes................. 22,020 26,383 28,215 31,030 (16,980) 8,034 13,711
Provision for income
taxes.................. 7,445 9,125 9,574 11,473 7,888 3,012 5,225
-------- -------- -------- -------- -------- -------- --------
Net income (loss)
before cumulative
effect of change in
accounting principle.. 14,575 17,258 18,641 19,557 (24,868) 5,022 8,486
Cumulative effect of
change in accounting
principle.............. -- (532) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 14,575 $ 17,790 $ 18,641 $ 19,557 $(24,868) $ 5,022 $ 8,486
======== ======== ======== ======== ======== ======== ========
Net income (loss) per
Class A Common Share... $ 0.93 $ 1.11 $ 1.16 $ 1.21 $ (1.53) $ 0.31 $ 0.52
Average common shares
outstanding(2)......... 15,648 16,039 16,090 16,172 16,254 16,228 16,305

APRIL 30, OCTOBER 31,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)

BALANCE SHEET DATA:
Working capital......... $ 82,789 $ 91,477 $109,560 $100,367 $133,197 $108,229 $138,298
Total assets............ 181,978 176,646 203,180 264,865 431,718 269,099 449,063
Long-term debt, less
current maturities..... 12,825 747 102 8,112 81,254 8,047 81,211
Shareholders' equity.... 112,706 130,589 149,421 170,893 147,925 176,396 152,554

- -------
(1) In fiscal 1996, the Company acquired E for M Corporation. This acquisition
was accounted for as a purchase and approximately $35.7 million of the
purchase price was allocated to in-process research and development and
was written-off immediately. In addition, in fiscal 1996 the Company
initiated a restructuring of its worldwide operations and took a non-
recurring restructuring charge of approximately $4.0 million, or
approximately $2.5 million net-of-tax effect. Operating income in fiscal
1996 before non-recurring charges was approximately $25.9 million and net
income in fiscal 1996 before non-recurring charges was approximately $13.3
million, or $0.82 per share of Common Stock. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Fiscal 1996
Compared to Fiscal 1995."
(2) In December 1996, all 26,250,000 outstanding shares of the Company's Class
C Common Stock were exchanged for 262,500 shares of Common Stock.
Consequently, there are currently no shares of Class C Common Stock
outstanding. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview." Historically, Class C
Common Stock participated in income with the Common Stock in the ratio of
1:100. Consequently, the weighted average common shares outstanding for
calculating net income of the Company for each of the periods indicated is
equal to the sum of the weighted average number of shares of Common Stock
outstanding for such period plus 1/100th of the weighted average number of
shares of Class C Common Stock outstanding for such period.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes thereto appearing
elsewhere in this Prospectus. Except for the historical information contained
herein, the discussion in this Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in such forward-looking statements.
Factors that could cause or contribute to such differences include, but are
not limited to, those discussed in the section entitled "Risk Factors" as well
as those discussed elsewhere in this Prospectus and in the documents
incorporated by reference in this Prospectus.

OVERVIEW

The Company was formed in 1965 by Michael J. Cudahy, the Chairman and Chief
Executive Officer of the Company, and Warren B. Cozzens, a retired Senior Vice
President and former director of the Company. Since its formation, the Company
has grown by continuously investing in research and development to create an
expanding proprietary line of medical products and through strategic
acquisitions which have broadened the Company's product lines and the
geographic scope of its operations. The Company has made two key acquisitions
in recent years. In 1994, the Company acquired Corometrics Medical Systems,
Inc. ("Corometrics") from American Home Products Corporation, giving the
Company a strong position in the fetal and perinatal monitoring market and
entree to the market for clinical information systems. In January 1996, the
Company acquired E For M Corporation ("E for M") which, with E for M's wholly-
owned German subsidiary, Hellige GmbH ("Hellige"), significantly broadened the
Company's lines of Cath Lab, defibrillator, ECG and patient monitoring
products, as well as adding electrophysiology laboratory ("EP Lab") and
digital imaging product lines and a significant distributorship for
specialized 35 millimeter cineangiography film.

In December 1996, the Company exchanged 262,500 shares of Common Stock for
all 26,250,000 shares of Class C Common Stock owned by Mr. Cudahy pursuant to
a negotiated agreement. The Company exchanged the Class C Common Stock in
order to simplify the Company's capital structure and eliminate the control
vote of the Class C Common Stock. The exchange ratio corresponds to the
liquidation value and right to dividends of the respective shares.
Consequently, there was no dilution to holders of the Common Stock in the
exchange. As a result of the exchange, the Common Stock is the only
outstanding equity security of the Company. The Company's Board of Directors
has proposed an amendment to the Company's Amended and Restated Articles of
Incorporation, as amended (the "Restated Articles of Incorporation"), to
eliminate the Class C Common Stock as an authorized class of common shares. If
the Company's shareholders approve the proposed amendment to the Restated
Articles of Incorporation, the Common Stock will be the only authorized common
shares of the Company.

The following table provides certain information with respect to the
Company's net sales:

FISCAL YEARS ENDED APRIL 30, SIX MONTHS ENDED OCTOBER 31,
----------------------------------------------------------- ---------------------------------------
1994 1995 1996 1995 1996
------------------- ------------------- ------------------- ------------------- -------------------
% OF % OF % OF % OF % OF
NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)

Patient Monitoring
Systems........... $109,781 43.3% $181,068 52.9% $208,321 50.0% $ 87,506 52.8% $123,359 47.2%
Diagnostic
Cardiology
Products.......... 89,883 35.4 94,749 27.7 124,413 29.9 44,058 26.6 87,764 33.5
Supplies and
Service........... 54,144 21.3 66,359 19.4 83,559 20.1 34,074 20.6 50,579 19.3
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total............. $253,808 100.0% $342,176 100.0% $416,293 100.0% $165,638 100.0% $261,702 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====

The sale of medical systems has become an important aspect of the Company's
business. The typical patient monitoring systems order is $300,000 to
$500,000, although it is common for the Company to receive orders in the $2-$3
million range, and the Company has received single orders greater than $10
million. The average sales cycle for these systems from quotation to shipment
is approximately 9-12 months, with some large orders having longer sales
cycles. The combination of periodic large orders and the variability in the
length of the sales cycle for patient monitoring systems may create short-

term fluctuations in the level of incoming orders and shipments from one
quarter to the next. The typical diagnostic cardiology order is $25,000-
$30,000, and the average sales cycle for these products is approximately 30
days. Therefore, the short-term impact of fluctuations in these orders is
minimal.

The Company's business is subject to some seasonality. Approximately one-
third of the Company's net sales are to European customers. Order and sales
activity in Europe have historically declined in the summer months of June,
July and August. As a result, the Company's sales for the first fiscal quarter
(ending July 31) are generally lower than the previous quarter and the
subsequent quarter. The Company expects that this reduced sales activity in
Europe in the summer months will continue.

SIX MONTHS ENDED OCTOBER 31, 1996 COMPARED TO SIX MONTHS ENDED OCTOBER 31,
1995

Net sales for the six-month period ended October 31, 1996 increased 58.0% to
$261.7 million from $165.6 million for the same period in the previous fiscal
year. The results for the six-month period ended October 31, 1996 included the
operations of E for M which was acquired in January 1996.

The Company's patient monitoring, diagnostic cardiology and supplies and
service product lines achieved sales growth of 41.0%, 99.2% and 48.4%,
respectively, for the six-month period ended October 31, 1996 compared to the
same period in the previous fiscal year. The increase in net sales was
primarily attributable to the E for M acquisition, which resulted in expanded
product lines as well as improved distribution. In addition to the E for M
products, the introduction of new products in both the patient monitoring and
diagnostic cardiology product lines contributed to the strong sales growth
experienced in the first six months of fiscal 1997.

Gross profit for the six-month period ended October 31, 1996 increased 53.6%
to $126.7 million from $82.5 million for the same period in the previous
fiscal year. The increased gross profit for the period was primarily
attributable to the E for M acquisition as well as the increased level of net
sales. Gross margin for the six-month period ended October 31, 1996 decreased
slightly to 48.4% from 49.8% for the same period in the previous fiscal year.
The decrease was mainly attributable to the historically lower gross margins
of E for M products.

Engineering expenses for the six-month period ended October 31, 1996
increased 46.9% to $23.8 million from $16.2 million for the same period in the
previous fiscal year. The increase was primarily related to the E for M
acquisition. Engineering expenses as a percentage of net sales were 9.1% for
the six-month period ending October 31, 1996 compared to 9.8% for the same
period in the previous fiscal year. Engineering expenses have remained
relatively constant as a percentage of net sales and the Company intends to
continue to invest significantly in developing new products and enhancing
current products.

Selling expenses for the six-month period ended October 31, 1996 increased
45.9% to $64.2 million from $44.0 million for the same period in the previous
fiscal year. The increased expenses were primarily attributable to the
addition of E for M selling expenses in the current year and the increased
sales levels in the current year. As a percentage of net sales, selling
expenses decreased in the six-month period ended October 31, 1996 to 24.5% of
net sales from 26.6% of net sales for the same period in the previous fiscal
year. This decrease was primarily attributable to restructuring and
consolidation of the distribution function, primarily in Europe.

General and administrative expenses for the six-month period ended October
31, 1996 increased 62.2% to $21.9 million from $13.5 million for the same
period in the previous fiscal year. E for M operations accounted for a
significant portion of the increase. For the six-month period ended October
31, 1996, general and administrative expenses as a percentage of sales
remained relatively constant with the prior year percentages. General and
administrative expenses as a percentage of net sales were 8.4% for the six-
month period ended October 31, 1996, compared to 8.2% for the same period in
the previous fiscal year.

Operating income for the six-month period ended October 31, 1996 increased
93.1% to $16.8 million from $8.7 million for the same period in the previous
fiscal year. The increase in operating income resulted from the

inclusion of E for M operations in the current year, increased sales and the
benefits realized with respect to the restructuring plan which was implemented
in the fourth quarter of fiscal 1996. The restructuring plan consisted of a
consolidation of offices in Europe as well as the integration of E for M's
operations into the Company.

Interest expense for the six-month period ended October 31, 1996 increased
to $4.2 million from $1.2 million for the same period in the previous fiscal
year. The increase was related to increased borrowings related to the E for M
acquisition.

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales for fiscal 1996 increased 21.7% to $416.3 million from $342.2
million for fiscal 1995. The fiscal 1996 results included four months of
activity from operations related to E for M. Approximately $54.5 million of
the increase in net sales was due to sales of E for M products. The remaining
increase in net sales for fiscal 1996 of $19.6 million, or 5.7%, was related
to the Company's historic product lines. An improving health care market as
well as the E for M acquisition contributed to an increase in net sales of
$27.3 million or 15.1% for the patient monitoring line and $29.7 million or
31.3% for the diagnostic cardiology product line. The supplies and service
product lines recorded a sales increase of $17.2 million, or 25.9%, from
fiscal 1995. Fiscal 1995 results included eleven months activity from
operations related to Corometrics, which was acquired in May 1994.

Gross profit for fiscal 1996 increased 15.0% to $201.3 million from $175.0
million in fiscal 1995. Gross margin decreased to 48.4% for fiscal 1996,
compared to 51.1% for fiscal 1995. The decrease was primarily attributable to
the lower gross margin realized on E for M products. The gross margin realized
on E for M products for the four months of E for M operations included in
fiscal 1996 was 38.1%. Lower than expected shipment levels of E for M
products, attributable in part to the integration of E for M operations into
Marquette, resulted in an inability to fully absorb fixed costs. All of the
Company's product lines experienced decreases in gross margins, mainly
attributable to increased pricing pressures, especially in Europe. In
addition, the ultrasound imaging line inventory at Corometrics was liquidated
at a significant discount, resulting in a margin decline in that line.

Engineering expenses for fiscal 1996 increased 21.5% to $37.3 million from
$30.7 million in fiscal 1995. Most of this increase was related to the
acquisition of E for M, which had $4.9 million of engineering expense for the
four months of E for M operations included in fiscal 1996. The remaining
increase was a result of increased new product development costs, particularly
in operating room and emergency care products. Engineering expenses as a
percentage of net sales remained at 9.0% for fiscal 1996, the same percentage
as for fiscal 1995.

Selling expenses for fiscal 1996 increased 23.7% to $105.3 million from
$85.1 million for fiscal 1995, due primarily to the E for M acquisition. Of
the total increase, $13.1 million related to the four months of E for M
operations included in fiscal 1996. In addition to the increased expenses
related to E for M, a portion of the increase was also related to the
incremental month of Corometrics expenses included in fiscal 1996 compared to
fiscal 1995. The remaining increase was primarily related to an increased
sales staff for all product lines. For fiscal 1996, selling expenses increased
slightly as percentage of net sales to 25.3%, from 24.9% of net sales for
fiscal 1995.

General and administrative expenses for fiscal 1996 increased 29.5% to $32.9
million from $25.4 million in fiscal 1995. General and administrative expenses
increased $6.0 million for fiscal 1996, primarily due to the operations of E
for M. The remaining operations of the Company had an increase of $1.5 million
for fiscal 1996 compared to fiscal 1995. In addition to the increase related
to E for M, an incremental month of Corometrics expenses in fiscal 1996
contributed to the remaining difference. General and administrative expenses
as a percentage of net sales were 7.9% for fiscal 1996, compared to 7.4% for
fiscal 1995.

The Company incurred a restructuring charge of $4.0 million for fiscal 1996,
primarily related to its European operations. The restructuring was undertaken
for purposes of consolidating the distribution function in Europe as well as
the integration of E for M operations into Marquette.

During 1996, the Company took a charge related to the write-off of purchased
in-process research and development ("R&D") in the amount of $35.7 million.
This one-time charge is attributable to the in-process R&D acquired with E for
M. The purchase price of E for M was allocated to the fair value of net
tangible and intangible assets acquired. The portion of the purchase price
allocated to the in-process R&D costs of E for M was written-off resulting in
this non-recurring charge.

Interest expense for fiscal 1996 increased to $4.4 million from $3.0 million
for fiscal 1995. The increased interest expense related to the E for M
acquisition was partially offset by the repayment of $8.0 million of debt
originally incurred in connection with the Corometrics acquisition in May
1994. Cash flow from operations enabled the Company to retire the remaining
debt related to the Corometrics acquisition during fiscal 1996.

Other income for fiscal 1996 increased to $1.2 million from $0.1 million in
fiscal 1995, primarily due to increased foreign exchange gains of $0.6
million. In addition, losses related to equity investments were $0.7 million
less in fiscal 1996 as compared to fiscal 1995.

The provision for income taxes for fiscal 1996 was $7.9 million. Even though
the Company incurred a before-tax loss of $17.0 million for the year, the
$35.7 million charge related to purchased in-process R&D was a permanent tax
difference for which the Company did not receive any tax benefit, either
current or deferred. Excluding this charge, the effective tax rate for fiscal
1996 was 42.1% compared to 37.0% for fiscal 1995. This increase in the
effective tax rate for fiscal 1996 was partly due to the expiration of the R&D
credit (a 1.9% benefit in 1995). This credit was reinstated prospectively on
July 1, 1996. The additional increase in the tax rate for fiscal 1996 was
related to foreign net operating losses which the Company was unable to
utilize.

FISCAL 1995 COMPARED TO FISCAL 1994

Net sales for fiscal 1995 increased 34.8% to $342.2 million from $253.8
million for fiscal 1994. The increase in net sales for fiscal 1995 was
primarily related to the acquisition of Corometrics, which added $77.1 million
to net sales for fiscal 1995. Net sales for the patient monitoring, diagnostic
cardiology and supplies and service product lines increased $71.3 million,
$4.9 million and $12.2 million, or 64.9%, 5.4% and 22.6%, respectively, in
fiscal 1995. The increase in net sales of patient monitoring and supplies and
service products was primarily attributable to the Corometrics acquisition.

Gross profit for fiscal 1995 increased 33.0% to $175.0 million from $131.6
million in fiscal 1994 primarily due to increased sales in fiscal 1995. The
gross profit margin was 51.1% in fiscal 1995 compared to 51.9% in fiscal 1994.
Productivity gains in manufacturing were offset by lower gross margins due to
pricing pressure in the U.S. In addition, including Corometrics products in
the product mix caused a decline in consolidated gross margins.

Engineering expenses for fiscal 1995 increased 37.0% to $30.7 million from
$22.4 million in fiscal 1994. Approximately $6.3 million of the increase
related to engineering expenses incurred by Corometrics. The increase in
engineering expenses was also related to the reassignment of engineers to
internal projects upon completion of a third party funded research project.
Engineering expenses as a percentage of net sales were 9.0% for fiscal 1995,
compared to 8.8% for fiscal 1994.

Selling expenses for fiscal 1995 increased 36.4% to $85.1 million from $62.4
million in fiscal 1994 primarily due to selling expenses incurred by
Corometrics and the addition of direct sales representatives to sell the
Corometrics line in Europe. Selling expenses as a percentage of net sales were
24.9% for fiscal 1995, compared to 24.6% for fiscal 1994.

General and administrative expenses for fiscal 1995 increased 35.1% to $25.4
million, from $18.8 million in fiscal 1994. The increase was primarily due to
the Corometrics acquisition, including $1.4 million in goodwill and
amortization. General and administrative expenses as a percentage of net sales
remained at 7.4% in fiscal 1995, the same percentage as for fiscal 1994.

Interest expense for fiscal 1995 increased to $3.0 million from $0.3 million
in fiscal 1994, primarily due to debt incurred in connection with the
acquisition of Corometrics.

Other income for fiscal 1995 decreased to $0.1 million from $0.6 million in
fiscal 1994, due to a decrease in interest income. Cash on hand in fiscal 1995
was greatly reduced due to the Corometrics acquisition in May 1994. The
decrease in interest income was partially offset by foreign exchange losses in
fiscal 1994 which did not recur in fiscal 1995.

The effective income tax rate increased to 37.0% in fiscal 1995, compared
with 33.9% in fiscal 1994. The increase in the effective rate was attributable
to an increase in the effective state tax rate and decreased benefits
associated with the Company's foreign sales corporation.

LIQUIDITY AND CAPITAL RESOURCES

Working capital was $138.3 million at October 31, 1996, compared to $133.2
million at April 30, 1996. Receivables increased by 6.6% to $147.7 million at
October 31, 1996, from $138.5 million at April 30, 1996, primarily due to
strong European sales. Inventories increased $7.0 million primarily due to
increased demonstration inventories.

As of October 31, 1996, the Company had $17.6 million outstanding on U.S.
lines of credit of $25.0 million. In addition, the Company had $29.5 million,
U.S. dollar equivalent, in foreign currency loans outstanding on foreign lines
of credit. The foreign currency denominated borrowings are used to reduce the
currency risks associated with foreign currency receivables. Notes payable
increased $18.3 million over the April 30, 1996 amounts. Of this increase,
$4.6 million was used by the Company to repurchase 281,400 shares of Common
Stock at a price of $16.50 per share in October 1996. Of the remaining
increase, $2.9 million was used to retire bank term debt, and the remainder
was used to finance working capital requirements and to purchase capital
additions.

Capital expenditures for the six-month period ended October 31, 1996 were
$10.4 million, compared with $6.1 million for the same period of the previous
fiscal year. The increase was due to the acquisition of a new business system.

The $90.3 million acquisition of E for M was funded by three variable rate
bank term loans each in the amount of $30.0 million. Each bank term loan is
payable in eight equal semi-annual installments of $3.75 million each
beginning on April 30, 1997 and continuing on each October 31 and April 30
thereafter through October 31, 2000. As of October 31, 1996, the Company had
repaid or refinanced $39.0 million of such bank term debt. Cash flow from
operations was used to repay approximately $9.0 million of such debt, and the
remaining $30.0 million was converted into longer term fixed-rate senior debt.
This senior debt accrues interest at a fixed rate of 7.46% per annum and
matures on August 29, 2008. The $51.0 million of bank term debt that remained
outstanding as of October 31, 1996 accrued interest at a rate equal to the
LIBOR rate plus one percent, reset monthly. At October 31, 1996, the rate was
6.375% per annum. The Company intends to repay a portion of the bank term debt
with the net proceeds of this Offering. See "Use of Proceeds."

Management believes the Company has the financial resources to meet its
short term and long term cash requirements. The current U.S. inflation rate
has little impact on Company operations.

BUSINESS

OVERVIEW

Marquette is a worldwide leader in the development and manufacture of
medical equipment and integrated systems for patient monitoring and diagnostic
cardiology applications. Marquette also develops clinical information systems,
designed to be integrated with medical equipment, consisting of hardware and
software used by integrated health care delivery networks and individual
hospitals to electronically acquire, record, store, analyze and distribute
patient medical data. The Company believes that its ability to offer
integrated clinical information systems and patient monitoring and diagnostic
cardiology equipment provides it with significant competitive advantages over
companies that market only equipment or clinical information systems. The
Company has made a substantial commitment to research and development and is
well known for its technological innovation and quality, dating back to 1965
when it introduced the first centralized ECG processing and storage system.

Patient monitoring systems and diagnostic cardiology products accounted for
approximately 47% and 34% of the Company's net sales, respectively, for the
six months ended October 31, 1996, with the remaining 19% of net sales
relating to supplies and after market services. The Company's products are
sold in more than 65 countries throughout the world, with the U.S. and
international markets accounting for approximately 60% and 40%, respectively,
of the Company's net sales for the six months ended October 31, 1996. The
Company's products are used principally in critical and intensive care units,
operating and recovery rooms, step-down units, labor and delivery units,
cardiology departments, Cath Labs and related areas of acute care hospitals.
In addition, Marquette products are increasingly being used in smaller
hospitals, medical clinics, outpatient surgery centers, physician offices and
homes.

The Company estimates that the annual worldwide market for patient
monitoring systems is approximately $1.3 billion, of which approximately $720
million is attributable to the U.S. market. Marquette's patient monitoring
systems continuously acquire, analyze, store, display and print patient
physiological information, providing attending medical personnel a means to
continuously evaluate a patient's condition. Patient monitoring systems
include bedside, telemetry, anesthetic and respiratory gas, maternal/fetal,
neonatal and home care equipment and clinical information systems. The Company
believes it is one of the leading manufacturers of maternal/fetal, bedside and
telemetry monitoring systems. The Company offers fully integrated, networked,
open architecture clinical information systems that process information
obtained from patient monitors and various other sources, including
Marquette's and other companies' products, to create an interactive electronic
patient medical record.

The Company estimates that the annual worldwide market for diagnostic
cardiology products is approximately $1.0 billion, of which approximately $430
million is attributable to the U.S. market. Marquette's diagnostic cardiology
products are used to diagnose cardiac disorders through the detection,
recording and analysis of electrical signals and other information relating to
the heart. These diagnostic cardiology products include resting, exercise
testing and Holter (ambulatory) ECG equipment, cardiovascular information
systems, cardiac defibrillators, Cath Lab monitors, and photo image and
digital image processing equipment. The Company believes it is one of the
leading manufacturers of cardiovascular information systems and Cath Lab
monitors. The Company offers an open architecture cardiovascular information
system that accepts and stores data from electrocardiographs and other
diagnostic cardiology products to create a patient-specific cardiology
database for comparative and other clinical purposes.

ADDRESSING MARKET NEEDS

Health care providers are increasingly differentiating medical equipment
vendors based on their ability to provide clinical management and patient
administration systems that deliver better quality care at lower costs.
Marquette is addressing these market needs with a total systems approach based
on a combination of its broad product lines, open architecture Unity Network
and its clinical process expertise.

Marquette's Unity Network is an integrated system which enables a wide range
of patient monitoring, diagnostic cardiology and clinical information systems
to be interconnected and to interface with hospital information systems
maintained by its customers. Reports can be generated that provide the data in
both clinical and administrative form to aid in improving the quality of care
in the most cost effective manner. The Unity Network is designed to (i)
communicate patient information from bedside and telemetry monitors to central
nurses' stations, (ii) allow clinicians to view patient information from
various areas of the hospital or from remote locations via telephone lines and
modems, and (iii) electronically transfer patient information to care units,
outpatient facilities or physicians' offices.

Marquette differentiates itself from other medical equipment vendors by
addressing market needs with a total solutions approach.

First, Marquette offers its customers a broad product line and the ability
to equip and supply multiple areas along the continuum of care, thereby
enabling integrated health care delivery networks and individual hospitals to
gain efficiencies through standardization with a single vendor.

Second, Marquette offers its customers the ability to construct an
information network infrastructure and clinical information systems to enhance
the utilization and clinical value of the Company's patient monitoring and
diagnostic cardiology products as well as other medical equipment vendors'
products to which the Unity Network can be interfaced.

Third, Marquette provides its customers expertise in clinical problem
solving, systems integration and process improvement to customize the
configuration of the Company's products and systems to optimize clinical
applications for the customers' various care areas and patient management
needs.

BUSINESS STRATEGY

Enter New Care Areas. The Company seeks to capitalize on the shift from
critical care to subacute care, physician offices and home care through the
introduction of newly designed patient monitoring and diagnostic cardiology
products aimed specifically at these evolving care areas. The Company believes
that there is a greater potential for growth in these care areas than in the
hospital market in which the Company's products have historically been sold.
The Company is developing new products that address the functional needs of
these lower acuity care areas based on the Company's technological expertise
developed in connection with its hospital products.

Broaden and Enhance Existing Product Lines. The Company is adding depth to
its product lines by introducing products at lower price points. The Company
has implemented this strategy by developing products internally, forming
strategic alliances and through acquisitions. For example, as part of the E
for M acquisition, the Company obtained Hellige's development efforts relating
to a high performance, compact, portable, battery-powered, multiparameter
patient monitor.

Continue Development of Clinical Information Systems. The networking of the
Company's products through clinical information systems enhances the value of
the Company's products to customers and will continue to be a focus of the
Company's product development efforts. The Company believes that the
development of expanded clinical information systems capabilities is an
important element of Marquette's competitive advantage in the patient
monitoring and diagnostic cardiology markets.

Increase Penetration of International Markets. International sales have
increased from approximately 26% of net sales for the six months ended October
31, 1995 to approximately 40% of net sales for the six months ended October
31, 1996 primarily due to the acquisition of E for M. The Company will
continue to seek greater

penetration of the European market, where the E for M acquisition has
substantially broadened the Company's distribution network. The Asia/Pacific
market accounted for approximately 11% of the Company's net sales for the six
months ended October 31, 1996 and has been identified by the Company as an
area for potential growth.

Increase Recurring Revenue Streams. The Company is focused on increasing its
recurring revenue by actively developing the disposable supplies market for
the products it sells. The Company seeks to continue to leverage its installed
equipment base to further increase sales of supplies and service.
Additionally, the Company seeks to leverage the brand-name recognition
generated through its equipment sales to increase sales of technology-
distinguished supplies related to a broad range of medical products
manufactured by the Company and others.

Enhance Profit Margins. The Company continually seeks to improve gross
margins by increasing capacity utilization at existing manufacturing
facilities and utilizing global purchasing contracts to reduce material and
component costs. Additionally, the Company seeks to control operating costs,
such as engineering and general and administrative expenses relative to sales
growth, in order to increase operating margins.

PATIENT MONITORING

Marquette's patient monitoring systems continuously acquire, analyze, store,
display and print patient physiological information such as ECGs, pulse rate,
blood pressure, temperature, gas measurements, respiration rate and oxygen
saturation in the blood. This information provides attending medical personnel
a means to continuously evaluate a patient's condition.

The Company estimates the annual worldwide market for patient monitoring is
approximately $1.3 billion, of which approximately $720 million is
attributable to the U.S. market. Recent market growth has been driven
principally by demographic trends resulting in larger numbers of ill and
elderly patients. Future market growth is also expected to result from
emerging monitoring demand in new care areas which previously did not use or
require monitoring. As health care providers seek to reduce costs, significant
portions of patient care are being delivered in lower acuity care areas. Many
patients who in the past would have remained in the intensive care unit and
received care with a 1:1 patient-to-nurse ratio for extended periods of time
are being moved to lower acuity care areas with a 4:1 or 6:1 patient-to-nurse
ratio in which portable monitors or telemetry is used. These areas, which
include step-down and subacute areas of hospitals, outpatient care facilities
and home care, are expected to provide significant growth opportunities.

Marquette has leveraged its expertise in microprocessor design, advanced
circuit development and software programming to establish itself as a global
leader in physiological data acquisition and analysis. The Company has well
known core competencies in ECG signal acquisition and analysis, pulse oximetry
monitoring, invasive and non-invasive blood pressure measurement, cardiac
output determination and respiratory gas analysis, and is actively involved in
the advancement of measurement techniques and algorithms in these areas.

In May 1994 the Company acquired Corometrics, a designer and manufacturer of
fetal and neonatal monitoring systems, and one of the leading providers of
clinical information systems for labor and delivery applications. The
Corometrics acquisition allowed the Company to expand its product offerings to
the labor and delivery care area with a well recognized trade name and an
established market position. The Company believes that its Corometrics and
Marquette brand names are widely recognized for technological innovation and
quality in the patient monitoring sector.

The following table provides information with respect to the Company's
principal patient monitoring systems.

APPROXIMATE LIST PRINCIPAL INTRODUCTION
PRODUCT CATEGORY PRICE RANGE PRODUCTS DATE
---------------- ---------------- --------- ------------

Modular Bedside Monitors $13,000-$25,000 Solar 8000 1995
Solar 9000 1996
Configured Bedside $6,500-$20,000 Eagle 3000 1995
Monitors Eagle 4000 1995
Dash 1000 (Portable) 1996
Telemetry Monitoring $6,500 per bed CD-Telemetry LAN System 1991
Systems APEX Telemetry Transmitter 1995
Anesthetic and Respiratory $10,000-$60,000 RAMS Mass Spectrometer 1995
Gas Monitoring Equipment SAM IR Anesthetic Agent 1995
Module
Maternal/Fetal Monitoring $4,800-$18,000 Model 145/Antepartum 1985
Equipment Model 150/Antepartum 1992
Model 151/Intrapartum 1994
Model 118/Intrapartum 1994
Model 155/Antepartum 1996
Model 340 Telemetry/ 1996
Intrapartum
Neonatal Monitoring $8,000-$20,000 Model 556 (color) 1994
Equipment Eagle 4000N 1995
Solar 7000N 1995
Eagle 3000N 1996
Solar 8000N 1996
Home Care Monitoring $1,500-$3,800 500E 1986
Equipment 500EXL 1995
510/511 1996
Event-Link 1996
Clinical Information $40,000-$1,500,000 QS System 1996
Systems

Modular Bedside Monitors are used to continuously acquire, analyze and
monitor physiological information primarily from critically ill patients
located in intensive and critical care units and operating rooms. These
devices use various software modules for individual physiological
parameters, enabling the device configuration at the point of care to meet
the monitoring needs and acuity of any particular patient.

The Solar 8000, the Company's principal modular bedside monitor, features
a hardware base which offers the user the flexibility to choose among
various features and capabilities, including acquisition and analysis of
12-lead ECGs and point-of-care blood gas analysis, through the addition of
software modules. A new single parameter Solar module library can be
configured for between one and eight physiological parameters to meet a
full range of monitoring configuration needs.

Marquette recently introduced the Solar 9000, a more advanced modular
bedside monitor that provides local area network computer and internet
connection capabilities. Initially, the Solar 9000 is targeted to operating
rooms that require combined vital signs monitoring and clinical information
management.

Configured Bedside Monitors are very similar to the modular bedside
monitors in their continuous vital signs monitoring capabilities. However,
they do not permit point-of-care configurability. In most cases, these
devices

are used to monitor patients in less acute settings or in places where general
purpose monitoring is needed, such as post-anesthesia care/recovery units or
the emergency department.

The Company offers the Eagle 4000 and 3000 and Dash 1000 configured bedside
monitors. The Eagle 4000 is the most advanced of these products and is capable
of monitoring 12-lead ECGs, including the ST segment of the ECG waveform, and
carbon dioxide levels. The Eagle 3000 is lower priced and offers fewer
features than the Eagle 4000. The Company believes that the current features
of the Eagle 3000, together with its lower price compared to the Eagle 4000,
should enable the Eagle 3000 to further penetrate the configured bedside
monitor market. The Dash 1000 is a low cost battery-powered portable monitor
that is available in a variety of configurations and is especially well suited
to compete in cost sensitive markets outside the U.S.

Telemetry Monitoring Systems continuously collect ECGs from a device worn by
the patient and transmit the data via radio frequency to a central receiver
unit and viewing station. These systems are designed for patients who are not
confined to their beds, which generally includes post-operative patients and
others in the recovery process. Telemetry monitoring systems represent an
increasing share of the market for monitoring equipment because they allow
patients to be ambulatory, which facilitates earlier discharge from the
hospital.

Marquette competes in this category with its CD-Telemetry LAN System and
APEX Telemetry Transmitter. The Company has entered into several recent
strategic alliances which add patient and staff tracking and location
capabilities, and clinician/caregiver paging with alarm event view on the
pager.

Anesthetic and Respiratory Gas Monitoring Equipment are used in tandem with
the Company's other vital sign monitors and diagnostic products for
cardiopulmonary monitoring in anesthesia, post-operative recovery, critical
care and pulmonary function laboratories. Gas monitoring products are used to
verify the accuracy of anesthetic gas vaporizers and delivery systems before,
during and after surgery, and measure pulmonary functions such as oxygenation
and ventilation. Gas monitors also detect potentially life-threatening
conditions such as hyperventilation (excessive pulmonary gas exchange),
hypoventilation (inadequate pulmonary gas exchange), pulmonary air embolus
(air bubbles in the pulmonary blood stream), and equipment malfunction during
surgery.

The Company offers products using two methodologies for multiple gas
detection and analysis: mass spectrometry and infrared spectroscopy. The
Company's mass spectrometry product, the RAMS, provides a comprehensive
analysis of gases administered/monitored during surgery. The Company's
infrared spectroscopy product, consisting of the SAM IR Anesthetic Agent
Modules, allows for cost-effective intraoperative monitoring of anesthetic
agents, carbon dioxide and oxygen.

Maternal/Fetal Monitoring Equipment provides electronic monitoring of the
fetal heart rate and uterine activity as well as maternal parameters such as
ECG, non-invasive blood pressure and pulse oximetry. The Company offers a
broad line of Corometrics brand perinatal products used in hospitals,
physician offices and other clinical settings for care of mother and child
during pregnancy (antepartum) and delivery (intrapartum).

The antepartum monitors, Models 145, 150 and 155 offer a full range of non-
invasive fetal surveillance throughout high risk pregnancies. The product's
ability to offer dual ultrasound heart rate for twin monitoring, external
uterine contraction monitoring and electronic fetal movement detection allows
flexibility in assessing fetal well-being during pregnancy.

The intrapartum monitors, Models 151, 118 and 340 Telemetry, allow for both
non-invasive and invasive fetal ECG and uterine contraction monitoring. In
addition, the Model 118 was the first product to combine fetal monitoring with
maternal vital signs, non-invasive blood pressure and oxygen saturation. This
combined maternal/fetal monitor allows assessment of the maternal and fetal
response to labor events which may affect the intrauterine environment,
including anesthesia, induction of labor and recovery of the mother. The Model
118 is ideally suited to the new concept in obstetrical care of providing
labor, delivery, recovery and postpartum (LDRP) in one room. The Model 340
Telemetry system allows ambulatory patients to be monitored during labor.

Neonatal Monitoring Equipment provides continuous monitoring of neonates and
allows clinicians to record, analyze and react to a neonate's changing
conditions. The Company's neonatal product line meets the monitoring
requirements of the less critical to the most critically ill neonate. These
monitors are capable of displaying multiple measurements such as ECG,
respiration, invasive pressures, temperatures, pulse oximetry and non-invasive
blood pressure. Using the Company's Eagle and Solar monitoring platforms, the
Corometrics brand products have added neonatal features such as superior
respiration detection algorithms and trending, thereby customizing these
monitors to the needs of the neonatal intensive care unit. The more compact
and cost effective Model 556 monitor is designed for lower acuity nurseries.

Home Care Monitoring Equipment incorporates the technological advances of
the Corometrics brand hospital based monitors with the simplicity that home
use requires. Corometrics introduced the first battery backup and internal
memory apnea monitor in the 1980s. In 1995, the Model 510/511 became the first
apnea monitor with integrated pulse oximetry cleared by the FDA for use in the
home, and the Company believes the Model 510/511 remains the only monitor of
its kind on the market today. The 500 series of apnea products and Event-Link
software allows home care clinicians to collect, store and analyze monitoring
data to provide objective documentation of alarm cause and effect, allowing
more cost efficient care of the patient in the home.

Clinical Information Systems integrate and store data coming from multiple
patient care areas. The data can be charted, reviewed and presented in
hospital selected formats that provide clinicians with a comprehensive
overview of patient status. Reports can then be generated that provide the
data in both clinical and administrative form to aid in improving the quality
of care in the most effective manner.

The Company's product platform, the QS System, is designed to integrate data
from all care areas, including labor and delivery, the neonatal intensive care
unit, general floor, intensive care unit, critical care unit, operating room
and perioperative unit. The QS System can be customized to meet the most basic
entry level requirements to the most complex whole hospital solutions
involving wide area networks. Interfaces exist for most lab and hospital
information systems as well as for all Company patient monitoring systems and
the patient monitoring products of other companies. Integrated clinical
applications can include remote site access that enables satellite hospitals,
clinics and physicians to be linked to the centrally-located system. The
Company believes that one of the primary advantages of the QS System is its
ability to interconnect and interface with hospital information systems
through the Unity Network.

DIAGNOSTIC CARDIOLOGY

Marquette's diagnostic cardiology products are used to diagnose cardiac
disorders through the detection, recording and analysis of electrical signals
and other information relating to the heart. Coronary artery disease is the
leading cause of death of adult Americans today, and accounts for over 20
percent of the national health care budget. In 1994, more than five million
Americans were seen in emergency rooms complaining of chest pain, and the
medical charges for their evaluation exceeded $8 billion.

The Company estimates the annual worldwide market for diagnostic cardiology
products is approximately $1.0 billion, of which approximately $430 million is
attributable to the U.S. market. An aging population, the increasing trend
towards preventative rather than corrective medicine and a general preference
for less invasive procedures are the factors expected to generate increased
demand for the Company's diagnostic cardiology products.

The Company believes that the Marquette brand is found on a wider variety of
diagnostic cardiology products in more cardiology hospitals than any other
vendor. For example, over 1000 of the largest medical institutions in the U.S.
utilize Marquette diagnostic cardiology products. Marquette believes its
cardiovascular information solution, the MUSE CV information system, is one of
the leading products used to store, manage, process and deliver the entire
cardiology patient file. The system delivers advances in patient databasing,
hospital information system interfaces, network connectivity, internet
technology, e-mail accessibility and health care protocol standards.

In January 1996, the Company acquired E for M. Through the acquisition,
Marquette added new cardiac imaging capabilities, broadened its diagnostic
cardiology product line and expanded its customer base for cardiology
systems. E for M's product lines also include high quality cineangiography
film and digital imaging products. Also, the E for M acquisition added
European manufacturing, marketing and distribution facilities. Moreover,
the acquisition of E for M allowed the Company's MUSE CV cardiovascular
information system to expand its functionality into image and
electrophysiology management. Furthermore, the Company believes Marquette
has the only complete Cath Lab solution providing electrophysiology and
hemodynamic monitoring, digital imaging and cardiology patient information
management.

The Company believes that its E for M, Hellige and Marquette brand names
are widely recognized for excellence and innovation in the diagnostic
cardiology sector. Furthermore, the Company believes the combined Marquette
and E for M capabilities in the Cath Lab have created the world's largest
supplier of Cath Lab equipment and systems.

The following table provides information with respect to the Company's
principal diagnostic cardiology products.

APPROXIMATE LIST PRINCIPAL INTRODUCTION
PRODUCT CATEGORY PRICE RANGE PRODUCTS DATE
---------------- ---------------- --------- ------------

Resting ECG Equipment $1,800-$15,000 MAC PC 1985
MAC 6 1989
MAC VU 1991
MAC 8 1993
CardioSoft 1993
CardioSmart 1994
MicroSmart 1996
Exercise Testing ECG Systems $4,000-$23,000 MAX 1 1989
CASE 16 1994
CardioSoft 1994
MAX Personal 1995
CardioSys XT 1996
CardioSmart ST 1997
Holter (Ambulatory) ECG $21,000-$60,000 MARS 1996
Equipment
Cardiovascular Information $30,000-$300,000 MUSE CV 1996
Systems
Cardiac Defibrillators $2,000-$14,500 Responder 1250 1991
Responder 1500 1991
CardioServ 1993
Model 2500 1996
Cardiac Catheterization $90,000-$160,000 MAC-Lab 1990
Equipment Midas System 6000 1993
Midas System 8000 1995
Photo Image and Digital $10,000-$125,000 AccuVision Series 1995
Image Processing Equipment

Resting ECG Equipment is designed to record an ECG of a patient who is at
rest, and is generally mounted on a wheeled cart for movement to the patient's
bedside or elsewhere as needed. The Company's extensive line of resting
electrocardiographs is designed for use across the spectrum of care areas,
including acute care hospitals, outpatient surgery centers, ambulances and
physician offices. The Company's resting electrocardiographs perform immediate
analysis of ECGs, store ECGs for further analysis and can communicate ECGs
electronically to other electrocardiographs or other equipment, including
cardiovascular information systems, for storage and comparison.

The Company's MAC PC and MAC 6 models are the entry level members of the MAC
family of resting ECG equipment. The MAC VU and MAC 8 models offer more
extensive diagnostic and display capabilities, including signal averaged,
pediatric and 15-lead ECG analysis programs.

CardioSmart is a modular electrocardiograph for physician offices and
hospitals. The MicroSmart configured electrocardiograph is a lower-price model
marketed primarily in the developing Asia-Pacific, Eastern European and Latin
American markets.

CardioSoft is a package consisting of a software program and ECG leads that
adds resting ECG recording and analysis capabilities to personal computers and
is used primarily in physician offices.

Exercise Testing ECG Systems are used to diagnose cardiac disease and assess
its severity by stressing the heart through physical exercise to elevate the
heart's blood flow requirements. While this stress exists, any significant
obstruction in the coronary arteries limits the flow of blood and results in
cardiac dysfunction, which can be detected using electrocardiography.

The Company's MAX 1 and MAX Personal are configured models designed
primarily for physician offices. The CASE 16, which is used primarily in
hospitals, offers more extensive diagnostic capabilities, including signal
averaged and pediatric ECG analysis programs. The CardioSmart ST model is
marketed primarily in the developing Asia-Pacific, Eastern European and Latin
American markets.

The CardioSys XT, the Company's newest addition to the exercise testing ECG
line, is a modular system that uses industry-standard operating platforms and
architecture, and interfaces with cardiovascular information systems.

The CardioSoft ECG recording and analysis package also provides exercise
testing ECG capabilities to personal computers when used in conjunction with
exercise equipment, and is used primarily in physician offices.

Holter (Ambulatory) ECG Equipment is designed to provide ECG information
from an ambulatory patient who experiences intermittent symptoms, such as
palpitations, angina or loss of consciousness, through a small recording
device over the course of an extended period (usually 24 hours), in or out of
the hospital.

The Company has recently introduced MARS (Multiparameter Analysis Review
Station), a new generation of Holter (ambulatory) ECG equipment. It combines
the ability to analyze signals acquired from the Company's line of bedside or
telemetry patient monitors with those of a traditional Holter monitor, thus
reducing the length of stay for many patients who might otherwise be delayed
in the hospital waiting for tests to be performed or interpreted.

Cardiovascular Information Systems accept data from outlying
electrocardiographs via telephone line, diskette or direct connection. Each
system can store hundreds of thousands of ECGs and quickly retrieve them for
comparison with ECGs currently being reviewed.

The Company's latest cardiovascular information system, the MUSE CV, is an
open architecture system designed for hospitals. The MUSE CV integrates all of
the Company's diagnostic cardiology products together through networking and
computer processing, creating a complete cardiology patient file. The system
stores, analyzes and retrieves ECGs taken at rest, and also provides similar
capabilities for Holter ECGs, exercise testing

ECGs, and other cardiology testing procedures. MUSE CV also provides an
interface to the hospital's information system. MUSE CV can generate billing
and activity reports which can assist a hospital or other user in cost control
and decrease the possibility of tests remaining unbilled. Many MUSE CV systems
serve more than one hospital, with outlying hospitals employing workstations
connected to the central MUSE CV by telephone lines, permitting cardiologists
at the central hospital to assist in treating large numbers of patients in
wide geographical areas.

Cardiac Defibrillators are designed to restart the heart of sudden cardiac
arrest victims. Sudden cardiac arrest is a severe form of heart attack caused
by erratic electrical impulses in the heart.

The Company markets a number of external defibrillator models for pre-
hospital and hospital use. The Responder 1250 is a semi-automatic
defibrillator used by paramedics in pre-hospital settings. Marquette's
Responder 1500 is a more sophisticated pre-hospital defibrillator that
provides 12-lead ECG acquisition and pacing, and can transmit ECGs directly to
the hospital's cardiovascular information system. The Company recently
introduced the Model 2500, a hospital defibrillator that can electronically
communicate ECGs to cardiovascular information systems and that automatically
provides cardiac arrest summaries. The Model 2500 is currently available only
outside the U.S. The CardioServ is a less sophisticated defibrillator which is
generally used in pre-hospital and hospital settings in price sensitive
applications and markets.

Cardiac Catheterization Equipment is used in various cardiovascular
procedures performed in the Cath Lab and the EP Lab. In vascular or
"hemodynamic" studies, the catheter, with attached physiological sensors, is
used to measure temperature and blood pressure in various parts of the heart
and the surrounding circulatory system, as well as determining the volume of
blood being pumped by the heart. Electrophysiology studies are performed to
evaluate the process of the conduction of electricity through the heart and to
diagnose the mechanisms of abnormal heart rhythm.

The Company's MAC-Lab system is a fully-computerized modular hemodynamic
recording system developed for adult and pediatric Cath Labs. The Midas System
6000 is a fully computerized modular electrophysiology system designed for EP
Labs. The Company's Midas System 8000 combines complete electrophysiology and
hemodynamics into one workstation and is specially configured to assist
cardiologists with fast, accurate collection and analysis of physiological
data.

Photo Image and Digital Image Processing Equipment is used to view the
performance and function of a patient's coronary vasculature to assist in the
detection, diagnosis, treatment and prevention of cardiac diseases and
injuries, particularly in connection with cardiac catheterization.

The Company's photographic and digital imaging systems allow the capture,
storage and review of these images. The Company's photographic systems utilize
a variety of 35mm high grade films produced under the Company's label by
third-party manufacturers and offer a number of different processing
chemistries. The Company's AccuVision Series of digital image processing
systems capture analog images from X-ray, ultrasound and other common imaging
sources and convert them to digital images. These systems then manage the
digitized images so they can be enhanced, quantified, reviewed in real-time,
transmitted over networks and/or archived on CD media. The Company does not
manufacture or sell the X-ray, ultrasound or other imaging source associated
with this process.

SUPPLIES AND DISPOSABLES

The Company manufactures, markets and distributes a broad spectrum of
disposable supplies and disposables used primarily in conjunction with the
Company's large installed base of patient monitoring systems and diagnostic
cardiology products. These products include ECG and other recording paper,
monitoring and diagnostic electrodes, patient belts and straps, disposable and
reusable blood pressure cuffs, disposable water traps, temperature probes,
pulse oximetry probes and ambulatory ECG/telemetry hookup kits. In addition,
the Company utilizes its product expertise and manufacturing capacity to
produce private label products for third parties.

The Company seeks to continue to leverage its installed base to further
increase sales of supplies and services related to its equipment.
Additionally, the Company seeks to leverage the brand-name recognition
generated through its equipment sales to increase sales of technology-
distinguished supplies related to a broad range of medical products
manufactured by the Company and others. To implement this strategy the Company
recently established supplies and disposable products as a separate division
of the Company and devoted additional management resources to the division.

CUSTOMER SERVICE

The Company's service operations are responsible for equipment installation
at customers' sites and for the fulfillment of the Company's warranty and
maintenance commitments. Most equipment sold by the Company is fully warranted
for all parts and labor for one year. The Company offers a variety of post-
warranty service agreements permitting customers to contract for the level of
equipment maintenance and repair they require.

In addition to warranty and post-warranty maintenance service, the Company
performs circuit board repairs on a 48-hour return basis and manufactures and
markets replacement parts to the Company's dealers and equipment users. The
Company offers repair and maintenance training classes throughout the year for
customers and dealers. In addition, the Company supports customers, dealers
and the Company's field personnel by providing telephone assistance on service
problems.

The Company has a national network of approximately 180 service technicians
located throughout the U.S., and approximately 125 service technicians located
in Europe. At its operations in Germany, the Company operates a parts and
support center for European service. In some foreign countries, if direct
Company field engineers and technicians are not conveniently located,
employees of local dealers provide warranty and field maintenance service.

RESEARCH AND DEVELOPMENT

Marquette has made a substantial commitment to product research and
development throughout its history and has introduced major new products in
each of its product lines during the past three years. The Company expended
$22.4 million, $30.7 million and $37.3 million on research and development,
which represented approximately 8.8%, 9.0% and 9.0% of net sales, for the
fiscal years ending April 30, 1994, 1995 and 1996, respectively. Marquette has
leveraged its expertise in microprocessor design, advanced circuit development
and software programming to establish itself as a global leader in
physiological data acquisition and analysis. The Company has well-known core
competencies in ECG signal acquisition and analysis, pulse oximetry
monitoring, invasive and non-invasive blood pressure measurement, cardiac
output determination and respiratory gas analysis, and is actively involved in
the advancement of measurement techniques and algorithms associated with each
area. The Company's primary product development efforts are carried out at the
division level. In addition, the Company maintains a 17,000 square foot
dedicated Research and Development Center approximately one mile from its
corporate offices in Milwaukee, Wisconsin.

The Company's research and development strategy is to improve and expand its
product line through innovative engineering and to create diagnostic and
monitoring technologies that address problems brought to its attention by
contacts in the medical community, particularly those technologies which
improve quality of care and reduce costs. For example, Marquette's telemetry
products improve the quality of care by tracking ambulatory patients and
alerting the nurse at the central control station if the patient has an event.
Additionally, the Solar 8000 modular bedside monitor was recently redesigned
to reduce production costs by reducing the number of circuit boards from three
to one and by utilizing an off-the-shelf display. In addition, the Company
seeks to be first to market with new products, to enter new markets and to
respond to market trends.

The Company's product engineers work closely with the Company's sales force
and customers to modify and improve current products. In addition, these
engineers assist with the integration of components or technologies across
several Company product lines to enhance product competitiveness.

SALES, DISTRIBUTION AND MARKETING

The Company's products are used principally in the critical and intensive
care units, operating and recovery rooms, step-down units and related areas of
acute care hospitals, particularly those institutions specializing in the
diagnosis and treatment of heart disease, together with labor and delivery
units. Marquette products increasingly are also being used in medical clinics,
outpatient surgery centers, physician offices and the home.

The U.S. has historically been the principal geographic market for the
Company's products. Over the past ten years the Company has sought to develop
its international market standing, and international sales increased from
approximately 26% in the six months ended October 31, 1995 to approximately
40% in the six months ended October 31, 1996. The Company will continue to
seek greater penetration of the European market, where the E for M acquisition
has substantially broadened the Company's distribution network.

The Company has a direct sales force in the U.S. of approximately 280 sales
representatives, clinical specialists and managers, as well as 7 national
account managers. In addition, the Company has approximately 120 and 7 direct
sales employees in Europe and Australia, respectively, as well as numerous
dealers in both markets. The remaining international markets, primarily Japan,
China, Southeast Asia, India, Latin America and Canada, are served by
distributorship arrangements under which a local dealer buys products from the
Company at a discount for resale within its own territory.

Because most Company products are highly technical requiring extensive
training in their application and operation, the Company's sales organization
is organized along divisional product lines, including technical support
groups which consist primarily of nurses, biomedical engineers and clinicians.
In addition, the Company believes its reputation in diagnostic cardiology
enables it to obtain an entry to patient monitoring systems sales
opportunities. The Company has also designated certain senior sales personnel
to coordinate multiple product line sales to the same customer. The Company
maintains demonstration equipment so that sales personnel can make on-site
clinical demonstrations for equipment sales. The Company offers technical
seminars and training sessions on a worldwide basis, and furnishes instruction
manuals, maintenance manuals, operator guides, application information and
software in foreign languages, as required.

In recent years, many hospitals have joined buying groups or have been
acquired by large hospital chains permitting them to negotiate with suppliers
of hospital equipment to obtain more favorable pricing on large quantity
purchases. In addition, some large hospitals, chains and buying groups prefer
to negotiate with a limited number of vendors who can provide a broad range of
products used by the hospital or group. While the Company believes that the
existence of these groups will present a marketing opportunity for the
Company, there can be no assurance that the Company will be able to negotiate
purchasing arrangements with these groups or on terms that are favorable to
the Company. The Company currently has purchasing arrangements in place with
many national and regional hospital systems, including Columbia/HCA Healthcare
Corporation and Tenet Healthcare, Inc., and many purchasing groups, including
MAGNET, AmeriNet and CMMA (Catholic Materials Management Alliance), as well as
with various subdivisions of the federal government.

The Company has an arrangement with a third party leasing company which
provides customer financing. Under this arrangement, the Company is paid in
full for its products, and the leasing company assumes credit risks. The
Company also directly provides lease financing in certain circumstances and
equipment rentals.

The Company also offers a Managed Use Program, permitting hospitals to make
payments to the Company based upon the frequency of use of equipment by the
hospital. Under the Managed Use Program, the Company has the right to increase
or reduce the number of equipment units deployed at the hospital to correlate
with the degree of use of the units at the hospital. The Company believes that
the program is being well received by the market and that it is likely to
facilitate distribution of the Company's products by permitting hospitals to
better correlate their equipment to their needs.

The Company markets and distributes its supplies in the U.S. through an in-
house telemarketing group, its national direct sales force and a number of
dealers. The Company distributes its supplies outside of the U.S. through its
direct sales force in Europe, its Australian subsidiary and through
independent dealers.

MANUFACTURING AND OTHER FACILITIES

Marquette internally controls all critical manufacturing processes,
including state-of-the-art circuit board assembly and thick film hybrid and
multichip module assembly, utilizing advanced assembly and subassembly burn-in
systems. The Company partners with major suppliers by locating supplier
inventories on Marquette premises, thereby reducing the Company's inventory
costs and improving access to technical components.

The following table sets forth certain information as of December 31, 1996,
relating to the Company's principal facilities, all of which are owned by the
Company, except for approximately 30,000 square feet of leased space at the
Freiburg, Germany facility:

APPROXIMATE PRINCIPAL
LOCATION SQUARE FEET USES
-------- ----------- ---------

Milwaukee, WI............... 295,000 Corporate offices, engineering,
research and development, and
marketing and manufacturing of
diagnostic and adult monitoring
products
Jupiter, FL................. 180,000 Manufacturing, engineering and
marketing of supplies and cardiac
catheterization products and
repair and maintenance products
Wallingford, CT............. 180,000 Engineering, research and
development and marketing and
manufacturing of fetal and
neonatal monitoring and
diagnostic products
Freiburg, Germany........... 140,000 Engineering, research and
development, marketing and
manufacturing of diagnostic and
monitoring products, primarily
for European distribution

The Company believes that its facilities are modern, well maintained and
adequate for its present needs.

COMPETITION

The markets for the Company's products have historically been highly
competitive. The consolidation of health care providers in the U.S. and the
national effort to curtail increases in medical care costs have increased the
level of competition. Although the Company competes directly with other
providers of medical equipment, no one company or group of companies competes
with the Company across its full line of products. The Company's primary
competitors in patient monitoring include Hewlett-Packard Corporation, Siemens
Medical Systems, Inc., SpaceLabs Medical, Inc. and Datex Company, and in
diagnostic cardiology include Hewlett-Packard Corporation, Schiller AG and
Quinton Instrument Company, a subsidiary of American Home Products
Corporation. Certain of these competitors are larger, have greater financial
and marketing resources and have a larger installed base than Marquette. In
addition, other technologies may in the future be the basis for competitive
products that could render the Company's products obsolete or non-competitive.
The principal competitive factors that differentiate one manufacturer from
another in the market are a manufacturer's reputation for producing accurate,
reliable and technically advanced products, product features, product line
breadth, price, expected medical cost savings and effectiveness of sales and
marketing efforts.

The Company believes that it has a reputation for technological leadership
and product reliability, which, with its working relationship with physicians
at teaching and research hospitals as well as the breadth of its product line,
have provided it with a strong competitive position. The Company's competitive
position is strongest with respect to its cardiology product line and fetal
and neonatal monitoring products, where the Company has been selling its
products for the longest period of time, has the greatest name recognition and
competes primarily on the basis of product features and technological
advances.

GOVERNMENT REGULATION

The medical devices manufactured and marketed by the Company are subject to
extensive and rigorous regulation by the FDA and, in many instances, by state
and foreign governments. Under the FDC Act, the FDA regulates, among other
things, the testing, manufacturing, labeling, distribution and promotion of
medical devices in the U.S. To facilitate compliance with the FDC Act and
regulations promulgated thereunder, the Company, from time to time, may
institute voluntary compliance actions such as product recalls when it
believes it advisable to do so. The failure of the Company to comply with FDA
requirements could result in warning letters, injunctions, civil penalties,
mandatory recall or seizure of products, total or partial suspension of
production, the government's refusal to grant, or withdrawal of, marketing
authorizations, and criminal prosecution.

In general, before a new medical device may be marketed in the U.S., the
manufacturer must obtain marketing authorization from the FDA through either
clearance of a pre-market notification submission (a "510(k) submission") or
receipt of PMA. In addition, changes to a medical device that significantly
affect the safety or efficacy of a marketed device are subject to FDA review
and clearance or approval.

The Company's products have not generally been subject to the comprehensive
PMA requirements, but are generally subject to 510(k) requirements. The FDA
may grant marketing clearance of a new medical device pursuant to a 510(k)
submission if it determines that the device is substantially equivalent to a
predicate device that did not require a PMA. A 510(k) submission must be
supported by information demonstrating substantial equivalence. The FDA
recently has been requiring more rigorous demonstration of substantial
equivalence than in the past, including the submission of clinical data in
some cases. It generally takes from four to 12 months from submission to
obtain clearance of a 510(k) submission, but it may take longer. The FDA has
no specific time limit by which it must respond to a 510(k) submission.

As a manufacturer of medical devices, the Company is also subject to certain
other FDA regulations, including compliance with current GMPs and similar
regulations in other countries, which include testing, control and
documentation requirements, and medical device reporting requirements. The FDA
recently revised its medical device GMP regulation, and the new regulation,
which goes into effect later this year, permits the FDA to regulate the design
as well as manufacture of medical devices and makes a number of other
significant changes in regulatory requirements. Ongoing compliance with GMP
and other applicable regulatory requirements is monitored through periodic
inspections by federal and state agencies, including the FDA, and by
comparable agencies in other countries.

Federal, state and foreign regulations regarding the development,
manufacture and sale of medical devices are subject to change. The Company
cannot predict what impact, if any, such changes might have on its business.
The Company also seeks, where appropriate, to comply with safety standards of
Underwriters Laboratories, the Canadian Standards Association, the European
Economic Community and other countries in which it markets products.

The Company's products are used by health care providers for diagnostic
testing services and other services for which the providers may seek
reimbursement under the federal Medicare and Medicaid programs or from other
governmental and private payers. Such reimbursement is subject to federal
regulations and policies and regulations of other payers. For example, the
Medicare program, which reimburses hospitals and physicians for services
provided to a significant percentage of hospital patients, places certain
limitations on the methods and levels of reimbursement of hospitals for
procedure costs and for capital expenditures made to purchase equipment such
as that sold by the Company. The Medicare program also limits the level of
reimbursement to physicians for diagnostic tests. Federal and state
regulations regarding the amount and manner of reimbursement are subject to
change. National health care remains a priority item on its legislative agenda
and it is expected that a number of bills relating to national health care
will be introduced in both houses of Congress. The Company is unable to
predict the impact, if any, that such change or legislation might have on its
business.

In addition to laws and regulations enforced by the FDA, the Company is also
subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Resource Conservation and Recovery Act and
other present and potential future federal, state and local regulations.

PRODUCT LIABILITY AND INSURANCE

The use of the Company's products in the delivery of medical services
involves the possibility of adverse effects that could expose the Company to
product liability claims. A recent U.S. Supreme Court decision held that
product liability may exist despite FDA approval and future court decisions
may also increase the Company's risk of product liability. The Company is
involved in various legal proceedings, including product liability suits of a
nature considered normal to its business. The Company's products are used by
health care providers in connection with the treatment of patients, who will,
on occasion, sustain injury or die as a result of their condition or medical
treatment. If a lawsuit is filed because of such an occurrence, the Company,
along with physicians and nurses, hospitals and other medical suppliers, may
be named as a defendant, and whether or not the Company is ultimately
determined to be liable, the Company may incur significant legal expenses. In
addition, such litigation could damage the Company's reputation and therefore
impair its ability to market its products or obtain product liability
insurance or cause the premiums for such insurance to increase. The Company
carries product liability insurance coverage under several policies with an
aggregate loss coverage which the Company believes is sufficient. However, in
the future the Company may be unable to obtain adequate product liability
coverage on acceptable terms, if at all. A successful product liability claim
or series of claims brought against the Company that are not covered by
insurance or exceed policy limits could have a material adverse effect on the
Company's business, financial condition or results of operations.

EMPLOYEES

At October 31, 1996, the Company had approximately 2,300 employees in the
U.S. and approximately 825 employees outside the U.S., including approximately
1,025 employees engaged primarily in sales, approximately 900 employees
engaged primarily in manufacturing, approximately 500 employees engaged
primarily in research and development and approximately 350 employees
primarily engaged in service. Management considers employee relations to be
excellent.

The Company believes that high levels of employee support and participation
significantly contribute to the Company's business success. Therefore, the
Company has implemented various employee benefit programs and work-related
policies. Employees are permitted to personalize their work areas and
determine their own flexible work schedules. The Company also provides many of
its employees with day care facilities, exercise facilities, and a tuition
reimbursement program. It also encourages direct and individual ownership by
employees of Common Stock through its 401(k)-Profit Sharing Plan and grants of
stock options.

MANAGEMENT

The Company's directors and executive officers are, and their ages as of
December 31, 1996 were, as follows:

NAME AGE POSITION
- ---- --- --------

Michael J. Cudahy....... 72 Chairman and Chief Executive Officer
Timothy C. Mickelson, 48 President, Chief Operating Officer and Director
Ph.D...................
Mary M. Kabacinski...... 47 Senior Vice President, Chief Financial Officer and Treasurer
Karl F. Braun........... 63 Vice President--Europe, Middle East and Africa
Steven G. Books......... 47 Division President--Cardiology
P. Michael Breedlove.... 53 Division President--E for M Imaging Services
Gerald J. Lentz......... 49 Division President--Service
James A. Mertens........ 43 Division President--E for M Cath Lab
Louis P. Scafuri........ 44 Division President--Corometrics Medical Systems
Mark Stega, M.D......... 42 Division President--QMI Clinical Information Systems
Mark R. Tauscher........ 44 Division President--Supplies
Gerald G. Woodard....... 49 Division President--Patient Monitoring
John G. Bollinger, 61 Director
Ph.D...................
Frederick G. Luber...... 71 Director
Melvin S. Newman........ 60 Director
Walter L. Robb.......... 68 Director
Peter P. Tong........... 55 Director

MICHAEL J. CUDAHY co-founded the Company in July 1965, has served as Chief
Executive Officer and Chairman of the Board since 1965 and was President from
1965 until September 1993.

TIMOTHY C. MICKELSON, PH.D. became President and Chief Operating Officer of
the Company in July 1995 and became a director of the Company in August 1996.
Dr. Mickelson served as President of Corometrics from the Corometrics
acquisition in May 1994 until his election to the presidency of the Company.
For approximately six years prior to May 1994, Dr. Mickelson was Vice
President--Patient Monitoring Division of the Company.

MARY M. KABACINSKI became a Senior Vice President of the Company in August
1996, Vice President and Chief Financial Officer of the Company in July 1991
and Treasurer of the Company in 1989. Prior to her employment with the
Company, Mrs. Kabacinski was a tax manager at Arthur Andersen LLP.

KARL F. BRAUN became Vice President--Europe, Middle East and Africa in May
1996. Mr. Braun became Managing Director of Hellige, a wholly-owned subsidiary
of the Company, in May 1994, and was Director of Marketing and Development for
Hellige from June 1993 to May 1994. Mr. Braun was Vice President--Cardiology
of Hellige from September 1989 to June 1993. Prior to September 1989, Mr.
Braun held various positions at Hellige, where he has been employed since
1955.

STEVEN G. BOOKS became Division President--Cardiology in May 1996. Mr. Books
was Vice President--Cardiology Division from June 1994 to May 1996, and a
manager in the Company's manufacturing and engineering departments from 1982
to June 1994.

P. MICHAEL BREEDLOVE became Division President--E for M Imaging Services in
May 1996. Mr. Breedlove was Vice President--Field Operations for E for M from
October 1995 to May 1996. Prior to joining E for M, Mr. Breedlove was Vice
President of Cerner Corporation from 1993 until October 1995, Managing
Director of Cerner Corporation PTY Ltd. from 1991 until 1993 and Vice
President--Sales and Marketing of Cerner Corporation from 1984 to 1991.

GERALD J. LENTZ became Division President--Service in May 1996. Mr. Lentz
was a Product Manager from June 1994 to May 1996 and National Service Manager
from February 1977 to June 1994. Mr. Lentz joined the Company in September
1969.

JAMES R. MERTENS became Division President--E for M Cath Lab in May 1996.
Mr. Mertens was Vice President--Software Technology for E for M from June 1994
to May 1996 and Software Manager for Mortara Instruments Company from November
1983 to June 1994. Mr. Mertens was a software engineer for the Company from
1981 to November 1983.

LOUIS P. SCAFURI became Division President--Corometrics Medical Systems in
May 1996. Mr. Scafuri has also been President of Corometrics since September
1995. Mr. Scafuri was a Vice President of Aspect Medical Systems, Inc. from
September 1992 to August 1995. Mr. Scafuri was Director of Sales, Western
Hemisphere for the Company from May 1991 to September 1992 and held various
field sales management positions prior to May 1991. Mr. Scafuri joined the
Company in August 1984.

MARK STEGA, M.D. became Division President--QMI Clinical Information Systems
in May 1996. Dr. Stega was General Manager of Quantitative Medicine, Inc.
("QMI") from January 1992 to May 1996, and President of QMI when it was an
independent company prior to January 1992.

MARK R. TAUSCHER became Division President--Supplies in November 1996. Mr.
Tauscher was General Manager of Medical Supplies for Hewlett-Packard from 1994
to November 1996. Prior to joining the Company, Mr. Tauscher was employed at
Hewlett-Packard for 21 years where he also held the positions of Director of
National Accounts and Marketing Manager for Medical Customer Service.

GERALD G. WOODARD became Division President--Patient Monitoring in January
1997. Mr. Woodard was Vice President--Sales and Marketing from October 1995 to
January 1997, Director of Operations of QMI from January 1992 to October 1995,
and a Vice President of QMI from 1986 to January 1992.

JOHN G. BOLLINGER, PH.D. became a director of the Company in August 1996.
Dr. Bollinger has been Dean of the College of Engineering of the University of
Wisconsin-Madison since 1982. Dr. Bollinger served as a director of E for M
from March 1992 until December 1995. Dr. Bollinger also serves as a director
of Andrea Corporation.

FREDERICK G. LUBER became a director of the Company in 1968. Mr. Luber has
been Chairman of the Board of Super Steel Products Corp. of Milwaukee,
Wisconsin, a steel fabricating company, since 1966.

MELVIN S. NEWMAN became a director of the Company in 1969. Mr. Newman is,
and has been since 1965, a partner in Schoenberg, Fisher, Newman & Rosenberg,
Ltd., counsel for the Company.

WALTER L. ROBB became a director of the Company in 1982. Mr. Robb served as
Senior Vice President--Corporate Research and Development for General Electric
Company from September 1986 until he retired in December 1992. He is the
founder, and serves as President, of Vantage Management, Inc., a consulting
and investment company. Dr. Robb also serves as a director of Neopath, Inc.,
Cree Research, Inc. and Celgene Corp.

PETER P. TONG became a director of the Company in January 1996. From January
1996 until May 1996, Mr. Tong served as a Co-President of the Company. Mr.
Tong served as President, Chairman of the Board and Chief Executive Officer of
E for M from July 1991 until March 1996.

SELLING SHAREHOLDERS

The following table sets forth at January 31, 1997, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby (without
including the shares subject to the Underwriters' over-allotment option),
certain information with respect to the beneficial ownership of the Common
Stock by each Selling Shareholder. Except where otherwise noted, each party
included in the table has sole voting and investment power with respect to the
shares of stock beneficially owned. The following table is based upon the
number of shares of Common Stock outstanding as of January 31, 1997 and
assumes the Underwriters' over-allotment option is not exercised.

BENEFICIAL BENEFICIAL OWNERSHIP
OWNERSHIP AT ADJUSTED TO REFLECT
JANUARY 31, 1997 SHARES OFFERING
----------------- OFFERED -----------------------
NAME SHARES PERCENT FOR SALE SHARES PERCENT
---- --------- ------- --------- ------------ ----------

Michael J. Cudahy(1)........ 4,246,176 26.3% 1,000,000 3,246,176 18.9%
GE Fund..................... 489,485 3.0 489,485 -- --
All directors and executive
officers
as a group (17 people)..... 5,007,214 30.5 1,000,000 4,007,214 23.0

- --------
(1) Includes 117,562 shares allocated to Mr. Cudahy's account under the
Company's Profit Sharing-401(k) Plan. Mr. Cudahy is Chairman and Chief
Executive Officer of the Company. Of the 1,000,000 shares offered for sale
by Mr. Cudahy, 66,430 shares will be donated to the Milwaukee School of
Engineering ("MSOE") prior to the closing and sold by MSOE, and 290,000
shares will be donated to Discovery World Museum prior to the closing and
sold by Discovery World Museum.

UNDERWRITING

The names of the Underwriters of the shares of Common Stock offered hereby
and the aggregate number of shares that each has severally agreed to purchase
from the Company and the Selling Shareholders (subject to the terms and
conditions specified in the Underwriting Agreement) are as follows:

UNDERWRITERS NUMBER OF SHARES
------------ ----------------

Dillon, Read & Co. Inc.................................. 455,485
Bear, Stearns & Co. Inc................................. 454,500
Robert W. Baird & Co. Incorporated...................... 454,500
Alex. Brown & Sons Incorporated......................... 48,000
William Blair & Company, L.L.C.......................... 26,000
Brean Murray & Co., Inc................................. 17,000
Cleary Gull Reiland & McDevitt Inc...................... 26,000
Cowen & Company......................................... 26,000
Credit Suisse First Boston Corporation.................. 48,000
Dean Witter Reynolds Inc................................ 48,000
Donaldson, Lufkin & Jenrette Securities Corporation..... 48,000
Fahnestock & Co. Inc.................................... 26,000
Frederick & Company, Inc................................ 17,000
Gerard Klauer Mattison & Co., LLC....................... 26,000
Goldman, Sachs & Co..................................... 48,000
Hambrecht & Quist LLC................................... 48,000
Jensen Securities Co.................................... 17,000
C.L. King & Associates, Inc............................. 17,000
Lazard Freres & Co. LLC................................. 48,000
McDonald & Company Securities, Inc...................... 26,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated...... 48,000
J.P. Morgan Securities Inc.............................. 48,000
Needham & Company, Inc.................................. 26,000
David A. Noyes & Company................................ 17,000
Oppenheimer & Co., Inc.................................. 48,000
Pacific Growth Equities, Inc............................ 26,000
Pennsylvania Merchant Group Ltd......................... 17,000
Piper Jaffray Inc....................................... 26,000
Prudential Securities Incorporated...................... 48,000
Ragen MacKenzie Incorporated............................ 26,000
Robertson, Stephens & Company LLC....................... 48,000
Schroder Wertheim & Co. Incorporated.................... 48,000
Smith Barney Inc........................................ 48,000
Wasserstein, Perella Securities Inc..................... 48,000
H.G. Wellington & Co. Inc............................... 17,000
Wessels, Arnold & Henderson, L.L.C...................... 26,000
---------
Total............................................... 2,489,485
=========

The Managing Underwriters are Dillon, Read & Co. Inc., Bear, Stearns & Co.
Inc. and Robert W. Baird & Co. Incorporated.

If any of the shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby if any Underwriter defaults in its
obligation to purchase such shares and if the aggregate obligations of the
Underwriters so defaulting do not exceed 10% of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.

The shares of Common Stock offered hereby are being offered severally by the
Underwriters for sale at the price set forth on the cover page hereof, or at
such price less a concession not to exceed $0.60 per share on sales to certain
dealers. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed $0.10 per share on sales to certain other dealers.
The offering of the shares of Common Stock is made for delivery when, as, and
if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares. After
the shares are released for sale to the public, the public offering price, the
concession and the reallowance may be changed by the Managing Underwriters.

The Company has granted to the Underwriters an option to purchase up to an
additional 373,422 shares of Common Stock on the same terms per share. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
proportion of the aggregate shares so purchased as the number of shares to be
purchased by it shown in the above table bears to the total number of shares
in such table. The Underwriters may exercise such option on or before the
thirtieth day from the date of the public offering of the shares offered
hereby and only to cover over-allotments made of the shares in connection with
this Offering.

The Company, its executive officers and directors and the Selling
Shareholders have agreed that they will not, without the prior written consent
of Dillon, Read & Co. Inc., offer, sell, contract to sell, grant an option to
sell, transfer or otherwise dispose of, directly or indirectly, any shares of
Common Stock, or any securities convertible into, or exercisable or
exchangeable for, Common Stock or warrants or other rights to purchase Common
Stock, prior to the expiration of 90 days from the date of the consummation of
the offering, except (i) the Company may issue shares of Common Stock issued
upon the exercise of options issued under the Company's existing employee
stock option plans and (ii) the grant of options to the Company's employees,
officers and directors under its existing employee stock option plans so long
as none of such options become exercisable during said 90-day period.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including any liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.

In connection with this Offering, certain Underwriters and selling group
members or their affiliates may engage in passive marketing making
transactions in the Common Stock on the Nasdaq National Market in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") during the two business day period before the commencement of
sales in this Offering. Passive market making consists of, among other things,
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and purchases limited by such prices and effected in
response to order flow. Net purchases by a passive market maker on each day
are limited to a specified percentage of the passive market maker's average
daily trading volume in the Common Stock during a specified prior period, and
all possible market making activity must be discontinued when such limit is
reached. Passive market making may stabilize the market price of the Common
Stock at a level above that which might otherwise prevail and, if commenced,
may be discontinued at any time.

The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.

From time to time, Robert W. Baird & Co. Incorporated has performed
financial advisory services for the Company, including in connection with the
Company's acquisition of E for M.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Schoenberg, Fisher, Newman & Rosenberg, Ltd., Chicago, Illinois and
for the Underwriters by Cooley Godward LLP, Menlo Park, California. Melvin S.
Newman, a partner of Schoenberg, Fisher, Newman & Rosenberg, Ltd., is a
director of the Company. As of January 15, 1997, Mr. Newman beneficially owned
66,000 shares of Common Stock.

EXPERTS

The audited consolidated financial statements and schedules included in and
incorporated by reference into this Prospectus and elsewhere in the
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company under
the Exchange Act can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Northeast
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048,
and Midwest Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates, and at the internet
Web site maintained by the Commission at http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on Form S-
3 (together with all amendments and exhibits thereto referred to herein as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement which may be inspected and copied
in the manner and at the sources described above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File No. 0-
18724) pursuant to the Exchange Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1996.

2. The Company's Quarterly Reports on Form 10-Q for the quarterly periods
ended July 31 and October 31, 1996.

3. The Company's Current Reports on Form 8-K dated August 22, 1996,
December 18, 1996, February 10, 1997 and February 25, 1997.

4. The Company's Registration Statement on Form 8-A dated July 23, 1990,
registering the Common Stock under the Exchange Act and the Company's
Registration Statement on Form 8-A dated December 24, 1996, registering the
Preferred Share Purchase Rights under the Exchange Act.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of shares which is the subject hereof shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more of the documents incorporated herein by reference;
accordingly, such information contained herein is qualified in its entirety by
reference to such documents incorporated herein by reference and should be read
in conjunction therewith.

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
that have been or may be incorporated herein by reference (other than exhibits
thereto, unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates). Requests should be directed
to Marquette Medical Systems, Inc., 8200 West Tower Avenue, Milwaukee,
Wisconsin 53223, Attention: Gordon W. Petersen, Secretary (telephone: (414)
355-5000).

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................................. F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at April 30, 1995 and 1996, and at October
31, 1996 (unaudited).................................................... F-2
Consolidated Statements of Income for the years ended April 30, 1994,
1995 and 1996, and for the six months ended October 31, 1995 and 1996
(unaudited)............................................................. F-4
Consolidated Statements of Cash Flows for the years ended April 30,
1994, 1995, 1996, and for the six months ended October 31, 1995 and 1996
(unaudited)............................................................. F-5
Consolidated Statements of Shareholders' Equity for the years ended
April 30, 1994, 1995 and 1996, and for the six months ended October 31,
1996 (unaudited)........................................................ F-6
Notes to Consolidated Financial Statements (Information pertaining to
the six months ended October 31, 1995 and 1996 is unaudited)............ F-7

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Marquette Medical Systems, Inc.:

We have audited the accompanying consolidated balance sheets of MARQUETTE
MEDICAL SYSTEMS, INC. (a Wisconsin corporation, formerly known as Marquette
Electronics, Inc.) and subsidiaries as of April 30, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended April 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Marquette Medical Systems,
Inc. and subsidiaries as of April 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended April 30, 1996, in conformity with generally accepted accounting
principles.

Arthur Andersen LLP

Milwaukee, Wisconsin,
June 13, 1996.

F-1

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

APRIL 30, 1995 AND 1996, AND OCTOBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

OCTOBER 31,
1995 1996 1996
ASSETS -------- -------- -----------
(UNAUDITED)

Current Assets:
Cash and cash equivalents...................... $ 3,330 $ 2,890 $ 5,370
Accounts receivable, less allowances of $1,066,
$6,430 and $5,947............................. 91,118 138,455 147,711
Inventories.................................... 75,140 106,168 113,131
Prepaid expenses and other..................... 4,112 5,543 5,030
Deferred income tax benefits................... 1,630 7,904 7,351
-------- -------- --------
Total current assets....................... 175,330 260,960 278,593
-------- -------- --------
Property and Equipment:
Land and improvements.......................... 6,238 23,669 23,816
Buildings...................................... 30,865 43,579 43,959
Equipment...................................... 66,663 82,896 91,012
Construction in Progress....................... 1,817 458 854
-------- -------- --------
105,583 150,602 159,641
Less--Accumulated depreciation................... 44,636 53,826 59,732
-------- -------- --------
Net property and equipment................... 60,947 96,776 99,909
-------- -------- --------
Other Assets:
Goodwill, less accumulated amortization of
$4,224, $6,635 and $8,305..................... 23,604 45,882 44,786
Other intangibles, less accumulated
amortization of $0, $648 and $1,817........... -- 20,587 19,361
Cash surrender value and other................. 4,984 7,513 6,414
-------- -------- --------
Total other assets......................... 28,588 73,982 70,561
-------- -------- --------
Total assets............................. $264,865 $431,718 $449,063
======== ======== ========

The accompanying notes are an integral part of these consolidated balance
sheets.

F-2

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

APRIL 30, 1995 AND 1996, AND OCTOBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

OCTOBER 31,
1995 1996 1996
LIABILITIES AND SHAREHOLDERS' EQUITY -------- -------- -----------
(UNAUDITED)

Current Liabilities:
Amounts due to bank............................... $ 6,450 $ 7,101 $ 8,490
Notes payable to bank............................. 22,544 28,822 47,146
Current maturities of long-term debt.............. 100 3,122 --
Accounts payable.................................. 18,957 31,764 33,822
Accrued liabilities --
Payroll related expenses........................ 12,258 22,014 20,549
Warranty........................................ 4,194 6,475 7,163
Other........................................... 10,460 28,465 23,125
-------- -------- --------
Total current liabilities..................... 74,963 127,763 140,295
-------- -------- --------
Long-Term Debt, less current maturities............. 8,112 81,254 81,211
Deferred Income Taxes............................... 2,897 21,404 20,129
Pension and Other Long-Term Liabilities............. -- 45,372 46,874
Class A Common Stock Under Repurchase Agreements
(Note 10).......................................... 8,000 8,000 8,000
Shareholders' Equity:
Class A Common Stock, $.10 par value, 30,000,000
shares authorized................................ 1,594 1,606 1,612
Class C Common Stock, $.01 par value, 50,000,000
shares authorized................................ 263 263 263
Additional paid-in capital........................ 26,870 31,569 31,986
Retained earnings................................. 151,020 126,152 134,638
Treasury Stock, at cost........................... -- -- (4,643)
Cumulative translation adjustment................. (854) (3,665) (3,302)
Class A Common Stock under repurchase agreements
(Note 10)........................................ (8,000) (8,000) (8,000)
-------- -------- --------
Total liabilities and shareholders' equity.... $264,865 $431,718 $449,063
======== ======== ========

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED APRIL 30, 1994, 1995 AND 1996, AND FOR THE SIX MONTHS ENDED
OCTOBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

SIX MONTHS ENDED
OCTOBER 31,
------------------
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)

Net Sales.................... $253,808 $342,176 $416,293 $165,638 $261,702
Cost of Sales................ 122,187 167,130 214,947 83,154 135,007
-------- -------- -------- -------- --------
Gross profit............... 131,621 175,046 201,346 82,484 126,695
-------- -------- -------- -------- --------
Engineering Expenses......... 22,417 30,716 37,307 16,181 23,787
Selling Expenses............. 62,397 85,072 105,259 44,035 64,243
General and Administrative
Expenses.................... 18,824 25,362 32,880 13,526 21,883
Restructuring Expenses....... -- -- 3,956 -- --
Write-Off of Acquired In-
Process Research &
Development................. -- -- 35,700 -- --
-------- -------- -------- -------- --------
Total operating expenses... 103,638 141,150 215,102 73,742 109,913
-------- -------- -------- -------- --------
Operating income (loss).... 27,983 33,896 (13,756) 8,742 16,782
Interest Expense............. 322 2,973 4,386 1,235 4,189
Other Expense (Income), net.. (554) (107) (1,162) (527) (1,118)
-------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes..................... 28,215 31,030 (16,980) 8,034 13,711
Provision for Income Taxes... 9,574 11,473 7,888 3,012 5,225
-------- -------- -------- -------- --------
Net Income (Loss).......... $ 18,641 $ 19,557 $(24,868) $ 5,022 $ 8,486
======== ======== ======== ======== ========
Per Class A Common Share:
Net Income (Loss).......... $ 1.16 $ 1.21 $ (1.53) $ .31 $ .52
======== ======== ======== ======== ========

The accompanying notes are an integral part of these consolidated statements.

F-4

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED APRIL 30, 1994, 1995 AND 1996, AND FOR THE SIX MONTHS ENDED
OCTOBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)

SIX MONTHS ENDED
OCTOBER 31,
-----------------
1994 1995 1996 1995 1996
------- -------- --------- ------- --------
(UNAUDITED)

Cash Flows from Operating
Activities:
Net income (loss)............. $18,641 $ 19,557 $ (24,868) $ 5,022 $ 8,486
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities--
Depreciation and
amortization................ 9,817 14,378 12,042 8,046 9,821
Write-off of acquired in-
process research and
development................. -- -- 35,700 -- --
Deferred income taxes........ (695) 826 (634) (1,469) (1,055)
Changes in assets and
liabilities
Accounts receivable........ (4,050) 364 992 1,567 (9,784)
Inventories................ (2,325) (7,037) 2,379 (7,756) (7,477)
Prepaid expenses and other
assets.................... (184) (675) 6,497 (26) 1,270
Accounts payable and
accrued liabilities....... 4,625 8,806 (8,123) 85 (438)
------- -------- --------- ------- --------
Net cash provided by
operating activities.... 25,829 36,219 23,985 5,469 823
Cash Flows from Investing
Activities:
Capital expenditures.......... (8,858) (15,124) (11,399) (6,128) (10,358)
Sale of product line.......... -- -- -- -- 905
Purchase of Corometrics
Medical Systems, Inc. and E
for M Corporation, net of
cash acquired................ -- (70,045) (89,171) -- --
------- -------- --------- ------- --------
Net cash used in
investing activities.... (8,858) (85,169) (100,570) (6,128) (9,453)
Cash Flows from Financing
Activities:
Net proceeds from (payments
on) notes payable to bank.... 4,993 14,737 3,005 (1,354) 18,319
Proceeds from issuance of
long-term debt............... -- 45,000 90,000 -- --
Payments on long-term debt.... (1,339) (37,003) (17,000) -- (2,911)
Proceeds from issuance of
common stock................. 551 1,110 1,393 334 617
Purchase of treasury stock.... -- -- -- -- (4,643)
------- -------- --------- ------- --------
Net cash provided by
(used in) financing
activities.............. 4,205 23,844 77,398 (1,020) 11,382
Effect of Exchange Rate
Changes on Cash and Cash
Equivalents.................. (413) 626 (1,253) 147 (272)
------- -------- --------- ------- --------
Net increase (decrease)
in cash and cash
equivalents............. 20,763 (24,480) (440) (1,532) 2,480
Cash and Cash Equivalents at
Beginning of Period.......... 7,047 27,810 3,330 3,330 2,890
------- -------- --------- ------- --------
Cash and Cash Equivalents at
End of Period................ $27,810 $ 3,330 $ 2,890 $ 1,798 $ 5,370
======= ======== ========= ======= ========
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the period
for--
Interest................... $ 343 $ 2,911 $ 4,153 $ 1,230 $ 3,382
Income taxes............... $ 8,835 $ 11,523 $ 9,789 $ 2,593 $ 5,053
Supplemental Schedule of
Noncash Investing and
Financing Activities
The Company purchased all of
the capital stock of
Corometrics Medical
Systems, Inc. and of E for
M Corporation for $70,766
and $90,333, in fiscal 1995
and 1996, respectively.
In conjunction with the
acquisition, liabilities
were assumed as follows:
Fair value of assets
acquired (including
goodwill)................. -- $ 78,729 $ 215,524 -- --
Cash paid for the capital
stock..................... -- 70,766 90,333 -- --
Stock options converted.... -- -- 3,083 -- --
-------- ---------
Liabilities assumed...... -- $ 7,963 $ 122,108 -- --
======== =========

The accompanying notes are an integral part of these consolidated statements.

F-5

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED APRIL 30, 1994, 1995 AND 1996, AND FOR THE SIX MONTHS ENDED
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)

CLASS A CLASS C
COMMON STOCK COMMON STOCK TREASURY STOCK ADDITIONAL CUMULATIVE
----------------- ----------------- ----------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
---------- ------ ---------- ------ -------- ------- ---------- -------- -----------

Balance, April 30, 1993. 15,790,975 $1,579 26,250,000 $263 -- $ -- $24,992 $112,822 $(1,067)
Issuance of common
stock under option.... 61,380 6 -- -- -- -- 545 -- --
Cumulative translation
adjustment............ -- -- -- -- -- -- -- -- (413)
Other.................. -- -- -- -- -- -- 53 -- --
Net income............. -- -- -- -- -- -- -- 18,641 --
---------- ------ ---------- ---- -------- ------- ------- -------- -------
Balance, April 30, 1994. 15,852,355 $1,585 26,250,000 $263 -- $ -- $25,590 $131,463 $(1,480)
Issuance of common
stock under option.... 94,250 9 -- -- -- -- 1,101 -- --
Cumulative translation
adjustment............ -- -- -- -- -- -- -- -- 626
Other.................. -- -- -- -- -- -- 179 -- --
Net income............. -- -- -- -- -- -- -- 19,557 --
---------- ------ ---------- ---- -------- ------- ------- -------- -------
Balance, April 30, 1995. 15,946,605 $1,594 26,250,000 $263 -- $ -- $26,870 $151,020 $ (854)
Issuance of common
stock under option.... 113,706 12 -- -- -- -- 1,381 -- --
Cumulative translation
adjustment............ -- -- -- -- -- -- -- -- (2,811)
Conversion of E for M
stock options into
Marquette options..... -- -- -- -- -- -- 3,083 -- --
Other.................. -- -- -- -- -- -- 235 -- --
Net loss............... -- -- -- -- -- -- -- (24,868) --
---------- ------ ---------- ---- -------- ------- ------- -------- -------
Balance, April 30, 1996. 16,060,311 $1,606 26,250,000 $263 -- $ -- $31,569 $126,152 $(3,665)
Issuance of common
stock under option.... 55,024 6 -- -- -- -- 611 -- --
Cumulative translation
adjustment............ -- -- -- -- -- -- -- -- 363
Purchase of treasury
stock................. -- -- -- -- (281,400) (4,643) -- -- --
Other.................. -- -- -- -- -- -- (194) -- --
Net income............. -- -- -- -- -- -- -- 8,486 --
---------- ------ ---------- ---- -------- ------- ------- -------- -------
Balance, October 31,
1996 (unaudited)....... 16,115,335 $1,612 26,250,000 $263 (281,400) $(4,643) $31,986 $134,638 $(3,302)
========== ====== ========== ==== ======== ======= ======= ======== =======

The accompanying notes are an integral part of these consolidated statements.

F-6

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 1994, 1995 AND 1996 AND OCTOBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

(1) NATURE OF OPERATIONS--

Marquette Medical Systems, Inc. (the "Company," formerly known as Marquette
Electronics, Inc.) is a worldwide leader in the development and manufacture of
medical equipment and integrated systems for patient monitoring and diagnostic
cardiology applications. The Company also develops clinical information
systems, designed to be integrated with medical equipment, consisting of
hardware and software used by integrated health care delivery networks and
individual hospitals to electronically acquire, record, store, analyze and
distribute patient medical data. The Company's products are used principally
in critical and intensive care units, operating and recovery rooms, step-down
units, labor and delivery units, cardiology departments, cardiac
catheterization laboratories and related areas of acute care hospitals. In
addition, the Company's products are increasingly being used in smaller
hospitals, medical clinics, outpatient surgery centers, physician offices and
homes. The Company covers the United States market, most of Western Europe and
Australia through its own sales force. The remainder of the international
market is served by dealers.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--

(a) Basis of consolidation and interim reporting--

The consolidated financial statements include the accounts of the Company
and its foreign and domestic subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
With respect to the interim periods, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. However, in the opinion of the Company, adequate disclosures have
been presented for the interim periods in order to make the information not
misleading and all adjustments necessary to present fair statements of the
results of operations, financial position and cash flows have been included.

(b) Revenue recognition--

Revenue is recognized on an accrual basis when equipment and supplies are
shipped. Revenue for service contracts is recognized over the term of the
contract, typically twelve months. Costs related to service contracts are
expensed as incurred.

Inventories consist of the following:

APRIL 30,
---------------- OCTOBER 31,
1995 1996 1996
------- -------- -----------
(UNAUDITED)

Raw materials and component parts............... $20,551 $ 35,716 $ 35,885
Work-in-process and finished goods.............. 33,561 45,869 45,765
Inventory on loan or consignment................ 21,028 24,583 31,481
------- -------- --------
$75,140 $106,168 $113,131
======= ======== ========

For its domestic inventories (representing 93% and 61% of total inventories
at April 30, 1995 and 1996, respectively), the Company employs the last-in,
first-out (LIFO) cost method. The first-in, first-out (FIFO) cost method is
used for all remaining inventories. If the FIFO cost method had been used for
domestic inventories instead of the LlFO cost method, the carrying value
assigned to inventories would have been $2,651 and $1,962 less at April 30,
1995 and 1996, respectively.

F-7

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(d) Property and equipment--

Property and equipment, along with improvements that significantly extend
the useful life of existing assets, are carried at cost. Depreciation is
provided on the straight-line method over the estimated useful lives of the
assets which range from 15-20 years for land improvements, 40-50 years for
buildings and 3-7 years for equipment.

(e) Engineering expenses--

Engineering expenses represent research and development costs and are
charged to operations as incurred. The Company also charged to operations
$35,700 related to the write-off of acquired in-process research and
development attributable to the E for M acquisition. See Note 3 for further
discussion of purchased research and development costs.

(f) Advertising costs--

Advertising costs are charged to operations as incurred. Such charges were
$1,755, $1,691 and $2,260 in fiscal 1994, 1995 and 1996, respectively.

(g) Cash and cash equivalents--

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three months or
less at the time of purchase to be cash equivalents.

(h) Foreign currency--

Asset and liability accounts of the Company's foreign operations are
translated at the current exchange rate, and income and expense accounts are
translated at the average of the monthly exchange rates. Gains and losses
resulting from the translation of foreign currency financial statements are
classified as a separate component of shareholders' equity.

Foreign currency transaction gains (losses) totalling $(490), $124 and $744
are included in other income in the consolidated statements of income for
fiscal 1994, 1995 and 1996, respectively.

As a hedge against foreign accounts payable, the Company at times has
entered into various forward exchange contracts to exchange foreign currencies
for United States dollars at a fixed contract rate. Market value gains and
losses resulting from these contracts are recognized in the consolidated
statements of income and offset foreign exchange gains or losses on the
foreign payables at their maturity date. As of April 30,1996, the Company has
three such contracts to exchange various foreign currencies for a total
contract amount of $758 and a maturity date of May 31, 1996. The carrying
value of these contracts approximates fair value.

(i) Net income per Class A common share--

Class C Common Stock participates in income with Class A Common Stock in the
ratio of 1:100. Consequently, the weighted average shares for calculating net
income per Class A common share is equal to the sum of the weighted average
number of shares of Class A Common Stock outstanding and 1/100 of the weighted
average number of shares of Class C Common Stock outstanding during the year.
Such weighted average shares were 16,090,000, 16,172,000 and 16,254,000 for
fiscal 1994, 1995 and 1996, respectively, and 16,228,000 (unaudited) and
16,305,000 (unaudited) for the six months ended October 31, 1995 and 1996,
respectively. See also Note 8.

F-8

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(j) Goodwill--

The excess of the purchase cost over the fair value of net assets acquired
is being amortized over a range of 15-20 years on a straight-line basis. The
Company continually evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of goodwill may
warrant revision or that the remaining balance of goodwill may not be
recoverable. When factors indicate that goodwill should be evaluated for
possible impairment, the Company uses an estimate of the related business
segment's discounted net cash flows over the remaining life of the goodwill in
measuring whether the goodwill is recoverable. Goodwill (net of accumulated
amortization) was $23,604 and $45,882 at April 30, 1995 and 1996,
respectively. Amortization of goodwill was $451 in fiscal 1994, $1,871 in
fiscal 1995 and $2,453 in fiscal 1996. See Note 3 for further discussion
related to the goodwill attributable to the Corometrics and E for M
acquisitions.

In March, 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", which addresses accounting for the impairment
of long-lived assets that either will be held and used in operations or that
will be disposed of. The Company does not believe that the adoption of this
statement on May 1, 1996 will have a material impact on the financial position
or results of operations of the Company.

(k) Use of estimates--

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(l) Reclassification of prior year amounts--

Certain prior year amounts have been reclassified to conform with current
year presentations.

(3) ACQUISITION OF COROMETRICS MEDICAL SYSTEMS, INC. AND E FOR M CORPORATION--

On May 31, 1994, the Company acquired 100% of the common stock of
Corometrics Medical Systems, Inc. ("Corometrics"), a manufacturer of fetal
monitors and related products. The purchase price was approximately $70,800
and was paid in cash. Related to this purchase, the Company borrowed $49,200
under a bank loan agreement. As of April 30, 1996, these borrowings have been
paid in full. The acquisition has been accounted for as a purchase, and the
excess of the purchase price over the fair value of net assets acquired has
been allocated to goodwill. The value of such goodwill is $23,230.

Effective January 1, 1996, the Company acquired 100% of the common stock of
E for M Corporation ("E for M"), an international medical equipment, software
and supplies company serving patient monitoring and cardiology, which includes
cardiac catheterization and electrophysiology laboratories. The purchase price
was approximately $93,400 and was paid in cash and through the issuance of
stock options. The Company converted outstanding options for E for M stock
into options for Marquette stock as part of the transaction. The fair value of
the converted options was $3,083. Related to this purchase, the Company
borrowed $90,000 under bank loan agreements payable periodically over the next
five years. The acquisition has been accounted for as a purchase and the
excess of the purchase price over the fair value of the net assets acquired
has been allocated to goodwill. Based on a preliminary allocation of purchase
price, the approximate value of such goodwill is $26,196. In addition, the
Company acquired intangible assets related to in-process research and
development (R&D), product technologies and tradenames with values of $35,700,
$12,672 and $8,468, respectively. The acquired in-process R&D was entirely
written-off during the year. The remaining intangibles have estimated useful
lives ranging from 7 to 40 years.

F-9

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In connection with the acquisition, the Company implemented a restructuring
plan for the purpose of integrating the E for M operation into the Company's
existing operations. This restructuring plan included consolidation of
facilities as well as a reduction in the number of employees required for the
combined operations. The costs expected to be incurred with respect to this
restructuring plan were recorded as liabilities of E for M which were assumed
in the purchase transaction. The total restructuring charges attributable to E
for M were $8,447. This total liability recorded at the acquisition included
$5,532 of severance costs, $992 of dealer termination costs and $1,923 of
facility closing, legal and other costs. This restructuring plan is expected
to be completed by April 30, 1997. As of April 30, 1996 and October 31, 1996,
$7,662 and $3,989 (unaudited), respectively, of the restructuring charges
remained in "Other current liabilities" in the Consolidated Balance Sheets.

Unaudited pro-forma results of operations, assuming the acquisition of both
Corometrics and E for M as of May 1, 1994, and the $35,700 write-off of
acquired in-process R&D in fiscal 1996, would be as follows:

YEAR ENDED SIX MONTHS
APRIL 30, ENDED
----------------- OCTOBER 31,
1995 1996 1995
-------- -------- -----------
(UNAUDITED)

Net sales..................................... $541,138 $540,936 $259,574
Net income (loss)............................. 11,493 (27,430) 3,385
Net income (loss) per Class A Common Share.... .71 (1.69) .21

(4) INCOME TAXES--

Deferred income taxes are recorded to reflect the tax consequences on future
years on differences between the tax basis of assets and liabilities and their
financial reporting amounts at fiscal year end. Deferred tax expense is the
result of changes in deferred tax assets and liabilities.

The provision for income taxes consists of the following:

YEAR ENDED APRIL 30,
-----------------------
1994 1995 1996
------- ------- ------

Current--
Federal........................................... $ 8,617 $ 8,609 $7,692
State............................................. 1,363 1,547 1,072
Foreign........................................... 289 491 (242)
------- ------- ------
10,269 10,647 8,522
Deferred............................................ (695) 826 (634)
------- ------- ------
$ 9,574 $11,473 $7,888
======= ======= ======

A reconciliation of the statutory Federal income tax rate to the
consolidated effective income tax rate is as follows:

YEAR ENDED
APRIL 30,
-----------------
1994 1995 1996
---- ---- -----

Statutory federal income tax rate....................... 35.0% 35.0% (35.0)%
State and local income taxes, net of Federal income tax
benefit................................................ 3.0 3.4 4.1
Tax credits............................................. (1.8) (1.9) --
Foreign tax rate differences and foreign tax losses not
benefitted............................................. 1.2 0.2 7.4
FSC benefit............................................. (2.5) (1.4) (2.7)
Purchased R&D........................................... -- -- 73.6
Other................................................... (1.0) 1.7 (0.9)
---- ---- -----
Effective income tax rate............................. 33.9% 37.0% 46.5%
==== ==== =====

F-10

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Temporary differences which give rise to the deferred tax assets and
liabilities at April 30, 1995 and 1996 are as follows:

APRIL 30,
------------------
1995 1996
-------- --------

Short-term deferred tax assets (liabilities):
Net operating loss carryforward.......................... $ 741 14,281
Pension.................................................. -- 1,773
Warranty reserve......................................... 1,193 1,350
Inventories.............................................. (1,755) (999)
Accrued vacation......................................... 942 1,216
Intercompany profit in inventory......................... 607 486
Restructuring reserve.................................... -- 4,371
Self-insurance reserve................................... 199 341
Bad debt reserve......................................... 150 201
Capital loss carryforward................................ 63 532
Other.................................................... 231 406
Valuation allowance...................................... (741) (16,054)
-------- --------
$1,630 $ 7,904
======== ========
Long-term deferred tax assets (liabilities):
Tax basis difference of fixed assets..................... $ (1,161) $ (1,251)
Tax basis difference of intangible assets................ (1,872) (19,672)
Other.................................................... (136) (481)
-------- --------
$(2,897) $(21,404)
======== ========

(5) NOTES PAYABLE TO BANK--

The Company has an unsecured line of credit with a bank whereby it may
borrow up to $20,000 ($25,000 (unaudited) as of October 31, 1996). As of April
30, 1996 and October 31, 1996, the borrowings outstanding were $14,500 and
$17,600 (unaudited), respectively. Standby letters of credit of $1,604 reduced
the available credit to $3,896 as of April 30, 1996.

The Company has loan authorizations and overdraft facilities with various
banks whereby it may borrow up to $33,244 (or Eurocurrency equivalent) to be
used for general purposes. As of April 30, 1996 and October 31, 1996, the
borrowings outstanding were $14,322 and $29,546 (unaudited), respectively.
Outstanding bank guarantees of $4,924 reduced the available credit to $13,998
as of April 30, 1996.

The Company has entered into some of the above foreign currency loans in an
amount and term similar to the expected collection period of foreign accounts
receivable as a natural hedge against these amounts. The amount outstanding on
such loans was $8,803 and $6,236 in fiscal 1995 and fiscal 1996, respectively.

The following table summarizes certain information regarding these short-
term borrowings:

YEAR ENDED APRIL 30,
------------------------
1994 1995 1996
------ ------- -------

Maximum amount of borrowings....................... $7,806 $27,256 $28,742
Average amount of borrowings....................... 3,462 20,924 21,975
Weighted average interest rate during year......... 7.9% 6.1% 6.8%
Weighted average interest rate at year end......... 7.6% 6.7% 6.5%

F-11

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(6) LONG-TERM DEBT--

Long-term debt consists of the following:

APRIL 30,
-------------- OCTOBER 31,
1995 1996 1996
------ ------- -----------
(UNAUDITED)

Term note, repaid in fiscal 1996 bearing
interest at LIBOR + 1%......................... $3,000 $ -- $ --
Term note, repaid in fiscal 1996 bearing
interest at LIBOR + 1%......................... 5,000 -- --
Senior notes, due in installments through August
29, 2008, bearing interest at 7.46%............ -- -- 30,000
Term note, due in installments through October
31, 2000, bearing interest at LIBOR + 1%
(6.4375% at April 30, 1996).................... -- 27,000 17,000
Term note, due in installments through October
31, 2000, bearing interest at LIBOR + 1%
(6.4375% at April 30, 1996).................... -- 27,000 17,000
Term note, due in installments through October
31, 2000, bearing interest at LIBOR + 1%
(6.4375% at April 30, 1996).................... -- 27,000 17,000
Installment promissory note, due March 31, 1999,
bearing interest at fixed rate of 7.175%....... -- 1,224 --
Installment promissory note, due September 30,
1999, bearing interest at fixed rate of 8.750%. -- 1,687 --
Other........................................... 212 465 211
------ ------- -------
8,212 84,376 81,211
Less--Current maturities........................ 100 3,122 --
------ ------- -------
$8,112 $81,254 $81,211
====== ======= =======

Scheduled maturities:

YEAR ENDING
APRIL 30, AMOUNT
----------- -------

1997............................ $ 3,122
1998............................ 23,753
1999............................ 23,470
2000............................ 22,781
2001............................ 11,250
-------
$84,376
=======

The carrying value of long-term debt approximates fair value.

The term notes contain restrictive covenants which, among other things,
require the Company to maintain a minimum tangible net worth, a minimum
interest coverage ratio and a maximum liabilities to tangible net worth ratio.
The Company was in compliance with all such covenants at April 30, 1996.

F-12

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(7) COMMITMENTS AND CONTINGENCIES--

The Company leases plant, office space, and automobiles under various
operating lease agreements. Minimum rental commitments under leases having
initial or remaining terms of greater than one year are as follows:

YEAR ENDING APRIL 30, AMOUNT
--------------------- ------

1997........................... $1,504
1998........................... 1,253
1999........................... 783
Thereafter..................... 20

Rental expense charged to operations was $1,727, $1,591 and $1,585 in fiscal
1994, 1995 and 1996, respectively. The Company leases automobiles from a
company owned by two directors. Rental expense was $1,058, $1,028 and $589 in
fiscal 1994, 1995 and 1996, respectively.

Various lawsuits and claims are pending against the Company. Although the
outcome of such lawsuits and claims cannot be predicted with certainty, the
resolution of these lawsuits and claims will not, in the opinion of
management, result in a material adverse effect on the financial position or
results of operations of the Company.

(8) COMMON STOCK--

Class A and Class C Common Stock have equal voting rights. Dividends may be
declared on the Class A Common Stock without the declaration of any dividend
on the Class C Common Stock. Dividends may only be declared on the Class C
Common Stock if at the same time a dividend in an amount at least 100 times as
great per share is declared on the Class A Common Stock. In the event of
liquidation, amounts distributed with respect to each share of Class A Common
Stock must be 100 times as great as amounts distributed with respect to each
share of Class C Common Stock. Subsequent to October 31, 1996, all 26,250,000
shares of Class C Common Stock were exchanged for 262,500 shares of Class A
Common Stock.

(9) STOCK OPTION PLANS--

The number of shares of Class A Common Stock reserved for issuance by the
Company under the Amended and Restated Stock Option Plan for Employees of
Marquette Medical Systems, Inc. (the "Plan") increased from 2,500,000 shares
to 3,500,000 shares on February 9, 1996 by a vote of the Company's Board of
Directors, subject to shareholder approval. Such approval was received at the
Company's annual meeting of shareholders on August 15, 1996. Under the Plan,
incentive options may be granted to purchase shares at or above fair market
value on the date of grant and expire within ten years, and non-qualified
options may be granted at or above 85% of fair market value on the date of
grant and expire within fifteen years. If stock options granted under the Plan
expire or otherwise terminate without being exercised, the Class A Common
Stock not issued under such stock options shall again become available for
issuance under the Plan.

F-13

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Option activity during fiscal 1994, 1995 and 1996 is as follows:

NUMBER OF SHARES
UNDER OPTION
----------------

Outstanding, April 30, 1993.............................. 349,921
Granted................................................ 1,090,000
Exercised.............................................. (61,380)
Cancelled.............................................. (73,875)
---------
Outstanding, April 30, 1994.............................. 1,304,666
Granted................................................ 292,200
Exercised.............................................. (94,250)
Cancelled.............................................. (80,250)
---------
Outstanding, April 30, 1995.............................. 1,422,366
Granted................................................ 895,600
Exercised.............................................. (96,800)
Cancelled.............................................. (407,950)
---------
Outstanding, April 30, 1996.............................. 1,813,216
=========

The prices of options exercised during fiscal 1994 were 15,000 shares at
$6.17 per share, 15,000 shares at $8.33 per share, 7,500 shares at $9.00 per
share, 19,880 shares at $11.13 per share and 4,000 shares at $11.20 per share.

The prices of options exercised during fiscal 1995 were 51,750 shares at
$11.13 per share, 2,000 shares at $9.67 per share, 4,750 shares at $10.00 per
share, 15,750 shares at $11.20 per share, 15,000 shares at $14.25 per share,
and 5,000 shares at $15.50 per share.

The prices of options exercised during fiscal 1996 were 9,250 shares at
$9.67 per share, 10,250 shares at $10.00 per share, 1,250 shares at $11.20 per
share, 4,050 shares at $13.67 per share, 2,000 shares at $16.75 per share,
50,000 shares at $14.25 per share, and 20,000 shares at $16.25 per share.

The options outstanding at April 30, 1996 consisted of the following:

NUMBER OF SHARES
---------------------------------------
OUTSTANDING EXERCISABLE OPTION PRICE
----------- ----------- -------------

611,116 199,366 $11.20-$14.99
1,064,600 101,500 15.00- 20.99
137,500 12,500 21.00- 21.50
--------- -------
1,813,216 313,366
========= =======

The Company has reserved 276,042 shares of Class A Common Stock for issuance
under the E for M 1991 Stock Option Plan and E for M 1991 Key Employee Stock
Option Plan. The E for M stock options outstanding on the acquisition date
were converted into stock options of the Company in conjunction with the
acquisition. Each option converted by the Company continues to have, and is
subject to, the same terms and conditions set forth in E for M's stock option
plan prior to the acquisition. The E for M stock options were converted into
276,042 stock options of the Company pursuant to this plan based on an
exchange ratio of the average price of Marquette stock at the acquisition date
to the tender price of E for M stock.

F-14

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Option activity related to this plan in fiscal 1996 was as follows:

NUMBER
OF
SHARES
UNDER
OPTION
-------

Outstanding, April 30, 1995......................................... --
Granted........................................................... 276,042
Exercised......................................................... (16,906)
Cancelled......................................................... --
-------
Outstanding, April 30, 1996......................................... 259,136
=======

The prices of the options exercised during fiscal 1996 were 12,532 shares at
$1.10 per share, 546 shares at $6.58 per share, 912 shares at $7.61 per share,
and 2,916 shares at $12.34 per share.

The options outstanding at April 30, 1996, consisted of the following:

NUMBER OF SHARES
---------------------------------------
OUTSTANDING EXERCISABLE OPTION PRICE
----------- ----------- -------------

118,924 50,367 $ 5.93-$ 8.99
90,170 74,091 9.00- 10.99
50,042 16,052 11.00- 12.76
------- -------
259,136 140,510
======= =======

On August 25, 1994, the Company's shareholders approved the Marquette
Electronics, Inc. Directors' (Non-Employee) Stock Option Plan (the "Directors'
Plan"). The Directors' Plan is designed to compensate non-employee members of
the Board of Directors by an annual grant of non-qualified options for 4,000
shares of Class A Common Stock at the then fair market value of the stock.
These options become exercisable in four equal annual installments on each of
the first four anniversaries of the date of grant and expire on the tenth
anniversary date.

The aggregate number of shares that may be issued under the Directors' Plan
shall not exceed 250,000. During fiscal 1994, options to purchase 16,000
shares were granted at $14.50 per share. During fiscal 1995, options to
purchase 20,000 shares were granted at $16.00 per share. During fiscal 1996,
options to purchase 20,000 shares were granted at $16.25 per share. All
options granted were outstanding at April 30, 1996, 20,000 shares of which
were exercisable.

(10) STOCK REPURCHASE AGREEMENTS--

By agreement, the Company is obligated to repurchase up to $4,000 worth of
Class A Common Stock from each of two shareholders, in each case at the
shareholder's death and at a price per share determined in accordance with the
agreements. Life insurance with a face value of $6,744 has been secured on the
lives of the two shareholders to fund the payments required under the
repurchase agreements. As of April 30, 1996, 444,444 shares of Class A Common
Stock were subject to these stock repurchase agreements. The amount of the
purchase price is payable within 210 days of the death of the shareholder.

(11) RESTRUCTURING OF OPERATIONS--

In fiscal 1996, the Company initiated and began to implement a plan to
restructure its worldwide operations, primarily in Europe. The restructuring
plan consists of a consolidation of European offices as well as a
corresponding reduction in the number of employees. The restructuring plan is
undertaken for purposes of

F-15

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

consolidating the distribution function in Europe in order to address
competitive conditions. In addition, the restructuring plan is necessary as
the existing Marquette operations are integrated with E for M's European
operations. In connection with these actions, the Company recorded
restructuring charges of $3,956 to operating expenses in fiscal 1996. These
charges include $1,267 of severance costs, $1,366 of facility closing costs
including asset write-offs, and $1,323 of other costs such as dealer
termination fees and related legal fees. This restructuring plan
implementation is expected to be completed by the end of fiscal 1997. As of
April 30, 1996 and October 31, 1996, $2,513 and $2,105 (unaudited),
respectively, of the restructuring charges remained in "Other current
liabilities" in the Consolidated Balance Sheets.

(12) EMPLOYEE BENEFIT PLANS--

Profit Sharing and 401(k) Plan--The Company has a Profit Sharing and 401(k)
Plan (the "Plan") covering substantially all non-union employees. The Plan
allows participants to make annual contributions ranging from 1% to 12% of
their compensation, subject to certain limitations imposed by the Internal
Revenue Code. The Company matches 25% of the Participants' contributions,
subject to maximum annual matching per participant of five hundred dollars or
1.5% of the participant's qualified compensation, whichever is greater. The
Company may make annual discretionary contributions as authorized by the Board
of Directors. Total Company contributions were $2,449, $3,300 and $3,313 in
fiscal 1994, 1995 and 1996, respectively.

Defined Benefit Plans--E for M has an unfunded noncontributory defined
pension plan covering substantially all of its German-based employees over 25
years of age and with at least 10 years of service. The benefits are based on
an employee's final month's salary and the number of years of continuous
service with E for M.

The components of net periodic pension cost for the four month period ended
April 30, 1996 are:

Service costs..................... $ 377
Interest costs.................... 1,127
Unrecognized net loss............. (503)
------
Net pension costs............... $1,001
======

The following is a reconciliation of the plan's projected benefit obligation
to the recorded pension obligation at April 30, 1996:

Accumulated benefit obligation... $41,099
=======
Vested benefit obligation........ $38,364
=======
Projected benefit obligation..... $45,339
Unrecognized net loss............ (503)
-------
Accrued pension obligation..... $44,836
=======

The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 6% and 2.75%, respectively.

Corometrics established a defined benefit pension plan for certain of its
union employees effective June 1, 1994. Pension expense charges to operations
in fiscal 1995 and 1996 were not material.

F-16

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(13) SEGMENT AND GEOGRAPHIC INFORMATION--

The Company operates primarily in one business segment, the medical
electronics equipment industry. Financial information by geographic area is
summarized as follows:

YEAR ENDED APRIL 30,
----------------------------
1994 1995 1996
-------- -------- --------

Net sales originating from:
United States............................... $236,497 $321,408 $355,689
Europe...................................... 38,283 45,634 98,137
Australia................................... 3,749 6,281 5,479
Corporate and eliminations.................. (24,721) (31,147) (43,012)
-------- -------- --------
$253,808 $342,176 $416,293
======== ======== ========
Income (loss) from operations:
United States............................... $ 29,816 $ 34,198 $ 11,307
Europe...................................... (1,247) (1,103) (27,481)
Australia................................... 62 321 (157)
Corporate and eliminations.................. (648) 480 2,575
-------- -------- --------
$ 27,983 $ 33,896 $(13,756)
======== ======== ========
Identifiable assets:
United States............................... $183,241 $237,224 $332,492
Europe...................................... 16,443 21,199 98,141
Australia................................... 1,919 2,167 2,680
Corporate and eliminations.................. 1,577 4,275 (1,595)
-------- -------- --------
$203,180 $264,865 $431,718
======== ======== ========

Transfers between geographic areas are recorded at market-based transfer
prices. Corporate assets are principally cash and cash equivalents.

Export sales, excluding sales to affiliates, totalled $25,882, $38,731 and
$39,566 in fiscal 1994, 1995 and 1996, respectively.

(14) DERIVATIVE FINANCIAL INSTRUMENTS--

The Company uses foreign currency forward exchange contracts to hedge
specific foreign currency exposures. These derivative financial instruments
are not used for trading purposes.

F-17

MARQUETTE MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) QUARTERLY DATA (UNAUDITED)--

YEAR ENDED APRIL 30, 1995
------------------------------------
1ST 2ND 3RD 4TH
-------- -------- -------- --------

Net sales.............................. $ 76,572 $ 86,720 $ 92,968 $ 85,916
Gross profit........................... 39,226 44,105 47,705 44,010
Net income (loss)...................... 4,224 5,502 6,112 3,719
Per Class A Common Share............... .26 .34 .38 .23

YEAR ENDED APRIL 30, 1996
------------------------------------
1ST 2ND 3RD 4TH
-------- -------- -------- --------

Net sales.............................. $ 81,127 $ 84,511 $110,309 $140,346
Gross profit........................... 38,641 43,843 53,578 65,284
Net income (loss)...................... 979 4,043 (30,665) 775
Per Class A Common Share............... .06 .25 (1.89) .05

YEAR ENDING
APRIL 30, 1997
-----------------
1ST 2ND
-------- --------

Net sales.............................. $124,794 $136,908
Gross profit........................... 60,385 66,310
Net income (loss)...................... 3,270 5,216
Per Class A Common Share............... .20 .32

F-18

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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, SHARES OF COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

----------------

TABLE OF CONTENTS

PAGE
----

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Recent Developments....................................................... 9
Use of Proceeds........................................................... 10
Price Range of Common Stock and Dividend Policy........................... 10
Capitalization............................................................ 11
Selected Consolidated Financial Information............................... 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 13
Business.................................................................. 18
Management................................................................ 32
Selling Shareholders...................................................... 34
Underwriting.............................................................. 35
Legal Matters............................................................. 36
Experts................................................................... 37
Available Information..................................................... 37
Incorporation of Certain Documents By Reference........................... 37
Index to Consolidated Financial Statements................................ 39

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LOGO

----------------

2,489,485 SHARES

COMMON STOCK

PROSPECTUS

MARCH 6, 1997

----------------

DILLON, READ & CO. INC.

BEAR, STEARNS & CO. INC.

ROBERT W. BAIRD & CO.
INCORPORATED

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