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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1996 Commission File Number-I7828
GELMAN SCIENCES INC.
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(Exact name of registrant as specified in its charter)
MICHIGAN 38-1614806
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 SOUTH WAGNER ROAD
ANN ARBOR, MICHIGAN 48103-9019
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (313) 665-0651
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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COMMON STOCK, PAR VALUE $.10 PER SHARE AMERICAN STOCK EXCHANGE
Securities Registered Pursuant to Section 12(g) of the Act:
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. ________
The aggregate market value of the registrant's voting stock (Common Stock, $.10
Par Value) held by non-affiliates of the registrant as of September 24, 1996
was $199,553,598.
The number of outstanding shares of the registrant's Common Stock, as of
September 24, 1996 was 7,947,080 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None
Exhibit Index at Page 41 Number of Pages 113.
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PART I
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS
Gelman Sciences Inc. ("Gelman" or the "Company") was incorporated in
Michigan in 1959. Unless the context indicates otherwise, the term "Gelman" or
the "Company" includes Gelman Sciences Inc. and its subsidiaries.
Gelman designs, manufactures and markets a broad line of specialty
microfiltration products for the separation and purification of liquids and
gases. Gelman's core technologies are the manufacturing of microporous
membranes which serve as a barrier, filter or separator of microscopic
particles and the packaging and sealing of these membranes into microfiltration
products. Gelman believes that it offers a greater variety of membranes and
microfiltration products in its markets than any other manufacturer and that it
has built significant brand recognition, particularly in scientific and
industrial laboratories. Nearly all of Gelman's microfiltration products are
disposable, and many are used in high volume applications requiring regular
replacement.
Gelman's products are marketed worldwide for scientific and industrial
applications. The Company has increased its focus on international business
and has opened or expanded subsidiaries or sales offices in Europe and Asia.
As a result of these efforts, non-U.S. sales have grown from 30% of total sales
for fiscal 1991 to 40% of total sales for fiscal 1996.
On August 30, 1996, Gelman entered into a merger agreement with Memtec
Limited ("Memtec"), a corporation organized under the laws of New South Wales,
Australia, and GSI Acquisition Corporation, a Michigan corporation and a
wholly-owned, direct subsidiary of Memtec ("GSI") pursuant to which GSI will be
merged (the "Merger") with and into Gelman and Gelman will become a
wholly-owned subsidiary of Memtec. In the Merger, each outstanding share of
Gelman Common Stock will be converted into and represent the right to receive
1.05 Memtec American Depositary Shares ("Memtec ADSs"). The Merger Agreement
will be submitted for approval and adoption by the stockholders of Gelman and
the issuance of the Memtec Ordinary Shares underlying the Memtec ADSs will be
submitted for approval by the Memtec shareholders.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
For information related to net sales, operating income and identifiable
assets and other information about industry segments, see Note L included in
the Financial Statements of the Company on Pages F-12 to F-14 of this report on
Form 10-K.
(C) NARRATIVE DESCRIPTION OF BUSINESS
HEALTH PRODUCTS GROUP
The Health Products Group supplies a variety of specialized medical
disposable filter devices. The products are sold to biotechnology,
pharmaceutical and healthcare companies for use in the research, development
and manufacturing of new drugs and vaccines and their administration to
patients. The products are sold by the Company's sales personnel and a network
of distributors as either standard catalog items or as original equipment
manufacturer ("OEM") products. The OEM products consist of intravenous fluid
in-line filters, transducer protectors and standard small volume filtration
disposable medical filters.
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The Health Products Group also provides other products for the healthcare
industry such as membranes, equipment and reagents for clinical diagnostic
testing by electrophoresis. Microporous membrane media, used in a variety of
medical applications, are provided by the Health Products Group in bulk roll
stock for use in products of OEMs. Medical device sales have accounted for
34%, 34% and 31% of consolidated sales for the fiscal years ended July 31,
1996, 1995 and 1994, respectively.
CUSTOMERS
No customer of the Health Products Group accounted for more than 10% of
consolidated sales in fiscal 1996. The Company believes that the loss of any
customer would not have a material adverse effect on the Health Products Group.
BACKLOG AND RAW MATERIALS
Backlog for the Health Products Group was $7,289,000 and $8,215,000 at
September 24, 1996, and October 21, 1995, respectively. It is anticipated that
the current backlog will be shipped prior to July 31, 1997. No unusual sources
of supply are required to meet the Company's manufacturing requirements.
COMPETITION
Competition in the Health Products Group comes from a variety of
competitors, the two most important of which are Millipore Corporation
("Millipore") and Pall Corporation ("Pall"). Both competitors are
significantly larger than the Company. Gelman competes with other
manufacturers based on a variety of factors, including product innovation and
performance, quality, breadth of product offering, price and customer service.
FILTRATION PRODUCTS GROUP
The Filtration Products Group supplies various configurations of
microfiltration media and hardware to the industrial and scientific
communities. Small diameter filter media and hardware are utilized in research
and industrial laboratories for clarification and purification of waters and
chemicals. The sales of laboratory filters and hardware have accounted for
39%. 40% and 44% of total sales for years ended July 31, 1996, 1995 and 1994,
respectively.
In the industrial process filtration area, products are utilized in both
large diameter filters and high surface area cartridges for clarification and
separation of gases, liquids and chemicals. Typical industrial customers are
in the pharmaceutical, electronics, and beverage industries. These products
are sold in the United States and internationally by Company sales personnel
and a network of distributors. Cartridge sales have accounted for 25%, 24% and
22% of consolidated sales for the years ended July 31, 1996, 1995 and 1994,
respectively.
CUSTOMERS
Gelman believes that no end-user of any of its filtration products
accounts for more than 5% of sales. Sales by Gelman of laboratory products to
its two largest U.S. distributors, Fisher Scientific International Inc.
("Fisher") and VWR Corporation, accounted for 25% of total sales in fiscal
1996. The loss of either of these distributors could have an adverse effect on
Gelman. Management believes the loss of either of these distributors is
unlikely due to Gelman's long-term relationship with these distributors and the
investments made by these distributors in inventory, promotional programs and
training of their sales forces.
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Fisher recently entered into a non-exclusive distribution agreement with
Millipore, one of Gelman's competitors in the laboratory market, pursuant to
which Fisher will distribute certain of Millipore's branded laboratory products
in the United States, Canada and Puerto Rico. Gelman does not believe that
this agreement will have an adverse impact on domestic sales due to Gelman's
strong relationships with Fisher and its end-use customers and other
distributors who have successfully competed against Millipore in the past. In
addition, Gelman is strengthening its relationship with Fisher's International
Division as Gelman continues to expand its international market presence.
BACKLOG AND RAW MATERIALS
Backlog for the Filtration Products Group was $7,529,000 and $5,922,000 at
September 24, 1996, and October 21, 1995, respectively. It is anticipated that
the current backlog will be shipped prior to July 31, 1997. No unusual sources
of supply are required to meet the Company's manufacturing requirements.
COMPETITION
In the Filtration Products Group, the Company's primary competitors are
Millipore, Pall and, to a lesser extent, Sartorius Membranfilter GmbH (in
Europe), with whom the Company has entered into a partnership agreement to
supply microfiltration media at prices which are competitive with those paid by
other customers of the Filtration Products Group. Competition in this market
is to a high degree based on product innovation and performance, quality,
breadth of product offering, and other technical services.
GENERAL BUSINESS
PATENTS, TRADEMARKS, LICENSES AND TECHNOLOGICAL CAPABILITY
The Company has 145 active patents and 114 registered and 40 unregistered
trademarks throughout the world. The Company does not consider any one of
these patents or trademarks to be materially important to its business. The
Company relies to a great extent on its technological skills and product
development achievements to compete effectively.
RESEARCH AND DEVELOPMENT
The Company maintains a strong commitment to applied research and
development. Gelman's product development efforts are focused on the
enhancement of existing product lines and development of new products based on
Gelman's existing technologies and production capabilities. Research and
development expenditures were $6.3 million, $5.5 million and $4.9 million in
fiscal 1996, 1995 and 1994, respectively.
ENVIRONMENTAL REGULATIONS
Until May 1986, the Company used 1,4-dioxane, an organic chemical, in its
manufacturing processes at its main facility in Ann Arbor, Michigan. Over the
years, various storage and waste water disposal methods have been permitted by
the responsible governmental agencies. In January 1986, 1,4-dioxane was
identified in wells near the manufacturing plant. Pursuant to a consent decree
agreed to in October 1992 and amended in September 1996, which resolved
litigation with the Michigan Department of Natural Resources, the Company is
remediating this contamination without admitting wrongdoing.
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For a description of the environmental litigation and remediation in which the
Company has been involved, see "Legal Proceedings," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and "Note J -
Pollution-Related Expenses" included in the Financial Statements of the
Company, on page F-12 of this report of Form 10-K.
EMPLOYEES
Gelman employs 773 persons in the United States and 128 persons in
non-U.S. operations. The Company relies to a great extent, both domestically
and internationally, on a network of distributors. In the United States, the
Company employs 27 sales representatives to work with distributors, make sales
calls in conjunction with the distributors' representatives and coordinate
technical support needs.
(D) FINANCIAL INFORMATION REGARDING GEOGRAPHIC AREAS
For information related to net sales, operating earnings and identifiable
assets of the Company's foreign and domestic operations, see Notes L and M
included in the Financial Statements of the Company on pages F-12 to F-14 of
this report on Form 10-K.
ITEM 2. PROPERTIES.
The Company owns its principal office and manufacturing facilities located
in Ann Arbor, Michigan, which contains approximately 180,000 square feet of
floor space. The Company was granted an Industrial Development Bond in July
1989, the proceeds of which were utilized to purchase land in Pensacola,
Florida and build a 58,000 square foot manufacturing facility which was
completed in fiscal 1990. The amount outstanding at July 31, 1996, under the
Industrial Revenue Bond, which has been redeemed and reissued twice and
currently matures in July 2004, was $4.4 million. The Company also leases
buildings in Ann Arbor and Pleasanton, California containing approximately
58,000 square feet which are used primarily for office space and manufacturing.
The Company's Australian, British, Canadian, German, Irish, French,
Italian and Japanese subsidiaries lease office and warehouse facilities. The
Company also maintains regional product application testing laboratories in the
British and Japanese facilities.
Substantially all of the existing facilities are used in connection with
the Company's Health and Filtration Product Groups.
ITEM 3. LEGAL PROCEEDINGS.
The Company, in the normal course of business, is involved in incidental,
routine litigation, which, in the opinion of management, will not have a
material impact on the financial condition of the Company. In addition, during
fiscal 1996 the Company was a party to various legal actions arising under
statutes regulating the discharge of materials into the environment or
otherwise protecting the environment. Those legal actions involving
environmental issues are described below. (See also, "Environmental
Regulations" in Item 1, above.)
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Kelly v. Gelman Sciences Inc. (Circuit Court for Washtenaw County,
Michigan, Case No. 88-34734-CE). On February 26, 1988, the Attorney General
for the State of Michigan, on behalf of the Michigan Natural Resources
Commission, the Michigan Water Resources Commission and the Michigan Department
of Natural Resources, filed suit against the Company, alleging that
contamination near the Company's Ann Arbor facility was caused by the Company
in disposing of waste water from its manufacturing processes. On October 23,
1992, the parties entered into a settlement agreement. Under the terms of the
settlement, the Company is to purge, treat and dispose of environmental
contamination near the Company's main facility. On October 26, 1992, the Court
entered an order of settlement of this case based upon the agreement reached by
the parties. In September 1996, the parties entered into an amendment of the
settlement agreement, modifying the levels of cleanup the Company must perform
so as to bring those levels into compliance with current statutory
requirements. On September 23, 1996, the Court approved the amendment.
Scarbrough, et al. v. Gelman Sciences Inc., et al. (Circuit Court for
Washtenaw County, Michigan, Case No. 88-35594-CE). By Complaint filed August
8, 1988, and amended September 15, 1988, 27 residents of the Westover
subdivision located near the Ann Arbor facility of the Company sued the Company
and eight other defendants for damages associated with alleged contamination of
residential water supplies and for the cost of court-supervised medical
surveillance. The total demand was $3,095,000. On March 9, 1990, plaintiffs
settled with seven of the eight other defendants for $100,000. (The suit
against the remaining other defendant was subsequently dismissed by the Court.)
Thereafter, 15 plaintiffs settled with the Company for a total of $175,535.
Twelve plaintiffs refused to settle. On November 30, 1990, a jury returned a
verdict in favor of the 12 plaintiffs, awarding damages totaling $119,756.
After adjustment for the March 9, 1990, settlement between plaintiffs and seven
other defendants, the net jury verdict against the Company was $62,250, plus
interest. On December 11, 1991, the Court awarded the Company costs totaling
$87,529.38, plus interest. The 12 plaintiffs who went to trial appealed the
outcome of the case. On July 27, 1994, the Court of Appeals affirmed the jury
verdict. On September 21, 1994, the Court of Appeals denied plaintiffs' Motion
for Rehearing. Plaintiffs filed an Application for Leave to Appeal with the
Michigan Supreme Court. On June 30, 1995, the Supreme Court denied the
Application. Plaintiffs filed a Motion for Reconsideration, which was denied
on October 31, 1995.
Dawson, et ano v. Gelman Sciences Inc., et al. (Circuit Court for
Washtenaw County, Michigan, Case No. 92-43975-CE). On November 3, 1992, two
residents in the Evergreen subdivision located near the Ann Arbor facility of
the Company filed a Complaint against the Company, the Chairman of the Company,
and eight other defendants for damages associated with alleged contamination of
residential water supplies. On January 7, 1993, the Company and its Chairman
filed their Answers denying liability and cross-claiming against the
co-defendants. On October 27, 1993, the Court granted the motion of the
Company and its Chairman for summary judgment. An Order dismissing this case
was entered on December 15, 1993. Plaintiffs appealed, and, on November 7,
1995, the Michigan Court of Appeals affirmed the dismissal.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS.
The Company's common stock trades on the American Stock Exchange. The
ticker symbol is "GSC". No cash dividends were paid by the Company during each
of the two fiscal years ended July 31, 1996. There were 1,145 shareholders of
record of the Company on September 24, 1996. The Company's debt agreements
limit the amount available for cash dividends to 50% of the Company's net
income. However, no cash dividends are expected to be paid by the Company in
the foreseeable future.
The following table sets forth, for the two fiscal years ended July 31,
1996, the high and low sales prices per share as reported on the American Stock
Exchange for the periods indicated.
<TABLE>
<CAPTION>
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FISCAL YEAR 1996 1995
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<S> <C> <C> <C> <C>
HIGH LOW High Low
First Quarter $22 3/8 $18 3/4 $15 1/4 $12 1/2
Second Quarter 25 1/4 20 1/2 15 7/8 11 5/8
Third Quarter 27 1/4 22 3/4 17 3/8 12
Fourth Quarter 29 3/4 19 19 7/8 17 3/4
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</TABLE>
On September 24, 1996, the closing sale price of the Company's common stock was
$28 1/2 per share.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
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Dollars in thousands, except per share data
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1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
OPERATING DATA FOR THE YEARS ENDED JULY 31,
Net sales $112,057 $103,503 $94,963 $86,209 $81,460
Gross margin 55,193 53,433 47,710 42,545 38,499
Pollution-related expense 2,800 - - 543 4,988
Interest expense 607 1,314 1,689 2,006 2,590
Income taxes (credit) 1,547 3,365 2,600 2.030 (212)
Net earnings (loss) 4,336 6,622 4,754 2.702 (1,211)
Net earnings (loss) per share .53 .92 .75 .47 (21)
Return on average stockholders' equity 7.0% 14.8% 18.0% 12.9% N.A.
BALANCE SHEET DATA AS OF JULY 31,
Cash and cash equivalents $ 9,590 $ 3,010 $ 1,525 $ 1,142 $ 867
Working capital 39,759 33,653 25,404 20,882 8,547
Total assets 88,220 81,781 71,687 63,495 61,530
Long-term debt including current maturities 7,867 7,385 25,198 25,269 25,624
Total liabilities 23,532 23,008 41,252 41,239 41,879
Stockholders' equity 64,688 58,773 30,435 22,256 19.651
Stockholders' equity per share 8.15 7.54 4.96 3.81 3.45
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</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FISCAL YEAR 1996 COMPARED WITH FISCAL YEAR 1995
Net sales for fiscal 1996 increased $8.6 million or 8% to $112.1 million
compared to $103.5 million for fiscal 1995. The sales growth was principally
in the European and Asia-Pacific regions where sales grew 22% and 12%,
respectively. Asia-Pacific's sales growth was negatively impacted by the
change in Japanese exchange rates. The Asia-Pacific sales growth denominated
in local currencies was 19%. Sales in the Americas increased approximately 3%
despite a 3% reduction in domestic laboratory sales caused by the consolidation
of two major laboratory distributors.
Worldwide sales of medical devices increased 12% reflecting strong
international growth for intravenous therapy devices. Sales of process
filtration products increased 16% compared to fiscal 1995 as a result of
continued growth in demand from the microelectronics, chemical and beverage
industries. Laboratory sales increased 3% and were negatively impacted
primarily by domestic distributor inventory reductions during mid-fiscal 1996.
Membrane sales increased 7% as compared to fiscal 1995, reflecting the
Company's continued focus on membrane sales.
Net sales for the fourth quarter of fiscal year 1996 of $28.1 million were
substantially identical to net sales of $28.4 million for the fourth quarter of
fiscal 1995. Sales in the fourth quarter of fiscal 1996 were negatively
impacted by a number of factors including the effect of the stronger dollar
relative to other currencies, which decreased fourth quarter sales by 2.5%, and
the initial uncertainty among the Company's employees, distributors and
customers created by the announcement of the Company's planned merger with
Memtec. An additional factor contributing to the lack of fourth quarter net
sales growth was $2.5 million of sales credits compared to $1.4 million of
sales credits in the fourth quarter of 1995. The significant increase in the
amount of sales credits was due to a transition in the Company's policy for
granting sales credits to customers, changes in its process for tracking sales
credits and one-time product returns from several large customers in exchange
for long-term purchase and other commitments.
Gross profit, as a percentage of sales, was 49.3% in fiscal 1996 compared
to 51.6% in fiscal 1995. The lower gross profit margin was primarily
attributable to fourth quarter items including negative inventory costing
adjustments, increased inventory obsolescence expense, an increase in the
amount of sales credits, the impact of foreign exchange rates as the dollar
strengthened relative to other currency, lower than anticipated fourth quarter
sales, and the impact of product mix. The effect on gross profit margin of
product mix was the result of the strong growth in the sales of process
filtration products and medical devices, which carry lower margins, and the
slower growth in laboratory products, which carry higher margins.
Selling and administration expense increased by $3.1 million or 8% to
$40.1 million for fiscal 1996 compared to $37.0 million for fiscal 1995,
primarily due to the Company's drive to increase market share consistent with
the overall growth strategy.
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Research and development expenses increased approximately $800,000 as a result
of expanded development efforts in the Company's core membrane technology.
Interest expense decreased approximately $700,000 due to repayment of
outstanding indebtedness in the third quarter of fiscal 1995 with the proceeds
from a public offering of the Company's common stock. The Company's effective
tax rate for fiscal 1996 was 26% versus a tax rate of 34% in fiscal 1995
reflecting the result of a research and development expense review undertaken
during the third quarter of fiscal 1996 for the purpose of reflecting a
research and development tax credit consistent with actual business activities,
a greater tax benefit from the Company's foreign sales corporation and the
benefit from the utilization of foreign net operating loss carryforwards and
adjustment of related valuation reserves.
During the fourth quarter of fiscal 1996 the Company increased its reserve
for environmental remediation by $2.8 million. The increase in the amount of
the environmental remediation reserve was made as a result of a comprehensive
review of operating expenses associated with the revised work plan for
groundwater cleanup at the Company's Ann Arbor facility. The work plan was
developed in connection with the amended consent decree signed with the
Michigan Department of Natural Resources in September 1996. (See Note J -
Pollution Related Expenses.) The ultimate costs incurred by the Company as a
result of the groundwater contamination will depend on the efficacy and
duration of the remediation plan.
Net earnings decreased $2.3 million to $4.3 million or $0.53 per share in
fiscal 1996 compared to $6.6 million or $.92 per share in fiscal 1995. The
weighted average shares for fiscal 1996 and 1995 were 8.3 million and 7.2
million, respectively, which includes the effect of a public offering of
1,437,500 shares of the Company's common stock in the third quarter of fiscal
1995.
FISCAL YEAR 1995 COMPARED WITH FISCAL YEAR 1994
Net sales for fiscal 1995 increased $8.5 million or 9% to $103.5 million
compared to $95.0 million for fiscal 1994, which included non-recurring sales
of $4.4 million related to divested Australian non-core product lines.
International sales for fiscal 1995 were favorably affected by the weakened US
dollar which increased reported sales by $2.1 million. The Company's sales
growth, adjusted for these items, was 12%.
Worldwide sales of medical devices increased 27% reflecting sales growth
for intravenous therapy devices. Sales of process filtration products
increased 21% compared to fiscal 1994 reflecting growth in the European and
Asia/Pacific markets. Laboratory sales increased 9% and membrane sales were
level compared to fiscal 1994. Net sales to customers in the Americas
increased 11% over fiscal 1994 primarily due to a 31% increase in sales of
medical devices. Sales to customers in Europe increased 14% primarily due to a
29% increase in sales of process filtration products. Sales to customers in
the Asia/Pacific region declined 6% due to the divestiture of Australian
non-core product lines in late fiscal 1994. Without the effect of this
divestiture, sales in this region would have increased 43%. The increase was
primarily attributable to increases in sales of process filtration products in
Japan and Korea.
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Gross profit, as a percentage of sales, was 51.6% in fiscal 1995 compared
to 50.2% in fiscal 1994. The improvement in gross profit was primarily
attributable to improved operating efficiencies and the divestiture of non-core
product lines.
Selling and administration expense increased $3.3 million or 9.6% to $37.0
million in fiscal 1995 compared to $33.8 million in fiscal 1994, primarily due
to the Company's drive to increase market share consistent with the overall
growth strategy. Other income (net) includes gains on foreign currency
transactions and rental income related to the divestiture of non-core product
lines. Interest expense decreased $375,000 due to repayment of outstanding
indebtedness and overall reduction in interest rates in the fourth quarter.
The Company's effective tax rate for fiscal 1995 and fiscal 1994 was 34%.
Net earnings increased $1.9 million or 39% to $6.6 million or $.92 per
share in fiscal 1995 compared to $4.8 million or $.75 per share in fiscal 1994.
Net earnings for fiscal 1994 included an extraordinary charge of $.03 per
share related to the refinancing of industrial revenue bonds. The weighted
average shares for fiscal 1995 and 1994 were 7.2 million and 6.3 million,
respectively, which includes the effect of a public offering of 1,437,500
shares of the Company's common stock in the third quarter of fiscal 1995.
INFLATION
Although the Company cannot determine the precise effects of inflation,
management believes that inflation does have an influence on the cost of
materials, salaries and benefits, utilities and outside services. The Company
attempts to minimize the effects of inflation, to the extent possible, through
increased sales volume, new product introductions, product redesigns, capital
expenditure and other programs to improve productivity and other cost
efficiencies, alternative sourcing of material and products and other cost
control measures. The Company's ability to pass on cost increases to its
customers is limited because of customer contracts and competitive pressure.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, the Company generated cash from operating activities
of $11.2 million compared to $6.0 million during fiscal 1995. The Company
invested $6.2 million in capital expenditures in fiscal 1996. The remaining
cash was invested in cash equivalents for funding future capital investments
and business projects. At July 31, 1996, $7.5 million in cash equivalents were
held in short-term money market instruments as compared to $1.2 million at July
31, 1995.
The Company has various credit facilities which are used for cash
management, foreign exchange management and future growth. The Company's
long-term credit facilities total $15 million and there were no borrowings
outstanding at July 31, 1996.
Working capital at July 31, 1996 and 1995 was $39.8 million and $33.7
million, respectively. The increased working capital was attributed mainly to
the increase in cash equivalents described above.
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Although there are no material capital expenditure commitments outstanding
as of July 31, 1996, the Company expects to invest in capital projects at a
rate at least equal to depreciation. The Company believes that its balances of
cash and cash equivalents, together with funds generated from operations and
existing borrowing capabilities, will be sufficient to meet its operating cash
requirements and fund the environmental cleanup and required capital
expenditures in the foreseeable future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the Report of Independent Auditors, Consolidated
Balance Sheet, Consolidated Statements of Cash Flow, Consolidated Statement of
Shareholders' Equity, Notes to Consolidated Financial Statements and Financial
Statement Schedules on pages F-1 to F-16 of this report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names and ages of the directors and
executive officers of the Company, together with all positions and offices held
by such persons. Executive officers are elected annually by, and serve at the
pleasure of, the Board of Directors. The number of shares of the Company's
common stock beneficially owned by each such person is shown below under the
caption "Security Ownership of Certain Beneficial Owners and Management".
<TABLE>
<CAPTION>
NAME POSITION APPOINTED AGE
- ---- --------------------------------------------------------- --------- ---
<S> <C> <C> <C>
Robert M. Collins Director 1994 65
John A. Geishecker, Jr. Director 1978 59
Saul H. Hymans Director 1980 59
Nina I. McClelland Director 1989 67
Charles Newman Director 1992 55
Charles Gelman Chairman of the Board and Chief Executive Officer 1974 64
Kim A. Davis President, Chief Operating Officer and a Director 1993 45
Anthony P. Kelly Vice President 1995 48
Edward J. Levitt Secretary and Corporate Counsel 1991 52
Karen A. Radtke Treasurer 1995 43
Charles J. Robrecht Vice President 1991 61
Mark A. Sutter Vice President 1992 35
George Uveges Chief Financial Officer and Vice President-Administration 1996 48
</TABLE>
Robert M. Collins has been an Independent Consultant since April 1991.
From 1990 to April 1991, he was President of Cobe Laboratories Inc. (a
manufacturer of medical devices). Mr. Collins has been a director of Cobe
Laboratories Inc. for more than five years and a director of QualiCenters, Inc.
since 1992.
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John A. Geishecker, Jr., has been Managing Director of Phillips Screw
Company since August 1993. Since March 1996, he has been Managing Director of
Hawk Resorts International, L.P. (a resort). Mr. Geishecker has been Managing
Director of KREW Team, Inc. since 1978 and Managing Director of SAGE Advisors,
Inc. (a business advisory service company) since mid-1995. From 1978 to 1996,
Mr. Geishecker was a Vice President and a Director of Rule Industries, Inc. (a
diversified manufacturer).
Saul H. Hymans has been a Professor of Economics and Statistics at the
University of Michigan since 1977 and Director, Research Seminar in
Quantitative Economics at the University of Michigan since 1981.
Nina I. McClelland has been the President of Nina I. McClelland, LLC
(consulting services) since May 1995, and has been a consultant to the Company
since May 1996. Since May 1995, Dr. McClelland has been Chairman Emeritus of
NSF International, Ann Arbor, Michigan. From January 1995 to May 1995, Dr.
McClelland was the Chairman of NSF International; and, for more than five years
previous thereto, she was the Chairman of the Board of Directors, President and
Chief Executive Officer of the National Sanitation Foundation, Ann Arbor,
Michigan. She has been an Adjunct Professor at the School of Public Health,
University of Michigan, since 1986. Dr. McClelland was a director of First of
America Bank, Ann Arbor, Michigan, from 1981 to August 1994.
Charles Newman has been the Chief Executive Officer of ReCellular Inc. (a
remanufacturer of cellular phones) since 1989. From 1989 until 1996 he was
also the President, and thereafter has been the Chairman, of ReCellular Inc.
Mr. Newman was President of Demand Publishing Inc. (a publishing services
business) from 1992 to 1994. In 1996, Mr. Newman became a director of the Bank
of Ann Arbor, Ann Arbor, Michigan.
Charles Gelman founded the Company in 1959. He was the Company's
President from 1974 to 1988 and from 1990 to 1993. He has been the Company's
Chairman and Chief Executive Officer and a Director since 1974. In 1996, Mr.
Gelman became a director of ReCellular Inc. and of Sleeping Bear Press (a
printing company).
Kim A. Davis has been the President and Chief Operating Officer of the
Company since May 1993, and a Director of the Company since March 1995. From
January 1991 until May 1993, he was Chief Operating Officer of Promega
Corporation (a biotechnology company).
Anthony P. Kelly has been Vice President, Worldwide Sales, of the Company
since August 1995. From May 1994 to January 1996, he was the Vice President,
Sales Asia/Pacific, and, from January 1996 to date, he has been the Vice
President, Worldwide Sales, for Gelman Sciences International, Inc., a
subsidiary of the Company engaged in non-US sales and distribution. For more
than the last five years, Mr. Kelly has served as the Managing Director and
Chief Operating Officer of Gelman Sciences Pty. Ltd., the Company's Australian
subsidiary. Since July 1994, Mr. Kelly has served as the Managing Director of
The Kelly Company Pty Ltd. (a diversified manufacturer), an Australian company
privately owned and operated by Mr. Kelly and his family.
12
<PAGE> 13
Edward J. Levitt has been the Secretary for the Company since March 1994.
He was Assistant Vice President - Legal from December 1991 to March 1994. Mr.
Levitt was hired in April 1989 as Corporate Counsel and continues to serve in
that capacity.
Karen A. Radtke has been Treasurer of the Company since June 1995 and an
executive officer since September 20, 1995. She was Treasurer and Tax Director
of Hayes Wheels, Inc. (an automotive components manufacturer) from July 1993 to
May 1995. Ms. Radtke served on the General Motors International Tax Staff from
1988 to 1993.
Charles J. Robrecht was appointed Vice President and General Manager of
the Fluids group in July 1995. For the previous four years, he held various
positions with the Company, including Vice President - Asia Pacific Ventures,
Vice President - Distribution, and Vice President - International.
Mark A. Sutter was appointed Vice President and General Manager of the
Healthcare group in July 1995. From May 1992 to July 1995, he was Vice
President - Research and Development. Previously, Mr. Sutter served as
Director of Membrane Research and Development and Cartridge Capsule Development
and in various marketing functions for the Company since January 1986.
George Uveges was appointed Chief Financial Officer and Vice President -
Administration in June 1996. He served as the Chief Financial Officer and Vice
President of Administration for G.I. Plastek (a manufacturer of plastic parts)
from September 1995 through March 1996. From April 1991 until September 1995,
Mr. Uveges served as the Chief Financial Officer and Vice President of
Administration for Industrial General Corporation (a holding company with
business in plastic molding and subfractional electrical motors).
There are and during the past five years there have been no legal
proceedings material to an evaluation of the ability of any director or
executive officer of the Company to act in such capacity or of his or her
integrity.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during the last fiscal year all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than ten percent beneficial owners were complied with, except as
follows:
- - Mr. Gelman filed one Form 4, pertaining to one sale transaction, late.
- - Ms. Radtke, who became an executive officer of the Company on September
20, 1995, filed her Form 3 late.
- - Mr. Kelly, who became an executive officer of the Company on September
20, 1995, filed an amendment of his Form 3 late and his Form 5, pertaining
to one sale transaction and one option grant, late.
13
<PAGE> 14
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
services in all capacities for each of the three fiscal years ended July 31,
1996 of those persons who were the chief executive officer at August 1, 1996,
and the other four most highly compensated executive officers of the Company
for the fiscal year ended July 31, 1996 (the "Five Named Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards/Securities
Name and Fiscal ------------------- Underlying All Other
Principal Position Year Salary Bonus(1) Options(#) Compensation(2)
- ------------------------ ------ ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Charles Gelman 1996 $350,000 - - $10,817
Chairman of the 1995 350,012 $150,000 50,000 157,179
Board and 1994 328,000 120,000 56,250 46,637
Chief Executive Officer
Kim A. Davis 1996 $325,000 - - $25,686
President and 1995 233,870 $150,000 50,000 11,551
Chief Operating Officer 1994 186,000 120,000 56,250 2,419
Anthony P. Kelly 1996 $144,469 $ 3,700 27,500 $ 299
Vice President 1995 112,550 33,000 - 462
1994 97,111 10,000 3,750 726
Mark A. Sutter 1996 $120,000 - - $ 8,551
Vice President 1995 106,923 $ 31,760 5,000 6,751
1994 100,000 30,000 - 7,869
Charles J. Robrecht 1996 $110,000 - 750 $ 6,965
Vice President 1995 105,000 $ 17,000 7,500 7,872
1994 105,000 18,900 - 8,112
</TABLE>
(1) Bonuses are shown in the fiscal year earned, but payment is deferred
until the subsequent fiscal year.
(2) "All Other Compensation" includes the following payments by the Company
during the fiscal year ended July 31, 1996:
(a) Employee Stock Ownership Plan: Mr. Gelman, $1,013; Mr.
Davis, $1,013; Mr. Robrecht $857; and Mr. Sutter, $1,013.
(b) Deferred Compensation Thrift Plan (401(k)): Mr. Gelman,
$4,806; Mr. Davis, $4,748; Mr. Robrecht, $3,423; and Mr. Sutter,
$7,034.
(c) Group Term and other Life Insurance: Mr. Gelman, $4,699;
Mr. Davis, $510; Mr. Robrecht $2,386; and Mr. Sutter, $205.
(d) Profit Sharing: Mr. Gelman, Mr. Davis, Mr. Kelly, Mr.
Robrecht, and Mr. Sutter each were paid $299.
(e) Mr. Davis' auto allowance of $19,116.
The following table sets forth additional information concerning stock
option grants made during fiscal 1996 to the Five Named Officers. These grants
are also reflected in the Summary Compensation Table. In addition, in
accordance with the rules of the Securities and Exchange Commission ("SEC"),
the hypothetical gain or "option spread" for each option grant is shown based
on compound annual rate of stock price appreciation of 5% and 10% from the date
of grant to the expiration date. The
14
<PAGE> 15
assumed rates of growth are prescribed by the SEC and are for illustration
purposes only; they are not intended to predict future stock prices. The
Company has not granted any stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM
--------------------------------------------------- ---------------------
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED (#) FISCAL YEAR BASE PRICE ($/SH.) DATE 5% ($) 10% ($)
- ------------------- ----------- ------------------ ------------------ -------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Charles Gelman - - - - - -
Kim A. Davis - - - - - -
Anthony P. Kelly 27,500 39.3% $22.570 9/20/05 and 12/14/05 $390,300 $989,000
Charles J. Robrecht 750 1.1% 26.125 4/2/06 12,300 31,200
Mark Sutter - - - - - -
</TABLE>
(1) The Company's 1988 Stock Option Plan, as amended, (the "1988 Plan")
generally provides for granting of incentive stock options, non-qualified
stock options and stock appreciation rights. The Company has not granted
any stock appreciation rights. The 1988 Plan is administered by a
committee of the Board of Directors. Subject to the limitations imposed
by the 1988 Plan, the committee selects participants, determines the size
of the grant, the option exercise price and the period of vesting.
Pursuant to the 1988 Plan, the exercise price of an incentive stock option
must be no less than the market price of a share of the Company's common
stock on the date of the grant. The options granted become exercisable
one-fourth each year on and after the anniversary of the grant date. The
exercise price must be paid in cash or, with the consent of the Board of
Directors, in whole or in part in the Company's common stock or other
property.
The following table provides information concerning the exercise of stock
options during fiscal 1996 by the Five Named Officers and the fiscal year-end
value of unexercised options on an aggregate basis.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options at Options at
July 31, 1996 July 31, 1996
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)(1) Unexercisable Unexercisable(2)
- ------------------- --------------- -------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Charles Gelman - - 31,250/37,500 $442,125/$351,563
Kim A. Davis - - 125,000 /37,500 2,323,144/ 393,750
Anthony P. Kelly - - 24,887/30,313 554,988/ 215,708
Charles J. Robrecht 20,999 $354,437 563/9,188 13,998/ 143,488
Mark Sutter 2,000 44,422 11,311/8,250 259,362/ 158,288
</TABLE>
(1) Aggregate market value of the shares of Common Stock covered by the
options on date of exercise less the exercise price of such options.
(2) Options are "in-the-money" if, on July 31, 1996, the market price of the
Common Stock ($28 1/4) exceeded the exercise price of such option.
15
<PAGE> 16
DIRECTORS COMPENSATION FOR FISCAL 1996
The following table sets forth information concerning the compensation for
fiscal 1996 paid to each non-management director of the Company.
<TABLE>
<CAPTION>
Cash Compensation Number of Shares
---------------------------------------- Underlying
Annual Meeting Consulting Options
Name Retainer Fee Fees Fees Granted (2)
- ---- ------------------- ------- ---------- ----------------
<S> <C> <C> <C> <C>
Robert M. Collins $4,000 $17,000 $4,000 -
John A. Geishecker, Jr. 4,000 20,000 - -
Hajime Kimura (1) 4,000 - - -
Saul H. Hymans 4,000 19,000 - 1,000
Nina I. McClelland 4,000 19,000 $5,000 1,000
Charles Newman 4,000 19,000 - -
</TABLE>
(1) Dr. Kimura resigned from the Board of Directors effective June 30, 1996.
(2) Pursuant to the Company's non-employee director stock plan, Dr. Hymans
and Dr. McClelland were each granted a stock option on July 31, 1996, to
acquire 1,000 shares of the Company's common stock at an exercise price of
$27.75 per share.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Charles Gelman. Pursuant to an employment agreement, Charles Gelman is
employed as Chairman and Chief Executive Officer of the Company for a
three-year term at an annual minimum salary of $350,000 plus bonus, as
determined by the Board of Directors. The agreement provides for the use of an
automobile by Mr. Gelman at no cost to him, and gives Mr. Gelman the right to
participate in medical, disability, retirement and other benefit programs on
the same terms and conditions as other executive employees of the Company. The
active employment period under the agreement commenced August 1, 1995, and is
automatically extended each year on August 1 for one additional year unless
notice of termination is given. (No such notice was given on August 1, 1996.)
Employment terminates upon Mr. Gelman's death or disability. It also may be
terminated by the Company with or without cause and/or by Mr. Gelman. Should
there have been no change in control of the Company, upon termination by the
Company without cause of Mr. Gelman's employment, Mr. Gelman is to receive
termination compensation equal to his annual salary plus bonus in the year of
termination, if the Company is then achieving or exceeding its projected
performance plan, or an amount equal to his annual salary only, if the Company
is not then achieving its projected performance plan, payable annually for the
greater of the remaining balance of the agreement or two years. If there has
been a change in control and Mr. Gelman resigns within one year of such a
change or his employment is terminated by the Company without cause, Mr. Gelman
is to receive termination compensation equal to his annual salary plus bonus in
the year of termination, if the Company is then achieving or exceeding its
projected performance plan, or an amount equal to his annual salary only, if
the Company is not then achieving its projected performance plan, payable
annually for the remaining balance of the agreement plus two years, the
immediate vesting of all stock options and awards granted to him, the immediate
payment of all incentive awards earned, and for the unexpired term of the
agreement, the use of an automobile and fringe benefits. The amount paid to
Mr. Gelman in fiscal 1996 is set forth in the compensation table, above. Mr.
Gelman's current annual salary is $350,000. As used in the agreement, "change
in control" means acquisition of beneficial ownership of a majority of the
outstanding voting shares of the Company, a tender offer consummated for at
least thirty-three percent
16
<PAGE> 17
(33%) of the Company's common stock or acquisition of beneficial ownership of
more than fifty-one percent (51%) of the total fair market value of the
Company's assets by any person or entity (or more than one person or entity
acting as a group), or replacement of a majority of the members of the
Company's Board of Directors within a one year period.
The Company and Mr. Gelman have agreed to amend Mr. Gelman's employment
agreement contingent upon the closing of the merger with Memtec. Under the
agreement, Mr. Gelman has agreed, in exchange for cash payments totaling
$2,352,709 payable on January 2, 1997, to terminate all provisions of his
Employment Agreement as of the effective date of the Merger, other than those
relating to the vesting of stock options. In addition, the Company and Mr.
Gelman will enter into a consulting agreement under which Mr. Gelman will act
as a consultant for a period of five years and will receive for three years a
fee of $50,000 annually and the use of an office, clerical and staff support,
and certain insurance and similar benefits. After the initial three-year
period, Mr. Gelman will have access to an office and secretarial help for an
additional two-year period.
Kim A. Davis. Pursuant to an employment agreement, Kim A. Davis is
employed as President and Chief Operating Officer of the Company for a
three-year term at an annual minimum salary of $325,000 plus bonus, as
determined by the Board of Directors. The agreement provides for the use of an
automobile by Mr. Davis at no cost to him and for whole life insurance benefits
in the amount of $1,000,000 with premiums payable by the Company, and gives Mr.
Davis the right to participate in medical, disability, retirement and other
benefit programs on the same terms and conditions as other executive employees
of the Company. The active employment period under the agreement commenced
August 1, 1995, and is automatically extended each year on August 1 for one
additional year unless notice of termination is given by the Company. (No such
notice was given on August 1, 1996.) Employment terminates upon Mr. Davis'
death or disability. Further, it may be terminated by the Company with or
without cause or by Mr. Davis. Should there have been no change in control of
the Company, upon termination by the Company without cause of Mr. Davis'
employment, Mr. Davis is to receive termination compensation equal to his
annual salary plus bonus in the year of termination, if the Company is then
achieving or exceeding its projected performance plan, or an amount equal to
his annual salary only, if the Company is not then achieving its projected
performance plan, payable annually for the greater of the remaining balance of
the agreement or two years. If there has been a change in control and Mr.
Davis resigns within one year of such a change or his employment is terminated
by the Company without cause, Mr. Davis is to receive termination compensation
equal to his annual salary plus bonus in the year of termination, if the
Company is then achieving or exceeding its projected performance plan, or an
amount equal to his annual salary only, if the Company is not then achieving
its projected performance plan, payable annually for the remaining balance of
the agreement plus two years, the immediate vesting of all stock options and
awards granted to him, the immediate payment of all incentive awards earned,
and for the unexpired term of the agreement the use of an automobile, continued
payment on the one million dollar whole life insurance policy and fringe
benefits. The amount paid to Mr. Davis in fiscal 1996 is set forth in the
compensation table, above. Mr. Davis' current annual salary is $325,000. As
used in the agreement, "change in control" means acquisition of beneficial
ownership of a majority of the outstanding voting shares of the Company, a
tender offer consummated for at least thirty-three percent (33%) of the
Company's common stock or acquisition of beneficial ownership of more than
fifty-one percent (51%) of the total fair market value of the Company's assets
by any person or entity (or more than one person or entity acting as a group),
or replacement of a majority of the members of the Company's Board of Directors
within a one year period.
The Company and Mr. Davis have agreed to amend Mr. Davis' employment
agreement, contingent upon the closing of the merger with Memtec. Under the
agreement, Mr. Davis has
17
<PAGE> 18
agreed, in exchange for cash payments totaling $924,386 payable on January 2,
1997, to amend his employment agreement so as to limit the maximum termination
benefit to three years' compensation.
Anthony P. Kelly. Pursuant to a service agreement, Mr. Kelly, the
Company's Vice President, Worldwide Sales, is employed by Gelman's Australian
subsidiary as its Managing Director and Chief Operating Officer through the
fiscal year ending July 31, 1998, at a salary to be reviewed and increased each
January and July 1 by the percentage increase in the Consumer Price Index for
Sydney, Australia, since the previous review date. In the fiscal year ended
July 31, 1996, Mr. Kelly's annual salary was $144,469. Under the agreement, on
each salary review date, Mr. Kelly is also entitled to receive an amount equal
to 5% of the first A$500,000 of pre-tax profits and 2.5% of pre-tax profits
over A$500,000 of the Australian subsidiary since the previous review date.
Further, pursuant to the agreement, the Australian subsidiary pays A$7,500 per
year to the Kelly Superannuation Fund on a date specified by Mr. Kelly. The
agreement also provides for the use of an automobile by Mr. Kelly at no cost to
him. Mr. Kelly's employment may be terminated at any time for any reason. If
his employment is terminated, Mr. Kelly is to receive an amount from the
Australian subsidiary equal to his then current annual salary plus an amount
equal to 5% of the pre-tax profits of less than A$500,000 and 2.5% of the
amount over A$500,000 earned by the Australian subsidiary for the preceding
twelve months; provided, if his employment is terminated within six months
after a change in control of the Company or the Australian subsidiary, Mr.
Kelly is to receive twice the amount he would otherwise receive upon
termination.
Charles J. Robrecht. Pursuant to a termination benefit agreement, upon
termination of his employment for any reason other than due to the commission
of an illegal act, Mr. Robrecht, a Vice President of the Company, will be paid
an amount equivalent to six months of his annual salary. Based on current
annual salary, severance payments for Mr. Robrecht would be $55,000. In
addition, in the event of termination, Mr. Robrecht will receive reimbursement
of his costs to obtain job placement services, not to exceed $7,500, and
medical and health insurance coverage for a period ending on the earlier of the
date which is twelve months from the date of his termination or the date he
commences new employment.
Mark A. Sutter. Pursuant to a termination benefit agreement, upon
termination of his employment for any reason other than due to the commission
of an illegal act, Mr. Sutter, a Vice President of the Company, will be paid an
amount equivalent to six months of his annual salary. Based on his current
annual salary, severance payments for Mr. Sutter would be $60,000. In
addition, in the event of termination, Mr. Sutter will receive reimbursement of
his costs to obtain job placement services, not to exceed $7,500, and medical
and health insurance coverage for a period ending on the earlier of the date
which is twelve months from the date of his termination or the date he
commences new employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Collins, Mr. Geishecker and Dr. McClelland served as members of the
Compensation Committee in fiscal 1996. No member of the Compensation Committee
has an interlocking or insider participation that would affect compensation
determination.
18
<PAGE> 19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of the Company's
common stock of each person known to the Company to be the beneficial owner of
more than five percent (5%) of the total shares issued and outstanding on
September 24, 1996. Under rules and regulations promulgated by the SEC, a
person is deemed to be the "beneficial owner" of all the shares with respect to
which he has or shares voting power or investment power, regardless of whether
he is entitled to receive any economic benefit from his interest in the shares.
Except as otherwise indicated, ownership is direct. As used herein, the term
"voting power" means the power to vote or to direct the voting of shares and
"investment power" means the power to dispose of or to direct the disposition
of shares.
<TABLE>
<CAPTION>
Name and Address of Shares Percent of
Beneficial Owner Beneficially Owned Class
- ------------------------------------------ ------------------ ----------
<S> <C> <C>
Charles Gelman 954,692 (a) 12.01%
600 South Wagner Road
Ann Arbor, MI 48103-9019
RCM Capital Management 702,500 (b) 8.84%
4 Embarcadero Centre
San Francisco, CA 94111-4189
Prudential Insurance Company of America 461,300 (c) 5.80%
Prudential Plaza
751 Broad Street
Newark, NJ 07102-3777
T. Rowe Price Associates, Inc. 451,200 (d) 5.68%
100 East Pratt Street
Baltimore, MD 21202
Mentor Partners, L.P. 434,400 (e) 5.47%
500 Park Avenue
New York, NY 10022
Schroder Wertheim Investment Services Inc. 411,600 (f) 5.18%
Equitable Center
787 Seventh Avenue
New York, NY 10019-6016
</TABLE>
- --------
(a) Mr. Gelman's beneficial ownership includes 7,697 shares allocated to him
under the Company's employee benefit plans. The total does not include
250,916 shares held by the Employee Stock Ownership Plan with respect to
which he has voting and investment power as a trustees.
(b) Based upon information contained in a Schedule 13G filed by RCM Capital
Management and certain affiliated accounts with the SEC on February 6,
1996. Consists of 597,500 shares over which the reporting persons have
sole voting power, 696,500 shares over which they have sole dispositive
power and 7,000 shares over which they have shared dispositive power.
19
<PAGE> 20
(c) Based upon information contained in a Schedule 13G filed by Prudential
Insurance Company of American with the SEC on February 14, 1996. Consists
of 461,300 shares over which Prudential Insurance Company of America has
sole voting and sole dispositive power.
(d) Based upon information contained in a Schedule 13G filed by T. Rowe Price
Associates, Inc. and certain affiliated accounts with the SEC on February
13, 1996. Consists of 3,900 shares over which T. Rowe Price Associates,
Inc. has sole voting power and 451,200 shares over which T. Rowe Price
Associates, Inc. has sole dispositive power, and 447,300 shares over which
T. Rowe Price New Horizon Fund, Inc. has sole voting power.
(e) Based on information contained in Schedule 13D filed by Mentor Partners,
L.P. with the SEC on September 20, 1996. Consists of 434,400 shares over
which Mentor Partners, L.P. has sole voting and sole dispositive power.
(f) Based upon information contained in a Schedule 13G filed by Schroder
Wertheim Investment Services Inc. with the SEC on February 9, 1996.
Consists of 411,600 shares over which Schroder Wertheim Investment
Services Inc. has sole voting and sole dispositive power.
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides certain information regarding the beneficial
ownership of the Company's common stock, as of September 24, 1996, by its
directors, the Five Named Officers and all directors and executive officers of
the Company as a group. Except as otherwise indicated, ownership is direct.
<TABLE>
<CAPTION>
Stock Beneficially Owned
Including Options Percent
Name and Warrants (a) of Class
- ---- ------------------------ --------
<S> <C> <C>
Robert M. Collins 9,000 *
John A. Geishecker, Jr. 44,100 *
Saul H. Hymans 5,110 *
Nina I. McClelland 9,000 *
Charles Newman 14,962 *
Charles Gelman 954,692 (b) 12.0%
Kim A. Davis 125,984 1.56%
Anthony P. Kelly 29,227 *
Charles J. Robrecht 5,779 *
Mark A. Sutter 15,686 *
All directors and
executive officers as a
group (13 persons) 1,225,498 14.9%
</TABLE>
- --------
*Less than 1% of outstanding shares of the Company's Common Stock.
(a) The number of unexercised option and warrant shares which are exercisable
within 60 days after September 24, 1996, were: Robert M. Collins, 9,000;
John A. Geishecker, Jr., 44,100; Saul H. Hymans, 4,500; Nina I.
McClelland, 8,550; Charles Newman, 9,000; Charles Gelman, 31,250; Kim A.
Davis, 125,000; Anthony P. Kelly, 28,012; Charles J. Robrecht 563; Mark
Sutter, 12,999; and all executive officers and directors as a group (13
persons) 280,299. In addition, 140,000 shares under option will become
immediately exercisable as a result of the Merger.
(b) See note (a) to the table above setting forth the security ownership of
principal shareholders.
20
<PAGE> 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During fiscal 1996, Mr. Collins provided strategic planning consulting
services to the Company in exchange for which Mr. Collins is paid a retainer of
$1,000 per quarter plus $1,000 per day for services in excess of one day per
quarter. At July 31, 1996, the Company had accrued $4,000 for the services
provided.
During fiscal 1996, KREW Team, Inc. provided financial services to the
Company. Mr. Geishecker, a Director of the Company, is Managing Director of
KREW Team, Inc. At July 31, 1996, the Company had accrued $30,000 plus
expenses for the services provided.
During fiscal 1996, the Company paid $5,000 to Dr. McClelland, a Director
of the Company, for consulting services and provided her with office space and
support services. The Company has an additional commitment for $20,000 of
consulting services from Dr. McClelland for the fiscal year ending July 31,
1997.
During fiscal 1994, the Company divested certain non-core product lines
manufactured by its Australian subsidiary. These product lines were sold to
The Kelly Company Pty. Ltd., which is owned by Mr. Kelly, a Vice President of
the Company, and his family, for $726,000. The purchase was funded by a note
to the Company. As of July 31, 1996, $653,000 was due on the note which bears
interest at prime as published in the Wall Street Journal on the first business
day of each month. The note, as amended, is a balloon note which provides for
36 monthly installments plus accrued interest, with the outstanding balance due
in August 1999.
21
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
(A) Consolidated Statements of Income - Years ended July 31, 1996, 1995
and 1994.
(B) Consolidated Statements of Stockholders' Equity - Years ended July
31, 1996, 1995, and 1994.
(C) Consolidated Balance Sheets - July 31, 1996 and 1995.
(D) Consolidated Statements of Cash Flows - Years ended July 31, 1996,
1995, and 1994.
(E) Notes to Consolidated Financial Statements.
(F) Report of Independent Accountants.
(a)(2) Financial Statement Schedules
II -- Valuation and Qualifying Accounts - Years ended July 31, 1996, 1995,
and 1994.
All other schedules for which provision is made in the applicable accounting
regulations of the SEC are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(a)(3) Exhibits
See Exhibit index at page number 41 of this Report on Form 10-K.
(b) Reports on Form 8-K
None.
22
<PAGE> 23
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Gelman Sciences Inc. and Subsidiaries
Dollars in thousands, except per share data
- ----------------------------------------------------------------------------------------------------
Years Ended July 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 112,057 $ 103,503 $ 94,963
Cost of products sold 56,864 50,070 47,253
- ----------------------------------------------------------------------------------------------------
Gross profit 55,193 53,433 47,710
Selling and administration 40,130 37,043 33,785
Research and development 6,258 5,498 4,877
- ----------------------------------------------------------------------------------------------------
Operating earnings 8,805 10,892 9,048
Pollution-related expense 2,800 - -
Interest expense 607 1,314 1,689
Other income - net (485) (409) (178)
- ----------------------------------------------------------------------------------------------------
Earnings before income taxes and
extraordinary item 5,883 9,987 7,537
Income taxes 1,547 3,365 2,600
- ----------------------------------------------------------------------------------------------------
Net earnings before extraordinary item 4,336 6,622 4,937
Extraordinary item - - 183
- ----------------------------------------------------------------------------------------------------
Net earnings $ 4,336 $ 6,622 $ 4,754
- ----------------------------------------------------------------------------------------------------
Primary earnings per share before
extraordinary item $ 0.53 $ 0.92 $ 0.78
- ----------------------------------------------------------------------------------------------------
Primary earnings per share $ 0.53 $ 0.92 $ 0.75
- ----------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
F - 1
<PAGE> 24
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Gelman Sciences Inc. and Subsidiaries
Dollars in thousands
- ------------------------------------------------------------------------------------------------------------------------
Common Additional Retained
Stock Capital Earnings
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at July 31, 1993 $260 $12,508 $12,345
- ------------------------------------------------------------------------------------------------------------------------
Net earnings for 1994 4,754
Stock issued under employee plans - 161,270 shares 16 1,276
ESOP loan payment
Three for two common stock splits 337 (337) (7)
Tax benefit from exercise of stock options 608
Currency translation adjustment
Officer loan repayment
- ------------------------------------------------------------------------------------------------------------------------
Balances at July 31, 1994 613 14,055 17,092
- ------------------------------------------------------------------------------------------------------------------------
Net earnings for 1995 6,622
Stock issued:
Employee plans - 221,730 shares 22 1,181
Public offering - 1,437,500 shares 144 19,278
ESOP loan payment
Tax benefit from exercise of non-qualified stock options 631
Currency translation adjustment
- ------------------------------------------------------------------------------------------------------------------------
Balances at July 31, 1995 779 35,145 23,714
- ------------------------------------------------------------------------------------------------------------------------
NET EARNINGS FOR 1996 4,336
STOCK ISSUED UNDER EMPLOYEE PLANS - 150,710 SHARES 15 1,033
WARRANTS SOLD 57
ESOP LOAN PAYMENT
TAX BENEFIT FROM EXERCISE OF NON-QUALIFIED STOCK OPTIONS 600
CURRENCY TRANSLATION ADJUSTMENT
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT JULY 31, 1996 $794 $36,835 $28,050
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Dollars in thousands
--------------------
Foreign Notes
Currency Receivable
Translation Common
Adjustments Stock
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balances at July 31, 1993 $(1,265) $(1,592)
- --------------------------------------------------------------------------------------------------------
Net earnings for 1994
Stock issued under employee plans - 161,270 shares
ESOP loan payment 150
Three for two common stock splits
Tax benefit from exercise of stock options
Currency translation adjustment 390
Officer loan repayment 992
- --------------------------------------------------------------------------------------------------------
Balances at July 31, 1994 (875) (450)
- --------------------------------------------------------------------------------------------------------
Net earnings for 1995
Stock issued:
Employee plans - 221,730 shares
Public offering - 1,437,500 shares
ESOP loan payment 150
Tax benefit from exercise of non-qualified stock options
Currency translation adjustment 310
- --------------------------------------------------------------------------------------------------------
Balances at July 31, 1995 (565) (300)
- --------------------------------------------------------------------------------------------------------
NET EARNINGS FOR 1996
STOCK ISSUED UNDER EMPLOYEE PLANS - 150,710 SHARES 15
WARRANTS SOLD
ESOP LOAN PAYMENT 150
TAX BENEFIT FROM EXERCISE OF NON-QUALIFIED STOCK OPTIONS
CURRENCY TRANSLATION ADJUSTMENT (276)
- -------------------------------------------------------------------------------------------------------
BALANCES AT JULY 31, 1996 $ (841) $ (150)
- -------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F - 2
<PAGE> 25
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Gelman Sciences Inc. and Subsidiaries
Dollars in thousands, except per share data
- -------------------------------------------------------------------------------------------------------------------------
July 31 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,590 $ 3,010
Accounts receivable less allowances (1996-$1,828; 1995-$1,310) 26,442 23,985
Inventories 11,751 14,944
Other current assets 4,205 5,363
- -------------------------------------------------------------------------------------------------------------------------
Total Current Assets 51,988 47,302
PROPERTY, PLANT AND EQUIPMENT, NET 34,124 32,584
INTANGIBLES AND OTHER ASSETS 2,108 1,895
- -------------------------------------------------------------------------------------------------------------------------
Total Assets $88,220 $81,781
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,989 $ 3,813
Accrued expenses 7,077 9,312
Current maturities of long-term debt 163 524
- -------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 12,229 13,649
LONG-TERM DEBT, EXCLUSIVE OF CURRENT MATURITIES 7,704 6,861
OTHER LONG-TERM LIABILITIES 3,599 2,498
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00 per share-authorized 500,000 shares,
none outstanding - -
Common stock, par value $.10 per share
issued 7,940,000 shares in 1996 and 7,790,000 shares in 1995. 794 779
Additional capital 36,835 35,145
Retained earnings 28,050 23,714
Foreign currency translation adjustments (841) (565)
Notes receivable-common stock (150) (300)
-----------------------------
Total Stockholders' Equity 64,688 58,773
- -------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $88,220 $81,781
=========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
F - 3
<PAGE> 26
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
Gelman Sciences Inc. and Subsidiaries
Dollars in thousands
- ------------------------------------------------------------------------------------------------------------
Years Ended July 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 4,336 $ 6,622 $ 4,754
Extraordinary loss related to early extinguishment of debt,
before tax benefit - - 295
Depreciation and amortization 4,734 4,495 4,396
(Decrease) increase in deferred income taxes (458) 144 627
Loss (gain) on sale of property, plant and equipment 51 54 (196)
Stock issued for employee service 265 389 360
Contribution to employee stock ownership plan 150 150 150
Decrease (increase) in inventories 2,947 (615) (1,431)
Increase in accounts receivable (2,738) (3,071) (3,391)
Decrease (increase) in other current assets 870 (1,100) (276)
(Decrease) increase in current liabilities (1,648) (686) 382
Increase (decrease) in liabilities for environmental activities 2,217 (597) (1,154)
Increase (decrease) in other long term liabilities 345 179 (25)
- ------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,071 5,964 4,491
FINANCING ACTIVITIES
Long-term debt borrowings 2,360 25,425 33,125
Principal payments on long-term debt (1,613) (43,070) (33,196)
Net proceeds from secondary stock offering - 19,422 -
Proceeds from exercised stock options and warrants 840 818 924
Tax benefit from exercised stock options 600 631 608
Fees paid on early retirement of debt - - (52)
Payment received - note receivable common stock - - 992
- ------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,187 3,226 2,401
INVESTING ACTIVITIES
Capital expenditures (6,230) (7,825) (6,682)
Proceeds from sale of property, plant and equipment 8 43 537
Increase in intangibles and other assets (329) (47) (347)
- ------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (6,551) (7,829) (6,492)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (127) 124 (17)
- ------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 6,580 1,485 383
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,010 1,525 1,142
- ------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,590 $ 3,010 $ 1,525
============================================================================================================
See notes to consolidated financial statements.
</TABLE>
F - 4
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Gelman Sciences Inc. and Subsidiaries
NOTE A-SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of all subsidiaries of the Company and are prepared in conformity with
generally accepted accounting principles which require management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from these
estimates. All significant intercompany transactions are eliminated. The
financial data of foreign subsidiaries is translated using current exchange
rates at the end of the year for balance sheet accounts and average exchange
rates for operations. Translation gains and losses are reflected in
stockholders' equity, while transaction gains and losses are reflected in the
statements of operations. Foreign exchange transaction gains (losses) of
($27,000), $233,000, and $77,000 were recognized in fiscal years 1996, 1995,
and 1994, respectively.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the presentation used for the year ended
July 31, 1996.
Revenue Recognition: The Company recognizes revenue from product sales when
goods are shipped to the customer and provides a reserve for estimated returns
and allowances.
Inventories: Inventories are stated at the lower of cost or market. Cost was
determined by the last-in, first-out (LIFO) method at the U.S. locations,
representing approximately 69% and 77% of the July 31, 1996 and 1995
inventories, respectively, and by the first-in, first-out (FIFO) method for
the foreign locations. The current cost of inventories exceeded their LIFO
carrying amount by approximately $2,824,000 and $2,961,000 at July 31, 1996 and
1995, respectively. During fiscal 1996, inventory quantities were reduced,
which resulted in a liquidation of LIFO inventory layers carried at lower costs
which prevailed in prior years. The effect of the liquidation was to decrease
cost of products sold by $137,000 and to increase net earnings by $90,400 or
$.01 per share.
Properties and Depreciation: Properties are stated at cost. Depreciation is
computed using the straight-line method based on the estimated useful life of
the related asset.
Intangibles and Other Assets: Intangibles and Other Assets consist principally
of the excess of cost over net assets of acquired companies, amortized over 30
years, the cost of patents, amortized over 10 years, and a note receivable
related to the 1994 sale of non-core product lines in Australia.
Earnings Per Share: Primary earnings per share for fiscal 1996, 1995, and 1994
are based on the weighted average of common and common equivalent shares of
8,254,993, 7,235,273, and 6,307,388, respectively. Common share equivalents
included in the computation represent shares issuable upon assumed exercise of
stock options and warrants which would have a dilutive effect. Full dilution
had no material effect on earnings per share in fiscal 1996, 1995 and 1994.
Fiscal 1995 weighted average shares includes the effect of the March 1995
public offering of 1,437,500 shares of the Company's common stock.
F - 5
<PAGE> 28
NOTE A-SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instruments: The Company enters into certain financial agreements to
reduce exposure to fluctuating foreign currency exchange rates and interest
rates. Realized and unrealized gains and losses on forward exchange contracts
are recorded as other expense (income) in the period in which exchange rate
movement occurs. The Company enters into interest rate financial agreements to
manage exposure to interest rate fluctuations. The differences to be paid or
received on interest rate agreements are included in interest expense
currently. Gains and losses realized upon settlement of these agreements are
deferred and amortized to interest expense over a period relevant to the
agreement if the underlying hedged instrument remains outstanding or
immediately if the underlying hedged instrument is terminated. The fee paid on
an interest rate cap agreement is amortized over the life of the agreement.
Concentration of Credit Risk: The Company invests its excess cash in both
deposits with major banks throughout the world and other high quality
short-term liquid money market instruments (commercial paper, government
treasury bills, etc.) These cash equivalents mature within three months and
the Company has not incurred any related losses. The carrying amount of cash
equivalents approximates fair value. At July 31, 1996, $7,466,000 in cash
equivalents were held.
The Company sells a broad range of products in most countries of the
world. Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's customer
base. Ongoing credit evaluations of customers' financial condition are
performed and, generally, no collateral is required. The Company maintains
reserves for potential credit losses and such losses, in the aggregate, have
not exceeded management's expectations.
Income Taxes: The Company uses the liability method in measuring the provision
for income taxes and recognizing deferred tax assets and liabilities in the
balance sheet. The liability method requires that deferred income taxes
reflect the tax consequences of currently enacted rates for differences between
the tax and financial reporting bases of assets and liabilities.
The Company intends to continue to reinvest its undistributed earnings to
expand its international operations; therefore, no tax has been provided to
cover the repatriation of such undistributed earnings. At July 31, 1996, the
cumulative amount of undistributed international earnings was approximately
$5.6 million.
NOTE B-INVENTORIES
- -----------------------------------------------------------------------------
Inventories consist of the following as of July 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Finished products $ 6,061 $ 6,320
Work in process 1,027 1,572
Raw materials and purchased parts 4,663 7,052
- -----------------------------------------------------------------------------
$11,751 $14,944
- -----------------------------------------------------------------------------
</TABLE>
F - 6
<PAGE> 29
NOTE C-PROPERTY, PLANT AND EQUIPMENT
- ----------------------------------------------------------------------------
Property, plant and equipment consist of the following as of July 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,441 $ 1,438
Buildings and leasehold improvements 19,956 19,302
Equipment 53,870 49,102
- ----------------------------------------------------------------------------
75,267 69,842
Less: allowance for depreciation 41,143 37,258
- ----------------------------------------------------------------------------
$34,124 $32,584
- ----------------------------------------------------------------------------
</TABLE>
NOTE D-CURRENT LIABILITIES
- ---------------------------------------------------------------------------
Accrued expenses consist of the following as of July 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Accrued salaries and wages $3,507 $5,310
Environmental reserve 1,000 250
Income taxes currently payable 329 1,332
Other accrued expenses 2,241 2,420
- --------------------------------------------------------------------------
$7,077 $9,312
- --------------------------------------------------------------------------
</TABLE>
NOTE E-FINANCING
Financing consisted of the following obligations as of July 31 (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Development Revenue Bonds $4,415 $4,697
Note payable, State of Michigan, bearing interest
at 7.5%, through January 6, 2002 638 744
Notes payable to banks 2,211 1,368
Other 603 576
- -----------------------------------------------------------------------------------------------
Total debt 7,867 7,385
Less: current maturities and short-term debt 163 524
- -----------------------------------------------------------------------------------------------
Long-term debt $7,704 $6,861
- -----------------------------------------------------------------------------------------------
</TABLE>
During fiscal 1996, the Company refinanced the 1994 Industrial Development
Revenue bonds to reduce future interest costs. The refinanced bonds are
payable in full on July 1, 2004, and bear a floating market interest rate. A
renewable bank letter of credit expiring May 15, 2001 supports the
creditworthiness of the bonds. The Company entered into an interest rate swap
agreement with a major financial institution which fixes the floating interest
rate to 5.89% through July 1, 2004. Covenants and default provisions of the
letter of credit and the bond indenture are tied to the Company's unsecured
revolving credit agreement.
Other notes payable to banks of $2,211,000 are borrowings under separate
foreign subsidiaries' local currency credit lines and supported by a parent
company guarantee. Borrowings under these facilities are classified as
long-term debt because the Company's other long-term debt credit agreements can
be used to refinance the notes payable.
F - 7
<PAGE> 30
NOTE E-FINANCING (CONTINUED)
The Company has available an unsecured revolving credit agreement for $15
million expiring June 2000 to support overall working capital needs. The
agreement contains various market rate borrowing options. Financial covenants
limit the Company's borrowing capacity, require a minimum net worth, and
restrict dividend payments.
The Company estimates the fair value of its long-term debt at July 31, 1996
approximates its carrying value because the debt bears interest at or near
market rates for similar issues.
Maturities of long-term debt, including the current portion, for the five years
following July 31, 1996 are as follows: $163,000 in 1997; $167,000 in 1998;
$189,000 in 1999; $2,720,000 in 2000; $107,000 in 2001 and $4,521,000
thereafter. Interest paid during the years ended July 31, 1996, 1995 and 1994
was $607,000, $1,629,000, and $1,433,000, respectively.
NOTE F-INCOME TAXES
The components of earnings before income taxes and extraordinary items
consisted of the following (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
U.S. $3,867 $7,860 $6,132
Foreign 2,016 2,127 1,405
- --------------------------------------------------------
$5,883 $9,987 $7,537
- --------------------------------------------------------
</TABLE>
The provision (benefit) for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
U.S. $ 948 $1,957 $1,469
State 118 110 88
Foreign 976 1,011 489
Deferred (credit):
U.S. (486) 418 556
Foreign (9) (131) (2)
- ------------------------------------------------------------
$1,547 $3,365 $2,600
- ------------------------------------------------------------
</TABLE>
Income tax benefit attributable to the extraordinary item in fiscal year 1994
was to $112,000.
A reconciliation between the provision for income taxes and the amount computed
through the application of the U.S. statutory tax rate (34%) to earnings before
income taxes and extraordinary items is as follows (in thousands):
F - 8
<PAGE> 31
NOTE F-INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at statutory rate $2,000 $3,396 $2,563
Add (deduct):
Effect of foreign losses that had no tax benefit 109 53 47
Foreign rates in excess of U.S. statutory rate 251 89 104
Non-deductible travel and entertainment 47 59 34
Net operating loss carryforward utilization (113) (38) (161)
Reduction in valuation allowance (177) (210) --
State income taxes, net of federal income tax benefit 78 73 58
Foreign sales corporation benefit (254) (89) (26)
Research and development tax credit (439) (167) (56)
Other items 45 199 37
- -----------------------------------------------------------------------------------------------
$1,547 $3,365 $2,600
- -----------------------------------------------------------------------------------------------
</TABLE>
During fiscal 1996, the Company implemented a research and development tax
credit study for the purpose of identifying activities and costs which qualify
as research and experimentation under the Internal Revenue Code for the current
and open prior years. The study concluded there were eligible unclaimed
research and development tax credits for prior fiscal years 1992 through 1994
which resulted in filing tax refund claims for these years.
Deferred income taxes for 1996 and 1995 reflect the impact of "temporary
differences" between amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws.
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities are as follows at July 31 (in
thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts $ 146 $ 131
Inventory-related transactions 728 729
Selling and administrative expenses
not currently deductible 661 781
Environmental accrual 1,229 511
Foreign operating loss carryforwards 401 420
- --------------------------------------------------------------------------------------
3,165 2,572
Less excess tax over book depreciation and amortization 2,102 1,823
- --------------------------------------------------------------------------------------
Gross deferred tax asset 1,063 749
Valuation allowance (127) (210)
- --------------------------------------------------------------------------------------
Net deferred tax asset 936 539
- --------------------------------------------------------------------------------------
Current deferred tax asset $2,185 $1,972
Non-current deferred tax liability $1,249 $1,433
- --------------------------------------------------------------------------------------
</TABLE>
The Company has reduced its valuation allowance on foreign operating loss
carryforwards, to reflect the utilization of certain subsidiary losses against
future earnings on a more likely than not basis. Net current deferred tax
assets of $2,185,000 and $1,972,000 for fiscal 1996 and 1995, respectively,
are included in other current assets and net non-current deferred tax
liabilities of $1,249,000 and $1,433,000 for fiscal 1996 and 1995,
respectively, are included in
F - 9
<PAGE> 32
NOTE F-INCOME TAXES (CONTINUED)
other long-term liabilities based on their relationship to assets and
liabilities that generated the temporary difference.
Income taxes paid during the years ended July 31, 1996, 1995, and 1994 were
$917,000, $1,571,000, and $1,210,000, respectively. Taxes paid in 1996, 1995
and 1994 reflect the benefit received from the exercise of stock options under
the Company's non-qualified stock option plan.
NOTE G-SAVINGS AND RETIREMENT PLANS
The Company has a Savings Plan and an Employee Stock Ownership Plan (ESOP)
covering substantially all U.S. employees. The Company contributes $.85 to the
Savings Plan for every dollar contributed by employees up to 6% of their
compensation, with one quarter of the Company's contribution in the Company's
common stock. Company contributions charged to operations under these plans
were $1,049,000, $875,000, and $861,000 for the years ended July 31, 1996,
1995, and 1994, respectively.
NOTE H-STOCKHOLDERS' EQUITY
During fiscal 1995, the shareholders approved an increase in the number of
authorized shares of common stock from 8 million to 15 million. Also, the
Company issued 1,437,500 shares of common stock at a price of $14.625 per share
in an underwritten public offering. The net proceeds of $19.4 million were
used to repay a term note payable to NBD Bank N.A. and to reduce outstanding
indebtedness under the Company's Credit Agreement.
In fiscal 1994, the Company declared two, three-for-two stock splits. A total
of 3,372,523 shares of common stock were issued in connection with the two
splits. The stated par value per share of common stock remained at $.10 and
the value of the shares at par of $337,252 was transferred from additional
capital to common stock. In September 1990, the Company issued 128,000 shares
(pre-split) of its common stock to an officer of the Company at fair market
value in exchange for a $992,000 promissory note and cancellation of 128,000
stock options outstanding. During fiscal 1994, this note was repaid in full
plus accrued interest on the note.
In October 1982, the Trust under the Company's Employee Stock Ownership Plan
acquired 200,000 shares (pre-split) of the Company's common stock. The purchase
price of $2,250,000 was financed by a loan from the Company to the Trust,
repayable over a 15 year period at a 13.5% interest rate. The Company is making
annual contributions to the Trust of $150,000 to cover the principal payments
plus additional contributions to cover interest.
The Company is entitled to a tax deduction for income tax purposes of the
amount that an employee reports as ordinary income from the exercise of
non-qualified stock options. Since the Company recognizes no compensation
expense from the exercise of the options, the tax benefit received is recorded
as a reduction to income taxes payable and an increase to additional capital.
F - 10
<PAGE> 33
NOTE I-STOCK OPTIONS AND WARRANTS
The Company has granted options under the Company's stock option plans to
certain key employees to purchase the Company's common stock at fair market
value on the date of grant. The options generally become exercisable
cumulatively, in equal installments over a period of four or five years
commencing one year from the date of grant and expiring ten years after the
date of grant. Changes in the number of shares available under outstanding
options during the three fiscal years ended July 31, 1996 were as follows:
<TABLE>
Number of Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at August 1, 1993 342,950 $6.75 to $16.00
Granted 110,300 14.25 to 18.38
Exercised (144,149) 4.50 to 10.00
Canceled (5,141) 5.08 to 10.25
Adjustment for Stock Splits 369,398 3.00 to 12.25
- --------------------------------------------------------------------------------------------------------------------------------
Outstanding at July 31, 1994 673,358 $3.00 to $12.25
Granted 189,000 13.50 to 18.88
Exercised (181,689) 3.00 to 12.25
Canceled (38,738) 3.39 to 12.25
- --------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT JULY 31, 1995 641,931 $3.39 TO $18.88
GRANTED 69,900 21.00 TO 27.00
EXERCISED (111,046) 3.39 TO 15.00
CANCELED (24,403) 3.39 TO 18.875
- --------------------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT JULY 31, 1996 576,382 $3.39 TO $27.00
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At July 31, 1996, 1995, and 1994, options for 337,219, 305,823 and 259,252
shares, respectively were exercisable. An additional 86,625 shares vest on a
change of control of the Company. Options for 35,499 shares are available for
future grants under the plan.
Changes in the number of shares available under outstanding warrants during the
three fiscal years ended July 31, 1996 were as follows:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at August 1, 1993 52,600 $3.33 to $10.92
Granted 18,000 16.38
Adjustment for Stock Splits 74,500 3.33 to 10.92
Exercised (200) 10.00
- -------------------------------------------------------------------------------------------------------------------
Outstanding at July 31, 1994 144,900 3.33 to 10.92
Granted 9,000 14.25
Exercised (40,000) 3.78 to 8.11
- -------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT JULY 31, 1995 113,900 3.33 TO 14.25
SOLD 20,000 22.65
EXERCISED (29,750) 8.11
- -------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT JULY 31, 1996 104,150 $3.33 TO $22.65
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has granted warrants to acquire shares of the Company's common
stock to members of its Board of Directors, which are exercisable six months
after the date of grant at the fair value at the date of grant. Additionally,
in fiscal 1996, the Company sold 20,000 warrants for $2.83 per warrant. Each
warrant represents a right to purchase one share of the Company's common stock
for $22.65 (which is 120% of the market value of the Company's common stock at
the date of the warrant agreement). The warrants become exercisable over a
three-year period (7,000 warrants per year in each of the first two years, and
6,000 warrants in the third year). The warrants expire in June 2000. Of the
104,150 warrants outstanding at July 31, 1996, 13,000 are unvested.
F - 11
<PAGE> 34
NOTE J - POLLUTION-RELATED EXPENSES
The Company has settled several lawsuits related to groundwater contamination
and has begun remediation activities. The remediation plan requires the Company
to treat the groundwater to the extent necessary to reduce the contaminants to
statutory levels. The following table shows pollution-related balance sheet
activity (in thousands):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Reserve for Remediation
Cost Long-term Debt
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance as of August 1, 1993 $ 2,881 $1,375
Remediation costs charged to accrued liability (1,258) -
Settlement with chemical companies, cost recovery 750 -
Payments related to settlements (561) (250)
Defense cost of settlement (312) -
- -------------------------------------------------------------------------------------------------------------------
Balance as of July 31, 1994 1,500 1,125
Remediation costs charged to accrued liability (567) -
Payments related to settlements (180) (381)
- -------------------------------------------------------------------------------------------------------------------
Balance as of July 31, 1995 753 744
Remediation costs charged to accrued liability (583) -
Payments related to settlements - (106)
Increase in reserve for remediation cost 2,800 -
- -------------------------------------------------------------------------------------------------------------------
Balance as of July 31, 1996 $ 2,970 $638
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
At July 31, 1996, $1 million of the reserve for remediation cost is included in
accrued liabilities and the remaining $1,970,000 is included in Other long-term
liabilities. The $637,500 of long-term debt is due to the State of Michigan
and is included in Long-term debt (see Note E).
Total costs to the Company of pollution-related activities will be dependent
upon the efficacy and duration of the remediation plan. The estimated future
remediation cost is based on an expected treatment period of ten years and
anticipated discharge methods for treated ground water. The ultimate costs to
be incurred could exceed the amount provided for at July 31, 1996. However, it
is the opinion of management that these additional costs, if any, will not have
a material adverse effect on the Company's operations because the cash outflows
would be spread over many future years.
NOTE K-OTHER INCOME
<TABLE>
<CAPTION>
Other income consists of the following as of July 31 (in thousands):
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $438 $ 211 $ 87
Rental income of Australian property 54 91 -
Foreign exchange gain (loss) (27) 233 77
Gain on sale of Australian assets related to Laminar Air Flow products - - 108
Other, net 20 (126) (94)
- -------------------------------------------------------------------------------------------------------------
$485 $ 409 $178
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE L-OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The principal products of the Company are grouped into two segments: the
Filtration Products Group and the Health Products Group. Filtration Products
are primarily comprised of laboratory products, certain membranes and process
filtration products for the biotechnology, pharmaceutical, environmental and
industrial markets. Health Products are primarily comprised of products for
the medical and health industries, including custom-manufactured disposable
filters and certain membranes for original equipment manufacturers in the
healthcare field. In both of the segments, sales and distribution of the
Company's products both
F - 12
<PAGE> 35
NOTE L-OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA (CONTINUED)
domestically and internationally are through Company salespeople and a network
of distributors. Geographic area data is based on the point of sale not the
location of the customer.
<TABLE>
<CAPTION>
Dollars in thousands
- -------------------------------------------------------------------------------------------
Net Operating Identifiable Depreciation Capital
Sales Earnings Assets Expense Expenditures
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDUSTRY SEGMENTS
YEAR ENDED JULY 31, 1996
FILTRATION PRODUCTS GROUP $ 72,195 $10,063 $59,017 $3,228 $3,765
HEALTH PRODUCTS GROUP 38,128 5,605 28,419 1,413 2,408
OTHER 1,734 134 705 20 57
- -------------------------------------------------------------------------------------------
TOTALS $112,057 $15,802 $88,141 $4,661 $6,230
- -------------------------------------------------------------------------------------------
Year Ended July 31, 1995
Filtration Products Group $ 66,355 $11,036 $54,975 $3,042 $3,400
Health Products Group 34,807 6,295 25,626 1,278 4,259
Other 2,341 160 1,096 31 166
- -------------------------------------------------------------------------------------------
Totals $103,503 $17,491 $81,697 $4,351 $7,825
- -------------------------------------------------------------------------------------------
Year Ended July 31, 1994
Filtration Products Group $ 62,916 $ 9,749 $49,431 $3,039 $4,223
Health Products Group 29,461 4,833 20,918 1,325 2,338
Other 2,586 115 1,245 41 121
- -------------------------------------------------------------------------------------------
Totals $ 94,963 $14,697 $71,594 $4,405 $6,682
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Dollars in Thousands
- -------------------------------------------------------------------------------------------
Net Operating Identifiable
Sales Earnings Assets Liabilities
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GEOGRAPHIC AREA DATA
YEAR ENDED JULY 31, 1996
U.S. OPERATIONS $ 95,937 $13,883 $67,961 $18,311
EUROPE 20,263 877 11,899 2,563
ASIA/PACIFIC 8,590 743 7,036 2,516
OTHER 3,794 299 1,245 142
ELIMINATION - INTER-AREA SALES (16,527) - - -
- -------------------------------------------------------------------------------------------
TOTALS $112,057 $15,802 $88,141 $23,532
- -------------------------------------------------------------------------------------------
Year Ended July 31, 1995
U.S. Operations $ 87,952 $15,521 $62,805 $18,423
Europe 16,514 995 10,775 1,965
Asia/Pacific 8,088 872 7,012 2,523
Other 3,297 103 1,105 97
Elimination - Inter-area sales (12,348) - - -
- -------------------------------------------------------------------------------------------
Totals $103,503 $17,491 $81,697 $23,008
- -------------------------------------------------------------------------------------------
Year Ended July 31, 1994
U.S. Operations $ 80,147 $13,477 $56,685 $37,026
Europe 13,631 809 7,579 1,428
Asia/Pacific 9,300 328 6,264 2,649
Other 3,095 83 1,066 149
Elimination - Inter-area sales (11,210) - - -
- -------------------------------------------------------------------------------------------
Totals $ 94,963 $14,697 $71,594 $41,252
- -------------------------------------------------------------------------------------------
</TABLE>
F - 13
<PAGE> 36
NOTE L-OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA (CONTINUED)
Operating earnings are total revenues less operating expenses excluding other
expense (income) and corporate expenses of: 1996 - $9,825,406; 1995 -
$6,599,000; 1994 - $5,649,000. Corporate expenses include an allocated share
of administrative costs and pollution-related expenses. Identifiable assets
by industry segment include both assets directly identified with those
operations and an allocated share of jointly used assets. Corporate assets
consist of an allocated share of the buildings, furniture and fixtures, and
equipment. Asia/Pacific operations are represented by subsidiaries located in
Japan and Australia. European operations are represented by subsidiaries
located in the United Kingdom, Ireland, France, Germany and Italy. Export
sales to unaffiliated customers were: 1996 - $12,154,220; 1995 - $9,667,000;
1994 - $9,239,000. Net sales to two major customers who distribute the
Company's products, including sales to distributors who the two customers
acquired during fiscal 1996, were $27.7 million, $29.6 million and $28.6
million in fiscal 1996, 1995 and 1994, respectively.
NOTE M-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company uses various financial instruments as part of an overall strategy
to manage exposure to market risk associated with interest and foreign exchange
rate fluctuations. At July 31, 1996 the Company had foreign exchange contracts
outstanding to exchange foreign currencies for U.S. dollars denominated in
British pounds, Japanese yen, French francs, German deutschemarks and Italian
lire, maturing at various dates. Maximum market risk is limited to the
difference between the spot rate on the date of delivery and the contract
price.
At July 31, 1996, the Company had outstanding a 7.5% interest rate cap on $5
million notional amount effective May 1, 1995 through May 1, 1998. The
interest rate cap agreement has been entered into with a major financial
institution which is expected to fully perform under the terms of the
agreement.
During fiscal 1996, the Company entered into an interest rate swap agreement in
connection with refinancing its Industrial Revenue Bonds. The agreement with a
major financial institution fixes the floating interest rate at 5.89% through
July 1, 2004, on a notional amount of $4,415,000. The financial institution
which is party to the agreement is expected to fully perform under the terms of
the agreement.
The fair value of these instruments is estimated using year-end quoted market
rates or settlement values as if such instruments had been terminated at year
end.
The carrying amounts and estimated fair value of the Company's financial
instruments at July 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ---------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ----------- --------------- ----------
<S> <C> <C> <C> <C>
Foreign currency contracts $4,304,000 $4,304,000 $3,328,000 $3,328,000
Interest rate cap 62,412 7,100 98,076 34,000
Interest rate swap - (75,000) - -
</TABLE>
F - 14
<PAGE> 37
NOTE N-EXTRAORDINARY ITEM
During the year ended July 31, 1994, the Company redeemed the 7.98% Industrial
Development Revenue Bonds issued in 1989. The Company recorded a charge of
$295,000 net of $112,000 tax benefit or $.03 per share to write-off deferred
finance charges and record a redemption premium and fees related to the 1989
Bonds.
NOTE O-SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Summarized quarterly financial information for fiscal years ended July 31, 1996
and July 31, 1995 is presented below:
<TABLE>
<CAPTION>
1996 QUARTER ENDED 1995 Quarter Ended
- ------------------------------------------------------------------------------------------------------------
OCT 31 JAN 31 APR 30 JULY 31 Oct 31 Jan 31 Apr 30 July 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $27,335 $27,124 $29,502 $28,096 $24,167 $24,018 $26,893 $28,425
Gross profit 13,842 13,803 15,359 12,189 12,157 12,445 14,068 14,763
Research and development 1,491 1,464 1,643 1,660 1,308 1,316 1,366 1,508
Earnings (loss) before income taxes 2,910 2,813 3,309 (3,149) 1,909 1,989 3,104 2,985
Income taxes 988 957 676 (1,074) 678 733 1,133 821
Net earnings (loss) 1,922 1,856 2,633 (2,075) 1,231 1,256 1,971 2,164
Net earnings (loss) per share $ .24 $ .23 $ .32 ($.25) $ .19 $ .19 $ .26 $ .27
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The net loss for the fourth quarter of fiscal 1996 includes the effects of
revisions of estimates made in prior periods and of certain non-recurring
charges. Due to the nature of certain of these fourth quarter adjustments, it
is not practicable to determine the effects, if any, on prior periods. These
adjustments amounted to $5 million pre-tax and $3.3 million ($.40 per share)
after tax. On a pre-tax basis, these adjustments consisted of $1,050,000 from
inventory costing adjustments and a higher-than-normal provision for inventory
obsolescence; $2.8 million increase in the reserve for environmental
remediation, and $2.8 million of sales credits and bad debt expense in the
fourth quarter of fiscal 1996 compared to $1.5 million of sales credits and bad
debt expense in the fourth quarter of fiscal 1995.
F - 15
<PAGE> 38
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Gelman Sciences Inc.
Ann Arbor, Michigan
We have audited the consolidated financial statements and the financial
statement schedule of Gelman Sciences Inc. and Subsidiaries listed in Item 14(a)
of this Form 10-K. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gelman Sciences
Inc. and Subsidiaries as of July 31, 1996 and 1995, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended July 31, 1996 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
September 30, 1996
F-16
<PAGE> 39
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
GELMAN SCIENCES INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Additions
------------------------------
Balance at Charged to Balance at
beginning cost and Charged to end of
Description of period expenses other accounts (1) Deductions (2) period
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1996 $1,310,000 $870,000 $(8,000) $344,000 $1,828,000
Deducted from Asset Accounts-
Accounts Receivable Allowance
YEAR ENDED JULY 31, 1995 $ 790,000 $564,000 $(14,000) $ 30,000 $1,310,000
Deducted from Asset Accounts-
Accounts Receivable Allowance
YEAR ENDED JULY 31, 1994 $ 927,000 $296,000 $8,000 $441,000 $ 790,000
Deducted from Asset Accounts-
Accounts Receivable Allowance
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Change is due to the effect of exchange rate changes on translating the
allowance for accounts receivable account of foreign subsidiaries in
accordance with FASB Statement No. 52, "Foreign Currency Translation."
(2) Uncollectable accounts charged off, net of recoveries.
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 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.
By: /s/ Charles Gelman
---------------------------------------
GELMAN SCIENCES INC.
Charles Gelman, Chairman of the
Board and Chief Executive Officer
Dated: October 7, 1996
Pursuant to the requirements of the Securities 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 October 7, 1996.
/s/ Charles Gelman
-----------------------------------------------------
Chairman of the Board and
Chief Executive Officer and Director
/s/ Kim A. Davis
-----------------------------------------------------
President and Chief Operating Officer
/s/ George Uveges
-----------------------------------------------------
Chief Financial Officer and Vice President - Administration
/s/ Robert M. Collins
-----------------------------------------------------
Director
/s/ John A. Geishecker, Jr.
-----------------------------------------------------
Director
/s/ Saul H. Hymans
-----------------------------------------------------
Director
/s/ Nina I. McClelland
-----------------------------------------------------
Director
/s/ Charles Newman
-----------------------------------------------------
Director
<PAGE> 41
GELMAN SCIENCES INC.
Report on Form 10-K for the fiscal year ended July 31, 1996.
EXHIBIT INDEX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OFFICIAL SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
2 Agreement and Plan of Reorganization and Merger By and
Among Memtec Limited, GSI Acquisition Corporation and
the Company, incorporated by reference to the Form F-4
Registration Statement filed with the Securities and
Exchange Commission by Memtec Limited on or about
October 17, 1996.
3(i) Restated Articles of Incorporation, incorporated by
reference to Exhibit (3)(1) to the Company's Form 10-Q
for the quarterly period ended January 31, 1995.
3(ii) Bylaws, as amended December 14, 1995, by the Board of
Directors.
4.1 Pursuant to 17 CFR 229.601(b)(4)(iii), instruments
with respect to long-term debt issues have been omitted
where the amount of securities authorized under each
such instrument does not exceed 10% of the total
consolidated assets of the Company. The Company hereby
agrees to furnish a copy of each such instrument to the
Commission upon its request.
10.1 1978 Employee Stock Option Plan, as amended,
incorporated by reference to Exhibit 10(2) to the
Company's Form 10-K for the year ended July 31, 1987.
10.2 1988 Stock Plan, incorporated by reference to Exhibit
10(6) to the Company's Form 10-K for the year ended
July 31, 1988.
10.3 Warrant Agreement, dated December 16, 1987, with John
A. Geishecker, incorporated by reference to Exhibit
28.4 to the Company's Form S-8 Registration Statement
No. 33-37235 filed with the Securities and Exchange
Commission on October 9, 1990.
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OFFICIAL SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
10.4 Warrant and Stock Appreciation Rights Agreement, dated
January 12, 1989, with John A. Geishecker, incorporated
by reference to Exhibits 28.7 to the Company's Form S-8
Registration Statement No. 33-37235 filed with the
Securities and Exchange Commission on October 9, 1990.
10.5 Warrant Agreement, dated January 12, 1989, with Nina
I. McClelland, incorporated by reference to Exhibit
28.10 to the Company's Form S-8 Registration Statement
No. 33-37235 filed with the Securities and Exchange
Commission on October 9, 1990.
10.6 Warrant Agreement, dated September 2, 1992, with
Charles Newman, incorporated by reference to Exhibit
10(14) to the Company's Form 10-K for year ended July
31, 1993.
10.7 Consent Judgment in Kelley v. Gelman Sciences Inc.
entered October 26, 1992, incorporated by reference to
Exhibit 10(15) to the Company's Form 10-K for year
ended July 31, 1993.
10.8 Amendment entered September 23, 1996, to the Consent
Judgment in Kelley v. Gelman Sciences Inc. entered
October 26, 1992.
10.9 Consent Judgment in State of Michigan v. Gelman
Sciences Inc. entered October 26, 1992, incorporated by
reference to Exhibit 10(16) to the Company's Form 10-K
for year ended July 31, 1993.
10.10 Warrant Agreement, dated June 17, 1994, with Robert
Collins, incorporated by reference to Exhibit 10(16) to
the Company's Form 10-K for the year ended July 31,
1994.
10.11 Warrant Agreement, dated June 17, 1994, with John
Geishecker, Jr., incorporated by reference to Exhibit
10(17) to the Company's Form 10-K for the year ended
July 31, 1994.
10.12 Warrant Agreement, dated June 17, 1994, with Saul
Hymans, incorporated by reference to Exhibit 10(18) to
the Company's Form 10-K for the year ended July 31,
1994.
10.13 Warrant Agreement, dated June 17, 1994, with Nina
McClelland, incorporated by reference to Exhibit 10(19)
to the Company's Form 10-K for the year ended July 31,
1994.
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OFFICIAL SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
10.14 Warrant Agreement, dated June 17, 1994, with Charles
Newman, incorporated by reference to Exhibit 10(20) to
the Company's Form 10-K for the year ended July 31,
1994.
10.15 Confidentiality, Anti-Competition and Termination
Benefits Agreement between Mark A. Sutter and the
Company, incorporated by reference to Exhibit 10(21) to
the Company's Form 10-K for the year ended July 31,
1994.
10.16 Confidentiality, Anti-Competition and Termination
Benefits Agreement between Edward J. Levitt and the
Company, incorporated by reference to Exhibit 10(22) to
the Company's Form 10-K for the year ended July 31,
1994.
10.17 Employment Agreement dated August 1, 1995, between
the Company and Kim A. Davis, incorporated by reference
to Exhibit 10(21) to the Company's Form 10-K/A
(Amendment No. 1 for the fiscal year ended July 31,
1995), filed August 5, 1996.
10.18 First Amendment dated May 1, 1996, to Employment
Agreement dated August 1, 1995, between the Company and
Kim A. Davis.
10.19 Employment Agreement dated August 1, 1995, between
the Company and Charles Gelman, incorporated by
reference to Exhibit 10(22) to the Company's Form
10-K/A (Amendment No. 1 for the fiscal year ended July
31, 1995), filed with the Securities and Exchange
Commission August 5, 1996.
10.20 First Amendment dated May 1, 1996, to Employment
Agreement dated August 1, 1995, between the Company and
Charles Gelman.
10.21 Waiver and Release dated May 1, 1996, by Kim A. Davis
and Charles Gelman in favor of each other and in favor
of the Company.
10.22 Service Agreement dated June 19, 1984, between
Anthony Paul Kelly, the Company and Gelman Sciences
Pty. Ltd.
10.23 Letter Agreement dated February 28, 1993, between
Anthony Paul Kelly, the Company and Gelman Sciences
Pty. Ltd., amending the Service Agreement dated June
19, 1984, between Anthony Paul Kelly, the Company and
Gelman Sciences Pty. Ltd.
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OFFICIAL SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
10.24 Letter Agreement dated September 21, 1995, between
Anthony Paul Kelly, the Company and Gelman Sciences
Pty. Ltd., amending the Service Agreement dated June
19, 1984, between Anthony Paul Kelly, the Company and
Gelman Sciences Pty. Ltd. (Exhibit 10.18), as amended
by the Letter Agreement dated February 28, 1993,
between Anthony Paul Kelly, the Company and Gelman
Sciences Pty. Ltd.
10.25 Promissory Note dated July 29, 1994, by Kelly Company
Pty. Ltd. to Gelman Sciences Pty. Ltd.
10.26 Amendment dated August 1, 1996, of Promissory Note
dated July 29, 1994, by Kelly Company Pty. Ltd. to
Gelman Sciences Pty. Ltd.
10.27 Non-Employee Director Stock Plan ratified and
approved by shareholder resolution at the Annual
Meeting of Shareholders of the Company held on December
15, 1996.
10.28 Executive Stock Ownership Plan ratified and approved
by shareholder resolution at the Annual Meeting of
Shareholders of the Company held on December 15, 1996.
10.29 Employment Agreement dated June 3, 1996, between
George Uveges and the Company.
10.30 Non-Qualified Stock Option Agreement dated August 21, 1996,
with George Uveges.
10.31 Non-Qualified Stock Option Agreement dated August 21, 1996,
with Kim A. Davis.
11 Statement re computation of per share earnings for
years ended July 31, 1996, 1995 and 1994.
21 Subsidiaries of the Registrant.
27 Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 3(ii)
BYLAWS
OF
GELMAN SCIENCES INC.
A MICHIGAN CORPORATION
Revised as of December 14, 1995
<PAGE> 2
BYLAWS OF GELMAN SCIENCES INC.
A MICHIGAN CORPORATION
TABLE OF CONTENTS
PAGE
----
ARTICLE I - OFFICES
1.1 Registered Office 1
1.2 Other Offices 1
ARTICLE II - MEETINGS OF SHAREHOLDERS
2.1 Time and Place 1
2.2 Annual Meetings 1
2.3 Special Meetings 1
2.4 Notice of Meetings 1
2.5 List of Shareholders 2
2.6 Quorum; Adjournment 2
2.7 Voting 2
2.8 [RESERVED] 2
2.9 Inspectors of Election 2
2.10 [RESERVED] 3
ARTICLE III - DIRECTORS
3.1 Number and Residence 3
3.2 Election and Term 3
3.3 Resignation 3
3.4 Removal 3
3.5 Nominations for Director 3
3.6 Vacancies 4
3.7 Place of Meetings 4
3.8 [RESERVED] 4
3.9 Regular Meetings 5
3.10 Special Meetings 5
3.11 Quorum 5
3.12 Voting 5
3.13 Telephonic Participation 5
3.14 Action by Written Consent 5
3.15 Committees 5
3.16 Compensation 6
i
<PAGE> 3
PAGE
----
ARTICLE IV - OFFICERS
4.1 Officers and Agents 6
4.2 Compensation 6
4.3 Term 6
4.4 Removal 7
4.5 Resignation 7
4.6 Vacancies 7
4.7 Chairman of the Board 7
4.8 President 7
4.9 Executive Vice Presidents and Vice Presidents 7
4.10 Secretary 7
4.11 Treasurer 8
4.12 Assistant Vice Presidents, Secretaries
and Treasurers 8
4.13 Execution of Contracts and Instruments 8
4.14 Voting of Shares and Securities of
Other Corporations and Entities 8
ARTICLE V - NOTICES AND WAIVERS OF NOTICE
5.1 Delivery of Notices 9
5.2 Waiver of Notice 9
ARTICLE VI - SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD
6.1 Certificates for Shares 9
6.2 Lost or Destroyed Certificates 9
6.3 Transfer of Shares 10
6.4 Record Date 10
6.5 Registered Shareholders 10
ARTICLE VII - INDEMNIFICATION 10
ARTICLES VIII - GENERAL PROVISIONS
8.1 Checks and Funds 11
8.2 Fiscal Year 11
8.3 Corporate Seal 11
8.4 Books and Records 11
8.5 Financial Statements 11
ARTICLE IX - AMENDMENTS 11
ARTICLE X - CONTROL SHARE ACQUISITIONS 12
ARTICLE XI - SCOPE OF BYLAWS 12
ii
<PAGE> 4
GELMAN SCIENCES INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the Corporation shall be
located at such place in Michigan as the Board of Directors from time to time
determines.
1.2 Other Offices. The Corporation may also have offices or branches at
such other places as the Board of Directors from time to time determines or the
business of the Corporation requires.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 Time and Place. All meetings of the shareholders shall be held at
such place and time as the Board of Directors determines.
2.2 Annual Meetings. An annual meeting of shareholders shall be held on a
date, not later than 180 days after the end of the immediately preceding fiscal
year, to be determined by the Board of Directors. At the annual meeting, the
shareholders shall elect directors and transact such other business as is
properly brought before the meeting and described in the notice of meeting. If
the annual meeting is not held on its designated date, the Board of Directors
shall cause it to be held as soon thereafter as convenient. Failure to hold an
annual meeting at the designated date shall not invalidate any otherwise valid
corporate acts. A proposal, other than a nomination of persons for election to
the Board of Directors complying with the provisions of Section 3.5 of these
Bylaws, by one or more shareholders shall not be properly brought before an
annual meeting if made and received by the Corporation less than 120 days in
advance of the date, disregarding the year, of the proxy for the previous
annual meeting. Any proposal by one or more shareholders shall be deemed to be
made for consideration at the next annual meeting of shareholders only.
2.3 Special Meetings. Special meetings of the shareholders, for any
purpose, (a) may be called by the Chairman of the Board or the Board of
Directors, and (b) shall be called by the President or Secretary upon written
request (stating the purpose for which the meeting is to be called) of the
holders of a majority of all the shares entitled to vote at the meeting.
2.4 Notice of Meetings. Written notice of each shareholders' meeting,
stating the place, date and time of the meeting and the purposes for which the
meeting is called, shall be given (in the manner described in Section 5.1
below) not less than 10 nor more than 60 days before the date of the meeting to
each shareholder of record entitled to vote at the meeting. Notice of
adjourned meetings is governed by Section 2.6 below.
1
<PAGE> 5
2.5 List of Shareholders. The officer or agent who has charge of the
stock ledger or stock transfer books for shares of the Corporation shall make
and certify a complete list of the shareholders entitled to vote at a
shareholders' meeting or any adjournment of the meeting. The list shall be
arranged alphabetically within each class and series and shall show the address
of, and the number of shares held by, each shareholder. The list shall be
produced at the meeting and may be inspected by any shareholders at any time
during the meeting. The list shall be prima facie evidence as to the
shareholders entitled to examine it or vote at the meeting.
2.6 Quorum; Adjournment. At all shareholders' meetings, the shareholders
present in person or represented by proxy who, as of the record date for the
meeting, were holders of a majority of the outstanding shares of the
Corporation entitled to vote at the meeting, shall constitute a quorum. Once a
quorum is present at a meeting, all shareholders present in person or
represented by proxy at the meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. Regardless of whether a quorum is initially present, a
shareholders' meeting may be adjourned to another time and place by a vote of
the shares present in person or by proxy without notice other than announcement
at the meeting; provided, that (a) only such business may be transacted at the
adjourned meeting as might have been transacted at the original meeting; and
(b) if the adjournment is for more than 60 days or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting must be given to each shareholder of record entitled to vote at the
meeting.
2.7 Voting. Each shareholder shall at every meeting of the shareholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such shareholder except as otherwise
expressly required in the Articles of Incorporation. A vote may be cast either
orally or in writing. When an action, other than the election of directors, is
to be taken by a vote of the shareholders, it shall be authorized by a majority
of the votes cast by the holders of shares entitled to vote thereon, unless a
greater plurality is required by the Articles of Incorporation or applicable
law. Except as otherwise provided by the Articles of Incorporation, directors
shall be elected by a plurality of the votes cast at an election. Each proxy
shall be in writing and signed by the shareholder or the shareholder's
authorized agent or representative. A proxy is not valid after the expiration
of six months after its date unless otherwise provided in the proxy. All
questions regarding the qualification of voters, the validity of proxies and
the acceptance or rejection of votes shall be decided by the presiding officer
of the meeting.
2.8 [RESERVED]
2.9 Inspectors of Election. The Board of Directors, in advance of a
shareholders' meeting, may appoint one or more inspectors (who may be employees
of the Corporation) to act at the meeting or any adjournment of the meeting.
If inspectors are not so appointed, the officer presiding at the shareholders'
meeting may, and on request of a shareholder entitled to vote at the meeting
shall, appoint one or more inspectors. If an appointed inspector fails to
appear or act, the vacancy may be filled by appointment made by the Board of
Directors before the meeting or at the meeting by the presiding officer. If
appointed, the inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies; receive votes, ballots or
consents; hear and determine challenges and questions arising in
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connection with the right to vote; count and tabulate votes, ballots or
consents; determine the result of the election or vote; and do such acts as are
proper to conduct the election or vote with fairness to all shareholders. In
the absence of an inspector, all of the determinations and actions described in
the preceding sentence shall be made and taken by the officer presiding at the
meeting. On request of the officer presiding at the meeting or a shareholder
entitled to vote at the meeting, the inspectors shall make and execute a
written report to the presiding officer of any of the facts found by them and
matters determined by them. The report is prima facie evidence of the facts
stated and the vote as certified by the inspectors.
2.10 [RESERVED]
ARTICLE III
DIRECTORS
3.1 Number and Residence. The business and affairs of the Corporation
shall be managed by or under the direction of a Board of Directors consisting
of not less than three nor more than eleven members. The number of Directors
shall be determined from time to time solely by a resolution adopted by an
affirmative vote of a majority of the entire Board of Directors. The Directors
shall be divided into three classes, designated Class I, Class II and Class
III. Each class shall consist, as nearly as may be possible, of one-third of
the total number of Directors constituting the entire Board of Directors. At
the 1985 Annual Meeting of Shareholders, Class I Directors were elected for a
one-year term, Class II Directors for a two-year term and Class III Directors
for a three-year term. At each succeeding annual meeting of shareholders,
commencing in 1986, successors to the class of Directors whose term expires at
that annual meeting shall be elected for a three-year term. Directors need not
be Michigan residents or shareholders of the Corporation.
3.2 Election and Term. Except as provided in Section 3.6 below, Directors
shall be elected at the annual shareholders' meeting. Each Director elected
shall hold office for the term for which he or she is elected and until his or
her successor is elected and qualified or until his or her death, resignation,
retirement, disqualification or removal.
3.3 Resignation. A Director may resign by written notice to the
Corporation. A Director's resignation is effective upon its receipt by the
Corporation or a later time set forth in the notice of resignation.
3.4 Removal. A Director or the entire Board may be removed only for
cause.
3.5 Nominations for Director. Only persons who are nominated in
accordance with the procedures set forth in this Section 3.5 shall be eligible
for election as Directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at the annual meeting of shareholders
by or at the direction of the Board of Directors or by any shareholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 3.5. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not less
than 60 days nor
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more than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the shareholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement
of the date of such meeting is first made. Such shareholder's notice shall set
forth (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a Director, (1) the name, age, business address and
residence address of such person, (2) the principal occupation or employment of
such person, (3) the class and number of shares of the Corporation which are
beneficially owned by such person and (4) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
each such person's written consent to being named in the proxy statement as a
nominee and to serving as a Director if elected); and (b) as to the shareholder
giving the notice (1) the name and address, as they appear on the Corporation's
books, of such shareholder and (2) the class and number of shares of the
Corporation which are beneficially owned by such shareholder. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if the Chairman should so determine, the Chairman shall so
declare to the meeting and the defective nominations shall be disregarded.
3.6 Vacancies. Vacancies and newly created directorships resulting from
any increase in the authorized number of Directors may be filled by the
affirmative vote of a majority of the remaining Directors (even if less than a
quorum) or by a sole remaining Director. Each Director so chosen shall hold
office until the next election of the class for which such Director shall be
chosen and until his or her successor is duly elected and qualified, or until
his or her resignation or removal. Directors elected to fill vacancies shall
be in the same class as the Director they replaced. If the number of Directors
is changed, any increase or decrease shall be apportioned among the classes of
Directors so as to maintain the number of Directors in each class as nearly
equal as possible, but in no case will a decrease in the number of Directors
shorten the term of any incumbent Director
3.7 Place of Meetings. The Board of Directors may hold meetings at any
location. The location of annual and regular Board of Directors' meetings
shall be determined by the Board and the location of special meetings shall be
determined by the Chairman of the Board.
3.8 [RESERVED]
3.9 Regular Meetings. Regular meetings of the Board of Directors or Board
committees may be held without notice at such places and times as the Board or
committee determines at least 30 days before the date of the meeting.
3.10 Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board or President, and shall be called by the
President or Secretary upon the written request of two Directors, on two days
notice to each Director or committee member by mail or 24 hours notice either
personally, by telephone, telegram, or telex. The notice must specify the
place of the special meeting, but need not specify the business to be
transacted or
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the purpose of the meeting. Special meetings of Board committees may be called
by the Chairman of the committee or a majority of committee members pursuant to
this Section 3.10.
3.11 Quorum. At all meetings of the Board or a Board committee, a
majority of the Directors then in office or members of such committee shall
constitute a quorum for the transaction of business. If a quorum is not
present at any Board or Board committee meeting, a majority of the Directors
present at the meeting may adjourn the meeting to another time and place
without notice other than announcement at the meeting. Any business may be
transacted at the adjourned meeting which might have been transacted at the
original meeting, provided a quorum is present.
3.12 Voting. The vote of a majority of the members at any Board of Board
committee meeting at which there is a quorum shall be the act of the Board of
Directors or the committee, unless a higher vote is otherwise required.
3.13 Telephonic Participation. Members of the Board of Directors or any
Board committee may participate in a Board or Board committee meeting by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in
a meeting pursuant to this Section 3.13 shall constitute presence in person at
such meeting.
3.14 Action by Written Consent. Any action required or permitted to be
taken at any Board or Board committee meeting may be taken without a meeting,
if, before or after the action, all members of the Board or committee consent
in writing to the action. Such consents shall be filed with the minutes of
proceedings of the Board or committee and shall have the same effect as a vote
of the Board or committee for all purposes.
3.15 Committees.
(a) Executive Committee. There shall be an Executive Committee consisting
of not less than two members of the Board of Directors with the members thereof
designated by the Board of Directors. During the intervals between meetings of
the Board of Directors and subject to such limitations as provided by law or by
resolution of the Board of Directors, the Executive Committee shall possess and
may exercise all powers and authority of the Board of Directors in the
management and direction of the affairs of the Corporation.
(b) Audit Committee. There shall be an Audit Committee consisting of not
less than two members of the Board of Directors with the members thereof
designated by the Board of Directors. The Audit Committee shall nominate the
Corporation's independent auditors for approval by the Board of Directors;
review with the independent auditors the scope, cost and results of the
auditing engagement; review and approve fees for audit services provided by the
independent auditors; review the fees for nonaudit professional services
provided by the independent auditors; review the reports submitted by the
independent auditors; and review the adequacy of the Corporation's system of
internal accounting controls. The Audit Committee shall perform such other
duties as the Board of Directors may prescribe.
(c) Compensation Committee. There shall be a Compensation Committee
consisting of not less than two members of the Board of Directors with the
members thereof designated by the Board of Directors. The Compensation
Committee shall recommend to the
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Board of Directors compensation arrangements for senior management and
directors; recommend to the Board of Directors compensation plans in which
officers and directors are eligible to participate; and administer those
employee benefit plans as designated by the Board of Directors. The
Compensation Committee shall perform such other duties as the Board of
Directors may prescribe.
(d) Committee Vacancies; Quorum, Voting and Procedures. Each committee
and its members shall serve at the pleasure of the Board of Directors, which
may at any time change the members and powers of, or discharge, the committee.
Each committee shall keep regular minutes of its meetings and report them to
the Board of Directors when required. A majority of all members of a committee
shall constitute a quorum, and the affirmative vote of a majority of all the
members of a committee shall constitute the action of the committee. Each
committee shall determine its own rules of procedure and shall meet as provided
by such rules, or by resolution of the Board of Directors.
(e) Other Committees. From time to time, the Board of Directors may
constitute and appoint any other committee or committees which the Board may
deem necessary or proper for the conduct of the Corporation's business. Any
such committee created by the Board of Directors shall have such duties, powers
and authority as shall be specified in the resolution constituting such
committee.
3.16 Compensation. The Board, by affirmative vote of a majority of
Directors in office and irrespective of any personal interest of any of them,
may establish reasonable compensation of Directors for services to the
Corporation as directors, officers or members of a Board committee. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation for such service.
ARTICLE IV
OFFICERS
4.1 Officers and Agents. The Board of Directors shall elect a Chairman of
the Board, a President, a Secretary and a Treasurer, and may also elect a Vice
Chairman of the Board and one or more Executive Vice Presidents, Vice
Presidents, Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers. The Board of Directors may also from time to time appoint such
other officers and agents as it deems advisable. Any number of offices may be
held by the same person, but no officer shall execute, acknowledge or verify an
instrument in more than one capacity. The officers shall have such powers and
duties as may be prescribed by the Board of Directors and, to the extent not so
prescribed, as set forth in this Article IV and as generally pertain to their
offices, subject to the control of the Board of Directors.
4.2 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors.
4.3 Term. Each officer of the Corporation shall hold office for the term
for which he or she is elected or appointed and until his or her successor is
elected or appointed and qualified, or until his or her resignation or removal.
The election or appointment of an officer does not, by itself, create any
contract rights.
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4.4 Removal. Any officer elected or appointed by the Board of Directors
may be removed at any time by the Board with or without cause.
4.5 Resignation. An officer may resign by written notice to the
Corporation. The resignation is effective upon its receipt by the Corporation
or at a later time specified in the notice of resignation.
4.6 Vacancies. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
4.7 Chairman of the Board. The Chairman of the Board, if such office is
filled, shall be the chief executive officer of the Corporation and a Director,
and shall preside at all shareholders' and Board of Directors' meetings. The
Chairman of the Board shall have the general powers of supervision and
management of the business and affairs of the Corporation usually vested in the
chief executive officer of a corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The Chairman of
the Board may delegate to the other officers such of his or her authority and
duties at such time and in such manner as he or she deems advisable.
4.8 President. In the absence or non-election of a Chairman of the Board,
the President shall preside at all shareholders' and Board of Directors'
meetings, and shall perform the duties and execute the authority of the
Chairman of the Board. If the office of Chairman of the Board is filled, the
President shall be the chief operating officer of the Corporation and shall
assist the Chairman of the Board in the supervision and management of the
business and affairs of the Corporation. The President may delegate to the
officers other than the Chairman of the Board such of his or her authority and
duties at such time and in such manner as he or she deems appropriate.
4.9 Executive Vice Presidents and Vice Presidents. The Executive Vice
Presidents and Vice Presidents shall assist and act under the direction of the
Chairman of the Board and President. The Board of Directors may designate one
or more Executive Vice Presidents and may grant other Vice Presidents titles
which describe their functions or specify their order of seniority. In the
absence or disability of the President, the authority of the President shall
descend to the Executive Vice Presidents or, if there are none, to the Vice
Presidents in the order of seniority indicated by their titles or otherwise
specified by the Board. If not specified by their titles or the Board, the
authority of the President shall descend to the Executive Vice Presidents or,
if there are none, to the Vice Presidents, in the order of their seniority in
such office.
4.10 Secretary. The Secretary shall act under the direction of the
Chairman of the Board and President. The Secretary shall attend all
shareholders' and Board of Directors' meetings, record minutes of the
proceedings and maintain the minutes and all documents evidencing corporate
action taken by written consent of the shareholders and Board of Directors in
the Corporation's minute book. The Secretary shall perform these duties for
Board committees when required. The Secretary shall see to it that all notices
of shareholders' meetings and special Board of Directors' meetings are duly
given in accordance with applicable law, the Articles of Incorporation and
these Bylaws. The Secretary shall have custody of the
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Corporation's seal and, when authorized by the Chairman of the Board, President
or the Board of Directors, shall affix the seal to any instrument requiring it
and attest such instrument.
4.11 Treasurer. The Treasurer shall act under the direction of the
Chairman of the Board and President. The Treasurer shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of the
Corporation's assets, liabilities, receipts and disbursements in books
belonging to the Corporation. The Treasurer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation in such depositories
as may be designated by the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Chairman of the Board,
the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board, the President and
the Board of Directors (at its regular meetings or whenever they request it) an
account of all his or her transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond for the faithful discharge of his
or her duties in such amount and with such surety as the Board prescribes.
4.12 Assistant Vice Presidents, Secretaries and Treasurers. The Assistant
Vice Presidents, Assistant Secretaries and Assistant Treasurers, if any, shall
act under the direction of the Chairman of the Board, the President and the
officer they assist. In the order of their seniority, the Assistant
Secretaries shall, in the absence or disability of the Secretary, perform the
duties and exercise the authority of the Secretary. The Assistant Treasurers,
in the order of their seniority, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the authority of the Treasurer.
4.13 Execution of Contracts and Instruments. The Board of Directors may
designate an officer or agent with authority to execute any contract or other
instrument on the Corporation's behalf; the Board may also ratify or confirm
any such execution. If the Board authorizes, ratifies or confirms the
execution of a contract or instrument without specifying the authorized
executing officer or agent, the Chairman of the Board, the President or any
Executive Vice President or Vice President may execute the contract or
instrument in the name and on behalf of the Corporation and may affix the
corporate seal to such document or instrument.
4.14 Voting Shares and Securities of Other Corporations and Entities.
Unless the Board of Directors otherwise directs, the Chairman of the Board
shall be entitled to vote or designate a proxy to vote all shares and other
securities which the Corporation owns in any other corporation or entity.
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ARTICLE V
NOTICES AND WAIVERS OF NOTICE
5.1 Delivery of Notices. All written notices to shareholders, Directors
and Board committee members shall be delivered personally or by mail
(registered, certified or other first class mail, with postage pre-paid),
addressed to such person at his or her address as it appears on the
Corporation's records or, with respect to a Director, at his or her office on
the Corporation's premises. Written notices to Directors or Board committee
members may also be delivered by telegram, telex, radiogram, cablegram,
facsimile, computer transmission or similar form of communication, addressed to
either address referred to in the preceding sentence. Notices delivered
pursuant to this Section 5.1 shall be deemed to be given at the time when
mailed or otherwise dispatched. The Corporation shall have no duty to change
the written address of any Director, Board committee member or shareholder
unless the Secretary receives written notice of such address change.
5.2 Waiver of Notice. Any required notice may be waived in writing
(signed by the person entitled to the notice or his or her duly authorized
attorney or legal representative), either before or after the event requiring
notice, or in such other manner as permitted by statute. Neither the business
to be transacted at, nor the purpose of, the meeting need be specified in the
written waiver of notice. Attendance at any shareholders' meeting (in person
or by proxy) or any Board or Board committee meeting constitutes a waiver of
notice of the meeting except if the person attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
ARTICLE VI
SHARE CERTIFICATES AND SHAREHOLDERS OF RECORD
6.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates signed by the Chairman or Vice Chairman of the
Board, President, Executive Vice President or Vice President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.
The officers' signatures may be facsimiles if the certificate is countersigned
by a transfer agent or registered by a registrar other than the Corporation or
its employee. If any officer who has signed or whose facsimile signature has
been placed upon a certificate ceases to be such officer before the certificate
is issued, it may be issued by the Corporation with the same effect as if the
person were such officer at the date of issue.
6.2 Lost or Destroyed Certificates. The Board of Directors may direct or
authorize an officer to direct that a new certificate for shares be issued in
place of any certificate alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the Board of Directors or officer
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner (or the owner's legal representative) of such lost or
destroyed certificate to give the Corporation an affidavit claiming that the
certificate is lost or destroyed or a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to such certificate or both.
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6.3 Transfer of Shares. Shares of the Corporation are transferable only
on the Corporation's stock transfer books upon surrender to the Corporation or
its transfer agent of a certificate for the shares, duly endorsed for transfer,
and the presentation of such evidence of ownership and validity of the transfer
as the Corporation requires.
6.4 Record Date. The Board of Directors may fix, in advance, a date as
the record date for determining shareholders for any purpose, including
determining shareholders entitled to (a) notice of, and to vote at, any
shareholders' meeting or any adjournment of such meeting; (b) express consent
or dissent from a proposal without a meeting; or (c) receive payment of any
dividend or other distribution or allotment of any rights. The record date
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action.
If a record date is not fixed:
(a) the record date for determining the shareholders entitled to notice
of, or to vote at, a shareholders' meeting shall be the close of business on
the day next preceding the day on which notice of the meeting is given, or,
if notice is not given, the close of business on the day next preceding the
day on which the meeting is held; and
(b) the record date for determining shareholders for any other purpose
shall be the close of business on the day on which the Board of Directors
adopts the resolution relating to the action.
A determination of shareholders of record entitled to notice of, or to vote at,
a shareholders' meeting shall apply to any adjournment of the meeting except
that the Board of Directors may fix a new record date for the adjourned
meeting.
Only shareholders of record on the record date shall be entitled to notice
of, or to participate in, the action relating to the record date,
notwithstanding any transfer of shares on the Corporation's books after the
record date. This Section 6.4 shall not affect the rights of a shareholder and
the shareholder's transferor or transferee as between themselves.
6.5 Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of a share for all purposes, including notices, voting, consents, dividends and
distributions, and shall not be bound to recognize any other person's equitable
or other claim to interest in such share, regardless of whether it has actual
or constructive notice of such claim or interest.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent authorized or
permitted by the Michigan Business Corporation Act any person, and his heirs,
executors, administrators and legal representatives, who is made or threatened
to be made a party to an action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such person is or
was a director or officer of the Corporation or serves or served, at the
request of the
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Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, and may provide such
other indemnification to directors, officers, employees and agents by
insurance, contract or otherwise as is permitted by law and authorized by the
Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Checks and Funds. All checks, drafts or demands for money and notes
of the Corporation must be signed by such officer or officers or such other
person or persons as the Board of Directors from time to time designates. All
funds of the Corporation not otherwise employed shall be deposited or used as
the Board of Directors from time to time designates.
8.2 Fiscal Year. The fiscal year of the Corporation shall end on July 31
or such other date as the Board of Directors from time to time determines.
8.3 Corporate Seal. The Board of Directors may adopt a corporate seal for
the Corporation. The corporate seal, if adopted, shall be circular and contain
the name of the Corporation and the words "Corporate Seal Michigan". The seal
may be used by causing it or a facsimile of it to be impressed, affixed,
reproduced or otherwise.
8.4 Books and Records. The Corporation shall keep within or outside of
Michigan books and records of account and minutes of the proceedings of its
shareholders, Board of Directors and Board committees, if any. The Corporation
shall keep at its registered office or at the office of its transfer agent
within or outside of Michigan records containing the names and addresses of all
shareholders, the number, class and series of shares held by each and the dates
when they respectively became recordholders of shares. Any of such books,
records or minutes may be in written form or in any other form capable of being
converted into written form within a reasonable time.
8.5 Financial Statements. The Corporation shall deliver to its
shareholders, within four months after the beginning of each fiscal year, a
financial report (including a statement of income, year-end balance sheet, and,
if prepared by the Corporation, its statement of sources and application of
funds) covering the preceding fiscal year of the Corporation.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed, or new Bylaws may be adopted, by
action of either the shareholders or a majority of the Board of Directors then
in office. The shareholders may from time to time specify particular
provisions of the Bylaws which may not be altered or repealed by the Board of
Directors.
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ARTICLE X
CONTROL SHARE ACQUISITIONS
Section 1. Control shares acquired in a control share acquisition, with
respect to which no acquiring person statement has been filed with the
Corporation, may, at any time during the period ending 60 days after the last
acquisition of control shares or the power to direct the exercise of voting
power of control shares by the acquiring person, be redeemed by the Corporation
at the fair value of the shares.
Section 2. After an acquiring person statement has been filed and after
the meeting at which the voting rights of the control shares acquired in a
control share acquisition are submitted to the shareholders, the shares are
subject to redemption by the Corporation at the fair value of the shares unless
the shares are accorded full voting rights by the shareholders as provided in
Section 798 of the Michigan Business Corporation Act.
Section 3. A redemption of shares by the Corporation pursuant to Sections
1 or 2 shall be made upon election by the Board of Directors. Written notice
of the election shall be sent to the acquiring person within seven days after
the election is made. The determination of the Board of Directors as to fair
value shall be conclusive. Payment shall be made for the control shares
subject to redemption within 30 days after the election to redeem is made at a
date and place selected by the Board of Directors. The Board of Directors may
adopt additional procedures to accomplish a redemption.
Section 4. This Article X is adopted pursuant to Section 799 of the
Michigan Business Corporation Act, and the terms used in this section shall
have the meanings of the terms in Section 799.
ARTICLE XI
SCOPE OF BYLAWS
These Bylaws govern the regulation and management of the affairs of the
Corporation to the extent that they are consistent with applicable law and the
Articles of Incorporation.
Rev.:121495
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EXHIBIT 10.8
STATE OF MICHIGAN
IN THE CIRCUIT COURT FOR THE COUNTY OF WASHTENAW
FRANK J. KELLEY, Attorney General
for the State of Michigan, ex rel,
MICHIGAN NATURAL RESOURCES COMMISSION,
MICHIGAN WATER RESOURCES COMMISSION,
and MICHIGAN DEPARTMENT OF NATURAL
RESOURCES,
Plaintiffs,
File No. 88-34734-CE
v
Honorable Melinda Morris
GELMAN SCIENCES, INC.,
a Michigan corporation,
Defendant.
________________________________________________________________________________
Robert P. Reichel (P31878) David H. Fink (P28235)
Assistant Attorney General Alan D. Wasserman (P39509)
Natural Resources Division Cooper, Fink & Zausmer, P.C.
Knapps Office Centre 31700 Middlebelt Road
300 South Washington Suite 150
Suite 530 Farmington Hills, MI 48018
Lansing, MI 48913 Telephone: (313) 851-4111
Telephone: (517) 335-1488 Attorneys for Defendant
Attorney for Plaintiffs
________________________________________________________________________________
AMENDMENT TO CONSENT JUDGMENT
<PAGE> 2
A Consent Judgment was entered in this case on October 26, 1992. The
Consent Judgment requires Defendant, Gelman Sciences, Inc., to implement
various remedial actions to address environmental contamination in the vicinity
of Defendant's property in Scio Township, subject to the approval of the
Michigan Department of Natural Resources ("MDNR").
Since the entry of the Consent Judgment, Executive Order 1995-18
reorganized the MDNR and transferred the MDNR functions relevant to this action
to a new Michigan Department of Environmental Quality ("MDEQ").
Since the entry of the Consent Judgment, state environmental laws
relevant to this action, including the former Michigan Environmental Response
Act, 1982 PA 307, as amended, have been recodified and amended as Part 201 of
the Natural Resources and Environmental Protection Act ("NREPA"), 1994 PA 451,
as amended, MCL 324.20101 et. seq. Those amendments have changed cleanup
criteria, MCL 324.20120a, and, in MCL 324.20102a, required the MDEQ to approve
requests by persons implementing response activities to change plans for such
response activity to be consistent with the new cleanup criteria.
Defendant has requested the MDEQ to approve changes in the Remedial
Action Plan attached to the Consent Judgment. The MDEQ has agreed that certain
changes to the Remedial Action Plan are appropriate.
The Parties have agreed that it is appropriate to establish schedules
for submittal and completion of certain remaining response activities
at the site.
1
<PAGE> 3
THEREFORE, the Parties agree to this Amendment to the Consent Judgment
("Amendment") and such Amendment is ordered, adjudged, and decreed as follows:
FIRST, modify Sections III.G,H, and N to read as follows:
G. "Groundwater Contamination" or "Groundwater Contaminant" shall
mean 1,4-dioxane in groundwater at a concentration in excess of 77 micrograms
per liter ("ug/1") as determined by the sampling and analytical method(s)
described in Attachment B.
H. "MDEQ" shall mean the Michigan Department of Environmental Quality,
the successor to the Michigan Department of Natural Resources ("MDNR") and to
the Water Resources Commission. All references to the "MDNR" or to the "Water
Resources Commission" in this Consent Judgment shall be deemed to refer to the
MDEQ.
N. "Soil Contamination" or "Soil Contaminant" shall mean 1,4-dioxane
in soil at a concentration in excess of 1500 ug/kg as determined by the
sampling and analytical method(s) described in Attachment C or other higher
concentration limit derived by means consistent with Mich Admin Code R
299.5711(2) or MCL 324.20120a.
2
<PAGE> 4
SECOND, modify Section V.A.5 to read as follows:
5. Treatment and Disposal. Groundwater extracted by the purge wells(s)
in the Evergreen System shall be treated as necessary using ultraviolet light
and oxidizing agents or such other method as approved by the MDEQ and disposed
of in accordance with the Evergreen System design approved by the MDNR or MDEQ.
The options for such disposal are the following:
THIRD, insert new Section V.A.7 to read as follows:
7. On August 15, 1996, Defendant submitted to the MDEQ a written
report based upon groundwater monitoring data and modeling, evaluating whether
the existing Evergreen System is intercepting and containing the leading edge
of the plume of groundwater contamination in the vicinity of the Evergreen
Subdivision area. Unless that report demonstrates to the MDEQ's satisfaction
that the existing Evergreen System is meeting that objective, Defendant shall,
at MDEQ's written request, install additional monitoring and/or purge wells as
needed to ensure that the objectives of the Evergreen System are achieved.
FOURTH, modify Section V.B.1 to read as follows:
1. Objectives. For purposes of the Consent Judgment, the "Core Area"
means that portion of the Unit C(3) aquifer containing 1,4-dioxane in a
concentration exceeding 500 ug/1. The objectives of the Core System are to
intercept and contain the migration of groundwater from the Core Area and
remove contaminated
3
<PAGE> 5
groundwater from the Core Area until the termination criterion for the Core
System in Section V.D.1 is satisfied.
FIFTH, modify the last clause of Section V.B.2 to read as follows:
(c) the discharge level for 1,4-dioxane in groundwater to be
reinjected in the Core Area shall be established based upon performance of
further tests by Defendant on the treatment technology and shall, in any event,
be less than 77 ug/1.
SIXTH, modify Section V.B.4 to read as follows:
4. Surface Water Discharge Alternative. Defendant shall, not later
than September 30, 1996, submit to MDEQ for review and approval Defendant's
design for the Core System, a schedule for implementing the design, an
operation and maintenance plan for the System, and an effectiveness monitoring
plan for the System. The Core System shall include groundwater purge wells as
necessary to meet the objectives described in Section V.B.1. The design shall
include, at a minimum, three purge wells.
Purged groundwater form the Core Area System shall be treated with
ultraviolet light and oxidizing agent(s) or such other method approved by the
MDEQ to reduce 1,4-dioxane concentrations to the level as required by NPDES
Permit No. MI-008453, as amended or reissued. Discharge to the Honey Creek
tributary shall be in accordance with NPDES Permit No. MI-008453, as amended or
reissued.
4
<PAGE> 6
SEVENTH, modify Section V.B.5 to read as follows:
5. Implementation of Program. Upon approval by the MDEQ, Defendant
shall install the Core System according to the approved schedule and thereafter
continuously operate and maintain the System according to the approved plans
until Defendant is authorized to terminate operation pursuant to Section V.D.
Defendant may thereafter, and at its option, continue purge operations as
provided in this Section.
In any event, Defendant shall, beginning not later than December 28,
1996, continuously operate groundwater purge wells in the Core Area System at
the rate of at least 65 gallons per minute until termination is authorized
pursuant to this Judgment. This initial, minimum purging rate requirement is
intended solely as a means of assuring progress toward remediation of the Core
Area by a date certain and shall not be construed as an indication that the
rate is sufficient to meet the objectives of the Core System.
EIGHTH, add a new Section V.B.7 to read as follows:
7. Modification of Program. Defendant may, at its option, propose to
MDEQ for review and approval modification(s) to the Core System, provided such
modification(s) will satisfy the objectives of the Consent Judgment as defined
in Section V.B.1. Any proposed modification involving groundwater reinjection
shall satisfy the requirements of Section V.B.3. If approved by the MDEQ, the
modification(s) shall be implemented according to MDEQ approval plan(s) and
schedule(s).
5
<PAGE> 7
NINTH, modify Section V.C.3 to read as follows:
3. Remedial Investigation. No later than April 28, 1997, Defendant shall
submit to the MDEQ for its review and approval a revised work plan for remedial
investigation and design of the Western System and a schedule for implementing
the revised work plan. The revised work plan shall include plans for
installation of a series of test/purge wells, conduct of an aquifer performance
test(s), groundwater monitoring, an operations and maintenance plan, and system
design.
TENTH, modify Section V.D.1 as follows:
Change 3 ug/1 to 77 ug/1 and change 60 ug/1 to 77 ug/1.
ELEVENTH, modify Section V.E.1 to read as follows:
1. For systems with a termination criterion of 77 ug/1, for a period of
five (5) years after cessation of operation of any purge well, Defendant shall
continue monitoring the purge well and/or associated monitoring wells, in
accordance with the approved monitoring plan, to verify that the concentration
of 1,4-dioxane in the groundwater does not exceed the termination criterion. If
such post-termination monitoring reveals the presence of 1,4-dioxane in excess
of the termination criterion, Defendant shall immediately notify MDEQ and shall
collect a second sample within fourteen (14) days of such finding. If the
second sample confirms the presence of 1,4-dioxane in excess of the termination
criterion, Defendant shall restart the associated purge well system.
6
<PAGE> 8
TWELFTH, add a new Section V.F to read as follows:
F. Minimum Monitoring. In the event that any groundwater system
provided for in Section V is not operating for any reason other than compliance
with the termination criteria of Section V.D, Defendant shall, not later than
November 30, 1996, and at least semi-annually thereafter, collect and analyze
for 1,4-dioxane samples from groundwater monitoring wells designated MW-15D,
MW-16, MW-21, MW-28, MW-40S, MW-40D, MW-41S, MW-41D, and MW-43, and report the
results to MDEQ. Such minimum monitoring shall not obligate Defendant to
duplicate monitoring required under any MDEQ-approved monitoring plan for a
groundwater system.
THIRTEENTH, modify the first paragraph of Section VI to read as
follows:
Defendant shall design, install, operate, and maintain the systems
described below to control, remove, and treat (as required) soil contamination
at the GSI Property. The overall objective of these systems shall be to: (a)
prevent the migration of 1,4-dioxane from contaminated soils into any aquifer in
concentrations that cause groundwater contamination; (b) prevent venting of
groundwater contamination into Honey Creek Tributary of 1,4-dioxane in
quantities which cause the concentration of 1,4-dioxane at the
groundwater-surface water interface of the Tributary to exceed 2000 ug/l; and
(c) prevent venting of groundwater contamination to Third Sister Lake in
quantities which cause the concentration of 1,4-dioxane at the
groundwater-surface water interface of the Lake to exceed 2000 ug/l. Defendant
also shall implement a monitoring plan to verify the effectiveness of these
systems.
7
<PAGE> 9
FOURTEENTH, modify Section VI.A.1 to read as follows:
1. Objectives. The objectives of this System are to: (a) remove
contaminated groundwater from the Marshy Area located north of former Ponds I
and II; (b) reduce the migration of contaminated groundwater from the Marshy
Area into other aquifers; and (c) prevent the discharge of contaminated
groundwater from the Marshy Area into the Honey Creek Tributary in quantities
which cause the concentration of 1,4-dioxane at the groundwater-surface water
interface of the Tributary to exceed 2000 ug/l.
FIFTEENTH, modify Sections VI.A.2 and VI.A.4 to read as follows:
2. Pilot Test and Design. No later than December 28, 1996, Defendant
shall begin the Extended Pilot Test according to the plan conditionally
approved by MDEQ on July 26, 1995. No later than March 1, 1998, Defendant shall
submit to MDEQ for review and approval the Pilot Test Report, final design, and
effectiveness monitoring plan. No later than June 13, 1998, Defendant shall
submit to MDEQ for review and approval the operation and maintenance plan.
4. Installation and Operation. Upon approval of the final design by MDEQ
and in any event not later than September 27, 1998, Defendant shall complete
installation of the system according to the approved design and begin operation.
Defendant shall thereafter continuously operate the system according to the
approved plans until it is authorized to shut down the system pursuant to
Section VI.D of the Consent Judgment.
8
<PAGE> 10
SIXTEENTH, modify Section VI.B.1 to read as follows:
1. Objectives. The objectives of this program shall be to meet the
overall objective of Section VI upon completion of the program and to prevent
the discharge of groundwater contamination into Third Sister Lake in quantities
which cause the concentration of 1,4-dioxane at the groundwater-surface water
interface of Third Sister Lake to exceed 2000 ug/l.
SEVENTEENTH, modify Section VI.B.3 by striking the paragraph.
EIGHTEENTH, modify Section VI.C.2 to read as follows:
2. Defendant shall, no later than November 30, 1996, submit to MDEQ
for review and approval a revised soils remediation plan for addressing
identified areas of soil contamination. The areas to be addressed include the
burn pit; the former Pond I area; the former Pond II area; the form Lift
Station area; and Pond III. The plan submitted by Defendant shall be consistent
with cleanup criteria as provided in MCL 324.20120a.
The Defendant's proposal must attain the overall objectives of Section
VI.
NINETEENTH, modify Section VI.D.1.a to read as follows:
(a) Except as otherwise provided pursuant to Section VI.D.3, Defendant
shall continue to operate the Marshy Area System until six (6) consecutive
monthly tests of samples from the purge well(s) and associated monitoring
well(s) fail to detect the
9
<PAGE> 11
presence of 1,4-dioxane in groundwater at a concentration at or above 500 ug/l.
This System shall also be subject to the same post-shutdown monitoring and
restart requirements as those Systems described in Section V.E.
TWENTIETH, modify Section VI.D.1.b by deleting the paragraph.
TWENTY-FIRST, modify the last clause of Section VI.D.2 to read as
follows:
2. ...that the concentration of 1,4-dioxane in soils in the area in
question does not exceed 1500 ug/kg or other higher concentration derived by
means consistent with Mich Admin Code R 299.5711(2) or MCL 324.20120a.
TWENTY-SECOND, modify Section IX.B as follows:
Modify the third sentence to read: "For purposes of this Paragraph,
'best efforts' includes, but is not limited to, seeking judicial assistance to
secure such access pursuant to MCL 324.20135a." Delete the remainder of this
subsection.
The Parties to the Amendment agree that no changes in the Consent
Judgment other than those specified above are intended by this Amendment, that
all provisions of the Consent Judgment remain in force to the extent they are
not specifically and affirmatively altered by this Amendment, and that -- unless
expressly stated otherwise -- all provisions of the Consent Judgment not altered
by this Amendment apply to it.
10
<PAGE> 12
IT IS SO STIPULATED AND AGREED:
PLAINTIFFS
/s/ Russell J. Harding Dated: 9/17/96
- ----------------------------------- ----------------------------
Russell J. Harding
Director
Michigan Department of
Environmental Quality
/s/ Robert P. Reichel Dated: 8/30/96
- ----------------------------------- ----------------------------
A. Michael Leffler (P24254)
Robert P. Reichel (P31878)
Assistant Attorneys General
Natural Resources Division
Knapps Office Centre
300 South Washington
Suite 530
Lansing, MI 48913
Telephone: (517) 335-1488
Attorneys for Plaintiffs
11
<PAGE> 13
DEFENDANT
/s/ Charles Gelman
- -------------------------------------
GELMAN SCIENCES, INC.
Approved as to form:
Cooper, Fink & Zausmer, P.C.
Attorneys for Defendant
Gelman Sciences, Inc.
/s/ David H. Fink Dated: September 3, 1996
- ------------------------------------- ---------------------------
David H. Fink (P28235)
Alan D. Wasserman (P39509)
31700 Middlebelt Road
Suite 150
Farmington Hills, MI 48018
Telephone: (313) 851-4111
IT IS SO ORDERED AND ADJUDGED this 23 day of September, 1996.
-- ---------
/s/ Melinda Morris
--------------------------------
HONORABLE MELINDA MORRIS
Circuit Court Judge
12
<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
DATED AUGUST 1, 1995
BY AND BETWEEN
GELMAN SCIENCES, INC. AND KIM A. DAVIS
This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT made as of May 1, 1996, by
and between GELMAN SCIENCES, INC. ("Employer") and KIM A. DAVIS ("Employee").
WHEREAS, the Employer and Employee entered into an Employment
Agreement dated August 1, 1995 (the "Employment Agreement") which they now
wish to amend; and
WHEREAS, the Employer and Employee have entered into this First
Amendment to Employment Agreement with the purposes and intents of amending the
Employment Agreement effective as of the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Employer and Employee hereby
agree as follows:
1. The "period" at the end of Paragraph 3.B(6) shall be deleted
and in lieu thereof a semicolon and the word "or" shall be inserted.
2. A new Paragraph 3.B(7) shall be inserted which shall read as
follows:
"(7) Upon Employee's resignation at any time for the reason that
the working relationship between Employee and the Employer's CEO has
become impracticable and inconsistent with the best interests of the
Employer, with the concurrence of the Employer's Board of Directors in
its sole discretion, in which event Employee shall become eligible for
termination compensation in the amounts determined in Paragraph 4.C
below."
3. In the second line of Paragraph 4.C immediately following the
phrase "3.B(5)" and immediately preceding the phrase ", Employee" the phrase
"or 3.B(7)" shall be inserted.
4. At the end of Subparagraph 4.C(1)(b) the word "and" shall be
inserted following the semicolon.
5. In both Paragraphs 4.C(1) and 4.C(2), a new subparagraph (c)
shall be added which shall read as follows:
<PAGE> 2
"(c) the termination is pursuant to Paragraph 3.B(7), an
additional amount equal to the base compensation the Employee would have
received in the year of termination, contingent upon delivery of a duly
executed broad form of waiver and release releasing the Employer and Charles
Gelman from any and all debts, dues, liabilities and damages accrued or
suffered by Employee through the effective date of Employee's termination
(exclusive of the Employer's continuing obligations to Employee under this
Agreement), in form and substance acceptable to Employer"
and followed by a period in Paragraph 4.C(1) and a semicolon in Paragraph
4.C(2).
6. Subparagraph 4.C(2)(c) of the Agreement shall be redesignated
subparagraph "(d)."
7. Subparagraph 4.C(2)(d) of the Agreement shall be redesignated
subparagraph "(e)", the period at the end of said subparagraph shall be deleted,
and the phrase ", and" shall be inserted at the end of said subparagraph.
8. A new Subparagraph 4.C(2)(f) shall be added which shall read as
follows:
"(f) all benefits described in Paragraphs 5.B, 6.A, 6.B and
6.D hereof shall be continued for the remainder of the unexpired term hereof
as in effect on the effective date of such termination."
9. As of the date hereof, the Board has authorized the grant of
nonqualified stock options to Employee to acquire 45,000 shares of Employer's
common stock subject to the vesting and other terms and conditions established
by the Board in its resolutions on the date hereof regarding the grant of such
stock options. In the event of a change in control of Employer (as defined in
Paragraph 4.C of the Employment Agreement), if Employer is unable or unwilling
to grant or permit the exercise of such options on such terms, Employer shall
pay Employee cash compensation in an amount equal to the excess of the fair
market value of the shares which would otherwise have been acquired upon the
exercise of such options in the change in control transaction over the aggregate
exercise price of such options.
10. All capitalized terms used herein and not otherwise defined
shall have the meaning set forth in the Employment Agreement.
2
<PAGE> 3
11. The Employment Agreement, as amended hereby, shall continue in full
force and effect.
IN WITNESS WHEREOF, the parties have signed this First Amendment to
Employment Agreement as of the date first written above.
WITNESSES: GELMAN SCIENCES, INC.
/s/ John A. Geishecker, Jr. By: /s/ Charles Gelman
- -------------------------------- --------------------------------
Its Chairman
- -------------------------------- --------------------------------
600 South Wagner Road
Ann Arbor, MI 48106-1448
/s/ Kim A. Davis
--------------------------------
KIM A. DAVIS
5366 Hidden Pines Ct.
Brighton, MI 48116-7729
3
<PAGE> 1
EXHIBIT 10.20
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT DATED AUGUST 1, 1995
BY AND BETWEEN
GELMAN SCIENCES, INC. AND CHARLES GELMAN
This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT made as of May 1, 1996, by
and between Gelman Sciences, Inc. ("Employer") and CHARLES GELMAN ("Employee").
WHEREAS, the Employer and Employee entered into an Employment Agreement
dated August 1, 1995 which they now wish to amend; and
WHEREAS, the Employer and Employee have entered into this First Amendment
to Employment Agreement with the purposes and intents of amending the
Employment Agreement effective as of the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Employer and Employee hereby
agree as follows:
1. The phrase "and," at the end of Section 4.C.(2)(c) shall be deleted,
the period at the end of Section 4.C.(2)(d) shall be deleted and in lieu
thereof the phrase "; and" shall be inserted, and a new Section 4.C.(2)(e)
shall be inserted to read as follows:
"(e) all benefits described in Sections 5.B, 6.A and 6.C
hereof shall be continued for the remainder of the
unexpired term hereof as in effect on the effective
date of such termination."
2. The Employment Agreement, as amended hereby, shall hereafter continue
in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have signed this First Amendment to
Employment Agreement as of the date first written above.
WITNESSES: GELMAN SCIENCES, INC.
/s/ Heather A. Gray By /s/ Edward Levitt
- -------------------------- ---------------------------
Its Secretary
- -------------------------- --------------------------
600 South Wagner Road
Ann Arbor, MI 48106-1448
/s/ Charles Gelman
-----------------------------
CHARLES GELMAN
[home address]
<PAGE> 1
EXHIBIT 10.21
WAIVER AND RELEASE
The undersigned, CHARLES GELMAN and KIM A. DAVIS, with the intent of
binding themselves and their representatives, successors and assigns, execute
this Waiver and Release in favor of each other and Gelman Sciences, Inc.
("Company").
In consideration for amendments dated as of May 1, 1996 to their
respective employment agreements dated August 1, 1995 and other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the undersigned, CHARLES GELMAN and KIM A. DAVIS, each, on behalf
of themselves and their respective successors and assigns, hereby waive,
release and forever discharge each other, their respective successors and
assigns, the Company, and all of its officers, directors, employees, successors
and assigns from any and all claims, charges, debts, dues, liabilities and
damages which either of them may have against any of such parties arising prior
to May 1, 1996, excluding only the liabilities and obligations which the
Company owes to each of the undersigned under their respective employment
agreements dated August 1, 1995, as amended.
The undersigned have read this Waiver and Release, understand all of
its terms, and execute it voluntarily and with full knowledge of its
significance.
IN WITNESS WHEREOF, the undersigned execute this Release at Ann Arbor,
Michigan on May 1, 1996.
WITNESSES:
John A. Geishecker, Jr. /s/ Charles Gelman
- -------------------------- -------------------------
/s/ Charles Gelman
/s/ Kim A. Davis
- -------------------------- -------------------------
Kim A. Davis
4
<PAGE> 1
EXHIBIT 10.22
SERVICE AGREEMENT
THIS AGREEMENT is made the 19th day of June 1984
BETWEEN
GELMAN SCIENCES INC. a corporation organized and existing under the laws of the
state of Delaware U.S.A., of 600 South Wagner Road, Ann Arbor Michigan, U.S.A.
(hereinafter called "Gelman Inc.") of the first part
AND
GELMAN SCIENCES PTY. LTD. of 27 Sirius Road, Lane Cove, 2066 (hereinafter
called "Gelman Australia") of the second part
AND
ANTHONY PAUL KELLY of 7 Tokanue Place, St. Ives Chase, 2075 (hereinafter called
"Mr. Kelly") of the third part
WHEREAS
A.______ Mr. Kelly is employed by Gelman Australia as Managing Director and
Chief Operating Officer, Australia, New Zealand and South East Asia.
B.______ Gelman Australia is a wholly owned subsidiary of Gelman Inc.
C.______ The parties are desirous of setting forth their understanding of the
terms upon which Mr. Kelly will continue to be so employed.
<PAGE> 2
- 2 -
NOW IT IS AGREED between the parties as follows:-
1. Appointment and Term of Employment
Gelman Australia shall employ Mr. Kelly and Mr. Kelly shall
serve Gelman Australia as Managing Director and Chief Operating
Officer, Australia, New Zealand and South East Asia for the term
of 3 years from 1 March 1984. The predominant location of the
employment shall be Sydney. At the conclusion of the said term
of 3 years, the parties will renegotiate a renewal of Mr.
Kelly's appointment.
2. Remuneration
By way of remuneration for his services Mr. Kelly shall be paid
by Gelman Australia:-
(a) a salary of $80,000 per annum which salary shall be deemed
to accrue from day to day and shall be paid in instalments
on the 15th day of each month. Provided however that the
amount of the salary payable to Mr. Kelly shall be reviewed
by the Company each 1 July and 1 January during the term of
this Agreement (hereinafter called "the review dates").
On each review date the salary shall be increased in
accordance with the following formula:-
b
x = a x -
c
where
x is the adjusted salary;
<PAGE> 3
- 3 -
a is the salary applying immediately prior to adjustment;
b is the Index as at the applicable review date;
c is the Index as at the immediately previous review date, or, in the
case of the first review, the Index as at the date of this Agreement.
For the purposes of this paragraph:-
(i) "Index" means the all groups Consumer Price Index for Sydney
published by the Office of the Commonwealth Statistician of the
Australian Government. If publication of that Index is suspended or
discontinued or the method of calculation is materially changed, the
expression "Index" shall be defined by an appropriately qualified
statistician acceptable to all parties acting as an expert and with
due regard to the intention of the parties expressed herein.
(ii) References to the Index as at a particular date shall be references
to the last Index published on or before any such date.
Should the Index at the applicable review date be less than the Index as at
the immediately previous review date, no adjustment shall be made to the
salary.
<PAGE> 4
- 4 -
(b) An amount equivalent to 5% of that amount of before-tax profits of
less than $500,000 and 2-1/2% of that amount of before-tax profits over
$500,000 of Gelman Australia for the 6 months prior to each review
date, such payment to be made within 30 days after each review date.
(c) Such further amounts as made be agreed upon between the parties.
3. Contribution to Superannuation
Gelman Australia shall pay $7,500 each year to the Kelly Superannuation
Fund, such payment to be made on a date specified by Mr. Kelly.
4. Expenses
Gelman Australia will reimburse Mr. Kelly for all reasonable travelling,
entertainment, legal and without limitation, all other expenses incurred by
him in connection with the business of Gelman Australia or Gelman Inc.
5. Vehicle
(a) Gelman Australia will provide to Mr. Kelly a motor vehicle of a type
commensurate with the position of Managing Director which is not more
than 4 years old. The vehicle shall be for the exclusive use of Mr.
Kelly and Gelman Australia shall pay all maintenance registration
repair and running costs and other expenses incurred in connection with
the vehicle and shall maintain the vehicle.
<PAGE> 5
- 5 -
(b) Alternatively should Mr. Kelly indicate at any time that he has
his own vehicle for company use, Gelman Australia shall pay Mr.
Kelly a fee per kilometer sufficient to reimburse him on the
same basis as set out in paragraph 5 (a).
6. Termination
(a) Upon termination of Mr. Kelly's employment for any reason Gelman
Australia shall pay Mr. Kelly 12 months remuneration as
described in clause 2 hereof.
(b) Notwithstanding paragraph 6 (a) should Mr. Kelly's employment be
terminated for any reason within 6 months after a change of
effective control of Gelman Inc. or Gelman Australia, Gelman
Australia shall pay Mr. Kelly twice the award specified in
paragraph 6 (a), that amount to be paid on the date and in the
manner requested by Mr. Kelly.
(c) If Mr. Kelly voluntarily terminates his employment he will not
be employed by a known and recognized competitor of Gelman
Australia or Gelman Inc. for a period of 1 year after such
termination.
7. Governing Law
This Agreement shall be governed by and interpreted in all respects in
accordance with the laws of the State of New South Wales.
<PAGE> 6
- 6 -
IN WITNESS WHEREOF the parties have signed this Agreement on the date first
hereinbefore written.
SIGNED for and on behalf of )
GELMAN SCIENCES INC. )
)
by CHARLES GELMAN )
) /s/ Charles Gelman
a director of that company )
in the presence of:- )
)
)
)
[ SIG. ] )
SIGNED for and on behalf of )
GELMAN SCIENCES PTY. LTD. )
)
by BASIL HOLLOWAY )
) /s/ Basil Holloway
a director of that company )
in the presence of:- )
)
)
)
[ SIG. ] )
SIGNED by the said )
ANTHONY PAUL KELLY )
in the presence of:- )
) /s/ Anthony Paul Kelly
)
)
[ SIG. ] )
<PAGE> 7
DATED 1996
------------------------------
BETWEEN
GELMAN SCIENCES INC.
of the first part
AND
GELMAN SCIENCES PTY. LTD.
of the second part
AND
ANTHONY PAUL KELLY
of the third part
-----------------------------------
SERVICE AGREEMENT
-----------------------------------
Laurence & Laurence,
Solicitors,
182 George Street,
SYDNEY. N.S.W. 2000
DX: 115, Sydney
Telex: AA73800
Ph: 20550
(AGRE3.JC:KC)
<PAGE> 1
EXHIBIT 10.23
February 23, 1993
Mr Charles Gelman and Gelman Sciences Pty Ltd
Chairman & CEO 27 Sirius Road
Gelman Sciences Inc. LANE COVE NSW 2066
600 South Wagner Road
Ann Arbor MI 48166-1448
UNITED STATES OF AMERICA
Dear Sir,
RE: SERVICE AGREEMENT
This is to confirm our recent agreement to extend the term of my engagement as
Managing Director and Chief Operating Officer of Gelman Sciences Pty. Ltd.
The terms of my service will continue to be governed by the Service Agreement
dated June 19, 1984, with the exception that the term of the appointment
provided for in Clause 1 shall be 3 years commencing on March 1, 1993.
Would you please indicate your agreement to this by signing at the foot of this
letter where indicated and returning the original to me.
Yours faithfully,
A.P. Kelly
A.P. Kelly
Agreed: /s/ Charles Gelman Agreed: /s/ B. L. Holloway
------------------------- -------------------------
Gelman Sciences Inc. Gelman Sciences Pty. Ltd.
Per: Charles Gelman Per: B. L. Holloway
Chairman & CEO Director
Dated: 2-23-93 Dated: 29/3/93
------------------------- -------------------------
<PAGE> 1
EXHIBIT 10.24
September 21, 1995
Mr. Kim A. Davis and Gelman Sciences Pty. Ltd.
President and COO 2 Lincoln Street
Gelman Sciences Inc. Lane Cove NSW 2066
600 South Wagner Road
Ann Arbor, MI 48103-9019
United States of America
Re: Service Agreement
Dear Sir:
This is to confirm our recent agreement to modify my salary and to extend the
term of my engagement as Vice President, Worldwide Sales, of Gelman Sciences
Inc. and Managing Director and Chief Operating Officer of Gelman Sciences Pty.
Ltd.
The terms of my service will continue to be governed by the Service Agreements
dated June 19, 1984, as amended by letter agreement dated February 28, 1993,
with the exceptions that: (1) effective August 1, 1995, my service also
includes my engagement as Vice President, Worldwide Sales, of Gelman Sciences
Inc.; (2) the term of the appointment provided for in Clause 1 shall be
extended through July 31, 1998, and (3) my salary effective August 1, 1995,
will be US$140,000 per annum.
Would you please indicate your agreement to this by signing at the foot of this
letter where indicated and returning the original to me.
Yours faithfully,
/s/ A.P. Kelly
- --------------------------------
A.P. Kelly
Agreed: /s/ Kim A. Davis Agreed: /s/ Nigel M. Mainwaring
-------------------------------- -----------------------------
Gelman Sciences Inc. Gelman Sciences Pty. Ltd.
Per: Kim A. Davis Per: Nigel M. Mainwaring
President & COO Director
Dated: 9/21/95 16.1.96
-------------------------------- ------------------------------------
<PAGE> 1
EXHIBIT 10.25
PROMISSORY NOTE
Australian Dollars $1,044,209.75 July 29, 1994
FOR VALUE RECEIVED - the undersigned ("Maker") promises to pay on the dates set
forth hereafter, to the order of Gelman Sciences Pty Ltd ("Payee"), or of any
permitted subsequent holder hereof, the principal sum set forth below together
with interest onset principal at the rate set forth below, interest accruing on
the principal on and after August 1, 1994.
The principal amount shall be the sum of the assets and inventory as at July
29, 1994 of the Vilair Air Filtration, Bug Killer, Ultra-Violet, and Air
Sampler businesses, totalling A$1,044,209.75.
Interest on the said principal shall be calculated on the reducing balance and
shall be at the rate of Gelman Sciences Inc's average borrowing rate on its
credit facilities plus one percent (1%). During the first year of the five (5)
year term of the Note, interest only shall be paid, in arrears, monthly by the
fifteenth (15th) day of the month commencing August 15, 1994.
During year two (2) and the subsequent four (4) years the principal sum of this
Note shall be paid by the Payee in forty eight (48) equal monthly instalments
together with accrued interest calculated at the rate and basis as set out
above, in arrears, by the fifteenth (15th) day of each month commencing
September 15, 1995.
Any payment made by Maker against the outstanding balance including principal
and interest, of this note shall be first applied against accrued interest and
then against principal outstanding.
This Note maybe prepaid in part or in full at any time without penalty.
All payments of the Note are payable to Payee at 2 Lincoln Street, Lane Cove,
Sydney, New South Wales, 2066, Australia or such other place as maybe
designated in writing. All payments are to be made by cheque, wire transfer of
funds, or otherwise, as designated by the Holder.
This Note may not be assigned or transferred by Payee without the prior written
consent of Maker, which consent shall not be unreasonably withheld.
The Maker grants to the Payee an equitable mortgage over the assets of the
Kelly Company Pty Ltd and such equitable mortgage will be in a registrable
form. In addition to this the Maker agrees to pledge as additional security
forty percent (40%) of all unexercised options that the Anthony Paul Kelly
holds in Gelman Sciences Inc. and forty percent (40%) of all future options that
the Maker maybe granted through to the date of final payment of this Note.
Page 1 of 2
<PAGE> 2
In the event that the Maker sells any of the assets purchased from the Payee
the Maker will use such funds to pay down the Note.
The Maker will provide the Payee, on a quarterly basis, with asset valuation
and stock valuation as recorded on the balance sheet of the Kelly Company. At
the request of the Payee the Maker will have this information verified by an
independent firm of accountants.
If one or more of the following events occurs and remains unremedied for a
period of forty five (45) days, the entire balance of unpaid principal and
accrued interest hereunder shall, at the option of the holder of the Note, be
due and payable in full immediately without demand or notice:
a. Maker defaults in the payment of any amount when due hereunder.
b. Maker admits in writing its inability to pay its debt as they
mature.
The undersigned waives presentment, demand for payment, notice of dishonour,
and any and all other notices and demands in connection with the delivery,
acceptance, performance, default, or enforcement of this Note; waives any right
to be released by reason of any extension of time or changes in terms of
payments and agrees to pay reasonable attorneys' fees if, after default
hereunder an attorney is retained by the holder of this Note to secure
collection hereof.
This Note is to be construed in accordance with the laws of the State of New
South Wales, Australia.
No delay or omission by the holder in exercising any right hereunder shall
operate as a waiver of such right or of any other right of the holder. A waiver
on one occasion shall not be construed as a bar to a waiver of any right in the
future. None of the provisions hereof and none of the rights of the holder of
this Note shall be deemed to have been waived by acceptance of any past due
amount or by any other indulgence granted to Maker.
If any provision of this Note shall be found invalid or unenforceable, all
other provisions shall remain in full force and effect to the maximum extent
permitted by law.
AGREED MAKER:
KELLY COMPANY PTY LTD
ACN 001 729 693
/s/ Anthony Paul Kelly By: /s/ A. P. Kelly
- ---------------------------- -------------------------------
Anthony Paul Kelly A. P. Kelly
Director
Page 2 of 2
<PAGE> 1
EXHIBIT 10.26
AMENDMENT OF PROMISSORY NOTE
This Amendment of Promissory Note is made as of August 1, 1996, by
Kelly Company Pty Ltd ("Kelly") and Gelman Sciences Pty Ltd ("Gelman").
WHEREAS, Kelly issued a Promissory Note to the order of Gelman in the
principal amount of A$1,044,209.75 on July 29, 1994 (the "Note");
WHEREAS, Gelman continues to retain the Note and has not assigned or
otherwise transferred all or any part of its interest therein as of the
date hereof;
WHEREAS the principal amount of the Note outstanding as of this date is
A$844,172.18, and
WHEREAS, Kelly desires to amend certain of the terms of the Note and
Gelman is willing to accept said amendment,
NOW, THEREFORE, the Note is amended as follows:
1. The third (3rd) and fourth (4th) and fifth (5th) paragraphs of the Note
are deleted in the entirety and the following is substituted in lieu thereof:
"Interest on the said principal shall be calculated on the reducing
balance and shall be at the rate of Gelman Sciences Inc. average
borrowing rate on its credit facilities plus one percent (1%) through
July 15, 1996, and thereafter at the prime rate as listed in the Wall
Street Journal on the first business day of each month. Commencing on
August 15, 1994, and by the fifteenth (15th) day of each of the next
twelve (12) months following immediately thereafter, interest only shall
be paid, in arrears, monthly.
"Commencing on September 15, 1995, and by the fifteenth (15th) day of
each of the next ten (10) months following immediately thereafter, Maker
shall pay a monthly installment against the original principal sum set
forth above equal to the original principal sum set forth above divided
by forty-eight (48) together with accrued interest calculated at the
rate and basis as set out above, in arrears. Commencing on August 15,
1996, and by the fifteenth day of each month following thereafter until
August 15, 1999, Maker shall pay a monthly installment of A$8,793.46
against the August 1, 1996, principal sum set forth above together with
accrued interest calculated at the rate and basis as set out above, in
arrears. On August 15, 1999, Maker shall pay an installment against the
principal sum set forth above in the remaining amount due together with
accrued interest calculated at the rate and basis as set out above, in
arrears."
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<PAGE> 2
2. Except as stated above, the Note is not otherwise amended and all other
terms and provisions thereof remain in full force and effect.
3. The amendment of the Note set forth above shall be fully effective on and
at all times after July 16, 1996, unless and until the Note is further
amended to the contrary. The effectiveness of the note is contingent upon
Anthony Paul Kelly agreeing to it and Gelman Sciences Pty Ltd signing in
the space provided below in acceptance of the amendment.
MAKER:
KELLY COMPANY PTY LTD
ACN 001 729 693
By: /s/ A. P. Kelly
------------------------
A. P. Kelly
Director
Agreed:
/s/ Anthony Paul Kelly
- -------------------------
Anthony Paul Kelly
Accepted:
GELMAN SCIENCES PTY LTD
By: /s/ Anthony Paul Kelly and By: /s/Charles Gelman
---------------------- -----------------------
A.P. Kelly Charles Gelman
Managing Director A Director
2
<PAGE> 1
EXHIBIT 10.27
GELMAN SCIENCES INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
NAME AND GENERAL PURPOSE OF PLAN. The name of the plan is the Gelman Sciences
Inc. Non-Employee Director Stock Plan (the "Plan"). The Plan was adopted by
the Board of Directors (the "Board") of Gelman Sciences Inc. (the "Company") on
September 20, 1995, subject to shareholder approval and ratification. The
purpose of the Plan is to provide non-employee directors of the Company an
opportunity to participate in future appreciation in the share value of the
Company's stock, further aligning the interests of non-employee directors with
the interests of shareholders of the Company, with the goal of maximizing
return on shareholder investment. The opportunity to participate in Company
stock appreciation is intended to enable the Company to attract and retain
superior Board members. The Plan consists of two components: (1) stock
options and (2) receipt of all or part of a non-employee director's fees in
Company stock, in lieu of cash compensation, at the election of the
non-employee director.
1. OPTIONS ISSUABLE UNDER PLAN. During each fiscal year, the Non-Employee
Director Stock Plan Committee (the "Committee") will issue options, in
accordance with Section 2, below, to purchase shares of the common stock
of the Company ("Shares"). The maximum number of Shares with respect to
which options may be granted under the Plan in any fiscal year of the
Company is 40,000, subject to adjustment pursuant to Section 4, below (the
"Plan Limit"). The Shares issued upon exercise of an option may be
treasury shares or authorized but unissued shares or a combination
thereof.
2. OPTION PARTICIPANTS AND GRANTS. Upon initial election to office, each
Participant will be granted an option to purchase 9,000 Shares and, on
each July 31st following reelection to office, an option to purchase 1,000
Shares. Each such option will become first exercisable six months after
the date of the grant, provided that the option recipient's status as a
non-employee director of the Company has not changed and the Plan then
remains in effect. Successive options may be granted to the same person,
whether or not any option previously granted to such person remains
unexercised. Each option granted pursuant to the Plan is referred to
hereinafter as an "Option," and each non-employee director of the Company
is referred to hereinafter as a "Participant."
3. OPTION PRICE. The exercise price per share underlying each Option will
be the closing price per share of Common Stock on the American Stock
Exchange on the last trading day immediately preceding the date of grant.
The Option exercise price will be payable in whole or in part, at the
election of the Participant, (i) in cash or (ii) in shares of Common Stock
valued at the closing
1
<PAGE> 2
price for Common Stock on the American Stock Exchange on the last
trading day immediately preceding the date of exercise, to the extent
permitted by all applicable laws and regulations, unless the Committee
determines that the application of any Financial Accounting Standard Board
rule affecting the tender of shares would be detrimental to the best
interests of the Company.
4. ADJUSTMENTS. The Committee will provide for such adjustments in the
exercise price per share with respect to each outstanding Option and in
the number of shares covered by each outstanding Option as is equitably
required to prevent dilution or enlargement of the rights of any
Participant that would otherwise result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the
capital structure of the Company, (b) any merger, consolidation,
separation, reorganization or partial or complete liquidation or (c) any
transaction or event having an effect similar to any of the foregoing.
5. EXPIRATION; TRANSFER; EXERCISE; RELOAD OPTIONS. Each Option granted
under the Plan will expire on the date that is ten (10) years from the
date of grant. No Option will be transferable to a Participant otherwise
than by will or the laws of descent and distribution. A Participant may
exercise an Option upon receipt by the Company of such forms as the
Company may require in advance of exercise and the required payment. A
stock certificate may be issued as soon as practical after exercise and
payment. An Option is exercisable during the Participant's lifetime only
by the Participant, except that in case of incompetence or disability of a
Participant, an Option may be exercised on behalf of the Participant by
his or her guardian or legal representative. The Company will assist any
Participant in effecting a "cashless exercise" of any Option; that is, if,
immediately following an Option exercise, the Participant decides to sell
all or any of the shares underlying the Option, the Participant will
receive (in lieu of a certificate evidencing such shares) the amount by
which the sale price of such shares exceeds the exercise price, after
deducting applicable taxes and brokerage fees, but without deduction for
interest that might otherwise be paid on any advance of monies to the
Participant between the exercise and settlement dates. Each Participant
will receive an automatic grant of an additional Option (a "reload
option") upon the exercise of an Option through the delivery of shares of
Common Stock, in the manner set forth in the Stock Option Agreement
(defined in Section 6, below). The number of Shares with respect to which
reload options are granted will be counted against the Plan Limit as of
the date of grant.
6. STOCK OPTION AGREEMENT; CANCELLATION. The granting of any Option shall
be evidenced by a stock option agreement ("Stock Option Agreement"). Such
Stock Option Agreement may, with the concurrence of the affected
Participant (and subject to the limitations set forth in Section 9,
below), be amended by the Committee, provided that the terms of each such
amendment are not inconsistent with the terms of the Plan. The Committee
may, with the
2
<PAGE> 3
concurrence of the affected Participant, cancel any Option granted
under the Plan or any warrant for the purchase of the Company's common
stock granted to any non-employee director of the Company pursuant to one
or more warrant agreements entered into prior to September 20, 1995. In
the event of any cancellation of an outstanding Option, the Company may
authorize the granting of one or more new Options under the Plan in such
manner, at such price and subject to similar terms and conditions as would
have been applicable had the cancelled Option not been granted. In the
event of any cancellation of an outstanding warrant, the Committee may
authorize the granting of one or more Options under the Plan for the same
number of shares at the same exercise price and upon the terms set forth
in the warrant, or, at the election of the Participant, providing for
exercise in such manner, at such price and subject to similar terms and
conditions as would be been applicable had the cancelled warrant not been
granted.
7. STOCK IN LIEU OF DIRECTORS' FEES. Each Participant may elect to receive
shares of Common Stock in an amount equal to, and in lieu of, all or part
of the fees that otherwise would be paid by the Company to such
Participant as compensation for serving on the Board. For purposes of
such payment in stock, a share of Common Stock will be valued at the
closing price on the American Stock Exchange on the last trading day of
the fixed quarter prior to the scheduled date for payment of such fees.
The value of any fractional share amount will be paid in cash. Such
election may be made by written notice to the Company's Secretary prior to
the start of each fiscal year.
8. ADMINISTRATION. The Plan will be administered by the Committee,
comprised initially of three or more persons, none of whom may be a
Participant, but each of whom may be (but need not be) an employee or
employee-director of the Company. A majority of Committee members will
constitute a quorum, and the action of a majority of the members of the
Committee present at any meeting at which a quorum is present, or the
unanimous written action of the Committee, will be considered the action
of the Committee.
9. PLAN AMENDMENT; TERMINATION. This Plan is subject to initial
ratification and approval of the Company's shareholders, but may be
terminated or amended thereafter from time to time by the Committee.
However, no such amendment by the Committee shall (a) increase the maximum
number of shares of Common Stock that may be issued under this Plan,
subject to adjustments pursuant to Section 4 above, (b) change the
designation in Section 2 of the persons eligible to be granted Option or
(c) cause Rule 16b-3 (or any successor rule) promulgated by the Securities
and Exchange Commission (the "Commission") under the Securities Exchange
Act of 1934 to cease to be applicable to this Plan without further
approval of the shareholders of the Company. Neither the Plan, nor any
Stock Option Agreement, may be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the
3
<PAGE> 4
Employee Retirement Security Act, or the rules thereunder, or rules
promulgated by the Commission.
10. GOVERNING RULES. This Plan is intended to comply with and be subject to
Rule 16b-3 as in effect prior to May 1, 1991. The Committee may at any
time elect that this Plan shall be subject to Rule 16b-3 (or its
successor) as in effect on or at any time after May 1, 1991 and, without
shareholder approval, make any and all amendments to this Plan that are
necessary to comply with the provisions of the Rule as then in effect or
make any other amendments that do not require shareholder approval under
applicable rules and regulations then in effect.
4
<PAGE> 1
EXHIBIT 10.28
GELMAN SCIENCES INC.
EXECUTIVE STOCK OWNERSHIP PLAN
1. PURPOSE
The Gelman Sciences Inc. Executive Stock Ownership Plan (the "Plan") is
intended to foster and promote the long-term growth and performance of
Gelman Sciences Inc. (the "Company") by requiring and enabling the
acquisition of a significant personal equity interest in the Company by
those Company executives upon whose judgment and efforts the Company is
largely dependent for the successful conduct of its business. As equity
holders, Company executives will participate in future appreciation in
the share value of the Company's stock, thus further aligning their
interests with the interests of other shareholders of the Company, with
the goal of maximizing return on shareholder investment. The opportunity
to participate in Company stock appreciation should enable the Company to
attract and retain key executives critical to the long-term success of
the Company. The Plan was adopted by the Company's Board of Directors on
September 20, 1995, with an effective date of August 1, 1995, subject to
shareholder approval and ratification.
2. BACKGROUND
The Plan is a feature of the Company's Executive Compensation Plan, also
adopted by the Board on September 20, 1995, with an effective date of
August 1, 1995. Pursuant to the Executive Compensation Plan, the Board
or its Compensation Committee (the "Committee") will make an annual
determination as to the dollar amount of a bonus pool to be allocated
among the Company's executive officers and other employees. It is the
goal of the Company that each executive officer acquire and retain of no
fewer than that number of shares of the Company's common stock ("Common
Stock") with a value equal to fifty percent (50%) of such officer's
annual base salary (the "Equity Value Requirement"), as adjusted from
time to time. Consistent with that goal, the annual bonus paid to each
executive officer will be paid in the form of a specified amount of
Common Stock, and the remainder of the bonus will be paid in cash. As of
each July 31st during the period in which the Plan is in effect, the
value of each executive officer's beneficial ownership of Common Stock
will be calculated, using the closing price on the principal stock
exchange on which the Common Stock is then traded for such day, or, if it
is not a trading day, then on the last trading day immediately preceding
such day. If the Equity Value Requirement is not met by an executive
officer as of any July 31st, the annual bonus received by that officer
for that year will have a stock component. The size of the stock
component will be sufficient to satisfy the
1
<PAGE> 2
Equity Value Requirement, subject to the limitation that the value of the
stock component paid to an executive officer with respect to any year
will not exceed the lesser of thirty percent (30%) of that officer's
annual bonus or ten percent (10%) of such officer's annual base salary
for that year.
3. ADMINISTRATION
The Plan will be administered by a committee ("Committee"), comprised of
three or more disinterested members of the Board, none of whom will be an
employee of the Company or a participant in the Plan. A majority of
Committee members will constitute a quorum, and the action of a majority
of the members of the Committee present at any meeting at which a quorum
is present, or the unanimous written action of the Committee, will be
considered the action of the Committee. Except for the terms and
conditions explicitly set forth in the Plan, the Committee will have the
authority, in its discretion, to determine all matters relating to awards
under the Plan. All decisions made by the Committee pursuant to the
provisions of the Plan and related orders or resolutions of the Board
shall be final and conclusive.
4. PARTICIPANTS
The Chief Executive Officer, the Chief Operating Officer and all other
executive officers of the Company will participate in the Plan.
5. STOCK SUBJECT TO THE PLAN; ADJUSTMENTS
The stock awarded under the Plan will be shares of Common Stock and may
be authorized and unissued shares or shares now held or subsequently
acquired by the Company or a combination thereof, as the Board may from
time to time determine. The aggregate number of shares to be awarded
under the Plan will not exceed 100,000, subject to adjustment for any
increase or decrease in the number of issued shares of Common Stock
resulting from any reorganization, capitalization, stock split, stock
dividend or similar corporate transaction.
6. STOCK AWARDS
Stock awards under the Plan will be determined pursuant to the provisions
of Section 2, above.
7. WITHHOLDING TAXES
The Company will have the right to deduct from any award made under the
Plan an amount sufficient to cover withholding required by law for any
federal, state or local taxes or to take such other action as may be
necessary to satisfy any such withholding obligations, including the
withholding from any other cash amounts
2
<PAGE> 3
due or to become due from the Company to the participant an amount equal
to such taxes.
8. TERM OF THE PLAN
The Plan is effective as of August 1, 1995, and shall remain in full
force and effect until all the Common Stock subject to it shall have been
issued pursuant to the provisions hereof, unless sooner terminated by the
Board.
9. PLAN AMENDMENT; TERMINATION
This Plan is subject to initial ratification and approval by the
Company's shareholders, but may be terminated or suspended or amended
thereafter from time to time by the Committee or the Board; provided,
however, no amendment by the Committee or the Board shall (a) increase
the maximum number of shares of Common Stock that may be issued under the
Plan, subject to adjustments pursuant to Section 5 above, (b) change the
designation in Section 4 of the Plan participants or (c) cause Rule 16b-3
(or any successor rule) promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934
(the "Exchange Act") to cease to be applicable to this Plan, without
further approval of the shareholders of the Company. The Plan may not be
amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder, or rules promulgated by the
Commission.
10. INDEMNIFICATION
Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Company against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim,
action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him or
her in settlement thereof, with the Company's approval, or paid by him or
her in satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give the Company
an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which any such person may be entitled under
the Company's Articles of Incorporation or By-laws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify or hold
such person harmless.
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<PAGE> 4
11. REQUIREMENTS OF LAW
The issuance of Common Stock under the Plan will be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be
required. The Plan, and all agreements hereunder, shall be construed in
accordance with and be governed by the laws of the State of Michigan.
It is the intention of the Company that the Plan will comply in all
respects with Rule 16b-3, including any successor provision to Rule
16b-3, and, if any Plan provision is later found not to be in compliance
with Section 16 of the Exchange Act, that provision will be deemed null
and void, and in all events the Plan will be construed in favor of its
meeting the requirements of Rule 16b-3. Specifically, the Plan is
intended to comply with and be subject to Rule 16b-3 as in effect prior
to May 1, 1991. The Committee may at any time elect that this Plan shall
be subject to a successor to this rule and, without shareholder approval,
make any and all amendments to this Plan that are necessary to comply
with the provisions of the Rule as then in effect or make any other
amendments that do not require shareholder approval under applicable
rules and regulations then in effect. Notwithstanding anything in the
Plan to the contrary, the Board, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit or condition the use of any
provision of the Plan to participants who are subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the
Plan with respect to other participants, if any.
4
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EXHIBIT 10.29
EMPLOYMENT AGREEMENT
Agreement made this 3rd day of June, 1996, by and between GELMAN
SCIENCES INC. ("Employer") and GEORGE UVEGES ("Employee").
1. Employment.
A. Employer hereby offers to Employee and Employee hereby accepts
employment by Employer on the conditions set forth herein.
2. Duties.
A. Employee has been appointed and shall serve Employer as Chief
Financial Officer and Vice President of Administration, reporting in such
capacity directly to the Chief Operating Officer of Employer ("COO").
B. Employee's duties and powers in such capacity shall be as
determined, from time to time, by COO.
3. Term.
A. The term of this Agreement shall be three (3) years beginning
June 3, 1996, which term shall be automatically extended one (1) year on June
3, 1997 and on June 3 of each year thereafter, unless Employer shall have
given:
(1) not less than six (6) months written notice of termination
of the Employment Agreement to Employee where there has been no Change
in Control (as defined in Paragraph 4.C) of Employer; or
(2) where there has been a Change in Control of Employer, not
less than twelve (12) months written notice of termination of the
Employment Agreement to Employee.
B. This Agreement shall be automatically earlier terminated and
the earlier termination shall supersede the later effective date of an Employer
written notice of termination of Agreement provided for in Paragraph 3.A, only
in the following manner:
(1) Upon the death of Employee; or
(2) Upon Employee's resignation, at any time (other than as
set forth in Paragraph 3.B(5)), after ninety (90) calendar days
written notice to Employer where there has been no Change in Control
of Employer, in which event Employee
<PAGE> 2
shall not be entitled to any additional compensation or benefits; or
(3) Upon Employee's disability whereby Employee is unable to
perform the essential duties of his assigned position for a period
exceeding one hundred eighty (180) calendar days within a one (1) year
period; or
(4) Upon Employer's termination of Employee, without cause,
at any time, after Employer has given ninety (90) calendar days written
notice of termination to Employee, in which event Employee shall become
eligible for termination compensation as set forth in Paragraph 4.C
below; or
(5) Upon Employee's resignation within one (1) year of a
Change in Control of Employer, after ninety (90) calendar days written
notice to Employer, in which event Employee shall become eligible for
termination compensation in the amount as determined in Paragraph 4.C
below; or
(6) Upon Employer's termination of Employee for violating
any of the provisions of Paragraph 7 below, in which event Employee
shall not be entitled to any additional compensation or benefits,
provided that Employer has given Employee ninety (90) calendar days
written notice of any violations of Paragraph 7 prior to termination and
further provided that Employer has given Employee an opportunity to
correct any violations prior to termination.
4. Compensation.
A. Employer shall pay, and Employee shall accept, as base
compensation for all services rendered, One Hundred Fifty Thousand Dollars
($150,000) per annum effective as of June 3, 1996 less appropriate payroll taxes
("salary"), payable in equal installments in accordance with Employer's normal
payroll periods, with annual reviews and adjustments, if any, at the discretion
of COO, as approved by the Employer's Board of Directors ("Board").
B. Employee shall be eligible to receive an incentive bonus,
established at the discretion of the Board, for the Employer's 1997 fiscal year
and each fiscal year thereafter, which bonus shall consist of an amount of up
to thirty percent (30%) of the Employee's annual salary for such fiscal year
upon the achievement of certain corporate and personal goals.
In addition, for the last two (2) months of Employer's 1996 fiscal
year, Employer shall pay to Employee an incentive bonus which shall consist of
an amount equal to one-sixth (1/6) of the
2
<PAGE> 3
average incentive bonuses actually paid to other similarly situated executives
of Employer for fiscal year 1996.
C. (1) If this Agreement is earlier terminated pursuant to
Paragraph 3.B(4), where there has been no Change in Control of Employer,
Employee shall become eligible to receive severance pay in an amount
equal to twelve months of base compensation and the incentive bonus the
Employee would have received in the year of termination.
(2) If this Agreement is earlier terminated pursuant to
Paragraph 3.B(4) or 3.B(5), where there has been a Change in Control of
Employer, Employee shall become eligible to receive:
(a) severance pay in an amount equal to twelve months
of base compensation and the incentive bonus the Employee would
have received in the year of termination;
(b) immediate vesting of all stock options and
awards;
(c) immediate payment of all incentive awards earned;
and
(d) all benefits described in Paragraphs 5.B and 6.A
hereof shall be continued for the remainder of the unexpired
term hereof as in effect on the effective date of such
termination.
To the extent the termination compensation and any other
amounts received as a result of termination are subject to the excise tax of
Internal Revenue Code Section 4999 (or any successor statute), the severance
amount shall be increased by a one (1) time calculation (without a pyramid
effect) of the product derived by multiplying the "excess parachute payments"
(as defined in Code Section 4999) as initially calculated by the applicable
excise tax rate (currently twenty percent (20%)).
Change in Control of the Employer means:
i) the acquisition of beneficial ownership by any person or
entity (or more than one (1) person or entity acting as a group) of a
majority of the outstanding voting shares of Employer; or
ii) a tender offer made and consummated for at least
thirty-three percent (33%) of Employer's common stock; or
3
<PAGE> 4
iii) the acquisition of beneficial ownership by any
person or entity (or more than one (1) person or entity acting
as a group) of more than fifty-one percent (51%) of the total
fair market value of the Employer's assets; or
iv) a majority of the members of the Board are
replaced within a one (1) year period.
The severance amount shall be payable in equal
installments to the Employee, made at the same frequency as Employee's salary,
less appropriate payroll taxes, commencing with the first payroll period
following Employee's termination, conditioned on Employee's execution of a
release agreement acknowledging that Employee is entitled to no other
compensation and benefits, except as provided in this Agreement, and
effectively waiving any and all claims against Employer, its officers,
directors, employees, affiliates, subsidiaries, successors and assigns arising
out of Employee's employment or separation from employment with Employer.
Employer shall have the right, at its option and without penalty, to accelerate
payments owed to Employee.
5. Expenses. Employer shall reimburse Employee, upon presentation of
proper documentation, for reasonable expenses incurred by Employee in the
performance of his assigned duties.
6. Benefits.
A. Employee shall be eligible to participate in the Flexible
Employee Benefits Program, including health, dental, vision, life, short and
long-term disability plans, for so long as such program is made available to
Employer's other executive employees.
B. Employee shall be eligible for up to two (2) weeks paid
vacation annually, scheduled by mutual agreement between Employee and COO.
Employee's annual paid vacation shall be increased in accordance with the
policy for other executive employees.
7. Undertakings of Employee.
A. The parties acknowledge that Employer is engaged in the
business of manufacturing, distributing and selling microporous membranes,
filters and microfiltration products, worldwide. Employee, because of his
position with Employer, will obtain, or have access to, highly confidential,
proprietary information and trade secrets and, as a result, Employee agrees
that:
4
<PAGE> 5
(1) Employee will execute, and at all times honor and comply
with all of the conditions set forth in, the Confidentiality and Patent
Protection Agreement attached hereto and made a part hereof as Exhibit A;
and
(2) At all times during Employee's employment, and for three (3)
years following the termination of Employee's employment, Employee will
not, directly or indirectly, without the express written consent of
Employer's Board, perform service for, aid, assist, own, operate, have any
financial interest in, or serve as employee, officer, director, agent,
partner, consultant, part-owner, shareholder, or engage in, any
microporous filter business which is competitive with Employer, or with
microporous products provided by Employer, and among the remedies set
forth in the above-referenced Confidentiality and Patent Protection
Agreement.
B. Employer relies upon Employee's representation that Employee
will:
(1) competently perform all assigned duties;
(2) carry out all policies, directives and decisions of
Employer's Board, Chief Executive Officer ("CEO") and COO;
(3) not withhold from Employer's Board, CEO or COO, and will
promptly report to COO, any information which may affect Employer's
business;
(4) refrain from any conduct which is illegal, dishonest,
fraudulent, or detrimental to Employer's business, as determined by
Employer's Board; and
(5) devote his entire time, attention and energies to the
operations of Employer and shall not, during the term of this Agreement,
without consent of the Board, be engaged in any other business activity
requiring any amount of his business time, whether or not such business
activity is pursued for gain, profit or pecuniary advantage.
8. Effect of Change in Control.
On May 28, 1996, Employee was granted nonqualified stock options (the
"Employer Options") to acquire 20,000 shares of Employer's common stock at an
exercise price of $22 7/8 per share, subject to vesting and other terms and
conditions. In the event of a Change in Control of Employer, if Employer is
unable or unwilling to grant or permit the exercise of the Employer Options on
such
5
<PAGE> 6
terms and conditions, Employer shall pay Employee cash compensation in an
amount equal to the excess of the fair market value of the shares which would
otherwise have been acquired upon the exercise of the Employer Options in the
Change in Control transaction over the aggregate exercise price of the Employer
Options. Notwithstanding the foregoing, if in a Change in Control transaction,
Employee receives new options, or is entitled to convert the Employer Options
into new options, the terms and conditions of which are at least as favorable
as the Employer Options, the cash compensation otherwise payable to Employee
under this Paragraph 8 shall be reduced to the extent appropriate to reflect
the grant of such new options.
9. Entire Agreement.
This Agreement supersedes and cancels all prior agreements, whether
verbal or written, between Employer and Employee and constitutes the entire
Agreement between the parties; provided, however, that notwithstanding the
foregoing, the provisions regarding relocation assistance set forth in that
certain Letter Agreement dated May 21, 1996 between Employer and Employee shall
remain in full force and effect. Any amendment or agreement supplemental hereto
shall not be binding upon either party unless executed in writing by Employer
and the Employee.
10. Miscellaneous.
A. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective heirs, successors, personal representatives
and assigns.
B. This Agreement shall be interpreted in accordance with and governed
by the laws of the State of Michigan.
C. Any and all notices or any other communication provided for herein
shall be given in writing by certified mail, return receipt requested, which
shall be addressed to the addresses shown immediately below each party's
signature unless notice of a change of address is furnished to the other
parties in the manner provided in this paragraph.
D. This Agreement will be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one (1) and the same instrument and agreement.
E. Each paragraph of this Agreement or portion thereof shall be
treated as severable, to the end that if any paragraph or portion thereof shall
be declared illegal, invalid or unenforce-
6
<PAGE> 7
able, this Agreement shall be interpreted so that part only is invalid, without
invalidating the remainder of this Agreement, which shall remain in full force
and effect as though such paragraph or portion thereof had never been contained
in this Agreement, and the affected part shall be interpreted, consistent with
the law, to carry out the intent of the parties.
IN WITNESS WHEREOF, the parties have signed this Employment Agreement
as of the date first above written.
WITNESSES: GELMAN SCIENCES INC.
[SIG] By: /s/ Charles Gelman
- -------------------- ---------------------------
Charles Gelman, Chairman and
[SIG] Chief Executive Officer
- --------------------
/s/ George Uveges
----------------------------------
George Uveges
26042 Tallwood Drive
North Olmsted, OH 44070
7
<PAGE> 1
EXHIBIT 10.30
[GELMAN SCIENCES LOGO]
NON-QUALIFIED STOCK OPTION AGREEMENT
TO: George Uveges
FROM: Charles Gelman
DATE: August 21, 1996
The Board of Directors, the Corporation hereby grants you an option (the
"Option") to purchase 20,000 shares of the Common Stock, $.10 par value, of the
Corporation (the "Shares") at $22.875 per share, upon the terms and conditions
contained in this Agreement.
1. The Option is intended to be an option which does not qualify as an
incentive stock option within the meaning of the Internal Revenue Code of
1986, as amended.
2. The Option may not be transferred by you otherwise than by will or by the
laws of descent and distribution and, during your lifetime, the Option is
exercisable only by you.
3. Subject to the terms contained in this Agreement, you may exercise the
Option in accordance with the following schedule:
5,000 shares will be exercisable on August 21, 1997
5,000 shares will be exercisable on August 21, 1998
5,000 shares will be exercisable on August 21, 1999
5,000 shares will be exercisable on August 21, 2000
4. In the event of a change in control of the Corporation, the right to
exercise all options shall vest immediately upon such change. For
purposes of this provision, "change in control" means any of the
following: (1) the acquisition of beneficial ownership by any person or
entity (or more than one (1) person or entity acting as a group) of a
majority of the outstanding voting shares of the Corporation; (2) a tender
offer made and consummated for at least thirty-three percent (33%) of
Corporation's common stock; (3) the acquisition or beneficial ownership by
any person or entity (or more than one (1) person or entity acting as a
group) of more than fifty-one percent (51%) of the total fair market value
of the Corporation's assets; or (4) a majority of the members of the Board
are replaced within a one (1) year period.
5. This Option will expire (to the extent not previously exercised) on the
tenth anniversary of the date of this Agreement, unless terminated earlier
upon your termination of employment with the Corporation or any subsidiary
or your death, which are governed by Paragraphs 5 and 6 of this Agreement,
respectively.
6. If your employment with the Corporation or any subsidiary of the
Corporation terminates for any reason other than your death, you have the
right for a period of 90 days following such termination, but in no event
subsequent to the expiration date of the Option, to
<PAGE> 2
exercise that portion of the Option, if any, which is exercisable by
you on the date of termination of your employment.
7. If your employment with the Corporation or any subsidiary of the
Corporation terminates by reason of your death, the Option, to the extent
it is exercisable on the date of your death, may be exercised for a period
of 180 days following your death, but in no event subsequent to the
expiration date of the Option, by your legal representative or by the
person or persons to whom your rights shall pass by will or by the laws of
descent and distribution.
8. The Option shall be exercised by giving a written notice to the Secretary
of the Corporation. Such notice shall specify the number of Shares to be
purchased, the name in which you desire to have the shares registered,
your address and your social security number and shall be accompanied by
payment in full in cash, or, with the consent of the Corporation's Board
of Directors, in Common Stock of the Corporation, of the aggregate option
price for the number of Shares purchased. Such exercise shall be
effective only upon the actual receipt of such written notice and no
rights or privileges of a shareholder of the Corporation in respect of any
of the Shares issuable upon exercise of any part of the Option shall inure
to you or any other person who is entitled to exercise the Option unless
and until certificates representing such Shares shall have been issued.
9. Nothing contained in this Agreement, nor any action taken by the
Corporation, shall confer upon you any right with respect to continuation
of your employment by the Corporation or any subsidiary of the
Corporation.
10. If, upon or as a result of your exercise of the Option, there shall be
payable by the Corporation any amount for income tax withholding, you will
pay such amount to the Corporation to reimburse the Corporation for such
income tax withholding.
11. By agreeing to and accepting this agreement, you agree that the option
previously granted to you on June 13, 1996, by the Compensation Committee
of the Board of Directors of the Corporation, is hereby rescinded and
cancelled, and the option spoken of in this agreement is in lieu thereof.
Sincerely yours,
GELMAN SCIENCES INC.
/s/ Charles Gelman
Charles Gelman
Chairman of the Board
The above is agreed to and accepted:
/s/ George Uveges
- --------------------------------
Dated: August 21, 1996
--------------------------
<PAGE> 1
EXHIBIT 10.31
[GELMAN SCIENCES LOGO]
NON-QUALIFIED STOCK OPTION AGREEMENT
TO: Kim A. Davis
FROM: Charles Gelman
DATE: August 21, 1996
The Board of Directors, the Corporation hereby grants you an option (the
"Option") to purchase 45,000 shares of the Common Stock, $.10 par value, of the
Corporation (the "Shares") at $27.000 per share, upon the terms and conditions
contained in this Agreement.
1. The Option is intended to be an option which does not qualify as an
incentive stock option within the meaning of the Internal Revenue Code of
1986, as amended.
2. The Option may not be transferred by you otherwise than by will or by the
laws of descent and distribution and, during your lifetime, the Option is
exercisable only by you.
3. Subject to the terms contained in this Agreement, you may exercise the
Option in accordance with the following schedule:
5,000 shares will be exercisable on May 1, 1997
10,000 shares will be exercisable on May 1, 1998
15,000 shares will be exercisable on May 1, 1999
10,000 shares will be exercisable on May 1, 2000
5,000 shares will be exercisable on May 1, 2001
4. In the event of a change in control of the Corporation, the right to
exercise all options shall vest immediately upon such change. For
purposes of this provision, "change in control" means any of the
following: (1) the acquisition of beneficial ownership by any person or
entity (or more than one (1) person or entity acting as a group) of a
majority of the outstanding voting shares of the Corporation; (2) a tender
offer made and consummated for at least thirty-three percent (33%) of
Corporation's common stock; (3) the acquisition or beneficial ownership by
any person or entity (or more than one (1) person or entity acting as a
group) of more than fifty-one percent (51%) of the total fair market value
of the Corporation's assets; or (4) a majority of the members of the Board
are replaced within a one (1) year period.
5. This Option will expire (to the extent not previously exercised) on the
tenth anniversary of the date of this Agreement, unless terminated earlier
upon your termination of employment with the Corporation or any subsidiary
or your death, which are governed by Paragraphs 5 and 6 of this Agreement,
respectively.
6. If your employment with the Corporation or any subsidiary of the
Corporation terminates for any reason other than your death, you have the
right for a period of 90 days following such termination, but in no event
subsequent to the expiration date of the Option, to
<PAGE> 2
exercise that portion of the Option, if any, which is exercisable by
you on the date of termination of your employment.
7. If your employment with the Corporation or any subsidiary of the
Corporation terminates by reason of your death, the Option, to the extent
it is exercisable on the date of your death, may be exercised for a period
of 180 days following your death, but in no event subsequent to the
expiration date of the Option, by your legal representative or by the
person or persons to whom your rights shall pass by will or by the laws of
descent and distribution.
8. The Option shall be exercised by giving a written notice to the Secretary
of the Corporation. Such notice shall specify the number of Shares to be
purchased, the name in which you desire to have the shares registered,
your address and your social security number and shall be accompanied by
payment in full in cash, or, with the consent of the Corporation's Board
of Directors, in Common Stock of the Corporation, of the aggregate option
price for the number of Shares purchased. Such exercise shall be
effective only upon the actual receipt of such written notice and no
rights or privileges of a shareholder of the Corporation in respect of any
of the Shares issuable upon exercise of any part of the Option shall inure
to you or any other person who is entitled to exercise the Option unless
and until certificates representing such Shares shall have been issued.
9. Nothing contained in this Agreement, nor any action taken by the
Corporation, shall confer upon you any right with respect to continuation
of your employment by the Corporation or any subsidiary of the
Corporation.
10. If, upon or as a result of your exercise of the Option, there shall be
payable by the Corporation any amount for income tax withholding, you will
pay such amount to the Corporation to reimburse the Corporation for such
income tax withholding.
11. By agreeing to and accepting this agreement, you agree that the option
previously granted to you on May 1, 1996, by the Compensation Committee of
the Board of Directors of the Corporation, is hereby rescinded and
cancelled, and the option spoken of in this agreement is in lieu thereof.
Sincerely yours,
GELMAN SCIENCES INC.
/s/ Charles Gelman
---------------------
Charles Gelman
Chairman of the Board
The above is agreed to and accepted:
/s/ Kim A. Davis
- -------------------------
Dated: August 21, 1996
------------------
<PAGE> 1
<TABLE>
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
PRIMARY AND FULLY DILUTED
- ----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net income for computing primary and fully diluted earnings per common share $4,336,000 $6,622,000 $4,754,000
PRIMARY SHARES
Weighted average number of common shares outstanding 7,885,206 6,828,809 5,787,236
Additions from assumed exercise of stock options and warrants 369,787 406,464 520,652
---------- ---------- ----------
Weighted average of common and common equivalent shares 8,254,993 7,235,273 6,307,888
========== ========= =========
FULLY DILUTED SHARES
Weighted average number of common shares outstanding 7,885,206 6,828,809 5,787,236
Additions from assumed exercise of stock options and warrants 403,490 420,925 548,640
---------- ---------- ----------
Weighted average of common and common equivalent shares 8,288,696 7,249,734 6,335,876
========== ========= =========
NET INCOME PER COMMON SHARE
Primary $ 0.53 $ 0.92 $ 0.75
========== ========= =========
Fully diluted $ 0.53 $ 0.92 $ 0.75
========== ========= =========
</TABLE>
Primary additions from assumed exercise of stock options and warrants are net of
assumed purchase of common shares at the average market price during the
fiscal year. Fully diluted earnings per share was determined in the same manner
except that the year-end stock price was used. The average and year-end stock
prices were as follows: fiscal 1996 - $23.25 and $28.25, fiscal 1995 - $15.53
and $19.875, fiscal 1994 - $10.07 and $13.50, respectively.
29
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME OF THE SUBSIDIARY INCORPORATION
- ---------------------- -------------
Gelman Sciences Ltd. England
Gelman Sciences Pty. Ltd. Australia
Gelman Sciences Inc. Canada
Gelman Ltd. Ireland
Gelman International Ltd. Ireland
Gelman Sciences Technology, Ltd. Israel
Gelman Research and Development, Ltd. Israel
Gelman Italy S.r.I. Italy
Gelman Sciences Japan, Ltd. Japan
Gelman Sciences GmbH Germany
Gelman Sciences S.A. France
Microbe One Inc. Michigan
Gelman Sciences International, Inc. Michigan
Micro Technologies Inc. Michigan
Gelman Sciences Foreign Sales Corporation U.S. Virgin Islands
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (a) Gelman
Sciences Inc. Statement of Income and Consolidated Statement of Cash Flows for
the twelve months ended July 31, 1996 and the Consolidated Balance Sheet as of
July 31, 1996 and is qualified in its entirety by reference to such (b) Form
10-K for the fiscal year ended July 31, 1996.
</LEGEND>
<CIK> 0000310252
<NAME> GELMAN SCIENCES INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 9,590
<SECURITIES> 0
<RECEIVABLES> 28,270
<ALLOWANCES> 1,828
<INVENTORY> 11,751
<CURRENT-ASSETS> 51,988
<PP&E> 75,267
<DEPRECIATION> 41,143
<TOTAL-ASSETS> 88,220
<CURRENT-LIABILITIES> 12,229
<BONDS> 11,303
0
0
<COMMON> 794
<OTHER-SE> 63,894
<TOTAL-LIABILITY-AND-EQUITY> 88,220
<SALES> 112,057
<TOTAL-REVENUES> 112,057
<CGS> 56,864
<TOTAL-COSTS> 56,864
<OTHER-EXPENSES> 48,225
<LOSS-PROVISION> 478
<INTEREST-EXPENSE> 607
<INCOME-PRETAX> 5,883
<INCOME-TAX> 1,547
<INCOME-CONTINUING> 4,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,336
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
