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SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, dated as of March 22, 2001 (the
"Agreement"), by and among Providence Capital, Inc., a Delaware corporation
("Providence Capital"), Providence Investors, LLC (together with Providence
Capital, "Providence"), Xxxxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxxx X. Xxxxx ("Xxxxx")
and Xxxxx X. Xxxxxx ("Xxxxxx", and together with Xxxxx, Xxxxxx and Providence,
the "Xxxxxx Group") and Spacelabs Medical, Inc., a Delaware corporation (the
"Company").
WHEREAS, on November 21, 2000, the Denton Group furnished the
Company with a submission (the "Advance Notice Submission") of their intention
to nominate, and solicit proxies (the "Proxy Contest") in support of, four (4)
candidates to stand for election to the Company's Board of Directors (the
"Board") at the Company's 2001 Annual Meeting of Stockholders (the "2001 Annual
Meeting"); and
WHEREAS, the Company and the members of the Denton Group have
determined that the interests of the Company and its stockholders, and the
interests of the members of the Denton Group, would best be served by (i)
avoiding the substantial expense and disruption that could be expected to result
from the Proxy Contest, (ii) nominating the persons set forth herein for
election as directors of the Company and (iii) the receipt of other agreements,
covenants, rights and benefits as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and representations set forth herein, intending to be legally bound
hereby, the parties hereby agree as follows:
1. Board Composition; Related Matters.
(a) The Company and the Denton Group agree that the eight
nominees standing for election at the 2001 Annual Meeting scheduled to be held
on May 24, 2001, shall be (i) six nominees designated by the current Board and
(ii) Messrs. Xxxxx and Hilton (the "Denton Group Nominees"), who have been
selected by the Company from the four nominees included in the Advance Notice
Submission. The foregoing persons are collectively referred to herein as the
"2001 Nominees," and shall stand for election to serve on the Board for a term
expiring at the Company's 2002 Annual Meeting of Stockholders (the "2002 Annual
Meeting") and until their respective successors shall have been duly elected and
qualified. Effective upon execution of this Agreement, the Denton Group
irrevocably withdraws its Advance Notice Submission and agrees to terminate the
Proxy Contest. Each of the Company and the Denton Group acknowledge that (i) to
the best of their knowledge, there are no circumstances that would preclude
either Messrs. Xxxxx or Hilton from serving as a member of the Board and (ii)
each of Messrs. Xxxxx and Xxxxxx are suitable nominees for election to the
Company's Board.
(b) The members of the Denton Group and their Affiliates and
Associates
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(as such terms are hereinafter defined), and the Company, shall publicly support
and recommend that the Company's stockholders vote for the election of each of
the 2001 Nominees at the 2001 Annual Meeting, and the members of the Denton
Group shall vote, and shall cause their Affiliates and Associates to vote, all
shares of the Company's Common Stock (the "Common Stock") which they are
entitled to vote at the 2001 Annual Meeting in favor of the election of each of
the 2001 Nominees. The Company agrees that it shall cause its designated proxy
holders to vote in favor of the election of each of the 2001 Nominees with
respect to any valid proxy received by the Company for the 2001 Annual Meeting
for which no contrary voting instructions are provided.
(c) If any Denton Group Nominee shall be unable or unwilling
to serve as a nominee for any reason prior to his election at the 2001 Annual
Meeting or, after election as a director of the Company at the 2001 Annual
Meeting, shall cease to be a member of the Board by reason of his death,
disability or resignation, the majority of the Board who are not Denton Group
Nominees shall be entitled to designate another person from among the five (5)
candidates identified in the Denton Group's counsel's fax to the Company's
counsel dated March 20, 2001. If any nominee, other than a Denton Group Nominee,
shall be unable or unwilling to serve as a nominee prior to his or her election
at the 2001 Annual Meeting or, after election as a director of the Company at
the 2001 Annual Meeting, shall cease to be a member of the Board by reason of
his or her death, disability or resignation, the members of the Board who are
not Denton Group Nominees shall be entitled to designate another person to serve
as a director or a nominee, as the case may be.
(d) At the first meeting of the Board following the
certification of the vote of the election of directors at the 2001 Annual
Meeting, the Board shall create a committee of the Board, to be designated the
Strategic Planning Committee (the "Committee"), consisting of three directors,
one of whom shall be Xxxx X. Xxxxxxxx, who shall act as Chairman of the
Committee, one of whom shall be Xxxxxxx X. Xxxxx, and one of whom shall be
Xxxxxxx X. Xxxxxxxx. The Committee's purpose is to review with the Company's
financial advisor and management the progress of the Company's process for
evaluating and pursuing strategic alternatives for maximizing stockholder value.
The Committee shall be entitled to make recommendations to the Board regarding
any proposed transaction. The Company agrees that prior to the Standstill
Termination Date (as hereinafter defined), it shall not take any action to (i)
disband or otherwise take any action to cause the Committee to cease to
function, (ii) decrease or limit the responsibilities of the Committee or (iii)
alter the composition of the Committee as provided in the first sentence of this
paragraph (d).
(e) At the first meeting of the Board following the
certification of the vote of the election of directors at the 2001 Annual
Meeting, the Board shall create a Nominating Committee of the Board, consisting
of three directors, one of whom shall be Xxxx X. Xxxxxxxx, who shall act as
Chairman of the Nominating Committee, one of whom shall be Xxxxxxx X. Xxxxx, and
one of whom shall be Xxxxx xxx Xxxxx. The Nominating Committee shall have
responsibility for making recommendations to the Board with respect to the
Board's nominees for election to the Board.
(f) At the first meeting of the Board following the
certification of the vote
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of the election of directors at the 2001 Annual Meeting, the Board shall appoint
Xxxxx X. Xxxxxx to the Executive Committee of the Board.
(g) Within thirty days of the date that the Denton Group
Nominees enter into a confidentiality agreement in the form attached hereto as
Exhibit A, management of the Company shall present the Denton Group Nominees
with an overview of the Company's business and a description of the Company's
strategies for enhancing stockholder value, including the steps taken to
implement those strategies.
2. Covenants of the Denton Group.
(a) The date on which the covenants and agreements contained
in this Section 2 terminate is referred to herein as the "Standstill Termination
Date." The Standstill Termination Date shall be one year from the date of this
Agreement.
(b) Each member of the Denton Group jointly and severally
agrees that during the period commencing on the date hereof and ending on the
Standstill Termination Date, without the prior written consent of the Board
specifically expressed in a resolution adopted by a majority of the directors
other than the Denton Group Nominees, they will not, and will use their best
efforts to cause each of their Affiliates and Associates not to, directly or
indirectly:
(i) acquire, offer or propose to acquire, or agree to
acquire (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of Voting
Securities (as such term is hereinafter defined) generally or to the
Company's non-employee directors pursuant to any compensatory plan of
the Company, provided, that any such securities so received shall be
subject to the provisions hereof), directly or indirectly, whether by
purchase, tender or exchange offer, through the acquisition of control
of another Person (as hereinafter defined), by joining a partnership,
limited partnership, syndicate or other "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or otherwise, any Voting Securities, if when taken
together with the Voting Securities owned by the Denton Group would
constitute more than 3% of the then outstanding Voting Securities;
(ii) except as specifically provided for in Section 1
hereof, make, or in any way participate, directly or indirectly, in any
"solicitation" (as such term is used in the proxy rules of the
Securities and Exchange Commission (the "SEC")) of proxies or consents
(whether or not relating to the election or removal of directors), seek
to advise, encourage or influence any Person with respect to the voting
of any Voting Securities, initiate, propose or otherwise "solicit" (as
such term is used in the proxy rules of the SEC) stockholders of the
Company for the approval of stockholder proposals whether made pursuant
to Rule 14a-8 under the Exchange Act or otherwise, induce or attempt to
induce any other Person to initiate any such stockholder proposal, or
otherwise communicate with the Company's stockholders or others pursuant
to Rule 14a-1(1)(2)(iv) under the Exchange Act;
(iii) make any public announcement with respect to any
proposal
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or offer involving any merger, consolidation, business combination,
tender or exchange offer, sale or purchase of assets, sale or purchase
of securities, dissolution, liquidation, restructuring, recapitalization
or similar transactions of or involving the Company or any of its
Affiliates;
(iv) form, join or in any way participate in any
"group" (within the meaning of Section 13(d)(3) of the Exchange Act)
with respect to any Voting Securities;
(v) deposit any Voting Securities in any voting trust
or subject any Voting Securities to any arrangement or agreement with
respect to the voting of any Voting Securities, except as specifically
set forth in Section 1 hereof;
(vi) execute any written consent as stockholders with
respect to the Company or its Voting Securities, except as set forth in
Section 1 hereof;
(vii) otherwise act, alone or in concert with others, to
control or seek to control or influence or seek to influence the
management, the Board or policies of the Company, including through
communications with stockholders of the Company or otherwise, other than
through non-public communications with the directors of the Company,
including the Denton Group Nominees acting in their capacity as
directors of the Company;
(viii) seek, alone or in concert with others, (a) to
call a meeting of stockholders, (b) representation on the Board, except
as specifically set forth in Section 1 hereof, or (c) the removal of any
member of the Board;
(ix) solicit, initiate or encourage any person
concerning any merger, tender offer, purchase of assets, purchase of
securities, business combination or strategic transaction involving the
Company or any of its subsidiaries;
(x) make any publicly disclosed proposal regarding any
of the foregoing;
(xi) publicly disclose any request to amend, waive or
terminate any provision of this Agreement; or
(xii) take or cause others to take any action
inconsistent with any of the foregoing.
(c) Denton Group Nominees will comply with their fiduciary
duties as directors of the Company.
(d) Notwithstanding this Section 2, the Denton Group may
provide the Company with written notice, in accordance with the Company's
by-laws, of the Denton Group's nomination of candidates for election as
directors to be elected at the 2002 Annual Meeting; provided, however, that in
the event that the Denton Group participates directly or indirectly, other than
through the Nominating Committee of the Board, in nominating candidates for
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election as directors to be elected at the 2002 Annual Meeting, Section 4(b) and
the last sentence of Section 1(d) shall no longer apply.
3. Representations and Warranties of the Xxxxxx Group.
(a) Each member of the Denton Group which is not a natural
person represents and warrants on its own behalf that it has the corporate power
and authority to execute, deliver and carry out the provisions of this Agreement
and to consummate the transactions contemplated hereby.
(b) Each member of the Denton Group which is not a natural
person represents and warrants on its own behalf that this Agreement has been
duly authorized, executed, and delivered, constitutes its valid and binding
obligation, and is enforceable against it in accordance with its terms.
(c) Each member of the Denton Group who is a natural person
represents and warrants on his own behalf that he has the power and authority to
execute, deliver and carry out the provisions of this Agreement and to
consummate the transactions contemplated hereby.
(d) Each member of the Denton Group who is a natural person
represents and warrants on his own behalf that this Agreement has been duly
executed and delivered, constitutes his valid and binding obligation, and is
enforceable against him in accordance with its terms.
(e) The members of the Denton Group represent and warrant
that they, together with their Affiliates and Associates, beneficially own an
aggregate of 170,600 shares of Voting Securities as set forth by beneficial
owner and amount on Schedule A hereto and such Voting Securities constitute all
of the Voting Securities of the Company beneficially owned by the Denton Group
and their Affiliates and Associates.
4. Representations, Warranties and Covenants of the Company.
(a) The Company hereby represents and warrants as follows:
(i) The Company has the corporate power and authority to
execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby, and
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable in accordance
with its terms.
(b) Except as required by law or the fiduciary obligations
of the Board, the Company will not amend its certificate of incorporation or
by-laws during the term of this Agreement in a manner that avoids the
performance by the Company of the terms or intent of this
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Agreement.
5. Proxy Statement. The Company and the Denton Group shall
mutually agree on the description of the Denton Nominees, this Agreement and the
circumstances related thereto to be included in the Company's proxy statement
for the 2001 Annual Meeting. Prior to the Standstill Termination Date, none of
the parties hereto will make any statements to third parties (including any
statements in any filing with the SEC or any other governmental agency) relating
to this Agreement and the circumstances related thereto (i) except, in the case
of a statement by the Company, as approved by Denton, and in the case of a
statement by any member of the Denton Group, as approved by the Company;
provided, however, that in either case such approval shall not be unreasonably
withheld, or (ii) that are inconsistent with, or are otherwise contrary to, the
statements in the proxy statement. Nothing shall preclude or prevent the Company
from making any required filings with the SEC or any other governmental agency.
In addition to the foregoing, and notwithstanding any other provision of this
Agreement, the Denton Group Nominees may not make any statements to third
parties at any time that would breach their fiduciary duties to the Company and
its stockholders or their obligations as members of the Board to maintain the
confidentiality of confidential information obtained in the course of their
service as directors of the Company.
6. Mutual Release and Waiver. Effective immediately, the Company
and the Denton Group (each, a "Releasing Party") hereby covenant not to xxx and
forever release and discharge the Denton Group and any actual or alleged member
of a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
Providence, on the one hand, and the Company, on the other hand, respectively
(and each of their respective directors, officers, representatives, employees,
counsel, Affiliates and Associates) (each, a "Released Party") from all manner
of claims, actions, causes of action or suits, at law or in equity, known or
unknown, which each now has as of the date hereof by reason of any matter, cause
or thing whatsoever relating to or arising out of the Advance Notice Submission
or the Proxy Contest, including any violation or alleged violation of Section
13(d) or Section 14(a) of the Exchange Act or the rules promulgated thereunder.
Nothing in this Agreement shall in any way constitute an agreement by any party
hereto to indemnify any other party hereto against any third party claim and
nothing in this Agreement shall in any way constitute a covenant not to xxx or a
release or discharge with respect to matters, causes or things relating to or
arising out of events occurring after the date hereof.
7. Expenses. The Company hereby agrees to reimburse the Denton
Group for their reasonable, documented, out-of-pocket expenses incurred in
connection with the Proxy Contest and the negotiation of this Agreement, in an
aggregate amount not to exceed $87,500. The Company agrees to pay such expenses
by check or wire transfer within five days of receipt of an invoice of the same,
together with supporting documentation (such as a law firm billing statement),
from the Denton Group.
8. Specific Performance. Each of the members of the Denton
Group, on the one hand, and the Company on the other, acknowledges and agrees
that irreparable injury to the other party or parties (as the case may be)
hereto would occur in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached and
that such injury would not be compensable in damages. It is accordingly agreed
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that each party hereto (the "Moving Party") shall be entitled to specific
enforcement of the terms hereof and the other parties hereto will not take
action, directly or indirectly, in opposition to the Moving Party seeking such
relief on the grounds that any other remedy or relief is available at law or in
equity.
9. No Waiver. Any waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party hereto to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
10. Certain Definitions. As used in this Agreement, (a) the term
"Person" shall mean any individual, partnership, corporation, limited liability
company, group, syndicate, trust, government or agency thereof, or any other
association or entity; (b) the terms "Affiliates" and "Associates" shall have
the meanings set forth in Rule 12b-2 under the Exchange Act and shall include
persons who become Affiliates or Associates of any Person subsequent to the date
hereof; and (c) the term "Voting Securities" shall mean the shares of Common
Stock and any other securities of the Company entitled to vote in the election
of directors, or securities convertible into, or exercisable or exchangeable
for, such Common Stock or other securities, whether or not subject to the
passage of time or other contingencies.
11. Successors and Assigns. All the terms and provisions of this
Agreement shall inure to the benefit of and shall be enforceable by the
successor and assigns of the parties hereto.
12. Survival of Representations. All representations, warranties
and agreements made by the parties in this Agreement or pursuant hereto shall
survive the date hereof.
13. Entire Agreement; Amendments. This Agreement contains the
entire understanding of the parties hereto with respect to its subject matter.
There are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings other than those expressly set forth herein. This
Agreement may be amended only by a written instrument duly executed by the
parties hereto or their respective successors or assigns.
14. Headings. The section headings contained in this Agreement
are for reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
15. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by hand delivery, telecopy
(confirmed in writing), overnight courier or by mail (registered or certified,
postage prepaid, return receipt requested) to the respective parties hereto as
follows:
If to the Company:
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Spacelabs Medical, Inc.
00000 X.X. 00xx Xxxxxx
P.O. Box 97013
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxx,
Vice President, General
Counsel and Secretary
Telecopy: 425/883-7091
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx, LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy: 202/393-5760
If to any member of the Xxxxxx Group:
Xxxxxxx X. Xxxxxx
Providence Capital, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: 212/888-3203
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: 212/969-2900
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
16. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without reference to the conflict of laws principles thereof.
17. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but each of which together shall constitute
one and the same Agreement.
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18. Xxxxxx Group Representative. Each member of the Denton Group
hereby irrevocably appoints Xxxxxxx X. Xxxxxx as such member's attorney-in-fact
and representative (the "Representative"), in such member's place and stead, to
do any and all things and to execute any and all documents and give and receive
any and all notices or instructions in connection with this Agreement and the
transactions contemplated hereby. The Company shall be entitled to rely, as
being binding on each member of the Denton Group, upon any action taken by the
Representative or upon any document, notice, instruction or other writing given
or executed by the Representative.
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IN WITNESS WHEREOF, and intending to be legally bound hereby,
each of the undersigned parties has executed or caused this Agreement to be
executed on the date first above written.
SPACELABS MEDICAL, INC.
By: /s/ Xxxx X. Xxxxxxxx
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Name: Xxxx X. Xxxxxxxx
Title: Chairman and Chief
Executive Officer
PROVIDENCE CAPITAL, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
PROVIDENCE INVESTORS, LLC
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title:
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
XXXXX X. XXXXXX
/s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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SCHEDULE A
DENTON GROUP
COMMON STOCK OWNERSHIP
PERSON SHARES
Xxxxxxx X. Xxxxxx 0
Providence Capital, Inc. 0
Providence Investors, LLC 48,000
Xxxxxxx X. Xxxxx 0
Xxxxx X. Xxxxxx 4,000
U.S. Value Investment Company plc 122,600
