_______________________________________________________________________________
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-9800
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
INCSTAR CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1254731
(State of Incorporation) (I.R.S. Employer Identification No.)
1990 Industrial Boulevard
Stillwater, Minnesota 55082
(Address of principal executive offices) (Zip Code)
(612) 439-9710
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $.01 Par Value American Stock Exchange
Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934:
None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days, Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K, [ X ].
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 20, 1996 was approximately $39,749,000.
The number of shares of the Registrant's Common Stock outstanding on March 20,
1996 was 16,413,350.
_______________________________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE:
Documents Form 10-K Reference
Proxy Statement for annual meeting to be held May 21, 1996 Part III
PART I.
ITEM 1. BUSINESS
GENERAL
INCSTAR Corporation and its subsidiaries (the "Company") develop,
manufacture, and market test kits and related products used by major hospitals,
clinical reference laboratories and researchers involved in diagnosing and
treating immunological conditions. Since December 1989, the Company has been
majority-owned by BioFin Holding International B.V. (BFHI), a subsidiary of
Sorin Biomedica Diagnostics S.p.A. (Sorin) which is an Italian affiliate of
Fiat, Inc. The Company was incorporated in Minnesota in 1975 under the name of
Immuno Nuclear Corporation. The Company's principal executive offices are
located at 1990 Industrial Boulevard, Stillwater, Minnesota, 55082.
PRODUCTS
The Company currently markets, develops and manufactures individual test
reagents and test kits, using primarily RIA, EIA, immunoturbidimetric assay
(ITA) and immunofluorescent assay (IFA) technologies for clinical diagnostic
and medical research purposes. The Company also produces and markets
histochemical antisera and natural and synthetic peptides also used in clinical
diagnostic and medical research. The Company's product focus is on diagnostic
tests for autoimmune, infectious disease, endocrinology and bone and mineral
metabolism product segments, utilizing a variety of technologies. The
immunodiagnostic market is shifting away from manual testing to automated or
semi-automated testing in an effort to reduce laboratory costs involved in
processing medical diagnostic tests. As a result, the research and development
activities of the Company are mainly focused on developing non-isotopic tests
that can be run on open instrument systems that are either currently in the
customers labs, or can be placed there in a cost effective manner.
DIAGNOSTIC AND RESEARCH KITS. The Company believes that it is one of the
largest producers of RIA products in the world. The total RIA market, however,
has been significantly decreasing in recent years due to two factors: (1)
isotopic technologies such as RIA are not easily convertible to automated
instrument testing systems and (2) disposal issues relative to radioactive
materials. Current trends in the immunodiagnostic market are to employ
technologies such as EIA, which require less labor to process test results.
Consequently, the challenge facing the Company is, and will continue to be, to
develop products that are non-isotopic and amiable to semi and fully automated
assay systems. Although the current trend in the domestic market, and to a
lesser degree in the international market, is away from manual, RIA testing,
the Company feels that its strengths in RIA manufacturing and marketing will
allow it to maintain or grow its share of this declining market. The Company
believes that in the near-term its RIA products will provide it with the
capital resources necessary to pursue new research and development activities.
RIA test procedures are used to precisely measure the extremely low
levels of certain hormones, peptides and other substances present in the human
body. Antibodies are proteins produced by higher animals in response to some
foreign material, known as the "antigen," entering the blood or tissue. The
antibody protects the animal by binding to the antigen and helping other body
mechanisms destroy it. When human hormones and peptides are injected as
antigens into a laboratory animal, the animal develops antibodies to eliminate
the antigens. Serum containing these antibodies (antiserum) is taken from the
laboratory animals and processed into a binding reagent for the specific human
hormone or peptide. The reagent is then combined with other reagents in a test
kit to create an analytical system to measure the level of that human hormone
or peptide present in the specimen to be tested.
Precise amounts of antiserum, which act as the binder, are mixed with
radioactively-labeled (isotopic) tracer antigen and a lower concentration
unlabeled antigen. The tracer antigen and the unlabeled antigen compete for
binding locations on the antibody in the antiserum. The bound antigen is
measured by a radiation counter and the level of bound antigen is calculated.
The results of this controlled procedure are repeated for several
concentrations of known antigen and a standard curve is plotted. A fluid
specimen is then taken from a patient for testing and substituted for the
unlabeled antigen. The results of the competitive binding of the tracer antigen
and the antigen in the fluid specimen are compared with the standard curve, and
the precise quantity of hormone or peptide being measured is determined. The
sensitivity and accuracy of RIA tests depend primarily upon the quality of the
binding antisera and tracer antigen.
The Company currently markets approximately 90 RIA products, primarily
used in the analysis of endocrine, neuroendocrine, bone and mineral metabolism,
therapeutic drug monitoring and thyroid function. The majority of thyroid
function testing products are marketed under the Clinical Assays product line
that the Company, together with Sorin, acquired in 1990 from Baxter
International Inc. (Baxter). Each RIA kit contains the following: an antiserum
consisting of primary antibodies and, in most cases, a reagent used to
precipitate the primary antigen antibody complex; a radioactively-labeled
antigen to act as tracer; a non-radioactive or cold antigen to act as test
calibrators; and a protocol booklet that provides specific test instructions.
The tracers in the RIA kits have shelf lives of six to twelve weeks depending
on the product. The process of RIA testing requires the use of skilled labor
in diagnostic laboratories.
The Company markets approximately 55 EIA products primarily for
infectious disease and autoimmune disorders. The basic principles of EIA
technology is very similar to RIA in that a highly specific and sensitive
reaction of an antigen and antibody must take place. With EIA, the result is
measured by color development intensity rather than radioactivity. EIA
technology uses standard laboratory procedures and facilitates throughput of
large testing volumes such as those of a large reference laboratory. EIA
product lines include the Epstein Barr Virus ("EBV") and TheraTest products, as
discussed below, and the ToRCH group of tests (toxoplasmosis, rubella,
cytomegalovirus and herpes).
The Company also markets approximately 20 products based on IFA
technology for infectious disease and autoimmune disorders. The kits based on
IFA technology are employed in sophisticated diagnostic laboratories for
antibody detection and semi-quantitation in infectious disease and autoimmune
disorders. Patient serum samples are incubated on microscope slides containing
prepared antigen substrate, for example, virus-infected mammalian cells. The
antibody, if present, will bind to the antigen. After a saline rinse which
removes unbound serum, the microscope slide is reacted with a fluorescein
conjugate which binds to antigen-antibody complexes, which formed during
initial incubation. Following a saline rinse, the slides are viewed under a
fluorescence microscope and examined for fluorescent staining on the specific
antigen sites. Immunofluorescence kits provide prepared multi-sample slides,
positive and negative reference serum controls, fluorescein conjugate, buffered
saline and mounting medium as ready-to-use stabilized reagents. The Company's
infectious disease IFA assays include Toxoplasmosis, Cytomegalovirus, Herpes
and a confirmatory test for syphilis. The autoimmune product offerings
incorporate a broad range of kits and components intended for detection of
antinuclear antibodies and anti-native DNA antibodies (useful in systemic lupus
erythematosus testing), antimitochondrial antibody testing and antithyroid
antibodies intended for diagnosis of primary biliary cirrhosis and Grave's
disease, respectively.
In addition to the distribution of those products which the Company
develops and manufactures, the Company is the exclusive distributor in the
United States and Canada of certain of Sorin's hepatitis in vitro diagnostic
products. Sorin has developed RIA and EIA microplate hepatitis tests that are
used worldwide in the diagnosis of Hepatitis A and Hepatitis B. Each of
Sorin's RIA and EIA hepatitis markers consist of 7 different marker-reagent
kits that are FDA approved.
SERUM PROTEIN MEASUREMENT. The Company currently markets 16 ITA kits for
the assessment of specific human serum proteins. Sold under the trade name
"SPQ Test System", the tests are designed for use on common automated clinical
chemistry analyzers. The ITA kits are utilized on a large number of different
automated analyzers. Consequently, the development of new instrument-specific
applications is required on an ongoing basis. Each assay is based on the
principle of immunoturbidimetric or immunonephelometric measurement of antigen-
antibody complexes. These antigen-antibody complexes are formed when patient
samples are combined with the specific antibody of the test kit. As a part of
the SPQ Test System, specific human protein controls, patient sample diluents
and specific antibodies are provided as separate products. ITA technology
offers the clinical laboratory the advantages of superior speed, precision and
automation. Included in the ITA product line are specific assays for
Apolipoprotein A-, Apolipoprotein B and Lipoprotein(a), which are useful in
cardiac risk assessment. The remaining ITA assays in the SPQ Test System are
used in the assessment of immunological disorders, nutritional status, acute
response and kidney failure.
ANTISERA PRODUCTS. The antisera product lines from the Company are used
for the analysis of human serum proteins present in the human serum. Common
clinical laboratory procedures using the antisera products include
immunofixation electrophoresis, immunoelectrophoresis and radial
immunodiffusion methods. The techniques utilized by the laboratory result in
the determination of specific protein levels and the assessment of specific
protein components following the binding of the antiserum to a specific serum
protein. The presence of the serum protein is determined by protein staining
or through the use of fluorescent or enzyme staining procedures.
BULK AND CUSTOM ANTISERA PRODUCTS. The bulk and custom antisera products
produced by the Company are used by major medical diagnostic instrumentation
manufacturers worldwide in the production of diagnostic test kits to be used on
their instruments. The Company offers an extensive line of antisera products
to human serum proteins that are monospecific, avid, and of high titer.
Antisera products are produced as nephelometric quality, standard antisera, IgG
fractions and fluorescent or enzyme conjugated preparations. The Company also
produces calibrators to be used as reference standards in conjunction with the
various antisera products offered.
Custom antisera from the Company's standard supply are also produced
according to specifications provided by customers. The Company also performs
custom immunization and development of specific antibodies upon customer
request.
HISTOCHEMICAL ANTISERA. Unlike RIA, ITA and EIA methods which are used
to analyze fluid samples taken from the human body, histochemical antisera are
utilized in an in vitro procedure to determine the presence of hormones or
peptides in body tissue. A histochemical antiserum is used as a binding
reagent for a specific hormone or peptide. Once binding has occurred, the
presence of the hormone or peptide is determined by fluorescent or enzyme
staining procedures performed on the tissue specimen. The Company's
histochemical products are used in clinical diagnoses and medical research,
frequently in conjunction with RIA, ITA or EIA technologies.
RECENT DEVELOPMENTS
Dr. Pierre M. Galletti, currently affiliated with Brown University in
Providence, Rhode Island, was appointed to the position of Chairman of the
Board effective March 1, 1995, replacing Dr. Orwin L. Carter, who resigned from
this position.
During the second quarter of 1995 the Company announced the completion
of the manufacturing transfer of its TheraTest trademark product line of
diagnostic assays to its Stillwater facility. INCSTAR acquired this Food
and Drug Administration (FDA)-cleared ELISA-based panel of autoimmune
diagnostic assays in May 1994 from TheraTest Laboratories, Inc. of
Chicago. The TheraTest products are used as a confirmatory test for the
diagnosis of rheumatoid arthritis and other connective tissue diseases
such as systemic lupus erythematosus and scleroderma. The TheraTest products
are also an extension of the Company's existing immunofluorescence autoimmunity
product line and complement the Company's Enzyme Immunoassay (EIA) product
offerings.
Also during the second quarter of 1995 the Company received approval
from the FDA for its second generation EBV diagnostic tests. EBV is the
causative agent of infectious mononucleosis, and can cause lymphomas, chronic
fatigue syndrome and a variety of other diseases in patients with a weakened
immune system. International market introduction of these tests began in the
third quarter of 1994.
The Company launched two autoimmune products in the international market
during the second quarter of 1995 -- a quantitative thyroid stimulating
autoantibodies assay (TRAb), which is used for the diagnosis of Grave's disease
and the complement activation enzyme assay (CAE) which provides general
information about the immune system in disease states such as rheumatic and
rare connective tissue disorders as well as tissue injury. The Company
received 510K clearance from the FDA in the fourth quarter of 1995 for its CAE
kit.
During the third quarter of 1995 the Company launched worldwide its
second generation Parathyroid Hormone-related Protein (PTHrP) assay. PTHrP is
the agent responsible for the condition of humoral hypercalcemia of malignancy
(HHM). This is a condition in which serum calcium is increased to potentially
life threatening levels. This assay provides customers with a superior product
that has significantly improved sensitivity and better definition of the
protein under investigation than the first generation product. This product is
being distributed as a "research use only" product in the US and is targeted to
the clinical research market. Internationally, the Company is pursuing
registration in several European countries as well as Japan.
During the third quarter of 1995, the Company experienced an increase in
demand for one of its hepatitis assays due to a competitor's kit becoming
unavailable to the market. This opportunity resulted in approximately $2.9
million in sales during 1995. The competitor re-entered the marketplace during
the first quarter of 1996. While the Company believes that a portion of these
sales may be maintained, the impact on future sales is uncertain at this time.
During the fourth quarter of 1995 the Company received the approved
licensure from the FDA for the final two assays within the Hepatitis line which
gave the Company a complete panel of seven EIA approved/licensed assays used in
the diagnosis of hepatitis A and B infections.
MARKETING
The Company's medical products are sold to commercial and public health
laboratories, blood banks, research and teaching institutions and hospital
laboratories, which use the Company's kits to conduct tests ordered by
physicians. Increased frequency of use of the Company's kits will depend, in
part, upon the acceptance by practicing physicians of the need and desirability
for measuring certain therapeutic drug, hormone, peptide and serology levels in
the evaluation of diseases and body disorders.
In North America, the Company's principal market for its medical products
includes approximately 1,200 clinical reference laboratories and 2,500
hospitals, which have laboratories that perform immunodiagnostic testing. In
the United States and Canada, the Company utilizes a direct sales force,
combined with selected independent distributors, to market its products.
The Company also utilizes foreign distributors in conjunction with a
subsidiary in the United Kingdom to market its products abroad. Since 1989
Sorin has been the distributor for the Company's products in Italy, Spain,
Portugal, Germany and the Benelux countries. As part of the 1990 acquisition
from Baxter, the Company manufactures and sells to Sorin the Clinical Assays
products for distribution in the above mentioned countries and France. Pursuant
to these arrangements, the Company recorded sales to Sorin of $7,625,000 for
the year ended December 31, 1995, which comprised 16.7% of total sales. Other
transactions entered into with Sorin and its subsidiaries are set forth in Note
6 of the Company's consolidated financial statements contained elsewhere
herein. Other than Sorin, the Company is not dependent on any single customer
for more than 15% of its business.
The Company's international sales constitute 46% of sales for the year
ended December 31, 1995; 50% of sales for the year ended December 31, 1994 and
46% of sales for the year ended December 31, 1993.
Because of the limited shelf life of the Company's radioactive tracer,
the Company delivers products by international air freight to its foreign
markets.
RESEARCH AND PRODUCT DEVELOPMENT
The ability of the Company to compete effectively in the marketplace will
depend upon the success of its efforts to improve existing products and to
develop new products, primarily non-isotopic and conducive to instrumentation,
that are useful to the medical diagnostic and research markets. The levels of
research and development expenditures by the Company during the periods shown
below were as follows:
<TABLE>
<CAPTION>
Percent of
Amount Net Sales
<S> <C> <C>
Year ended December 31, 1995 $3,748,000 8.2%
Year ended December 31, 1994 $5,069,000 11.9%
Year ended December 31, 1993 $5,719,000 13.2%
</TABLE>
The reduction in research spending in 1995 from previous years levels,
results primarily from the discontinuance of a development program discussed in
Note 2 of the financial statements contained elsewhere herein.
The Company has established scientific advisory panels for its
autoimmune and bone and mineral metabolism segments. In addition, the Company
intends to establish a third scientific panel in its infectious disease
segment. These panels are overseen by a scientific advisory board led by
INCSTAR's Chairman Dr. Pierre M. Galetti. Also, Dr. Michael Steffes, a
director of the Company, is a member of the Scientific Advisory Board. These
panels are intended to enhance and strengthen the Company's ties with the
scientific community.
MANUFACTURING
The Company manufactures its immunoassay kits and serum protein products
in two locations within the United States. It maintains manufacturing and
administration activities in its principal facility in Stillwater, Minnesota,
which consists of 120,000 square feet. Additionally, the Company is vertically
integrated into the production of bulk antisera and maintains a USDA licensed
animal facility on 116 acres in Windham, Maine (the Serum Proteins segment of
the Company's business). Management believes that it will have adequate
capability to meet its anticipated manufacturing needs in all current product
lines for the foreseeable future.
The steps involved in manufacturing the Company's immunoassay and serum
protein kits include the following: i) the isolation and production of
antigens; ii) the development and production of antibodies; iii) the design and
development of the required reagent system; iv) the iodination or conjugation
of precursors; v) the manufacture and packaging of the components in the kit
format; and vi) ongoing quality control to meet all regulatory requirements.
As a result of strategic alliances and acquisitions over the past several
years, the Company has an extensive line of immunoassay and serum protein
assays which are manufactured in a cost effective manner in a quality
environment. The Company's products and kits consist of the components
necessary to perform specific assays in consistent and reproducible fashion.
Antisera are a critical component in the products which are manufactured using
RIA, ITA, EIA and IFA technologies and the Company insures the quality of this
raw material from its source in its Serum Protein segment of the business. In
addition to these antiserums, the components of the immunoassay kits include
specialized chemical reagents, reference standards and performance data
required to properly calibrate test results. Raw materials used in these
components meet design specifications. The Company is not dependent on any
particular supplier for ongoing operations. Some raw materials critical in the
production of the Company's products have extensive lead times for supply.
Lack of supply of critical raw materials would have a materially adverse affect
on the Company. For this reason the Company continually strives to maintain
multiple sources for its most critical raw materials.
The Company maintains quality controls for the assurance of accurate and
reliable test kits and to meet FDA good manufacturing standards. The Company
also complies with procedures mandated by the Nuclear Regulatory Commission
(NRC) for the use and disposal of radioactive materials.
COMPETITION
Historically the Company has developed and marketed diagnostic and
research products serving specialized markets not adequately served by its
largest competitors. Included here are the fields of endocrinology, bone and
mineral metabolism and therapeutic drug monitoring. However, as a result of
the Company's acquisition of the Clinical Assay product lines from Baxter and
relationship with Sorin, the Company now competes with a number of the larger
immunodiagnostic companies offering similar lines of RIA and EIA products.
The Company's major competition, outside the specialty product area,
includes Abbott Diagnostics, Diagnostic Products Corporation, Hybritech, Ares-
Serono, and CIBA Corning Diagnostic Corporation. The principle elements of
competition for the Company are based upon providing quality, consistent and
reliable products and services. Price is only a factor for those tests in the
larger, more competitive markets. The Company intends to maintain its
competitive differentiation in the market by selecting new and innovative
technology approaches to both the routine and specialty market analytes. The
Company intends to develop and maintain quality customer relationships with
health care professionals.
GOVERNMENT REGULATION
Under the Medical Device Amendments of 1976, the Company is required to
file an annual registration statement with the FDA and to provide updated
device listings. The Company is also required to submit a pre-market
notification submission to the FDA for each new diagnostic product. This
submission may be either a 510(k), a premarket approval application, or a
product license application, unless the product is being distributed for
research or investigational use only. The FDA also imposes rules with respect
to good manufacturing practices (GMP). The Company believes it is in
compliance with FDA regulations. The Company also complies with foreign
government regulations, specifically for Japan, France, Germany, Canada,
England and other countries where required. These requirements include
adherence to GMP, device listings, premarket notifications, or product licenses
where applicable. Additionally, the Company is in the process of certifying
its Quality Assurance system to ISO 9000 standards and hopes to complete the
registration process under this standard by the end of 1996.
Because the Company uses radioactive isotopes in the manufacture of some
of its products, it is required to maintain licenses authorizing the
possession, use and distribution of radioactive material. The licenses were
renewed in 1993 and will expire by their terms in 1998. To maintain the
licenses, the Company is required to keep certain records and to demonstrate
continued compliance with NRC regulations and the conditions of its radioactive
licenses. Although not expected, loss of these licenses would have a
materially adverse affect on the Company.
The Company believes it is in compliance with all federal, state and
local regulations regarding the discharge of material into the environment.
Additionally, the cost to maintain licenses and meet environmental and safety
requirements is not material to the Company's consolidated financial statements
and the Company does not expect any material financial commitment in the near-
term.
FOREIGN AND DOMESTIC OPERATIONS AND INTERNATIONAL SALES
Company information with respect to foreign and domestic operations and
international sales is set forth in Note 12 to the Company's consolidated
financial statements contained elsewhere herein.
PATENTS
The Company has been issued patents covering (i) the method and
radioactive tracers used for the immunoassay of C-terminal parathyroid hormone,
(ii) bioassay for parathyroid hormone, and (iii) usage of iodinated or
fluorescent forms of cyclosporin in immunoassay kits. These patents expire on
July 26, 1999; January 17, 2000; and April 1, 2002, respectively.
The Company does not believe patent protection will be a material factor
in its operations because of the Company's proprietary know-how regarding the
production and development of its product lines. Certain other companies may
have been issued or applied for patents with respect to products or technology
manufactured by, or of interest to the Company. Management is unable at this
time to determine the impact, if any, which any such patents may have on the
Company.
LICENSES AND TRADEMARKS
The Company holds certain licenses for technology, intellectual property
and distribution rights. The Company also holds certain registered trademarks
such as CYCLO-Trac registered trademark, N-tact registered trademark and
PTH-MM registered trademark as well as several other non-registered trademarks.
The terms of these licenses and trademarks vary. The Company does not believe
that any of these licenses or trademarks is material to its business or
operations.
EMPLOYEES
As of December 31, 1995 the Company had 290 employees, including part-
time employees.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are listed below:
John J. Booth President and Chief Executive Officer since
September, 1994 and Senior Vice President and
Chief Financial Officer since May, 1992, age 41.
Mr. Booth joined the Company in December, 1989
as Vice President of Finance and Administration
and prior to that was Vice President, Controller
and Secretary of CSI from October, 1989 to
December, 1989.
Fabio Lunghi Executive Vice President and Chief Operating
Officer of the Company since September, 1994,
age 51. Prior to joining the Company, from 1986
to 1994 Mr. Lunghi was Vice President and
General Manager of the radiopharmaceutical
business unit at Sorin Biomedica, S.p.A.
Gerald L. Majewski, Ph.D. Vice President of Research and Development since
October 1992, age 46. Prior to joining the
Company, from 1983 to 1992 Dr. Majewski held a
variety of positions at Fisher
Scientific/Instrumentation Laboratory, most
recently as Director of Research and
Development, Reagents Development from 1989 to
1992.
Thomas P. Maun Vice President and Chief Financial Officer of
the Company since September, 1994 and Director
of Finance since January, 1990, age 42. Mr.
Maun joined the Company in 1987 as Corporate
Controller.
George E. Wellock Vice President of Manufacturing of the Company
since March 1991, age 46. From June 1988 to
March 1991, Mr. Wellock was Vice
President of Operations of Baxter Dade in
Cambridge, Massachusetts, a subsidiary of
Baxter International. From June 1984 to
June 1988, he served as Manufacturing Manager
for Travenol Genentech Diagnostics and
Baxter Dade.
At each annual meeting of the Board of Directors, the board elects
executive officers as necessary. Such elected officers hold office until the
next annual meeting of the directors or until their successors are elected and
qualified.
<PAGE>
ITEM 2. PROPERTIES
The Company presently owns three adjacent concrete buildings totaling
approximately 120,000 square feet located on a 14 acre site in Stillwater,
Minnesota, which is part of the metropolitan area of Minneapolis-St. Paul. One
building houses all manufacturing operations. A second building houses a
research laboratory. The third building houses the Company's executive
offices. The Company believes this capacity to be adequate for present and
future needs. The Company owns a farm operation of 116 acres and related
buildings in Windham, Maine, which houses laboratory animals.
ITEM 3. LEGAL PROCEEDINGS
The Company is engaged in routine litigation incident to its business,
which management believes will not have an adverse effect upon its operations
or consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's Common Stock is currently traded on the American Stock
Exchange (AMEX) under the symbol: "ISR". As of December 31, 1995, there were
approximately 1,425 shareholders of record holding 16,363,477 shares. The
following table sets forth for the calendar quarters indicated the high and low
sales prices as reported by the AMEX.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1994
First Quarter $ 3 15/16 $ 2 3/4
Second Quarter 3 5/16 2 3/8
Third Quarter 2 3/4 1 3/4
Fourth Quarter 2 3/8 1 11/16
<S> <C> <C>
1995
First Quarter 2 3/4 1 1/2
Second Quarter 3 3/4 2 1/2
Third Quarter 5 5/16 2 7/8
Fourth Quarter 5 3 3/4
</TABLE>
DIVIDENDS. The Company did not pay cash dividends on its common stock during
1994 or 1995. It is not currently anticipated that cash dividends will be paid
in the future on the Company's Common Stock. The Board of Directors of the
Company will review its dividend policy from time to time. Any future
determination as to the payment of dividends on the Company's Common Stock will
depend upon future earnings, results of operations, capital requirements, the
financial condition of the Company and any other factors the Board of Directors
of the Company may consider relevant.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Summary Operations Statement Year Ended
December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Domestic sales $24,494,000 $21,282,000 $23,321,000 $24,712,000 $18,601,000
International sales 21,266,000 21,221,000 19,967,000 21,272,000 19,585,000
Net sales 45,760,000 42,503,000 43,288,000 45,984,000 38,186,000
Cost of goods sold 23,271,000 22,039,000 23,007,000 22,052,000 16,450,000
Inventory valuation
adjustment --- 750,000a --- --- ---
Gross profit 22,489,000 19,714,000 20,281,000 23,932,000 21,736,000
Operating expenses:
Selling,general and
administrative 12,592,000 12,853,000 12,761,000 13,621,000 12,001,000
Research and
development 3,748,000 5,069,000 5,719,000 3,277,000 3,023,000
Unusual items --- 5,750,000a 750,000a --- ---
Total operating
expenses 16,340,000 23,672,000 19,230,000 16,898,000 15,024,000
Operating
income (loss) 6,149,000 (3,958,000) 1,051,000 7,034,000 6,712,000
Interest expense (348,000) (365,000) (472,000) (656,000) (1,551,000)
Investment and other
income (expenses) 33,000 11,000 (42,000) 73,000 116,000
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEMS 5,834,000 (4,312,000) 537,000 6,451,000 5,277,000
Provision for
income taxes 1,571,000 193,000 284,000 1,577,000 1,521,000
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 4,263,000 (4,505,000) 253,000 4,874,000 3,756,000
Extraordinary items --- --- --- --- 329,000
NET INCOME (LOSS) $ 4,263,000 $(4,505,000)$ 253,000 $ 4,874,000 $ 4,085,000
INCOME (LOSS) PER
SHARE BEFORE
EXTRAORDINARY ITEMS $ 0.26 $ (0.28)$ 0.02 $ 0.30 $ 0.23
NET INCOME (LOSS)
PER SHARE $ 0.26 $ (0.28)$ 0.02 $ 0.30 $ 0.25
Weighted average
shares and
equivalents 16,491,501 16,322,301 16,432,883 16,337,857 16,203,750
<CAPTION>
Balance Sheet Information December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total assets $38,761,000 $38,154,000 $43,426,000 $45,069,000 $43,985,000
Working capital 14,947,000 13,873,000 14,555,000 13,863,000 12,434,000
Long-term debt 3,000 4,143,000 6,501,000 8,167,000 12,295,000
Shareholders'equity 28,384,000 23,889,000 28,240,000 27,277,000 21,974,000
Book value per share 1.72 1.46 1.73 1.69 1.38
<FN>
Note 1.For information with respect to dividends, see Item 5 above.
a) Relates to the write off of certain tangible and intangible costs,
severance and related costs and inventory write downs as discussed in Note 2 to
the consolidated financial statements contained elsewhere herein.
</FN>
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Sales in 1995 were $45,760,000, an 8 percent increase from $42,503,000
in 1994. Contributing to the increase were sales from the Company's hepatitis
assays, as discussed below, and many new products introduced during the last 16
months in the Company's autoimmune disease, bone and mineral metabolism and
infectious disease market segments. These gains were partially offset by
declines in the Company's oncology and endocrinology market segments due to the
continued shift in the diagnostic industry from isotopic, manual testing to non-
isotopic, automated and semi-automated testing. 1994 sales declined 2 percent
from $43,288,000 in 1993 due to these shifts away from isotopic, manual
testing.
Domestic sales increased to $24,494,000, a 15 percent increase from 1994
sales of $21,282,000. Sales increased in the autoimmune disease market segment
due primarily to sales of an ELISA-based panel of diagnostic assays acquired
from TheraTest Laboratories, Inc. in May, 1994. The manufacturing transfer of
these tests to the Company's Stillwater facility was completed in the second
quarter of 1995. The bone and mineral metabolism market segment has been
favorably impacted by sales of the Company's Vitamin D assays. In addition,
since June, 1995, the Company has experienced an increase in demand for one of
its hepatitis assays due to a competitor's kit becoming unavailable to the
market. This opportunity resulted in approximately $2.9 million in sales
during 1995. The competitor re-entered the marketplace during the first
quarter of 1996. While the Company believes that a portion of these sales may
be maintained, the impact on future sales is uncertain at this time. Domestic
sales have continued to be negatively impacted by declines in the Company's
oncology and endocrinology market segments, as discussed above. 1994 sales
decreased from $23,321,000 in 1993 due primarily to these declines.
1995 international sales of $21,266,000 remained flat with 1994 sales of
$21,221,000. Sales were favorably impacted in 1995 due to the introduction of
a second generation Epstein Barr Virus diagnostic kit and a Thyroid Receptor
Autoantibody (TRAb) assay. Sales were negatively impacted, however, in the
serum protein segment resulting mainly from declines in demand for the
Company's bulk antisera products. 1994 sales increased from $19,967,000 in
1993 primarily due to the introduction of new products in the Company's bone
and mineral metabolism market segment.
Gross margins were 49 percent of sales in 1995 compared with 46 percent
of sales in 1994 and 47 percent in 1993. The decline in 1994 was attributable
to the $750,000 charge for excess inventories as discussed in Note 2 of the
Company's consolidated financial statements contained elsewhere herein.
Exclusive of the inventory write down, gross margins were 48 percent of sales
in 1994. Gross margins have improved during the last two years due to improved
product mix as well as efficiencies derived from operational restructuring.
Pricing pressures associated with healthcare cost containment measures, and
shifts away from isotopic testing resulting in production volume declines in
the Company's endocrinology market segment, continue to negatively impact gross
margins. Despite these negative pressures, the Company expects to maintain or
slightly improve its gross margins during 1996.
The Company's ratio of selling, general and administrative expenses to
sales was 28 percent in 1995, 30 percent in 1994 and 29 percent in 1993. These
expenses, as a percentage of sales, are expected to remain relatively
consistent with 1995.
Research and development expenses were $3,748,000 in 1995, compared with
$5,069,000 in 1994 and $5,719,000 in 1993. The continued decreases are
attributable to the discontinuance during 1994 of the Fluorescence Polarization
Immunoassay (FPIA) development project as discussed in Note 2 of the Company's
consolidated financial statements contained elsewhere herein. Exclusive of
FPIA, these expenses represent 8 percent, 9 percent and 7 percent of sales in
1995, 1994 and 1993, respectively. Research and development expenses are
projected to increase slightly due to the Company's increased emphasis on new
development activities.
Interest expense declined by 5 percent in 1995 to $348,000 compared with
$365,000 in 1994 and 26 percent from $472,000 in 1993. The decrease was
attributable to lower average debt levels. 1995 expense includes interest on
certain tax obligations.
Income tax expense was 27 percent of income before taxes or $1,571,000,
compared with $193,000 in 1994 and $284,000 in 1993. The tax expense in 1994
related primarily to book reserves and liabilities not deductible for tax
purposes until paid. These book reserves and liabilities created deferred tax
assets subject to a valuation allowance. The effective rate is expected to
decline slightly in 1996 as this valuation allowance is reduced.
Net income in 1995 was $4,263,000, or 26 cents per share, compared with
a net loss of $4,505,000, or 28 cents per share, in 1994 and net income of
$253,000, or 2 cents per share, in 1993. The 1994 loss results from $6.5
million in charges, as discussed in Note 2 to the Company's consolidated
financial statements contained elsewhere herein. 1993 net income was impacted
by a $750,000 pre-tax charge in the first quarter relating to employee
severance and related costs.
LIQUIDITY AND CAPITAL RESOURCES
INCSTAR's free cash flow (operating cash flow less investment
activities) was $5,190,000 in 1995, compared to $3,118,000 in 1994 and
$1,954,000 in 1993. These funds were used to eliminate all outstanding debt
obligations, which were in excess of $4.0 million at the beginning of the year.
The Company's ratio of total debt to total capital was 16 percent in 1994 and
20 percent in 1993.
Working capital increased to $14,947,000 at year-end 1995 from
$13,873,000 at the end of 1994, resulting from higher accounts receivable and
inventory balances associated with increased sales levels.
Capital expenditures for 1995 were $1,557,000, compared with $923,000 in
1994 and $1,535,000 in 1993. For 1996, capital expenditures are expected to be
approximately $2.8 million, primarily for manufacturing improvements and
laboratory equipment.
The Company's primary sources of liquidity are a $1 million revolving
bank credit line secured by Company assets and a $4.5 million unsecured credit
line with Fiat Finance USA, Inc. (Fiat). At year-end, the Company had no
outstanding borrowings under these credit lines. The Company anticipates that
the generation of free cash flow and the resources available within the Fiat
Group will provide sufficient sources of liquidity for planned capital and
research and development expenditures.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and financial
statement schedules are listed under Items 6, 14 (a) (1) and 14 (a) (2) of
this report and contained elsewhere herein.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
[The remainder of this page left blank intentionally.]
<PAGE>
PART III
Part III, Items 10, 11, 12 and 13, except for certain information
relating to Executive Officers included in Part I, Item 1, is omitted inasmuch
as the Company intends to file with the Securities and Exchange Commission
within 120 days of the close of the fiscal year ended December 31, 1995, a
definitive proxy statement containing such information pursuant to Regulation
14A of the Securities Exchange Act of 1934 and such information shall be deemed
to be incorporated herein by reference from the date of filing such document.
[The remainder of this page left blank intentionally.]
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
(1) Consolidated Statements of Operations - Years Ended
December 31, 1995, December 31, 1994, and
December 31, 1993
Consolidated Balance Sheets - As of December 31,
1995 and 1994
Consolidated Statements of Cash Flows - Years Ended
December 31, 1995, December 31, 1994; and
December 31, 1993
Consolidated Statements of Shareholders' Equity -
Years Ended December 31, 1995; December 31, 1994; and
December 31, 1993
Consolidated Quarterly Results (unaudited) for
the Years Ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
All other financial statement schedules not listed have been
omitted since the required information is included in the
consolidated financial statements or the notes thereto or is
not applicable or required.
(3) Exhibits:
Number Description
3.1 Restated Articles of Incorporation of INCSTAR
Corporation, as amended to date [incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-8
(File No. 33-84498)].
3.2 Bylaws of INCSTAR Corporation, as amended to date
[incorporated by reference to Exhibit 4.2 to
the Registrant's Registration Statement on Form S-8
(File No. 33-84498)].
4.1 Specimen Certificate representing the
Registrant's Common Stock [incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-3
(File No. 33-37805)].
4.2 Note Purchase Agreement, dated December 27,
1991 between the Registrant and Fiat Finance, U.S.A.
Inc. [incorporated by reference to Exhibit 4.2 to the
Registrant's Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-9800)]
4.3 Form of Warrant Certificate issued by the
Registrant in favor of Bioengineering International
B.V. (now BioFin Holding International B.V.)
[incorporated by reference to Exhibit 10.11 of the
Registrant's Registration Statement on Form S-4
(File No. 33-30785)].
4.4 Form of Purchase Rights Agreement between
Bioengineering International B.V. (now BioFin Holding
International B.V.) and the Registrant [incorporated
by reference to Exhibit 10.12 of the Registrant's
Registration Statement on Form S-4
(File No. 33-30785)].
10.1+* INCSTAR Corporation Stock Option Plan, as
amended to date, filed herewith.
10.2* Economic Value Sharing Plan [incorporated by
reference to Exhibit 10.1 of the Registrant's Report
on Form 10-K for the year ended December 31, 1994
(File No. 1-9800)].
10.3* Form of Executive Survivor Benefit Income
Continuation Agreement between the Registrant and
certain of its employees [incorporated by reference
to Exhibit 10.4 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.4* Executive Survivor Benefit Income Continuation Plan
covering certain executive officers of the Registrant
[incorporated by reference to Exhibit 10.4 of the
Registrant's Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-9800)].
10.5* Form of Employment Agreement between the Registrant
and John J. Booth [incorporated by reference to
Exhibit 10.13 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.6* Amendments to Employment Agreement between the
Registrant and John J. Booth [incorporated by
reference to Exhibit 10.8 of the Registrant's Report
on Form 10-K for the year ended December 31, 1993
(File No. 1-9800)].
10.7* Employment Continuation Agreement between the
Registrant and Orwin L. Carter [incorporated by
reference to Exhibit 10.1 of the Registrant's report
on Form 10-Q for the quarter ended September 30, 1994
(File No. 1-9800)].
10.8* Separation Agreement between the Registrant and
Jacques A. Bagdasarian [incorporated by reference to
Exhibit 10.1 of the Registrant's Report on Form 10-K
for the year ended December 31, 1994
(File No. 1-9800)].
10.9+ Form of Scientific Advisory Board agreement between
the Registrant and Dr. Pierre M. Galetti and Dr.
Michael Steffes filed herewith.
10.10+ Consulting Agreement between the Registrant and Dr.
Michael Steffes filed herewith.
10.11 Form of Distributorship Agreement between the
Registrant and Sorin Biomedica S.p.A., without
exhibits or schedules [incorporated by reference to
Exhibit 10.15 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.12 Form of Distributorship Agreement between Sorin
Biomedica S.p.A. and the Registrant [incorporated by
reference to Exhibit 10.16 of the Registrant's
Registration Statement on Form S-4
(File No. 33-30785)].
10.13 Distribution Agreement, dated October 30, 1986,
between Clinical Sciences Inc. and Sorin Biomedica
S.p.A., as amended [incorporated by reference to
Exhibit 10.17 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.14 Form of Technology Transfer Agreement between
the Registrant and Sorin Biomedica S.p.A.
[incorporated by reference to Exhibit 10.18 of the
Registrant's Registration Statement on Form S-4
(File No. 33-30785)].
10.15 Distribution and Supply Agreement between Baxter
International Inc. and the Registrant dated September
19, 1990 [incorporated by reference to Exhibit 10(b)
of the Registrant's report on Form 10-Q for the
quarter ended September 30, 1990 (File No. 1-9800)].
10.16 Product Distribution Agreement between Centocor, Inc.
and the Registrant dated December 2, 1991
[incorporated by reference to Exhibit 10.14 of the
Registrant's Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-9800)].
10.17.1 Letter agreements dated August 3, 1992 and February
19, 1993 amending the product distribution agreement
filed as Exhibit 10.15 [incorporated by reference to
Exhibit 10.14.1 of the Registrant's Report on Form
10-K for the year ended December 31, 1993
(File No. 1-9800)].
10.18 Revolving Credit, Security and Note Agreement, with
exhibits thereto, dated as of December 27, 1993
between Norwest Bank Minnesota, National Association
and the Registrant [incorporated by reference to
Exhibit 10.1 of the Registrant's Report on Form 10-K
for the year ended December 31, 1994
(File No. 1-9800)].
10.18.1 First Amendment dated January 3, 1995 to Revolving
Credit, Security and Note Agreement filed as Exhibit
10.16 [incorporated by reference to Exhibit 10.1 of
the Registrant's Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-9800)].
10.18.2 Second Amendment dated February 15, 1995 to Revolving
Credit, Security and Note Agreement filed as Exhibit
10.16 [incorporated by reference to Exhibit 10.1 of
the Registrant's Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-9800)].
10.18.3+ Third Amendment dated January 29, 1996 to Revolving
Credit, Security and Note Agreement filed as Exhibit
10.16.
10.19 Agreement for Purchase, Sale and Distribution of
Assets between TheraTest Laboratories Inc. and the
Registrant dated May 16, 1994 [incorporated by
reference to Exhibit 10.1 of the Registrant's Report
on Form 10-K for the year ended December 31, 1994
(File No. 1-9800)].
11+ Statement Re: Computation of Net Income (Loss)
Per Common Share.
21+ Subsidiaries of the Registrant.
23+ Independent Auditors' Consent
27+ Financial Data Schedules
* Executive Compensation Plans and Arrangements
+ Filed with this Annual Report on Form 10-K
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
INCSTAR CORPORATION
Dated: March 28, 1996 By: /s/John J. Booth
John J. Booth
President
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 21, 1996.
/s/Pierre M. Galetti Chairman of the Board,
Pierre M. Galletti, M.D., Ph.D. Director
/s/John J. Booth President and Director
John J. Booth (Principal Executive Officer)
/s/Thomas P. Maun Vice President and Chief Financial Officer
Thomas P. Maun (Principal Accounting and Financial
Officer)
/s/Ennio Denti Director
Ennio Denti
/s/Michael W. Steffes Director
Michael W. Steffes, M.D., Ph.D.
_________________ Director
George H. Dixon
_________________ Director
Umberto Rosa
/s/Carlo Vanoli Director
Carlo Vanoli
/s/D. Ross Hamilton Director
D. Ross Hamilton
/s/Franco Fornasari Director
Franco Fornasari
/s/Ezio Garibaldi Director
Ezio Garibaldi
<PAGE>
INCSTAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Net sales $45,760,000 $ 42,503,000 $ 43,288,000
Cost of goods sold 23,271,000 22,039,000 23,007,000
Inventory valuation adjustment --- 750,000 ---
Gross profit 22,489,000 19,714,000 20,281,000
Operating expenses:
Selling, general and
administrative 12,592,000 12,853,000 12,761,000
Research and development 3,748,000 5,069,000 5,719,000
Unusual items --- 5,750,000 750,000
Total operating expenses 16,340,000 23,672,000 19,230,000
Operating income (loss) 6,149,000 (3,958,000) 1,051,000
Interest expense (348,000) (365,000) (472,000)
Investment and other
income (expense) 33,000 11,000 (42,000)
INCOME (LOSS) BEFORE
INCOME TAXES 5,834,000 (4,312,000) 537,000
Provision for income taxes 1,571,000 193,000 284,000
NET INCOME (LOSS) $ 4,263,000 $ (4,505,000) $ 253,000
INCOME (LOSS) PER SHARE:
Net income (loss) per share $ 0.26 $ (0.28) $ 0.02
Weighted average shares
and equivalents 16,491,501 16,322,301 16,432,883
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
INCSTAR CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 460,000 $ 153,000
Restricted cash 251,000 251,000
Accounts receivable, net of allowance for
doubtful accounts of $107,000 and
$113,000, respectively 7,575,000 6,759,000
Other receivables 24,000 119,000
Inventories 13,445,000 12,368,000
Other current assets 294,000 562,000
TOTAL CURRENT ASSETS 22,049,000 20,212,000
PROPERTY AND EQUIPMENT:
Land and land improvements 1,573,000 1,573,000
Buildings and improvements 13,252,000 13,103,000
Equipment and furniture 18,170,000 16,924,000
Construction in progress 6,000 114,000
33,001,000 31,714,000
Less allowance for depreciation and
amortization (18,387,000) (16,482,000)
14,614,000 15,232,000
INTANGIBLE ASSETS 1,105,000 1,744,000
OTHER ASSETS 993,000 966,000
$ 38,761,000 $ 38,154,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 76,000 $ 278,000
Accounts payable and cash overdraft 1,914,000 2,262,000
Accrued compensation 1,972,000 1,418,000
Accrued expenses 2,928,000 2,286,000
Income taxes payable 212,000 95,000
TOTAL CURRENT LIABILITIES 7,102,000 6,339,000
LONG-TERM DEBT 3,000 4,143,000
OTHER NON-CURRENT LIABILITIES 3,272,000 3,783,000
SHAREHOLDERS' EQUITY:
Undesignated stock, authorized 5,000,000 shares - - - - - -
Common stock, par value $.01, authorized
25,000,000 shares; issued and outstanding
16,363,477 and 16,322,521 shares, respectively 164,000 163,000
Additional paid-in capital 17,940,000 17,676,000
Foreign currency translation adjustment (151,000) (118,000)
Retained earnings 10,431,000 6,168,000
TOTAL SHAREHOLDERS' EQUITY 28,384,000 23,889,000
$ 38,761,000 $ 38,154,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
INCSTAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $4,263,000 $(4,505,000) $ 253,000
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Provision for deferred taxes -- -- (79,000)
Cumulative effect of accounting
change -- -- 16,000
Provision (payments) for unusual
items and inventory valuation
adjustment (1,060,000) 5,371,000 --
Provision for retirement plans 272,000 529,000 489,000
Depreciation and amortization 2,910,000 3,395,000 3,280,000
Changes in operating assets and
liabilities:
Accounts receivable (816,000) 39,000 297,000
Other receivables 95,000 (29,000) 82,000
Inventories (1,077,000) 194,000 414,000
Other current assets 212,000 (21,000) 75,000
Accounts payable 254,000 (229,000) 156,000
Accrued compensation 554,000 (108,000) 51,000
Accrued expenses 975,000 90,000 (380,000)
Income taxes payable 320,000 (56,000) (27,000)
Other, net (33,000) 35,000 (11,000)
Net cash provided by operating
activities 6,869,000 4,705,000 4,616,000
INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment -- -- 610,000
Additions to property and equipment,
net (1,557,000) (923,000) (1,535,000)
Payments for product distribution
rights -- (599,000) (1,350,000)
Payments for intellectual property
and purchased technology (86,000) -- (508,000)
(Increase) decrease in other assets (36,000) (65,000) 121,000
Net cash used in investing activities (1,679,000) (1,587,000) (2,662,000)
FINANCING ACTIVITIES:
Net repayments under lines of credit -- (422,000) (563,000)
Net increase (decrease) in cash
overdraft (602,000) (512,000) 275,000
Increase in restricted cash -- (11,000) (10,000)
Payments on long-term debt (4,342,000) (2,364,000) (2,059,000)
Payments on officer loans -- -- 35,000
Issuance of common stock -- -- 296,000
Issuance of common stock to employees 61,000 119,000 219,000
Net cash used in financing activities (4,883,000) (3,190,000) (1,807,000)
Effects of exchange rate changes on
foreign currency cash balances -- -- 1,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 307,000 (72,000) 148,000
Cash and cash equivalents at
beginning of year 153,000 225,000 77,000
Cash and cash equivalents at end of
year $ 460,000 $ 153,000 $ 225,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
INCSTAR CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Foreign
Common Stock Additional Currency
Number of Paid-In Translation Retained
Shares Amount Capital Adjustment Earnings
<S> <C> <C> <C> <C> <C>
Balance at December 16,156,615 $ 162,000 $16,832,000 $ (137,000) $10,420,000
31, 1992
Common stock issued
under employee stock
purchase plan and
and upon exercise of
stock options 46,847 -- 219,000 -- --
Officer loans related
to options exercised -- -- 35,000 -- --
Issuance of shares
to BFHI 77,595 1,000 295,000 -- --
Compensation expense on
executive stock options -- -- 176,000 -- --
Translation adjustments -- -- -- (16,000) --
Net income -- -- -- -- 253,000
Balance at December
31, 1993 16,281,057 $ 163,000 $17,557,000 $ (153,000) $10,673,000
Common stock issued
under employee stock
purchase plan and
upon exercise of
stock options 41,464 -- 119,000 -- --
Translation adjustments -- -- -- 35,000 --
Net loss -- -- -- -- (4,505,000)
Balance at December
31, 1994 16,322,521 $ 163,000 $17,676,000 $ (118,000) $ 6,168,000
Common stock issued
under employee stock
purchase plan and
upon exercise of
stock options 40,956 1,000 61,000 -- --
Translation adjustments -- -- -- (33,000) --
Compensation expense on
executive stock options -- -- 203,000 -- --
Net income -- -- -- -- 4,263,000
Balance at December
31, 1995 16,363,477 $ 164,000 $17,940,000 $ (151,000) $10,431,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
INCSTAR CORPORATION
<TABLE>
QUARTERLY RESULTS (UNAUDITED):
(in thousands, except per share data)
<CAPTION>
Net Sales Gross Profit
Year Ended Year Ended
December 31, December 31,
Quarter 1995 1994 Quarter 1995 1994
<S> <C> <C> <S> <C> <C>
First $ 11,117 $ 10,657 First $ 5,130 $ 5,036
Second 11,041 11,188 Second 5,319 5,434
Third 11,664 10,451 Third 5,873 5,131
Fourth 11,938 10,207 Fourth 6,167 4,113
<CAPTION>
Net Income (Loss) Net Income (Loss) Per Share
Year Ended Year Ended
December 31, December 31,
Quarter 1995 1994 Quarter 1995 1994
<S> <C> <C> <S> <C> <C>
First $ 799 $ 104 First $ 0.05 $ 0.01
Second 827 (2,443) Second 0.05 (0.15)
Third 1,092 487 Third 0.07 0.03
Fourth 1,545 (2,653) Fourth 0.09 (0.16)
</TABLE>
<PAGE>
INCSTAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1_SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
INCSTAR Corporation (the "Company") is a medical immunodiagnostics
company focused on the development, production and worldwide marketing of
reagents, particularly for bone/mineral metabolism, endocrinology, infectious
and autoimmune diseases. The Company predominantly markets these products in
North America, Europe and Asia.
PRICIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of INCSTAR Corporation and its wholly-owned subsidiaries, Atlantic Antibodies,
Inc., INCSTAR Ltd. and Immuno Nuclear Export Ltd. All material inter-company
accounts and transactions have been eliminated in consolidation. Certain
amounts for periods prior to the year ended December 31, 1995 have been
reclassified to conform with the current classifications.
CASH EQUIVALENTS
Cash equivalents consist primarily of investments in mutual funds with
current maturities.
The Company's cash management system is designed to maintain zero
balances at certain banks in order to minimize interest expense by reducing
outstanding debt. Accounting records classify checks written but not presented
to these banks as cash overdraft in the balance sheet heading Accounts payable
and cash overdraft.
RESTRICTED CASH
Through December 31, 1995 the Company maintained a self insured workers
compensation insurance plan. Pursuant to the plan, the Company holds a
certificate of deposit with current maturity as a compensating balance with a
bank. These funds are restricted to assure future credit availability for the
potential self insured aggregate limits under the plan. The funds are required
to be on deposit with a bank under Minnesota state regulations and are expected
to be released in the second quarter of 1996. As of January 1, 1996, the
Company is no longer self insured.
INVENTORIES
Inventories are valued at the lower of average cost, which approximates
the first-in, first-out (FIFO) method, or market.
PROPERTY AND EQUIPMENT
Property and equipment, including equipment under capital leases, is
reported at cost less accumulated depreciation and amortization. Maintenance
and repairs are charged to expense as incurred. The Company computes
depreciation and amortization using the straight-line method based on estimated
useful lives of three to seven years for equipment and furniture and seven to
thirty years for buildings and improvements.
INTANGIBLE ASSETS
Intangible assets includes patents, trademarks, intellectual property and
purchased technology, goodwill and product distribution rights. Patents and
trademarks are amortized using the straight-line method over a five-year
period. Goodwill, which represents the cost in excess of the fair value of net
assets acquired, is amortized using the straight-line method over a ten-year
period. Intellectual property and purchased technology is amortized using the
straight line method over the properties estimated useful lives which range
from seven to ten years. Product distribution rights are amortized using the
straight line method over the life of the agreement or the estimated product
life, whichever is shorter.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard (SFAS) No. 109. Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
INCOME (LOSS) PER SHARE
Income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and common stock equivalents,
consisting of stock options and warrants, outstanding during the period. For
all periods presented, fully diluted and primary income or loss per share are
the same. For 1994, the effects of stock options and warrants were excluded
from the computation of weighted average shares outstanding because their
effects were antidilutive.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated at rates of
exchange in effect at period end. Statement of operations amounts are
translated at the average rate of exchange for the period. Gains and losses
resulting from translation are accumulated in a separate component of
shareholders' equity. Foreign currency transaction gains and losses, which are
not material, are included in the consolidated statements of operations.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" in March, 1995. This statement will be effective for the
Company's year ended December 31, 1996. Management believes that adoption of
this pronouncement will not have a significant impact on the financial position
or results of operations of the Company.
In addition, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Awards for Stock-Based Compensation to Employees" in October,
1995. This statement will be effective for the Company's year ended December
31, 1996. Management intends to adopt the disclosure provisions of SFAS No.
123 during 1996.
NOTE 2_ UNUSUAL ITEMS AND INVENTORY VALUATION ADJUSTMENTS
In December, 1994 the Company recorded a $750,000 charge related to the
write down of excess inventories and a $2,450,000 unusual charge related to the
termination of certain distribution and supply agreements ($540,000) as well as
severance and other costs related to senior management changes ($1,910,000).
Amounts remaining to be paid at December 31, 1995 pursuant to this charge are
$498,000 included in Accrued expenses and $102,000 included in Other non-
current liabilities, exclusive of amounts included in Note 9, Executive
Retirement Plans. The non-current portion will be paid in 1997.
In May, 1994 the Company discontinued the development of certain purchased
technology acquired in 1992 from Robert Dowben Associates, a diagnostic
research company, and incurred a one-time pre-tax charge of $3,300,000. The
majority of this charge related to the write off of tangible and intangible
assets ($1,560,000), costs incurred to terminate contracts with outside vendors
and consultants ($797,000), as well as severance and related costs for
terminated employees ($943,000). Amounts remaining to be paid at December 31,
1995 pursuant to this charge, exclusive of amounts included in Note 9,
Executive Retirement Plans, are $49,000, and are included in Accrued expenses.
In March, 1993 the Company reduced its workforce by approximately 40
positions, or 10% of its employee base. This resulted in a $750,000 pre-tax
charge to earnings for severance and related costs. None of this amount
remains to be paid on December 31, 1995. This reduction was accomplished
through lay-offs and elimination of open positions.
NOTE 3 - INVENTORIES
<TABLE>
Inventories consist of the following:
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
Raw materials $ 2,281,000 $ 2,242,000
Work in progress 9,421,000 8,521,000
Finished goods 1,743,000 1,605,000
$ 13,445,000 $ 12,368,000
</TABLE>
NOTE 4 - INTANGIBLE ASSETS
<TABLE>
Intangible assets consist of the following:
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
Patents $ 717,000 $ 717,000
Trademarks 17,000 17,000
Goodwill 619,000 619,000
Intellectual property and purchased 734,000 648,000
technology
Product distribution rights 2,700,000 2,700,000
4,787,000 4,701,000
Less accumulated amortization (3,682,000) (2,957,000)
$ 1,105,000 $ 1,744,000
</TABLE>
NOTE 5_LONG-TERM DEBT, LEASE AND ROYALTY COMMITMENTS
<TABLE>
Long-term debt consists of the following:
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
Long-term note from affiliate due December
1996, interest at LIBOR plus 125 basis $ --- $ 4,020,000
points
Capitalized lease obligations, 8.0%,
due through 1996 72,000 390,000
Other 7,000 11,000
79,000 4,421,000
Less current portion (76,000) (278,000)
Total long-term debt $ 3,000 $ 4,143,000
</TABLE>
The Company has a revolving line of credit from a bank which provides for
maximum borrowings of $1,000,000 through January 31, 1996 and is secured by
accounts receivable. This credit line has been renegotiated for another one-
year term at the prime interest rate or LIBOR plus 2.50%. In addition, the
Company has a $4,500,000 revolving line of credit with Fiat Finance U.S.A.,
Inc. which expires on April 29, 1996. It is anticipated that this credit line
will continue to be renewed at one year terms.
At December 31, 1995 and 1994, property and equipment includes capital
lease costs of $842,000 and accumulated amortization of $773,000 and $615,000,
respectively. Lease amortization included in depreciation was $158,000 for the
year ended December 31, 1995 and $264,000 for the year ended December 31, 1994.
Aggregate annual maturities of long-term debt are $76,000 in 1996 and
$3,000 in 1997. These amounts include payments on capitalized leases, net of
$2,000 representing future interest payments.
The Company leases certain manufacturing and other equipment in
connection with its normal operations. Rent expense under these operating
leases was $295,000 for the year ended December 31, 1995 and $238,000 for the
year ended December 31, 1994. Future minimum lease payments for all
noncancelable operating leases having a remaining term in excess of one year
are as follows: 1996_$226,000; 1997_$145,000; 1998_$21,000.
The Company is obligated to make royalty payments under several
distribution and licensing agreements. The majority of these agreements call
for payments based on a percentage of sales and contain no minimum royalty
clause. Royalty expense under these agreements was $1,715,000 in 1995,
$1,099,000 in 1994 and $1,564,000 in 1993.
NOTE 6 - RELATED PARTY TRANSACTIONS
<TABLE>
As part of the ongoing operations of the Company, various transactions
were entered into during 1995, 1994 and 1993 with its affiliates, Sorin
Biomedica S.p.A. and its subsidiaries (Sorin), an affiliate of the Fiat group,
and Fiat Finance U.S.A., Inc. The following tables summarize transactions and
related year end balances:
<CAPTION>
Operating Sorin Fiat Finance U.S.A., Inc.
Statement Data: Year Ended December 31, Year Ended December 31,
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Product sales $7,625,000 $6,903,000 $6,842,000 $ --- $ --- $ ---
Product purchases 1,807,000 1,248,000 1,240,000 --- --- ---
Royalty expense 582,000 176,000 211,000 --- --- ---
Interest expense --- --- --- 170,000 312,000 389,000
<CAPTION>
Balance Sheet Data:
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Assets
Trade receivables $1,965,000 $ 1,743,000 $ --- $ ---
Other receivables 6,000 5,000 --- ---
Liabilities
Accounts payable $ 675,000 $ 389,000 $ --- $ ---
Accrued royalty 480,000 47,000 --- ---
Accrued interest --- --- 4,000 3,500
Long-term debt --- --- --- 4,020,000
</TABLE>
NOTE 7_INCOME TAXES
<TABLE>
The provision for income taxes is summarized as follows:
<CAPTION>
Year Ended December 31, Federal State Foreign Total
<S> <C> <C> <C> <C>
1995
Current $1,505,000 $ 89,000 $ (23,000) $ 1,571,000
Deferred - - - - - - - - - - - -
Provision for Income Taxes $1,505,000 $ 89,000 $ (23,000) $ 1,571,000
1994
Current $ 123,000 $ 34,000 $ 36,000 $ 193,000
Deferred - - - - - - - - - - - -
Provision for Income Taxes $ 123,000 $ 34,000 $ 36,000 $ 193,000
1993
Current $ 428,000 $ (58,000) $ (7,000) $ 363,000
Deferred (79,000) - - - - - - (79,000)
Provision for Income Taxes $ 349,000 $ (58,000) $ (7,000) $ 284,000
</TABLE>
<TABLE>
The provision for income taxes differs from the statutory federal tax
rate of 34% applied to income (loss) before income taxes as follows:
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Federal tax calculated at the
statutory rate $1,984,000 $(1,466,000) $ 183,000
Tax credits - - - - - - (120,000)
Change in the valuation allowance
for deferred taxes (532,000) 1,872,000 528,000
Amortization and depreciation of
intangible and fixed assets acquired 34,000 34,000 34,000
Exempt income attributable to
foreign sales (333,000) (288,000) (269,000)
Tax differential of foreign
subsidiary income 6,000 13,000 6,000
State taxes, net of federal benefit 59,000 22,000 52,000
State refunds, net of federal tax benefit - - - - - - (90,000)
Compensation expense on executive
stock options 203,000 - - - 47,000
Other, net 150,000 6,000 (87,000)
Provision for income taxes $1,571,000 $ 193,000 $ 284,000
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1994 are as follows:
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due
to allowance for doubtful accounts $ 29,000 $ 32,000
Accrued vacation pay 27,000 33,000
Inventories, reserves and additional
costs inventoried for tax purposes 728,000 798,000
Patents, due to different book and tax lives 27,000 30,000
Retirement plans 1,066,000 984,000
Tax credits 492,000 527,000
Net operating loss carryforward --- 72,000
Severance and related costs not
currently deductible 189,000 650,000
Other 26,000 75,000
Gross deferred tax assets 2,584,000 3,201,000
Valuation allowance (2,553,000) (3,084,000)
Net deferred tax asset $ 31,000 $ 117,000
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation and
capitalized interest $ 41,000 $ 127,000
Other 5,000 5,000
Deferred tax liability $ 46,000 $ 132,000
Total net deferred tax liability $ ( 15,000) $ ( 15,000)
</TABLE>
At December 31, 1995, the Company has research and development tax credits of
$492,000, expiring in years through 2005.
NOTE 8_EMPLOYEE SAVINGS RETIREMENT AND VALUE SHARING PLAN
The Company adopted a Salary Savings Plan under Section 401(k) of the
Internal Revenue Code, effective November 1, 1985. Participants make pre-tax
contributions of up to 15% of their wages subject to an annual limit of $9,500.
The Company is required to match 50% of that portion of the participant's pre-
tax contribution which does not exceed 6% of the participant's compensation.
The Company contributed $262,000 for the year ended December 31, 1995, $273,000
for the year ended December 31, 1994, and $230,000 for the year ended December
31, 1993.
In 1994 the Company changed its profit sharing plan to a non-contributory
value sharing plan. Cash payments to all eligible employees are based on the
improvement in economic value as well as a targeted performance factor for
economic value added (EVA). The Company incurred $984,000 and $0 expense under
this plan for the years ended December 31, 1995 and 1994, respectively.
Prior to the adoption of an EVA value sharing plan the Company sponsored
a non-contributory profit sharing plan covering all eligible employees. Cash
payments to participants were based on a sliding scale of pre-tax income. There
was no expense under this plan for the year ended December 31, 1993.
NOTE 9_EXECUTIVE RETIREMENT PLANS
The Company has individual retirement agreements with certain current and
prior executive officers which are intended to provide continued compensation
to such individuals or their respective beneficiaries upon the later of their
retirement from the Company after attainment of sixty years of age (fifty-five
years of age for one plan participant) or attainment of sixty years of age
(fifty-five years of age for one plan participant) following termination of
employment, or upon death during the term of employment (the "triggering
events"). Subject to vesting requirements, the retirement agreements provide
for the payment to these individuals or their respective beneficiaries, of
annual benefits for a period of fifteen years following the occurrence of a
triggering event. The amount of annual benefits is adjusted annually to
reflect changes in the cost of living. The annual benefit amounts vest at the
rate of 10% per year.
The Company maintains an executive income continuation plan for the
benefit of executive officers not covered under the agreements discussed above.
The plan provides payments for fifteen years to such officers or their
respective beneficiaries upon the later of an officer's retirement from the
Company after attainment of sixty years of age or attainment of sixty years of
age following termination of employment, or upon death during the term of
employment. The annual retirement payment is the product of an annual benefit
rate set by the Board of Directors ($3,333 for 1995) multiplied by the number
of years of employment, up to a maximum of fifteen years, and as adjusted to
reflect the cost of living changes during the payment period. An officer's
rights under the plan are fully vested after ten years of employment.
In connection with both of the above plans, included in other noncurrent
liabilities at December 31, 1995 and 1994 is $3,136,000 and $2,895,000,
respectively, representing the present value of the future liability. Also,
included in Accrued expenses at December 31, 1995 is $31,000 representing the
current portion of this liability. The Company intends to fund this obligation
through life insurance contracts on the individual executives. Included in
Other assets at December 31, 1995 and 1994 is $934,000 and $905,000,
respectively, of cash surrender value in connection with these policies.
NOTE 10_EMPLOYEE STOCK PURCHASE AND OPTION PLAN
The Company's Employee Stock Purchase Plan enables eligible employees to
purchase the Company's Common Stock at the lower of 85% of the fair market
value on the first or the last day of each plan year. The number of shares
reserved for sale under this plan is 300,000, of which 250,127 shares have been
sold.
Under the Company's Stock Option Plan, as amended, stock options are
awarded to key employees, consultants and directors at a price equal to the
fair market value at the date of grant. All options have five or ten year
terms and become exercisable in varying amounts after the grant date.
<TABLE>
A summary of activity under the Company's various options plans follows:
<CAPTION>
Shares Options Outstanding
reserved Option
for grant Shares price
<S> <C> <C> <C>
Balance December 31, 1992 109,968 582,875 $ 1.44/8.50
Exercised --- (13,500) 2.50/3.63
Canceled 49,200 (49,200) 3.63/8.25
Granted (322,000) 322,000 3.375/5.63
Additional shares reserved
-1989 plan as amended 500,000 --- ---
Balance December 31, 1993 337,168 842,175 $ 1.44/8.50
Exercised --- (1,500) 1.44/2.50
Canceled 136,000 (136,000) 2.50/8.50
Granted (119,000) 119,000 2.50/3.00
Balance December 31, 1994 354,168 823,675 $ 2.50/8.50
Exercised outside the plan (1,000) 1.44
Canceled 206,000 (206,000) 2.50/8.25
Canceled outside the plan (14,035) 1.44/2.50
Granted (103,000) 103,000* 2.375/4.75
Balance December 31, 1995 457,168 705,640 $ 2.375/8.25
</TABLE>
As of December 31, 1995 options for 464,923 shares were exercisable at
prices ranging from $1.44 to $8.25 per share. *Includes 12,000 options issued
subject to approval at the Company's annual shareholder meeting to be held May
21, 1996.
NOTE 11_SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 192,000 $ 369,000 $ 474,000
Income taxes, net 1,151,000 242,000 390,000
Schedule of non-cash investing and
financing activities:
Capital lease obligations incurred under
new equipment leases --- --- 510,000
</TABLE>
NOTE 12_GEOGRAPHIC SEGMENT DATA
<TABLE>
Comparative geographical data for the Company's operations is summarized
as follows:
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
SALES
United States $ 24,494,000 $ 21,282,000 $ 23,321,000
Europe 13,110,000 12,478,000 12,562,000
Asia 4,798,000 5,290,000 3,949,000
Other Foreign 3,358,000 3,453,000 3,456,000
Total $ 45,760,000 $ 42,503,000 $ 43,288,000
OPERATING INCOME
United States $ 3,515,000 $ 877,000 $ 638,000
Europe 938,000 639,000 388,000
Asia 971,000 290,000 76,000
Other Foreign 725,000 736,000 699,000
6 ,149,000 2,542,000 1,801,000
Unusual items --- (5,750,000) (750,000)
Inventory valuation adjustment --- (750,000) ---
Other expenses, net (315,000) (354,000) (514,000)
Income (loss) before income taxes $ 5,834,000 $ (4,312,000) $ 537,000
TOTAL ASSETS
United States $ 38,059,000 $ 37,272,000 $ 42,615,000
Europe 702,000 882,000 811,000
Asia --- --- ---
Other Foreign --- --- ---
Total $ 38,761,000 $ 38,154,000 $ 43,426,000
</TABLE>
NOTE 13_WARRANTS AND STOCK PURCHASE RIGHTS
The Company has issued to BFHI a warrant to purchase up to 730,720 shares
of Common Stock at the prevailing market price and has granted BFHI the right
to purchase additional Common Stock at a price identical to any new issuances.
These agreements enable BFHI to maintain a minimum 51% ownership in the
Company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of INCSTAR Corporation:
We have audited the consolidated financial statements of INCSTAR
Corporation and subsidiaries as listed in the accompanying index in Item
14(a)(1) on page 17. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedule as
listed in the accompanying index in Item 14(a)(2) on page 17. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of INCSTAR
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material aspects, the
information set forth therein.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 26, 1996
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
INCSTAR CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Charged
the to Balance at
Beginning Charged Other the
of to Costs & Accounts Deductions End of
Period Expenses Describe (Describe) Period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts receivable:
Year ended December
31, 1995 $113,000 $ 16,000 $ - - $22,000(A) $107,000
Year ended December
31, 1994 195,000 23,000 - - 105,000(A) 113,000
Year ended December
31, 1993 170,000 39,000 - - 14,000(A) 195,000
<FN>
(A) Uncollectible accounts written off, net of recoveries
</FN>
</TABLE>
EXHIBIT INDEX
(a) List of documents filed as part of this report:
(1) Consolidated Statements of Operations - Years Ended
December 31, 1995, December 31, 1994, and December 31,
1993
Consolidated Balance Sheets - As of December 31,
1995 and 1994
Consolidated Statements of Cash Flows - Years
Ended December 31, 1995, December 31, 1994; and
December 31, 1993
Consolidated Statements of Shareholders' Equity -
Years Ended December 31, 1995; December 31, 1994; and
December 31, 1993
Consolidated Quarterly Results (unaudited) for
the Years Ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
All other financial statement schedules not listed have been
omitted since the required information is included in the
consolidated financial statements or the notes thereto or is
not applicable or required.
(3) Exhibits:
Number Description
3.1 Restated Articles of Incorporation of INCSTAR
Corporation, as amended to date [incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-8
(File No. 33-84498)].
3.2 Bylaws of INCSTAR Corporation, as amended to date
[incorporated by reference to Exhibit 4.2 to
the Registrant's Registration Statement on Form S-8
(File No. 33-84498)].
4.1 Specimen Certificate representing the
Registrant's Common Stock [incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-3
(File No. 33-37805)].
4.2 Note Purchase Agreement, dated December 27, 1991
between the Registrant and Fiat Finance, U.S.A. Inc.
[incorporated by reference to Exhibit 4.2 to the
Registrant's Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-9800)]
4.3 Form of Warrant Certificate issued by the Registrant
in favor of Bioengineering International B.V. (now
BioFin Holding International B.V.) [incorporated by
reference to Exhibit 10.11 of the Registrant's
Registration Statement on Form S-4
(File No. 33-30785)].
4.4 Form of Purchase Rights Agreement between
Bioengineering International B.V. (now BioFin Holding
International B.V.) and the Registrant [incorporated
by reference to Exhibit 10.12 of the Registrant's
Registration Statement on Form S-4
(File No. 33-30785)].
10.1+* INCSTAR Corporation Stock Option Plan, as amended to
date, filed herewith.
10.2* Economic Value Sharing Plan [incorporated by
reference to Exhibit 10.1 of the Registrant's Report
on Form 10-K for the year ended December 31, 1994
(File No. 1-9800)].
10.3* Form of Executive Survivor Benefit Income
Continuation Agreement between the Registrant and
certain of its employees [incorporated by reference
to Exhibit 10.4 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.4* Executive Survivor Benefit Income Continuation Plan
covering certain executive officers of the Registrant
[incorporated by reference to Exhibit 10.4 of the
Registrant's Report on Form 10-K for the year ended
December 31, 1993 (File No. 1-9800)].
10.5* Form of Employment Agreement between the Registrant
and John J. Booth [incorporated by reference to
Exhibit 10.13 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.6* Amendments to Employment Agreement between the
Registrant and John J. Booth [incorporated by
reference to Exhibit 10.8 of the Registrant's Report
on Form 10-K for the year ended December 31, 1993
(File No. 1-9800)].
10.7* Employment Continuation Agreement between the
Registrant and Orwin L. Carter [incorporated by
reference to Exhibit 10.1 of the Registrant's report
on Form 10-Q for the quarter ended September 30, 1994
(File No. 1-9800)].
10.8* Separation Agreement between the Registrant and
Jacques A. Bagdasarian [incorporated by reference to
Exhibit 10.1 of the Registrant's Report on Form 10-K
for the year ended December 31, 1994
(File No. 1-9800)].
10.9+ Form of Scientific Advisory Board agreement between
the Registrant and Dr. Pierre M. Galetti and Dr.
Michael Steffes filed herewith.
10.10+ Consulting Agreement between the Registrant and
Dr. Michael Steffes filed herewith.
10.11 Form of Distributorship Agreement between the
Registrant and Sorin Biomedica S.p.A., without
exhibits or schedules [incorporated by reference to
Exhibit 10.15 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.12 Form of Distributorship Agreement between Sorin
Biomedica S.p.A. and the Registrant [incorporated by
reference to Exhibit 10.16 of the Registrant's
Registration Statement on Form S-4
(File No. 33-30785)].
10.13 Distribution Agreement, dated October 30, 1986,
between Clinical Sciences Inc. and Sorin Biomedica
S.p.A., as amended [incorporated by reference to
Exhibit 10.17 of the Registrant's Registration
Statement on Form S-4 (File No. 33-30785)].
10.14 Form of Technology Transfer Agreement between the
Registrant and Sorin Biomedica S.p.A. [incorporated
by reference to Exhibit 10.18 of the Registrant's
Registration Statement on Form S-4
(File No. 33-30785)].
10.15 Distribution and Supply Agreement between Baxter
International Inc. and the Registrant dated September
19, 1990 [incorporated by reference to Exhibit 10(b)
of the Registrant's report on Form 10-Q for the
quarter ended September 30, 1990 (File No. 1-9800)].
10.16 Product Distribution Agreement between Centocor, Inc.
and the Registrant dated December 2, 1991
[incorporated by reference to Exhibit 10.14 of the
Registrant's Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-9800)].
10.17.1 Letter agreements dated August 3, 1992 and
February 19, 1993 amending the product distribution
agreement filed as Exhibit 10.15 [incorporated by
reference to Exhibit 10.14.1 of the Registrant's
Report on Form 10-K for the year ended December 31,
1993 (File No. 1-9800)].
10.18 Revolving Credit, Security and Note Agreement, with
exhibits thereto, dated as of December 27, 1993
between Norwest Bank Minnesota, National Association
and the Registrant [incorporated by reference to
Exhibit 10.1 of the Registrant's Report on Form 10-K
for the year ended December 31, 1994
(File No. 1-9800)].
10.18.1 First Amendment dated January 3, 1995 to Revolving
Credit, Security and Note Agreement filed as Exhibit
10.16 [incorporated by reference to Exhibit 10.1 of
the Registrant's Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-9800)].
10.18.2 Second Amendment dated February 15, 1995 to Revolving
Credit, Security and Note Agreement filed as Exhibit
10.16 [incorporated by reference to Exhibit 10.1 of
the Registrant's Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-9800)].
10.18.3+ Third Amendment dated January 29, 1996 to Revolving
Credit, Security and Note Agreement filed as Exhibit
10.16.
10.19 Agreement for Purchase, Sale and Distribution of
Assets between TheraTest Laboratories Inc. and the
Registrant dated May 16, 1994 [incorporated by
reference to Exhibit 10.1 of the Registrant's Report
on Form 10-K for the year ended December 31, 1994
(File No. 1-9800)].
11+ Statement Re: Computation of Net Income (Loss)
Per Common Share.
21+ Subsidiaries of the Registrant.
23+ Independent Auditors' Consent
27+ Financial Data Schedules
* Executive Compensation Plans and Arrangements
+ Filed with this Annual Report on Form 10-K
EXHIBIT 10.1
INCSTAR CORPORATION
STOCK OPTION PLAN
(as amended September 14, 1995)
1. Purpose of Plan.
This Plan shall be known as the "INCSTAR Corporation Stock Option Plan"
and is hereinafter referred to as the "Plan". The purpose of the Plan is to
aid in attracting and retaining key personnel, consultants or independent
contractors of INCSTAR or any of its subsidiaries and members of the Scientific
Advisory Board and the Scientific Advisory Panels, in order to assure the
future success of INCSTAR Corporation, a Minnesota corporation ("INCSTAR"), to
offer such personnel additional incentives to put forth maximum efforts for the
success of the business of INCSTAR, and to afford such personnel an opportunity
and incentive to acquire a proprietary interest in INCSTAR and in its future
success and progress. Options granted under this Plan may be either incentive
stock options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or options which do
not qualify as Incentive Stock Options.
2. Stock Subject to Plan.
Subject to the provisions of Section 14 hereof, the stock that is subject
to options under the Plan is shares of INCSTAR's authorized common stock, par
value $0.1 per share (the "Common Stock"). Subject to adjustment as provided
in Section 14 hereof, the maximum number of shares with respect to which
options may be exercised under this Plan shall be 1,200,000 shares. If an
option under the Plan expires or for any reason is terminated without being
exercised with respect to any shares, or for any other reason is or becomes
unexercisable with respect to any shares, such shares shall again be available
for options thereafter granted during the term of the Plan.
3. Administration of Plan.
(a) The Plan shall be administered by a committee (the "Committee")
consisting of two or more "outside directors" of INCSTAR, who satisfy the
requirements of Section 162(m) of the Code and who are "disinterested persons"
with respect to the Plan within the meaning of Rule 16b-3(c)(2)(i) under the
Securities Exchange Act of 1934 as presently in effect or as hereafter modified
or amended. The members of the Committee shall be appointed by and serve at
the pleasure of the Board of Directors.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan, to: (i) determine (A) the
purchase price of the shares covered by each option, (B) the employees to whom
and the times at which such options shall be granted and the number of shares
to be subject to each option, (C) the terms of exercise of each option, (D) the
form of payment to be made upon the exercise of an SAR as provided in Section
10 hereof of each option and (E) whether an option will be an Incentive Stock
Option; (ii) accelerate the time at which all or any part of an option may be
exercised; (iii) amend or modify the terms of any option with the consent of
the optionee; (iv) interpret the Plan; (v) prescribe, amend and rescind rules
and regulations relating to the Plan; (vi) determine the terms and provisions
of each option agreement under this Plan (which agreements need not be
identical), and (vii) make all other determinations necessary or advisable for
the administration of the Plan, subject to the exclusive authority of the Board
of Directors under Section 15 hereof to amend or terminate the Plan. The
Committee's determinations with respect to such matters, unless otherwise
disapproved by the Board of Directors of INCSTAR, shall be final and
conclusive.
(c) The Committee shall select one of its members as its chairman and
shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any
decision or determination reduced to writing and signed by all of the members
of the Committee shall be fully effective as if it had been made by a majority
vote at a meeting duly called and held. The Committee may appoint a secretary
and may make such rules and regulations for the conduct of its business as it
shall deem advisable.
4. Eligibility.
Incentive Stock Options may be granted under this Plan only to full or
part-time employees of INCSTAR or any of its subsidiaries, including officers
and directors of INCSTAR and such subsidiaries who are also employees. Options
which do not qualify as Incentive Stock Options and SARs may be granted under
this Plan to any full or part-time employee of INCSTAR or any of its
subsidiaries, including officers and directors of INCSTAR and such
subsidiaries, to consultants or independent contractors of INCSTAR or any of
its subsidiaries, including members of the Scientific Advisory Board and the
Scientific Advisory Panels as provided in Section 19 hereof, and to nonemployee
directors of INCSTAR as provided in Section 9 hereof. In determining the
persons to whom options or SARs shall be granted and the number of shares
subject to each option, the Committee may take into account the nature of
services rendered by the proposed grantees, their past, present and potential
contributions to the success of INCSTAR, and such other factors as the
Committee in its discretion shall deem relevant. A person who has been granted
an option or SAR under this Plan may be granted an additional option or options
or SAR or SARs under the Plan if the Committee shall so determine; provided,
however, that to the extent that the aggregate fair market value determined at
the time an Incentive Stock Option is granted of the stock with respect to
which all Incentive Stock Options owned by an optionee are exercisable for the
first time by such optionee during any calendar year under all plans of his
employer corporation and its parent and subsidiary corporations exceeds
$100,000, such options shall be treated as options that do not qualify as
Incentive Stock Options.
5. Price.
The option price for all Incentive Stock Options granted under the Plan
shall be determined by the Committee but shall not be less than 100% of the
fair market value of the Common Stock at the date of granting of such options.
Except as provided in Section 9 hereof, the option price for options granted
under the Plan which do not qualify as Incentive Stock Options shall also be
determined by the Committee, but shall not be less than 50% of the fair market
value of the Common Stock at the date of granting of such options. For such
purposes and for all other valuation purposes under the Plan, the fair market
value of the Common Stock shall be as reasonably determined by the Committee,
but shall not be less than (a) the closing price of the Common Stock as
reported for composite transactions, if the Common Stock is then traded on a
national securities exchange, or (b) the last sale price of the Common Stock if
the Common Stock is then quoted on the NASDAQ National Market System, or (c)
the average of the closing representative bid and asked prices of the Common
Stock as reported on NASDAQ on the date as of which fair market value is being
determined, or (d) if the Common Stock is not publicly traded, such value as
the Committee shall in good faith determine after taking into account such
facts and circumstances and taking such action as it determines are
appropriate.
6. Term.
Subject to the provisions of Sections 9, 11 and 19 hereof, each option and
all rights and obligations thereunder shall expire on the date determined by
the Committee and specified in the option agreement with respect thereto, which
date shall be no later than the tenth anniversary of the date of grant. The
Committee shall be under no duty to provide terms of like duration for options
granted under the Plan.
7. Exercise of Option.
(a) Subject to the provisions of Section 11 hereof, the Committee shall
have full and complete authority to determine whether an option will be
exercisable in full at any time or from time to time during the term of the
option, or to provide for the exercise thereof in such installments, upon the
occurrence of such events and at such times during the term of the option as
the Committee may determine.
(b) The exercise of any option shall only be effective at such time as
the sale of Common Stock pursuant to such exercise will not violate any state
or federal securities or other laws.
(c) An optionee electing to exercise an option shall give written notice
to INCSTAR of such election and of the number of shares subject to such
exercise. The full purchase price of such shares shall be tendered with such
notice of exercise. Payment shall be made to INCSTAR either in cash (including
check, bank draft or money order) or, at the discretion of and as specified by
the Committee, (i) by delivering certificates representing Common Stock already
owned by the optionee having a fair market value equal to the full purchase
price of the shares, or (ii) a combination of cash and such shares. Until the
optionee has been issued a certificate or certificates representing the shares
subject to such exercise, he shall possess no rights as a shareholder with
respect to such shares.
8. Additional Restrictions.
(a) The Committee shall have full and complete authority to determine
whether all or any part of the Common Stock acquired upon exercise of any
option shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner the optionee's rights with respect
thereto. Any such restriction shall be set forth in the agreement relating to
such options.
(b) No person may be granted any option or options, for more than 200,000
shares of Common Stock, in the aggregate, in any three calendar year period
beginning with the period commencing January 1, 1994 and ending December 31,
1996.
9. Options to Nonemployee Directors.
(a) Each director of INCSTAR who is not an employee of INCSTAR or
any of its subsidiaries shall be granted an option to purchase 10,000 shares of
Common Stock on (i) the date of the director's initial election to the Board of
Directors, and (ii) on the date of the annual meeting of shareholders in each
third year thereafter if the director has served continuously during the
interim period and will continue in office after the annual meeting. The
exercise price of each option shall be equal to 100% of the fair market value
of the Common Stock on the date of grant. Such options shall not qualify as
Incentive Stock Options, shall become exercisable in equal portions on the
first, second and third anniversaries of the date of grant and shall expire on
the tenth anniversary of the date of grant. Clause (ii) of the first sentence
of this paragraph was adopted on September 7, 1993. For the initial
implementation of clause (ii), each director who would have been eligible to
receive an option on the date of the 1993 annual meeting of shareholders shall
be granted an option as of September 7, 1993 on the terms set forth in this
paragraph and shall not be eligible to receive another option pursuant to the
Plan until the annual meeting of shareholders in 1996. No portion of the
option may be exercised until the Plan, as amended, has been approved by the
shareholders of the Company.
(b) Options shall be subject to the terms and conditions of Sections 7,
11, 13 and 17, except that the provisions with respect to termination for
changes in status set forth in to Section 11 shall be modified by substituting
service as a director in lieu of employment.
(c) This Section 9 shall not be amended more than once every six months
other than to comport with changes in the Code, the Employees Retirement Income
Security Act or the rules and regulations thereunder.
10. Alternative Stock Appreciation Rights.
(a) At the time of grant of an option under the Plan (or at any time
thereafter as to options which are not Incentive Stock Options), the Committee,
in its discretion, may grant to the holder of such option an alternative Stock
Appreciation Right ("SAR") for all or any part of the number of shares covered
by the holder's option. Any such SAR may be exercised as an alternative, but
not in addition to, an option granted hereunder, and any exercise of an SAR
shall reduce an option by the same number of shares as to which the SAR is
exercised. An SAR granted to an optionholder shall provide that such SAR, if
exercised, must be exercised within the time period specified therein. Such
specified time period may be less than (but may not be greater than) the time
period during which the corresponding option may be exercised. An SAR may be
exercised only when the corresponding option is eligible to be exercised. The
failure of the holder of an SAR to exercise such SAR within the time period
specified shall not reduce his option rights. If an SAR is granted for a
number of shares less than the total number of shares covered by the
corresponding option, the Committee may later (as to options which are not
Incentive Stock Options) grant to the optionholder an additional SAR covering
additional shares; provided, however, that the aggregate amount of all SARs
held by any optionholder shall at no time exceed the total number of shares
covered by his unexercised options.
(b) SARs shall be exercised by the delivery to INCSTAR of a written
notice which shall state that the optionee elects to exercise an SAR as to the
option shares specified in the notice and which shall further state what
portion, if any, of the SAR exercise amount (hereinafter defined) the holder
thereof requests be paid to him in cash and what portion, if any, he requests
be paid to him in Common Stock. The Committee promptly shall cause to be paid
to such holder the SAR exercise amount either in cash, in Common Stock or in
any combination of cash and Common Stock as the Committee may determine. Such
determination may be either in accordance with the request made by the holder
of the SAR or in the sole and absolute discretion of the Committee. The SAR
exercise amount is the excess of the fair market value of one share of Common
Stock on the date of exercise over the per share option price for the option in
respect of which the SAR is exercised multiplied by the number of shares as to
which the SAR is exercised. An SAR may be exercised only when the SAR exercise
amount is positive.
(c) An SAR may only be exercised in compliance with Rule 16b-3 of the
Securities Exchange Act of 1934 as presently in effect or as hereafter modified
or amended if the same shall be in effect on the date of exercise.
(d) All provisions of this Plan applicable to options granted hereunder
shall apply with equal effect to an SAR.
11. Effect of Termination of Employment, Death or Disability.
(a) In the event that an optionee shall cease to be employed by INCSTAR
or any of its subsidiaries for any reason other than willful and material
misconduct, death or disability, such optionee shall have the right to exercise
the option at any time within 3 months after such termination of employment to
the extent of the full number of shares that such optionee was entitled to
purchase under the option on the date of termination, subject to the condition
that no option shall be exercisable after the expiration of the term of the
option.
(b) In the event that an optionee shall cease to be employed by INCSTAR
or any of its subsidiaries by reason of his willful and material misconduct,
his options shall be terminated as of the date of the misconduct.
(c) If an optionee shall die while in the employ of INCSTAR or a
subsidiary or within 3 months after termination of employment for any reason
other than willful and material misconduct, or if such optionee's employment by
INCSTAR or any of its subsidiaries shall terminate by reason of optionee's
disability, and such optionee shall not have fully exercised any option granted
under the Plan, such option may be exercised at any time within 12 months after
such death or (in the case of disability) termination of employment by the
personal representatives, administrators or guardian of the optionee or by any
person or persons to whom the option is transferred by will or the applicable
laws of descent and distribution, but only to the extent of the full number of
shares such optionee was entitled to purchase under the option on the date of
such death or termination of employment.
(d) Nothing in the Plan or in any agreement thereunder shall confer on
any employee any right to continue in the employ of INCSTAR or any of its
subsidiaries or affect, in any way, the right of INCSTAR or any of its
subsidiaries to terminate any optionee's employment at any time.
12. Ten Percent Shareholder Rule.
Notwithstanding any other provision of the Plan, if at the time an option
is otherwise to be granted pursuant to the Plan the optionee owns directly or
indirectly (within the meaning of Section 424(d) of the Code) Common Stock of
INCSTAR possessing more than 10% of the total combined voting power of all
classes of stock of INCSTAR or its parent or subsidiary corporations (within
the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option
to be granted to such optionee pursuant to the Plan shall satisfy the
requirements of Section 422(c)(5) of the Code, and the option price shall be
not less than 110% of the fair market value of the Common Stock of INCSTAR on
the date of grant, and such option by its terms shall not be exercisable after
the fifth anniversary of such date of grant.
13. Non-Transferability.
Except as provided in Section 11(c), (a) no option granted under the Plan
shall be transferable by an optionee, otherwise than by will or the laws of
descent or distribution, and (b) during the lifetime of an optionee the option
shall be exercisable only by such optionee.
14. Dilution or Other Adjustments.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the capitalization or corporate structure of INCSTAR, the
Committee shall make appropriate adjustments in the Plan and any options or
SARs outstanding under the Plan. Such adjustments shall include, where
appropriate, changes in the aggregate number of shares subject to the Plan and
such changes in the number of shares and the price per share subject to
outstanding options and the amount payable upon exercise of outstanding SARs as
are necessary in order to prevent dilution or enlargement of option or SAR
rights.
15. Amendment or Discontinuance of Plan.
The Board of Directors may amend or discontinue the Plan at any time.
Except as provided in Section 14 hereof, however, no amendment of the Plan that
is not approved by the shareholders of INCSTAR shall (a) increase the maximum
number of shares subject to the Plan, (b) decrease the minimum option price
provided in Section 5 hereof, (c) extend the maximum option term under Section
6 hereof, or (d) modify the eligibility requirements for participation in the
Plan. The Board of Directors shall not alter or impair any option granted
under the Plan without the consent of the holder of the option.
16. Time of Granting.
The granting of an option pursuant to the Plan shall be effective only if
a written agreement shall have been duly executed and delivered by and on
behalf of INCSTAR and the person to whom such right is granted. Nothing
contained in the Plan or in any resolution adopted or to be adopted by the
Board of Directors or by the shareholders of INCSTAR, and no action taken by
the Committee or the Board of Directors other than the execution and delivery
of an option agreement, shall constitute the granting of an option hereunder.
17. Income Tax Withholding.
In order to comply with all applicable federal or state income tax laws or
regulations, INCSTAR may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes which are the sole and absolute responsibility of an optionee under the
Plan are withheld or collected from such optionee. In order to assist an
optionee in paying all federal and state taxes to be withheld or collected upon
exercise of an option which does not qualify as an Incentive Stock Option
hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, may permit the optionee to
satisfy such tax obligation by (a) electing to have INCSTAR withhold a portion
of the shares otherwise to be delivered upon exercise of such option having a
fair market value equal to the amount of such taxes or (b) delivering to
INCSTAR shares of Common Stock other than the shares issuable upon exercise of
such option with a fair market value, determined in accordance with Section 5
hereof, equal to such taxes. The election must be made on or before the date
that the amount of tax to be withheld is determined.
18. Effective Date and Termination of Plan.
(a) Subject to approval of the Plan by the shareholders of INCSTAR, the
effective date of the Plan, as amended, is March 4, 1994, the date of adoption
of the most recent amendments to the Plan by the Board of Directors of INCSTAR.
(b) Unless the Plan shall have been discontinued as provided in Section
15 hereof, the Plan shall terminate on the tenth anniversary of the effective
date set forth in (a) above. No option may be granted after such termination,
but termination of the Plan shall not, without the consent of an optionee,
alter or impair any rights or obligations under any option theretofore granted.
19. Options to Members of Scientific Advisory Board and Scientific Advisory
Panels.
(a) If permitted by the academic, research, medical or other institution
or institutions with which a member of the Scientific Advisory Board of
INCSTAR, may be associated, each such member shall be granted an option to
purchase 4,000 shares of Common Stock on the date such member executes a
Scientific Advisory Board Agreement with the Company; provided, that no such
grant shall be made to a member of the Committee; and provided, further, that
the number of shares of Common Stock subject to such grant, together with the
aggregate number of shares of Common Stock subject to grants made to such
person pursuant to Section 19(b) within the preceding two years, shall not
exceed 4,000 shares. The exercise price of each such option shall be the fair
market value of the Common Stock (as determined in accordance with Section 5)
on such date. Such options shall not qualify as Incentive Stock Options, shall
become exercisable in equal portions on the first and second anniversaries of
the date of grant, provided in each case that the recipient of the option is a
member of the Scientific Advisory Board on such date, and shall expire on the
fifth anniversary of the date of grant.
(b) If permitted by the academic, research, medical or other institution
or institutions with which a member of a Scientific Advisory Panel of INCSTAR,
may be associated, each such member shall be granted an option to purchase
2,000 shares of Common Stock of the Company on the date such member executes a
Scientific Advisory Panel Agreement with the Company; provided, that no such
grant shall be made to a member of the Committee; and provided, further, that
no such grant shall be made to any person who has been granted an option
pursuant to Section 19(a) within the preceding two years. The exercise price
of each such option shall be the fair market value of the Common Stock (as
determined in accordance with Section 5) on such date. Such options shall not
qualify as Incentive Stock Options, shall become exercisable in equal portions
on the first and second anniversaries of the date of grant, provided in each
case that the recipient of the option is a member of the relevant Scientific
Advisory Panel on such date, and shall expire on the fifth anniversary of the
date of grant.
(c) Options granted pursuant to this Section 19 shall be subject to the
terms and conditions of Sections 7, 11, 13, 14, 16 and 17, except that the
provisions with respect to termination for changes in status set forth in
Section 11 shall be modified by substituting service on the Scientific Advisory
Board or the relevant Scientific Advisory Panel in lieu of employment. This
Section 19 was adopted on September 14, 1995, and no portion of any option
granted pursuant to this Section 19 may be exercised until the Plan, as amended
on such date, has been approved by the shareholders of INCSTAR.
EXHIBIT 10.9
SCIENTIFIC ADVISORY BOARD AGREEMENT
This SCIENTIFIC ADVISORY BOARD AGREEMENT (this "Agreement") is entered
into this__________day of______________________, 1995 (the "Effective
Date"), between______________________("Advisor") and INCSTAR Corporation (the
"Company").
WHEREAS, the Board of Directors of the Company has authorized the
establishment of a scientific advisory board (the "Scientific Advisory Board"),
comprised of internationally recognized experts in various fields to provide
the Company a broad background on the scientific advances and medical trends
that are likely to impact the Company's current and future products;
WHEREAS, the Company desires that Advisor be appointed as a member of the
Scientific Advisory Board;
WHEREAS, as a member of the Scientific Advisory Board, Advisor will advise
the Company on certain matters as more fully described below; and
WHEREAS, the Company desires to compensate Advisor upon the terms and
conditions described below for such advisory services performed pursuant to
this Agreement.
NOW, THEREFORE, in consideration of the premises, the respective covenants
and commitments set forth in this Agreement, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Company and Advisor agree as follows:
1. Appointment to Scientific Advisory Board. The Company hereby
appoints Advisor as a member of the Scientific Advisory Board. Advisor hereby
agrees to serve as a member of the Scientific Advisory Board in accordance with
the terms of this Agreement and to provide the advisory services described in
Section 3.
2. Term and Termination.
2.01 Unless earlier terminated pursuant to Section 2.02 below, the
term of this Agreement shall be for a period of two years from the Effective
Date.
2.02 At any time after the first anniversary of the Effective Date,
this Agreement may be terminated prior to the expiration of the term hereof
upon 30 days prior written notice given by either the Company or Advisor to the
other.
3. Advisory Services. As a member of the Scientific Advisory Board,
Advisor agrees to attend one meeting per year with other board members and/or
employees or agents of the Company or its affiliates for the purpose of
advising the Company of technical and scientific advances in the field of
immunodiagnostic/ molecular diagnostic testing, assessing the feasibility of
new programs of the Company and offering technical and scientific guidance.
Subject to the direction of the Company, Advisor agrees to utilize his or her
best efforts to further the interests of the Company and to discharge his or
her responsibilities under this Agreement. If the Company asks Advisor to
perform special tasks and/or to collaborate on specific projects requiring a
sizable amount of time in addition to the basic advisory function described
above, the additional activities will be scheduled on an "as available" basis
and at an agreed upon fee to be negotiated in writing between the Company and
Advisor.
4. Compensation and Reimbursements.
4.01 As a member of the Scientific Advisory Board, the Company agrees
to pay Advisor an annual fee of $1,500 per annum during the term of this
Agreement. Upon the execution of this Agreement, the Company will pay Advisor
$750 and the Company agrees to pay Advisor one half of the annual fee every six
months thereafter, as payment in advance for his or her advisory services
during the succeeding six months. The Company also agrees to pay Advisor a
meeting fee of $1,000 for each meeting he or she attends in connection with his
or her advisory services pursuant to this Agreement, subject to a maximum of
one meeting per year, as provided in Section 3. The Company agrees to pay
Advisor his or her meeting fee on the date of the meeting.
4.02 In addition, if permitted by the academic, research, medical or
other institution or institutions with which Advisor may be associated (the
"Institutions"), the Company will grant Advisor a non-qualified stock option to
purchase 4,000 shares of the common stock of the Company (the "Option"). The
Option will have an exercise price equal to the "fair market value" of the
Company's common stock as determined in accordance with the terms of the
INCSTAR Corporation Stock Option Plan (the "Plan"). The Option will be granted
as of the Effective Date pursuant to the terms of the Plan and will be subject
to the terms of the Plan and the stock option agreement evidencing the Option.
The Option will vest to the extent of one-half of the full amount on the first
anniversary of the Effective Date, and the remaining one-half will vest on the
day immediately preceding the second anniversary of the Effective Date,
provided in each case that Advisor is a member of the Scientific Advisory Board
on such date. The Option will have a term of five years, subject to the
earlier termination thereof in certain circumstances as provided in the stock
option agreement and the Plan. Advisor acknowledges and agrees that he or she
shall not be entitled to any additional or other compensation under this
Agreement if Advisor is not permitted by one or more of the Institutions with
which he or she may be associated to accept the Option to be granted pursuant
to this Section 4.02 or otherwise voluntarily does not accept the Option.
4.03 The Company agrees to reimburse Advisor for all authorized
expenses incurred in performing the advisory services under this Agreement upon
presentation of the pertinent documentation. The Company also will reimburse
Advisor for other travel and living expenses for specifically requested
meetings with the employees and agents of the Company or its affiliates or
meetings with the members of the Scientific Advisory Board or with other
individuals involved in the development of projects of the Company and its
affiliates.
5. Confidentiality. Except as permitted by the Company in writing,
during the term of this Agreement and for a period of three years thereafter,
Advisor shall not divulge, furnish or make accessible to anyone or use in any
way (other than in advising the Company) any confidential or secret knowledge
or information of the Company that Advisor has acquired from the Company
concerning trade secrets, confidential or secret designs, processes, formulae,
plans, devices or material (whether or not patented or patentable) directly or
indirectly useful in any aspect of the business of the Company, any
confidential or secret development or research work of the Company, or any
other confidential information or secret aspects of the business of the
Company. The foregoing obligation of confidentiality, however, shall not apply
to any knowledge or information that is now part of the public domain or that
subsequently becomes generally publicly known other than as a direct or
indirect result of the breach of this Agreement by Advisor, any knowledge or
information that was known to Advisor prior to disclosure by the Company or any
knowledge or information is obtained from a third party.
Advisor acknowledges that the above-described confidential or secret
knowledge or information constitutes a unique and valuable asset to the Company
and represents a substantial investment of time and expense by the Company,
and that any disclosure or other use of such knowledge or information other
than for the sole benefit of the Company would be wrongful and would cause
irreparable harm to the Company.
6. Relationship to the Company. The relationship created by this
Agreement shall be that of an independent contractor and Advisor shall not be
deemed an employee of the Company for any purpose whatsoever. The Company
shall have no obligation to deduct from compensation due to Advisor hereunder
any sums required for social security and withholding taxes or for any other
federal, state, or local tax or charge that may be in effect or hereafter
enacted or required.
7. Relationship of Advisor to Certain Institutions. The Company
acknowledges that Advisor may be associated with certain Institutions, and is
subject to certain agreements and policies of such Institutions. Advisor
represents that he is not a party to any existing agreement with such
Institutions that would prevent him from performing any of the advisory
services for the Company contemplated in this Agreement. Advisor represents
that he will ensure that any services he performs outside of such Institutions
are not in conflict with any policy or agreement of such Institutions.
8. No Other Conflicts. The Advisor also represents to the Company that
the Advisor has disclosed to the Company any and all other obligations,
arrangements, agreements or interests of the Advisor that may constitute or
give rise to a conflict of interest on the part of the Advisor given the nature
and terms of this Agreement. The Advisor represents to the Company that the
Advisor is not now under any obligation of a contractual or other nature to any
person, firm, corporation or other entity which is inconsistent or in conflict
with this Agreement, or which would prevent, limit or impair the execution of
this Agreement or the performance by the advisor of the Advisor's obligations
hereunder.
9. Entire Understanding; Binding Agreement. This Agreement constitutes
the final and complete agreement between the Company and Advisor with respect
to the subject matter hereof, superseding any previous oral or written
communication, representation, understanding or agreement with the Company or
any officer or representative of the Company. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
assigns and upon Advisor and his or her executors, administrator or
representatives.
10. Legal and Equitable Remedies. Advisor agrees that the advisory
services to be rendered hereunder are personal and unique and because Advisor
may have access to and become acquainted with confidential or secret knowledge
or information of the Company, as described in Section 6 above, the Company
shall have the right to enforce this Agreement and any of its provisions by
injunction, specific performance or other equitable relief without prejudice to
any other rights and remedies that the Company may have for a breach of this
Agreement.
11. Captions. The section captions are inserted only as a matter of
convenience and reference and in no way define, limit, or describe the scope of
this Agreement or the intent of any provisions hereof.
12. Modification of Agreement. No modification of this Agreement shall
be valid unless made in writing and signed by the parties hereto.
13. Notices. Any notice required or permitted to be given hereunder
shall be in writing and shall be deemed effective upon the personal delivery
thereof, if mailed, forty-eight (48) hours after having been deposited in the
United States mails, postage prepaid, and addressed to the party to whom it is
directed at the address set forth below:
If to Company:
INCSTAR Corporation
1990 Industrial Boulevard
P.O. Box 285
Stillwater, Minnesota 55082
Attention: Vice President Research and Development
If to Advisor, then to the address listed under Advisor's name below.
Any party may change the address to which such notices are to be addressed, by
giving the other parties notice in the manner herein set forth.
14. Assignment. Advisor may not assign any right nor delegate any
obligation under this Agreement without the prior written consent of the
Company. Any such attempted assignment or delegation without proper consent
shall be void.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Minnesota.
INCSTAR CORPORATION __________________________
__________________________
By____________________
Its___________________
EXHIBIT 10.10
CONSULTING AGREEMENT
This Agreement is entered into this 1st day of January, 1996 by and
between INCSTAR Corporation, a Minnesota corporation having its principal place
of business at 1990 Industrial Boulevard, P.O. Box 285, Stillwater, Minnesota
55082 (the "Company"), and Michael Steffes, M.D., Ph.D., an individual residing
at 1583 Fulham Street, St. Paul, Minnesota 55108 ("Consultant").
Recitals
A. Consultant has been involved in the field of immunodiagnostic
technology and has substantial technical and business knowledge of the
development, manufacturing and marketing of immunodiagnostic products.
B. The Company values the knowledge and expertise of Consultant and
desires to obtain consulting services from Consultant on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the Company and Consultant agree as follows:
1. Retention of Consultant; Services to be Performed. The Company
hereby retains Consultant for the term of this Agreement to perform consulting
services in the field of immunodiagnostic products (the "Field"), including
attendance at meetings of the Company's Scientific Advisory Panels, and general
consulting services relating to such field and such other consulting services
as the parties may agree.
2. Compensation. For Consultant's services hereunder, the Company shall
pay to Consultant a fee of $12,000 per year. The Company shall pay such fee in
equal quarterly amounts on the first day of the applicable quarter. Consultant
shall be responsible for the payment of all federal, state or local taxes
payable with respect to all amounts paid to Consultant under this Agreement.
3. Expenses. The Company shall reimburse Consultant for all reasonable
travel and other out-of-pocket expenses incurred by Consultant in rendering
consulting services hereunder; provided that the Company has approved such
expenses in advance. The Company shall pay such reimbursement within 30 days
after receipt of appropriate receipts or documentation of the expenses.
4. Ownership and Assignment of Inventions.
a. Notification of Inventions. Consultant shall promptly notify
the Company in writing of the existence and nature of, and shall promptly and
fully disclose to the Company, any and all ideas, designs, practices,
processes, apparatus, improvements and inventions, whether or not they are
believed to be patentable, which Consultant has conceived or first actually
reduced to practice and/or may conceive or first actually reduce to practice
during the term of this Agreement or which Consultant may conceive or reduce
to practice within six (6) months after termination of this agreement, if such
inventions relate to a product or process upon which Consultant worked during
the term of his consulting arrangement with the Company ("Inventions").
b. Assignment to Company. Consultant agrees to assign, and hereby
does assign, to the Company, all right, title and interest in and to all such
Inventions. At the request of the Company, Consultant shall execute all
papers, including patent applications, assignments of inventions, patents and
copyrights, and other instruments that the Company shall deem necessary or
convenient in order to perfect the Company's rights in the Inventions.
c. Limitation. Section 4(b) shall not apply to any invention
meeting the following conditions:
(1) such invention was developed entirely on Consultant's own time;
(2) such invention was made without the use of any of the equipment,
supplies, facility or trade secret information of the Company;
(3) such invention does not relate (i) directly to the business of
the Company, or (ii) to the Company's actual or demonstrably
anticipated research or development; and
(4) such invention does not result from any work performed by
Consultant for the Company.
d. Copyrights. All right, title, and interest in all copyrightable
material which Consultant shall conceive or originate, either individually or
jointly with others, and which arise out of the performance of this Agreement,
will be the property of the Company and are by this Agreement assigned to the
Company along with ownership of any and all copyrights in the copyrightable
material. Consultant agrees to execute all papers and perform all other acts
necessary to assist the Company to obtain and register copyrights on such
materials in any and all countries. Where applicable, works of authorship
created by Consultant for the Company in performing his responsibilities under
this Agreement shall be considered "works made for hire" as defined in the U.S.
Copyright Act.
e. Know-How. All know-how and trade secret information conceived
or originated by Consultant which arises out of the performance of his
obligations or responsibilities under this Agreement or any related material or
information shall be the property of the Company, and all rights therein are by
this Agreement assigned to the Company.
5. Confidential Information.
a. Confidentiality Obligation. Except as permitted by the Company
in writing, during the term of this Agreement or for a period of three (3)
years thereafter, Consultant shall not divulge, furnish or make accessible to
anyone or use in any way (other than in the consultancy for the Company) any
confidential or secret knowledge or information of the Company which Consultant
has acquired from the Company concerning trade secrets, confidential or secret
designs, processes, formulae, plans, devices or material (whether or not
patented or patentable) directly or indirectly useful in any aspect of the
business of the Company, any confidential or secret development or research
work of the Company, or any other confidential information or secret aspects of
the business of the Company. The foregoing obligation of confidentiality,
however shall not apply to any knowledge or information which is now part of
the public domain, which subsequently becomes generally publicly known other
than as a direct or indirect result of the breach of this Agreement by
Consultant, the knowledge or information was known to Consultant prior to
disclosure by Company or the knowledge or information is obtained from a third
party having the right to make such disclosure.
b. Irreparable Harm. Consultant acknowledges that the above-
described confidential or secret knowledge or information constitutes a unique
and valuable asset to the Company and represents a substantial investment of
time and expense by the Company, and that any disclosure or other use of such
knowledge or information other than for the sole benefit of the Company would
be wrongful and would cause irreparable harm to the Company.
6. Relationship to an Academic Institution. The Company acknowledges
that Consultant is a member of the faculty of the University of Minnesota (the
"University"), and is subject to certain agreements and policies of the
University. Consultant represents that he is not a party to any existing
agreement with the University that would prevent him from performing any of the
consulting services for the Company contemplated in this Agreement. Consultant
represents that he will ensure that any services he performs outside of the
University are not in conflict with any University policy or agreement.
7. Competing Activities. Consultant represents to the Company that (a)
Consultant has disclosed to the Company any and all other obligations,
arrangements, agreements or interests of Consultant that may constitute or give
rise to a conflict of interest on the part of Consultant given the nature and
terms of this Agreement and (b) Consultant is not now under any obligation of a
contractual or other nature to any person, firm, corporation or other entity
which is inconsistent or in conflict with this Agreement, or which would
prevent, limit or impair the execution of this Agreement or the performance by
Consultant of Consultant's obligations hereunder. Consultant further agrees
that he will not, during the term of this Agreement and for six (6) months
thereafter, provide to any other business or entity any services relating to
the research, development, production, marketing or sale of any product in the
Field that is similar to or competitive with any in vitro immunodiagnostic
product researched, developed, produced, marketed or sold by the Company during
the term of this Agreement.
8. Term and Termination. Unless terminated as provided herein, this
Agreement shall continue until the one (1) year anniversary of the date set
forth above, and shall be renewed automatically for one (1) year terms
thereafter, unless either party notifies the other party at least sixty (60)
days prior to the renewal date. This Agreement shall be terminated earlier (a)
in the event of the death or serious disability of Consultant or (b) upon
thirty (30) days written notice by either party. If this Agreement is
terminated prior to the expiration of the term hereof, Consultant shall be
entitled to receive the quarterly consulting fee through the date of
termination, pro rated as of the date of termination. Sections 4 and 5 shall
survive termination of this Agreement.
9. Miscellaneous.
a. Assignment. Consultant may not assign any right nor delegate
any obligation under this Agreement without the prior written consent of the
Company. Any such attempted assignment or delegation without proper consent
shall be void.
b. Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Minnesota, excluding its choice of
law rules.
c. Entire Understanding; Binding Agreement. This Agreement
constitutes the final and complete agreement between the Company and Consultant
with respect to the subject matter hereof, superseding any previous oral or
written communication, representation, understanding or agreement with the
Company or any officer or representative of the Company. This Agreement shall
inure to the benefit of and shall be binding upon the Company and its
successors and assigns and upon Consultant and his executors, administrator or
representatives. No modification of this Agreement shall be valid unless made
in writing and signed by the parties hereto.
d. Notices. Any notice required or permitted to be given hereunder
shall be in writing and shall be deemed effective upon the personal delivery
thereof, if mailed, forty-eight (48) hours after having been deposited in the
United States mails, postage prepaid, and addressed to the party to whom it is
directed at the address set forth above (or such other address provided in
writing to the other party).
e. Injunctive Relief. Consultant acknowledges that it would be
difficult to fully compensate the Company for damages resulting from any breach
by Consultant of the provisions of Section 4 or 5 of this Agreement.
Accordingly, in the event of any actual or threatened breach of such
provisions, the Company shall (in addition to any other remedies that it may
have) be entitled to temporary and/or permanent injunctive relief to enforce
such provisions, and such relief may be granted without the necessity of
proving actual damages.
f. Status of Consultant. Consultant is an independent contractor
and not an employee of the Company. Consultant has no authority to obligate
the Company by contract or otherwise. Consultant shall not be entitled to any
employee benefits that the Company provides to its employees. Consultant shall
be free to exercise discretion and independent judgment as to the method and
means of performance of the services to be provided pursuant to this Agreement.
IN WITNESS WHEREOF, the Company and Consultant have executed this
Agreement as of the date set forth in the first paragraph.
INCSTAR CORPORATION
By /s/John Booth___________
/s/Michael Steffes_________
Michael Steffes, M.D., Ph.D.
EXHIBIT 10.18.3
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT is made as of the 29th day of January, 1996, and is by and
between INCSTAR Corporation (the "Borrower"), and Norwest Bank Minnesota,
National Association, a national banking association ("Norwest").
REFERENCE IS HEREBY MADE to that certain credit agreement dated as of December
27, 1993 and amended January 3, 1995 and amended February 15, 1995 (the "Credit
Agreement") made between the Borrower and Norwest. Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed to them in
the Credit Agreement.
WHEREAS, the Borrower has requested Norwest to extend the Line to January 31,
1997; and
WHEREAS, the Borrower has requested Norwest to amend Section 2.1(a) of the
Credit Agreement; and
WHEREAS, Norwest is willing to grant the Borrower's request, subject to the
provisions of this Third Amendment;
NOW, THEREFORE, in consideration of the premises and for other valuable
consideration received, it is agreed as follows:
1. Section 1.2 of the Credit Agreement is hereby amended by changing the said
Section so that, when read in its entirety, it provides as follows:
Line Availability Period. The Line Availability Period will
mean the period from the Effective Date to January 31, 1997 (the
"Line Expiration Date").
2. Section 2.1(a) of the Credit Agreement is hereby amended by changing the
said Section so that, when read in its entirety, it provides as follows:
Line Fee. During the Line Availability Period the Borrower
will pay the Bank a Line fee of 1/8 of 1% per annum on the average
daily unused amount of the Line. This fee will be paid quarterly in
arrears beginning March 31, 1996.
3. Simultaneously with the execution of this Third Amendment, the Borrower
shall execute and deliver to Norwest a Third Amendment to Note (the "Third
Note Amendment"), duly executed by the Borrower and in form and content
acceptable to Norwest. Pursuant to the Third Amendment to Note, the
maturity date of the Note shall be extended to January 31, 1997. All
references in the Credit Agreement to "the Note" shall be deemed to mean
the Note as modified by the First Note Amendment and the Second Note
Amendment and the Third Note Amendment.
4. The Borrower hereby represents and warrants to Norwest as follows:
A. As of the date of this Third Amendment, the outstanding
principal balance of the Note is $0, and accrued but unpaid interest
thereon equals $0.
B. The Credit Agreement and the Note constitute valid, legal and
binding obligations owed by the Borrower to Norwest, subject to no
counter claim, defense, offset, abatement or recoupment.
C. The execution, delivery and performance of this Third
Amendment and the Third Amendment to Note by the Borrower are within
its corporate powers, have been duly authorized, and are not in
contravention of law or the terms of the Borrower's Articles of
Incorporation or By-laws, or of any undertaking to which the Borrower
is a party or by which it is bound.
D. All financial statements delivered to Norwest by or on behalf
of the Borrower, including any schedules and notes pertaining
thereto, fully and fairly present the financial condition of the
Borrower at the dates thereof and the results of operations for the
periods covered thereby, and there have been no material adverse
changes in the financial condition or business of the Borrower from
December 31, 1995 to the date hereof.
5. This Third Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but which taken together shall
constitute one and the same instrument. This Third Amendment shall not
become effective until this Third Amendment and the Third Note Amendment
have been duly executed by the Borrower and Norwest.
6. Except as expressly modified by this Third Amendment, the Credit Agreement
remains unchanged and in full force and effect. Without limiting the
generality of the foregoing, all advances under the Line shall continue to
be evidenced by the Note, as amended by the First Note Amendment and The
Second Note Amendment and the Third Note Amendment.
IN WITNESS WHEREOF, the Borrower and Norwest have executed this Third Amendment
as of the date first written above.
INCSTAR CORPORATION NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:___________________ By:______________________
Its:__________________ Its:_____________________
By:___________________
Its:__________________
EXHIBIT 11
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
INCSTAR CORPORATION
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
Average shares outstanding 16,362,916 16,322,301 16,258,929
Dilutive stock options and warrants--
based on the treasury stock method (1) 128,585 -- 173,954
16,491,501 16,322,301 16,432,883
Net income (loss) $ 4,263,000 $(4,505,000) $ 253,000
Net income (loss) per share $ 0.26 $ (0.28) $ 0.02
<FN>
(1) The effects of stock options and warrants were excluded from the calculation
of weighted average shares outstanding for 1994 because their effects were
antidilutive.
</FN>
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Atlantic Antibodies, Inc.
Incorporated in the State of Delaware
d.b.a. Atlantic Antibodies, Inc.
INCSTAR UK Ltd.
Incorporated in the United Kingdom
d.b.a. INCSTAR Limited
Immuno Nuclear Export, Limited
Incorporated in Jamaica
d.b.a. Immuno Nuclear Export Limited
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
INCSTAR Corporation:
We consent to incorporation by reference in the Registration Statements No. 33-
34055, No. 33-84498, No. 33-32162, and No. 33-32736 on Form S-8 of INCSTAR
Corporation of our report dated January 26, 1996, relating to the consolidated
balance sheets of INCSTAR Corporation and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statement of operations, shareholders'
equity and cash flows and related schedule for each of the years in the three-
year period ended December 31, 1995, which reports appears in the 1995 Annual
Report on Form 10-K of INCSTAR Corporation.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet for the period ended December 31, 1995 and the
related statements of income, cash flows and retained earnings for the period
ended December 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 711,000
<SECURITIES> 0
<RECEIVABLES> 7,682,000
<ALLOWANCES> 107,000
<INVENTORY> 13,445,000
<CURRENT-ASSETS> 22,049,000
<PP&E> 33,001,000
<DEPRECIATION> 18,387,000
<TOTAL-ASSETS> 38,761,000
<CURRENT-LIABILITIES> 7,102,000
<BONDS> 3,000
0
0
<COMMON> 164,000
<OTHER-SE> 28,220,000
<TOTAL-LIABILITY-AND-EQUITY> 38,761,000
<SALES> 45,760,000
<TOTAL-REVENUES> 45,760,000
<CGS> 23,271,000
<TOTAL-COSTS> 23,271,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 348,000
<INCOME-PRETAX> 5,834,000
<INCOME-TAX> 1,571,000
<INCOME-CONTINUING> 4,263,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,263,000
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
