<PAGE> 1
CONFORMED COPY
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1995
_ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-10005
BIOCHEM INTERNATIONAL INC.
A DELAWARE CORPORATION IRS EMPLOYER IDENTIFICATION
NO. 39-1272816
Address Telephone Number
W238 N1650 Rockwood Drive (414) 542-3100
Waukesha, WI 53188-1199
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
---
The number of shares outstanding of the Company's Common Stock, par value $.02,
on December 31, 1995 was 13,086,284.
Page 1 of 30
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOCHEM INTERNATIONAL INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31 June 30
1995 1995
---------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 5,550,578 $ 2,628,445
Accounts receivable, less $134,188 and $100,000 allowance
for doubtful accounts, respectively 4,333,335 3,751,377
Inventories 2,896,625 2,686,501
Deferred income taxes 107,527 1,470,000
Prepaid expenses 30,040 43,538
------ ------
Total Current Assets 12,918,105 10,579,861
Deferred income taxes 180,000 180,000
Property, plant and equipment, net 1,414,712 1,437,690
Related party receivable 101,828 101,828
Other 5,483 5,483
----- -----
Total Assets $ 14,620,128 $ 12,304,862
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade $ 1,373,147 $ 1,463,067
Accrued liabilities:
Salaries, wages and commissions 493,062 502,055
Other 180,136 226,413
------- -------
Total Current Liabilities 2,046,345 2,191,535
Stockholders' Equity:
Common Stock, $.02 par value 261,726 261,666
Additional Paid-in Capital 11,699,348 11,698,173
Retained Earnings (Deficit) 612,709 (1,846,512)
------- -----------
Total Stockholders' Equity 12,573,783 10,113,327
---------- ----------
Total Liabilities and Stockholders' Equity $ 14,620,128 $ 12,304,862
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements
Page 2 of 30
<PAGE> 3
BIOCHEM INTERNATIONAL INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
----------- ----------- ------------ --------------
<S> <C> <C> <C>
Revenues:
Net sales 7,169,534 6,131,042 $ 13,847,911 $ 12,084,826
Other income 106,831 62,556 192,318 90,258
------- ------ ------- ------
Total Revenues 7,276,365 6,193,598 14,040,229 12,175,084
Costs and Expenses:
Cost of goods sold 3,250,559 2,715,487 6,166,528 5,387,512
Selling, general and administrative 1,531,223 1,462,554 3,180,044 2,829,913
Engineering, research and development 428,651 172,162 771,138 332,177
Interest - 51,984 - 103,670
------- ------ ------- -------
Total Costs and Expenses 5,210,433 4,402,187 10,117,710 8,653,272
--------- --------- ---------- ---------
Income Before Income Tax Expense 2,065,932 1,791,411 $ 3,922,519 $ 3,521,812
Income tax expense:
Current 90,000 61,000 100,825 71,025
Deferred 687,898 690,050 1,362,473 1,360,850
------- ------- --------- ---------
Net Income 1,288,034 1,040,361 $ 2,459,221 $ 2,089,937
============= ============ ============ =============
Net Income per Common Share $ .10 $ .08 $ .19 $ .16
===== ===== ===== =====
Weighted Average Number of Common
Shares Outstanding 13,243,784 13,183,284 13,243,784 13,183,284
============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 30
<PAGE> 4
BIOCHEM INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,459,221 $ 2,089,937
Adjustments to reconcile net cash provided
by operating activities:
Deferred interest - 103,670
Depreciation 157,800 84,461
Deferred income taxes 1,362,473 1,360,850
Change in assets and liabilities:
Accounts receivable (581,958) (645,436)
Inventories (210,124) 499,423
Prepaid expenses and other 13,498 16,544
Accounts payable and accrued liabilities (145,190) (672,408)
-------- --------
Net cash provided by operating activities 3,055,720 2,837,041
--------- ---------
Cash flows from investing activities:
Property, plant and equipment additions (134,822) (188,506)
-------- --------
Cash flows from financing activities:
Issuance of common stock 1,235 2,500
----- -----
Net increase in cash and equivalents 2,922,133 2,651,035
Cash and equivalents:
Beginning of period 2,628,445 1,756,578
--------- ---------
End of period $ 5,550,578 $ 4,407,613
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ - $ -
============ ============
Cash paid during the period for income taxes $ 100,825 $ 71,025
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 30
<PAGE> 5
BIOCHEM INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements should be read in
conjunction with the Company's 1995 Annual Report on Form 10-KSB. In
the opinion of management, all adjustments necessary to a fair
statement of operations and financial position of the Company have
been included in the accompanying statements of operations and balance
sheets. All adjustments made to the interim financial statements were
of a normal, recurring nature.
The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
2. Inventories are comprised of:
<TABLE>
<CAPTION>
December 31 June 30
1995 1995
---- ----
<S> <C> <C>
Finished goods $ 129,279 $ 311,751
Loaner and demonstration 812,081 804,708
Work in process 602,502 644,977
Purchased material 1,352,763 925,065
--------- -------
$ 2,896,625 $ 2,686,501
============= ==============
</TABLE>
3. Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31 June 30
1995 1995
---- ----
<S> <C> <C>
Land $ 88,200 $ 88,200
Building 724,699 724,699
Leasehold improvements 126,841 126,841
Machinery and equipment 1,245,690 1,110,868
Office furniture and equipment 207,993 207,993
------- -------
2,393,423 2,258,601
Less accumulated depreciation 978,711 820,911
------- -------
$ 1,414,712 $ 1,437,690
============= ==============
</TABLE>
4. Net Income Per Share:
Net income per common and common equivalent share is computed based on
the weighted average common shares outstanding, including common stock
equivalents.
Page 5 of 30
<PAGE> 6
BIOCHEM INTERNATIONAL INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Working capital at December 31, 1995 was $10,872,000 as compared to $8,388,000
at June 30, 1995. The increase in working capital is primarily a function of
the cash flow from operating activities. The cash and equivalents balance has
increased due to the positive cash flows the company experienced during the
first six months of fiscal 1996.
Company management believes that sales revenues to be generated by current
products and anticipated new product introductions, and financing arrangements
currently in place will be sufficient to meet future cash needs.
Results of Operations
Net sales for the three-month period ended December 31, 1995 increased 17% over
the corresponding prior year period. This increase results primarily from an
increase in sales to our international OEM customers, both in the Pacific Rim
and in the European community. The increase is largely due to increased sales
of our oximetry products and high end OEM monitors. Additionally, our handheld
pulse oximeter continues to be very well received in the marketplace, and has
allowed us to enter some markets, such as emergency medicine, which we did not
serve in the past. The handheld pulse oximeter sales to our domestic customers
and our other international customers, continue to be strong, and account for
the balance of the increase in sales.
Net sales for the six-month period ended December 31, 1995 increased 14%. This
increase is due to the above mentioned factors.
Other income for the three- and six-month periods ended December 31, 1995
consists primarily of interest income.
Cost of goods sold as a percentage of net sales was approximately 45.3% and
44.5%, respectively, during the three- and six-month periods ended December 31,
1995 compared to 44.3% and 44.6% for the corresponding periods ended December
31, 1994. This fluctuation is attributable to a change in the product mix and
increased sales to our OEM customers, as cited above. The volume discounts we
allow our OEM customers result in an increase in cost of goods as a percentage
of net sales.
Selling, general and administrative expenses were 22.5% and 24.0%,
respectively, of net sales in the three- and six-month periods ending December
31, 1995 compared to 23.8% and 23.4% during the same periods of the prior year.
The overall increase was primarily incurred in the sales & marketing and
domestic sales departments. We have increased staffing in our domestic sales
departments, adding two new sales territories in fiscal 1996, to support and
improve an increase in sales. Additionally, BCI has been spending more on its
marketing efforts, to better promote both our name and our products. The
decreased percentage in the three-month period ended December 31,
Page 6 of 30
<PAGE> 7
1995 is solely due to the increase in sales in the same period, as actual
dollars spent over the period increased for the above mentioned reasons.
The increase in engineering, research and development expenditures noted during
the three- and six-month periods ended December 31, 1995 of 149% and 132%,
respectively, when compared to the similar periods in the prior year reflects
increases in expenses related to payroll, outside consultants and miscellaneous
new project expenses. The increase in payroll expenses is the result of
additional staffing when comparing the first half of fiscal 1996 to the same
period in fiscal 1995. The increased staff, with the outside consultants,
continue to develop new products that BCI feels will meet the needs of the
marketplace.
There was no interest expense in the six-month period ended December 31, 1995.
The long-term debt and related accrued interest were paid off in full during
the third quarter of fiscal 1995.
In fiscal 1994, BCI International adopted the provisions of SFAS 109,
"Accounting for Income Taxes", which required our booking of a deferred tax
asset. SFAS 109 is an accounting regulation promulgated by the Financial
Accounting Standards Board (FASB), an accounting board that sets standards for
uniformity of accounting reports issued by businesses. The deferred tax asset
and related effect on profits was determined based on the difference between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the years in which the differences are expected to
reverse. BCI's asset is based primarily on the projected future value of its
net operating loss (NOL) carryforward. In the current year, this deferred tax
asset is being amortized monthly, based on projected utilization of its NOL.
During the three- and six-month periods ending December 31, 1995, deferred
income tax expense was recognized in the amount of $687,898 and $1,362,473,
respectively.
All other costs and expenses of the Company remained relatively constant when
comparing the first six months of fiscal 1996 to that of fiscal 1995.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 5. OTHER INFORMATION
On January 24, 1996, the Company entered into a Compensation Agreement with its
President, Frank A. Katarow ("Katarow"). Under the terms of that Compensation
Agreement, Katarow has undertaken to remain in the employ of the Company for a
period of at least one (1) year following a change of control of the Company
(defined as a change of control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Exchange Act of 1934). The intention of the Agreement is to retain
Katarow's services in the event of a sale, transfer or other disposition of the
business or ownership of the Company, for the benefit
Page 7 of 30
<PAGE> 8
of any acquiring party, in order to provide for continuity of management of the
Company, if so desired by any such acquiror.
Under the terms of the Agreement, for the one (1) year period following a
change of control, Katarow would be entitled to receive base salary at a rate
at least equal to the rate in effect immediately prior to such a change of
control, together with an annual bonus equal to the average bonus paid in the
three (3) years preceding such change of control. In addition, at the end of
the one (1) year period (or sooner if Katarow's employment with the Company or
its successor is earlier terminated without cause, as defined), Katarow would
be entitled to receive an amount equal to the amount remaining in a trust fund
concurrently established to provide for payment under the Compensation
Agreement. That trust fund, established pursuant to a complementary Trust
Agreement and funded with a cash deposit of $1,870,200.00, is intended to
constitute a grantor trust as described in Section 671 et. seq. of the Internal
Revenue Code of 1986, as amended (the "Code"). As such, all income earned by
the trust is attributable to the Company. Nevertheless, the trust instrument
provides for payment of earnings of the trust to Katarow on an annual basis.
This amount, attributable to the Company as income and deductible by it as an
employee salary expense, is to be treated as earned income to Katarow, who is
responsible for payment of individual income tax on such amount. Payment of
these annual earnings to Katarow will constitute a material increase in
Katarow's salary payments from the Company on a current basis. While earnings
from the trust fund are payable to Katarow on an annual basis commencing
immediately, payment of the principal of the trust fund is payable only upon
his satisfaction of his continuing post-change of control employment
undertaking.
Until actually paid to Katarow, the assets of the trust are subject to
intervening claims of general creditors of the Company, including Katarow,
whose rights therein are no greater than those of other general creditors.
Katarow may not assign, anticipate, alienate or encumber his rights in the
trust. David H. Sanders, Chairman of the Board of the Company, has been
designated as trustee under the Trust Agreement.
Katarow concurrently entered into a similar Compensation Agreement with DS
Medical Products Co. ("DS Medical"), the principal shareholder of the Company.
Under the terms of the respective Compensation Agreements, to the extent that
payments otherwise due Katarow from the Company would be considered (I) "excess
parachute payments" under Section 280G or 4999 of the Code, or (ii) not
deductible by the Company by reason of Section 162(m) of the Code, such
payments become the obligation of DS Medical, and the Trustee is directed to
return to the Company the balance of the assets in the trust that would
otherwise be available to make those payments.
The intention of the foregoing arrangement with Katarow is to assure his
continuing service to the Company on a current basis, and his availability to
any potential acquiror of the Company or its business or assets into the
future. While the Company and its principals are not in discussions with
parties contemplating a current transfer of ownership of the business or assets
of the Company, the Company and its principals have recently engaged in
negotiations for such a transaction (see Reports on Form 8-K, dated May 23,
1995 and July 25, 1995) and may encounter or entertain other similar
discussions or initiatives in the future. The Company, its management and
principal shareholder have determined that the existence of continuity of
present management would be an important aspect in the valuation of the Company
by any potential acquiror, and the Company, its Board of Directors, and its
principal shareholder, deem it, in their best business judgment, to be
important to provide for retention of management in order to enhance the value
of the Company for
Page 8 of 30
<PAGE> 9
the benefit of its shareholders. While the Company is not presently engaged in
any negotiations or discussions with any parties proposing an acquisition of
the company or its business or assets, management and the principal beneficial
shareholders of the company have, from time to time, been approached by parties
proposing such an acquisition, and the Company and its principal shareholder
retain the right to solicit, initiate, entertain, consider, discuss and
negotiate offers for the sale or other transfer of the stock or assets of the
Company from time to time.
The ownership of a significant majority of the outstanding capital stock of the
Company by DS Medical, the Company's principal shareholder, which in turn, is
owned by David H. Sanders and Ken M. Davee (directors and officers of the
Company) and related parties, means that any discussions, negotiations and
transfer could be accomplished when, as and on terms deemed advantageous to
that principal shareholder, which may not coincide with the interests or
anticipated timing of minority shareholders. Nevertheless, management and
ownership believe that enhancement of the value of the Company, through a
facility such as the foregoing Compensation Agreements, will redound to the
benefit of minority shareholders as well.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company has not filed any reports on Form 8-K for the quarter ended
December 31, 1995.
The Exhibits filed as part of this report are listed below:
Exhibit No. Description
----------- ------------------------------------
10.23 Compensation Agreement between Frank A. Katarow and
Biochem International Inc.
10.24 Compensation Agreement between Frank A. Katarow and
DS Medical Products Co.
10.25 Trust Agreement for Katarow Employment Trust
Page 9 of 30
<PAGE> 10
SIGNATURES
Pursuant to the requirements 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/ David H. Sanders
--------------------
David H. Sanders
Chairman of the Board and
Chief Executive Officer
By /s/ Frank A. Katarow
--------------------
Frank A. Katarow
President and Chief
Operating Officer
Dated: February 7, 1996 By /s/ Ann M. Johnson
------------------
Ann M. Johnson
Vice President of Finance
and Operations
Page 10 of 30
<PAGE> 1
EXHIBIT 10.23
COMPENSATION AGREEMENT
This Agreement is made this 24th day of January, 1996, between Frank
Katarow ("Executive") and Biochem International Inc., a Delaware corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the Company wishes to assure itself of continuity of
management in the event of any Change in the Control of the Company; and
WHEREAS, the Company believes it is important that Executive be able
to assess and advise the Company whether supporting a Change in Control would
be in the best interests of the Company and its shareholders without being
influenced by the uncertain effect of such a change upon Executive's role
within the Company; and
WHEREAS, Executive has been employed by the Company and the Company
wishes to demonstrate to Executive the Company's concern for his welfare; and
WHEREAS, the Company has or will deposit certain amounts (the "Trust
Funds" ) with David Sanders, as trustee of the Katarow Employment Trust (the
"Trust"), to fund certain obligations to be herein entered into; and
WHEREAS, the Company wishes to insure that the Executive will continue
to advise and be an employee of the Company, and to provide such services as
are required in such position, for a period of at least one year following any
Change in Control of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I. OPERATION OF AGREEMENT
1.1. This Agreement will be binding immediately upon its execution by
the parties hereto, but will operate as an employment contract only during the
"Term of Employment" as described below. Notwithstanding the foregoing, if,
prior to any Change in Control, Executive resigns from the Company, is
dismissed for Cause, as defined in paragraph 4.3 below, or dies, this Agreement
shall terminate, and Executive shall not be entitled to any benefits hereunder.
1.2. The "Term of Employment" is the period beginning on the date of
a "Change of Control" and ending on the earliest of:
(a) One year following such Change of Control,
(b) Executive's death, or
(c) the date on which all rights and obligations of the parties
hereto have been satisfied in accordance with the terms of
this Agreement.
Except as provided in paragraph 1.1 of this Agreement, neither the
expiration of the Term of Employment nor the termination of this Agreement will
relieve the Company of the obligation to provide Executive, in accordance with
the terms hereof, the payments, benefits and coverage to which he has become
entitled under this Agreement.
1.3. "Change of Control" means a change of control of the Company of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"),
Page 11 of 30
<PAGE> 2
whether or not the Company is then subject to such reporting requirement;
provided, however, that, without limitation, such a Change of Control shall be
deemed to have occurred if:
(a) any person or group (as such terms are used in connection with
Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under
the Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the
Company's then outstanding securities; or
(b) the Company is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in
office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter.
Notwithstanding the foregoing provisions of this paragraph 1.3, a
"Change of Control" will not be deemed to have occurred solely because of the
acquisition of securities of the Company (or any reporting requirement under
the Act relating thereto) by an employee benefit plan maintained by the Company
for its employees.
ARTICLE II. EMPLOYMENT
2.1. The Company agrees to employ Executive throughout the Term of
Employment as an officer of the Company without reducing Executive's status and
without imposing on Executive travel requirements or other duties substantially
more onerous than those to which he was subject immediately prior to the Change
of Control. The Company agrees to provide Executive with an office and
executive secretarial support similar to those provided immediately before the
Change of Control and further agrees that Executive's situs of employment will
be in Waukesha, Wisconsin, or such other location in the Milwaukee, Wisconsin
vicinity to which the Company's executive headquarters may be moved.
2.2. Executive agrees, subject to paragraph 4.4 below, to remain in
the Company's employ during the Term of Employment, as described in paragraph
2.1.
Excluding periods of vacation and sick leave, Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company to the extent necessary to discharge
responsibilities assigned to Executive hereunder and to use reasonable efforts
to perform such responsibilities faithfully and efficiently. No greater time,
attention or effort to discharge responsibilities shall be required of
Executive than was required prior to the Change of Control. Executive may:
(a) serve on corporate, civic and charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements and teach at
educational institutions and
(c) manage personal investments,
so long as such activities do not significantly interfere with the
performance of Executive's responsibilities. To the extent that any such
activities have been conducted by Executive prior to the Change of Control,
such prior conduct, and any subsequent conduct similar in nature and scope,
shall not be deemed to interfere with the performance of Executive's
responsibilities.
2.3. For purposes of this Agreement, employment by a subsidiary of
the Company will be deemed to be employment by the Company, and the Company may
cause its obligations hereunder to be discharged through such a subsidiary,
provided that the Company will remain liable for the discharge of all such
obligations and that the rights, benefits, authority and status of the
Executive are in no way
Page 12 of 30
<PAGE> 3
diminished thereby. A subsidiary is any corporation more than 50% of the
voting stock of which is owned by the Company or another subsidiary of the
Company.
ARTICLE III. COMPENSATION
3.1. The Company will pay as compensation to Executive for his
services as an employee during the Term of Employment:
(a) base annual salary at a rate equal to or greater than the rate
of base salary in effect for Executive immediately prior to
the Change of Control; plus
(b) an annual bonus equal to the average bonus (as a percentage of
base salary) paid to the Executive for the three full fiscal
years of the Company immediately preceding the Change of
Control.
3.2. In addition, for his services as an employee during the Term
of Employment, Executive will:
(a) participate fully in the Company's stock option plan (and/or
any successor plan), if any;
(b) participate fully in all pension, profit sharing and similar
benefit plans of the Company, if any;
(c) participate fully, together with his dependents and
beneficiaries, in all life insurance plans, accident and
health plans and other welfare plans, maintained or sponsored
by the Company immediately prior to the Change of Control, or
receive substantially equivalent coverage (or the full value
thereof in cash) from the Company;
(d) participate fully in any additional benefit plans offered by
the Company to executives before or after the Change of
Control; and
(e) receive fringe benefits (which shall not include any benefit
referred to elsewhere in this Article III) substantially
equivalent to those provided to Executive immediately prior to
the Change of Control as well as reimbursement, upon proper
accounting, of reasonable expenses and disbursements incurred
by Executive in the course of his duties.
3.3. Amounts payable under this Article III for services rendered
by Executive during his employment constitute reasonable compensation for such
services. If any such amount (or, if by reason of such amount, any other
amount in the nature of compensation payable to Executive) is determined to be
subject to the excise tax imposed by section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any successor provision, the Company will
pay to Executive in cash an additional amount necessary to cause the total
payments (including the additional payment required by this paragraph 3.3) and
benefits received by him under this Article III (net of all federal and state
taxes, including all taxes payable under section 4999 of the Code) to be equal
to the total payments and benefits Executive would have received under this
Article III (net of all federal, state and local taxes) if section 4999 of the
Code had not applied. This paragraph 3.3 does not apply to amounts payable
under Article IV.
ARTICLE IV. ADDITIONAL BONUS PAYMENT
4.1. Unless Executive's employment is terminated by the Company
during the Term of Employment for "Cause" (as defined in paragraph 4.3 below)
the Company will pay Executive one year after the Change in Control a lump sum
cash payment, in the amount of the Trust Funds held by the Trust on the date
payment is due under this Article IV.
Page 13 of 30
<PAGE> 4
4.2. (a) Upon the occurrence of any breach by the Company of
this Agreement within the meaning of paragraph 4.2(b), below, Executive may
give the Company written notice of his intention to resign effective the 30th
day following the date of such notice. If the Company does not fully remedy
such breach within 15 days of the date of such notice, Executive's resignation
will become effective on such 30th day. If Executive resigns in accordance
with this paragraph during the Term of Employment, his employment will be
deemed to have been terminated by the Company for reasons other than Cause (and
he will be deemed to have offered to continue to provide services to the
Company), and he will be entitled to all the payments and rights and benefits
described in paragraph 4.1; provided that such payments and rights and benefits
will in no event be less than they would have been had such termination taken
place on the date that the Company first breached this Agreement.
(b) The following events are breaches by the Company of this
Agreement within the meaning of this paragraph 4.2(b):
(i) any reduction of, or failure to pay, Executive's salary
or bonus as described in paragraph 3.1 above;
(ii) any failure to provide the benefits required by
paragraph 3.2 above or to make any payment which might be due
in accordance with paragraph 3.3 above;
(iii) assignment to Executive of any duties inconsistent in
any respect with his position (including status, offices and
titles), authority, duties or responsibilities as contemplated
by paragraph 2.1 above or any other action by the Company
which results in a diminution of such position, authority,
duties or responsibilities;
(iv) failure after a Change of Control to comply with and
satisfy paragraph 8.1 or 8.2 below;
(v) relocation of the Company's principal executive offices,
or any event that causes Executive to have his principal place
of work changed, to any location outside the Milwaukee,
Wisconsin area; and
(vi) without limiting the generality or effect of the
foregoing, any other material breach of this Agreement by the
Company or any successor thereto or transferee of
substantially all the assets thereof.
4.3. If Executive is dismissed by the Company for Cause, he will
not be entitled to payments or benefits provided under paragraph 4.1 above.
"Cause" means only the willful commission by Executive of theft, embezzlement
or other serious and substantial crimes against the Company. For purposes of
this definition, no act or omission shall be considered to have been "willful"
unless it was not in good faith and Executive had knowledge at the time that
the act or omission was not in the best interest of the Company.
4.4. If Executive's employment is alleged to be terminated for
Cause or if Executive's right to resign under paragraph 4.2 is disputed,
Executive may initiate binding arbitration in Milwaukee, Wisconsin, before the
American Arbitration Association by serving a notice to arbitrate upon the
Company or, at Executive's election, institute judicial proceedings, in either
case within 90 days of the effective date of his termination or, if later, his
receipt of notice of termination, or such longer period as may be reasonably
necessary for Executive to take such action if illness or incapacity should
impair his taking such action within the 90-day period. The Company agrees:
(i) to pay the costs and expenses (including fees of counsel
to Executive of any such arbitration and/or judicial
proceeding, including Executive's counsel fees), and
Page 14 of 30
<PAGE> 5
(ii) to pay interest to Executive on any amounts ultimately
found to be due to Executive hereunder during any period of
time that such amounts are withheld pending arbitration and/or
judicial proceedings. Such interest will be at the "Prime
Rate" most recently announced by the First National Bank of
Chicago prior to the commencement of the arbitration.
4.5. Termination of employment during the Term of Employment due to
the death or total and permanent disability of Executive will not be considered
a termination for purposes of this Article IV.
4.6. If Executive dies following a termination of employment which
entitled him to benefits under this Article IV but prior to receipt of all such
benefits his beneficiary (as designated to the Company in writing) or, if none,
his estate, will be entitled to receive within 60 days of the date of the
Executive's death all unpaid amounts due hereunder.
ARTICLE V. NO OBLIGATION TO MITIGATE
There shall be no requirement on the Executive's part to seek other
employment or otherwise mitigate in order to be entitled to the full amount of
any payments or benefits hereunder.
ARTICLE VI. LIMITATION
Notwithstanding any other provision of this Agreement, the payments or
benefits to which Executive will be entitled under Article IV of this Agreement
will be reduced to the extent necessary so that none of the payments will (i)
be deemed "excess parachute payments" under sections 280G or 4999 of the Code,
or (ii) be treated as not deductible by the Company under section 162(m) of the
Code.
ARTICLE VII. EXPENSES
It is the intent of the Company that the Executive not be required to
incur any expenses associated with the enforcement of his rights under this
Agreement by legal action or arbitration proceeding because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if Executive determines in
good faith that the Company has failed to comply with any of its obligations
under this Agreement, or if the Company or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any legal action or
arbitration proceeding designed to deny Executive, or to recover from him, the
benefits intended to be provided hereunder, or in the event of actions
instituted as contemplated by paragraph 4.4 above, the Company irrevocably
authorizes Executive from time to time to retain counsel of his choice, at the
expense of the Company as hereafter provided, to represent Executive in
connection with any and all actions and proceedings, whether by or against the
Company or any director, officer, stockholder or other person affiliated with
the Company, which may adversely affect Executive's rights under this
Agreement. In addition, notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to Executive's entering into an attorney-client relationship with such
counsel and agrees that a confidential relationship shall exist between
Executive and such counsel. Without limiting the effect of paragraph 4.4 above
or of the foregoing provisions of this Article VII, the Company shall pay or
cause to be paid and shall be solely responsible for any and all attorneys' and
related fees and expenses incurred by Executive as a result of the Company's
failure to perform under this Agreement.
Page 15 of 30
<PAGE> 6
ARTICLE VIII. MERGER OR ACQUISITION
8.1. If the Company is at any time before or after a Change of
Control merged with or consolidated into or with any other corporation or other
entity (whether or not the Company is the surviving entity), or if
substantially all of the assets of the Company are transferred to another
corporation or other entity, the corporation or other entity resulting from
such merger or consolidation, or the acquirer of such assets, shall (by
agreement in form and substance satisfactory to Executive) expressly assume the
obligations of the Company under this Agreement. In any event, however, the
provisions of this Agreement shall be binding upon and inure to the benefit of
the corporation or other entity resulting from such merger or consolidation or
the acquirer of such assets, and this Article VIII will apply in the event of
any subsequent merger or consolidation or transfer of assets.
8.2. In the event of any merger, consolidation or sale of assets
described above, nothing contained in this Agreement will detract from or
otherwise limit Executive's right to or privilege of participation in any stock
option or purchase plan or any bonus, profit sharing, pension, group insurance,
hospitalization or other incentive or benefit plan or arrangement which may be
or become applicable to executives of the corporation resulting from such
merger or consolidation or the corporation acquiring such assets of the
Company.
8.3. In the event of any merger, consolidation or sale of assets
described above, references to the Company in this Agreement shall unless the
context suggests otherwise be deemed to include the entity resulting from such
merger or consolidation or the acquirer of such assets of the Company.
ARTICLE IX. WITHHOLDING
All payments required to be made by the Company hereunder to Executive
or his dependents, beneficiaries or estate will be subject to the withholding
of such amounts relating to tax and/or other payroll deductions as may be
required by law.
ARTICLE X. AMENDMENT
No amendment, change or modification of this Agreement may be made
except in writing, signed by both parties.
ARTICLE XI. GENERAL
11.1. The provisions of this Agreement shall be binding upon and
shall inure to the benefit of Executive, his executors, administrators, legal
representatives and assigns, and the Company and its successors.
11.2. The validity, interpretation and effect of this Agreement
shall be governed by the laws of the State of Wisconsin.
11.3. There shall be no right of set-off or counterclaim, in respect
of any claim, debt or obligation, against any payments to Executive, his
dependents, beneficiaries or estate provided for in this Agreement.
11.4. No right or interest to or in any payments shall be assignable
by Executive; provided, however, that this provision shall not preclude him
from designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of his
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The
term "beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary
has been so designated, the legal representative of the Executive's estate.
Page 16 of 30
<PAGE> 7
11.5. No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
11.6. Beginning on the date of a Change of Control, this Agreement
shall govern Executive's employment and compensation by the Company and the
other matters referred to herein, and any other employment or severance
agreement, arrangement or policy otherwise applicable to the Executive shall be
superseded by this Agreement.
11.7. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision.
IN WITNESS WHEREOF, the Company and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
Biochem International Inc.
By
ATTEST: -------------------------------
- --------------------------
----------------------------------
Frank A. Katarow
Page 17 of 30
<PAGE> 1
EXHIBIT 10.24
COMPENSATION AGREEMENT
This Agreement is made this 24th day of February, 1996, between Frank
Katarow ("Executive") and DS Medical Products Co., a corporation ("DS
Medical").
W I T N E S S E T H:
WHEREAS, DS Medical wishes to assure itself of continuity of
management in the event of any Change of Control of DS Medical or Biochem
International Inc. (the "Company"); and
WHEREAS, DS Medical believes it is important that Executive be able to
assess and advise the Company and DS Medical whether supporting a Change of
Control would be in the best interests of the Company and its shareholders
without being influenced by the uncertain effect of such a change upon
Executive's role within the Company and DS Medical; and
WHEREAS, the Company and the Executive have entered into a
Compensation Agreement, dated the same date hereof (the "Company Agreement"),
to provide the Executive certain rights and benefits from the Company; and
WHEREAS, DS Medical wishes to insure that the Executive will continue
to advise and be an employee of the Company and DS Medical, and to provide such
services as are required in such position, for a period of at least one year,
following any Change of Control of the Company or DS Medical; and
WHEREAS DS Medical wishes to maximize and protect the value of its
assets, including the stock of the Company, and believes the continuing
employment of the Executive will further these goals;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I. OPERATION OF AGREEMENT.
1.1. This Agreement will be binding immediately upon its execution
by the parties hereto. Notwithstanding the foregoing, if, prior to any Change
of Control, Executive resigns from the Company, is dismissed for Cause, as
defined in paragraph 2.2 below, or dies, this Agreement shall terminate. The
termination of this Agreement will relieve DS Medical of the obligation to
provide Executive, in accordance with the terms hereof, the payments to which
he has become entitled under this Agreement.
1.2. "Change of Control" means a change of control of the Company
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not the Company is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change of
Control shall be deemed to have occurred if:
(a) any person or group (as such terms are used in connection with
Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under
the Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the
Company's then outstanding securities; or
(b) the Company is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in
office immediately prior to
Page 18 of 30
<PAGE> 2
such transaction or event constitute less than a majority of
the Board of Directors thereafter.
Notwithstanding the foregoing provisions of this paragraph 1.2, a
"Change of Control" will not be deemed to have occurred solely because of the
acquisition of securities of the Company (or any reporting requirement under
the Act relating thereto) by an employee benefit plan maintained by the Company
for its employees.
ARTICLE II. ADDITIONAL BONUS PAYMENT.
2.1. Unless Executive's employment is terminated by the Company
during the one year period following the Change in Control for "Cause" (as
defined in paragraph 2.2 below) DS Medical will pay Executive, or his
beneficiary (as designated pursuant to Section 4.7 of the Company Agreement) or
estate, at the time payment is due under Article IV of the Company Agreement a
lump sum cash payment, in an amount equal to the amount due to Executive under
Section 4.1 of the Company Agreement, without taking into account the
limitation set forth in Article VI of the Company Agreement, less the amount of
lump sum payment received by the Executive under Section 4.1 of the Company
Agreement.
2.2. If Executive is dismissed by the Company for Cause, he will
not be entitled to payments provided under paragraph 2.1 above. "Cause" means
only the willful commission by Executive of theft, embezzlement or other
serious and substantial crimes against the Company. For purposes of this
definition, no act or omission shall be considered to have been "willful"
unless it was not in good faith and Executive had knowledge at the time that
the act or omission was not in the best interest of the Company.
ARTICLE III. EXPENSES
It is the intent of DS Medical that the Executive not be required to
incur any expenses associated with the enforcement of his rights under this
Agreement by legal action or arbitration proceeding because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if Executive determines in
good faith that DS Medical has failed to comply with any of its obligations
under this Agreement, or if DS Medical or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any legal action or
arbitration proceeding designed to deny Executive, or to recover from him, the
benefits intended to be provided hereunder, DS Medical irrevocably authorizes
Executive from time to time to retain counsel of his choice, at the expense of
DS Medical as hereafter provided, to represent Executive in connection with any
and all actions and proceedings, whether by or against the Company, DS Medical,
or any director, officer, stockholder or other person affiliated with the
Company, which may adversely affect Executive's rights under this Agreement.
In addition, notwithstanding any existing or prior attorney-client relationship
between DS Medical and such counsel, DS Medical irrevocably consents to
Executive's entering into an attorney-client relationship with such counsel and
agrees that a confidential relationship shall exist between Executive and such
counsel. Without limiting the effect of the foregoing provisions of this
Article III, DS Medical shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and expenses incurred
by Executive as a result of DS Medical's failure to perform under this
Agreement.
ARTICLE IV. WITHHOLDING
All payments required to be made by DS Medical hereunder to Executive
or his dependents, beneficiaries or estate will be subject to the withholding
of such amounts relating to tax and/or other payroll deductions as may be
required by law.
Page 19 of 30
<PAGE> 3
ARTICLE V. AMENDMENT
No amendment, change or modification of this Agreement may be made
except in writing, signed by both parties.
Page 20 of 30
<PAGE> 4
ARTICLE VI. GENERAL
6.1. The provisions of this Agreement shall be binding upon and
shall inure to the benefit of Executive, his executors, administrators, legal
representatives and assigns, and DS Medical and its successors.
6.2. The validity, interpretation and effect of this Agreement
shall be governed by the laws of the State of Wisconsin.
6.3. There shall be no right of set-off or counterclaim, in respect
of any claim, debt or obligation, against any payments to Executive, his
dependents, beneficiaries or estate provided for in this Agreement.
6.4. No right or interest to or in any payments shall be assignable
by Executive; provided, however, that this provision shall not preclude him
from designating one or more beneficiaries to receive any amount that may be
payable after his death and shall not preclude the legal representative of his
estate from assigning any right hereunder to the person or persons entitled
thereto under his will or, in the case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate. The
term "beneficiaries" as used in this Agreement shall mean a beneficiary or
beneficiaries so designated to receive any such amount, or if no beneficiary
has been so designated, the legal representative of the Executive's estate.
6.5. No right, benefit or interest hereunder, shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation, or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
6.6. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision.
IN WITNESS WHEREOF, DS Medical and Executive have each caused this
Agreement to be duly executed and delivered as of the date set forth above.
DS Medical Products Co.
By
--------------------------------
ATTEST:
- --------------------------
-----------------------------------
Frank Katarow
Page 21 of 30
<PAGE> 1
EXHIBIT 10.25.
TRUST AGREEMENT
BETWEEN
BIOCHEM INTERNATIONAL INC.
AND
DAVID H. SANDERS
This Agreement is made this 24th day of February, 1996 (the "Effective
Date"), by and between Biochem International Inc., a Delaware corporation (the
"Company"), and David H. Sanders as trustee (the "Trustee").
ARTICLE I
The Trust and the Plan
1.1 Name and Grantor. This Trust Agreement and Trust hereby
evidenced shall be known as the "Katarow Employment Trust." The grantor of the
Trust shall be the Company.
1.2 Plan. The Trust has been established by the Company to
provide compensation and benefits to a key employee of the Company under the
terms of the compensation agreement listed in Schedule A of this Agreement,
which compensation agreement is sometimes referred to below as the "Plan." The
rights, powers and duties of the Trustee, however, shall be governed solely by
the terms of this Trust Agreement without reference to the provisions of the
Plan. A payment under the Trust to any individual with respect to the Plan
shall be deemed a payment under the Plan by the Company. In addition, under
circumstances described more fully in paragraph 4 of Article IV, the assets of
the Trust shall be applied in partial or total satisfaction of claims of
certain creditors of the Company.
1.3 Advisor. The accounting and tax advisor to the Trust (the
"Advisor") shall be the Company or such other individual, committee, firm,
corporation or entity as the Company may from time to time appoint in writing;
provided, however in no event shall the Beneficiary, or any person who is a
member of the Beneficiary's family, as defined in Section 267(c)(4) of the
Internal Revenue Code of 1986, be the Advisor. The Advisor shall advise the
Trustee as to when a Beneficiary (as defined in Section 1.4) has fulfilled the
conditions for payment of benefits and the amount and form of such benefits.
The Trustee shall be responsible for making all benefit payments, and may rely
on advice from the Advisor with respect to the commencement date and the amount
and the manner of payment from the Trust of each Beneficiary's benefits under
the Plan. The Advisor may rely on advice of legal counsel as to any terms of
the Plan. The Advisor may rely on information provided by the Trustee with
respect to statements of account balances and transactions under the Trust.
The Company shall timely provide the Advisor with certified copies of each Plan
and with all information within its control which the Advisor may reasonably
require to provide advice to the Trustee. Each Beneficiary of the Trust shall
provide the Advisor with all information which the Advisor may reasonably
request with respect to determining the Beneficiary's benefits. The Advisor
shall not be required to independently verify such information or seek
additional information. To the extent that any dispute shall arise between a
Beneficiary and the Company with respect to the Beneficiary's entitlement to a
benefit under the Plan, such dispute shall be resolved under the provisions of
that Plan. In the event that the Advisor is unable or unwilling to render
advice or opinions to the Trustee under this Trust Agreement, the Trustee shall
have no duty or responsibility to assume the role or responsibilities of the
Advisor and shall have no liability for any loss or damage incurred by a
Beneficiary because no Advisor is acting hereunder.
Page 22 of 30
<PAGE> 2
1.4 Beneficiaries. For purposes of this Trust, the term
"Beneficiary" or "Beneficiaries" shall include the Executive under the Plan
whose benefits under such Plan may be payable in whole or in part by this Trust
and each other person entitled to receive such benefits with respect to the
Executive as of the date on which the Executive becomes eligible to have his
benefits payable under this Trust.
1.5 Contribution. Company agrees to fund this Trust by depositing
with the Trustee One Million Eight Hundred Seventy Thousand Two Hundred Dollars
($1,870,200), no later than Thirty (30) days after the date hereof.
ARTICLE II
Management and Control of Trust Fund Assets
2.1 The Trust Fund. The "Trust Fund" as of any date means all
property of every kind then held by the Trustee under this Trust Agreement.
2.2 Company Contributions. The Company shall contribute to the
Trust such amounts as are necessary to fund the benefits payable to
Beneficiaries under the Plan. In addition, the Company shall contribute
sufficient funds to the Trust to provide for the expenses of its administration
or shall make such other arrangements with the Trustee to provide for such
expenses as agreed upon by the Trustee and the Company. The Company may
contribute additional amounts to the Trust at such times and in such amounts as
it determines in its sole discretion.
2.3 Investment Guidelines and Investment Funds. The Trustee shall
invest the Trust Fund assets at the direction of the Advisor. In the event the
Advisor shall fail to direct the Trustee or the Advisor shall instruct the
Trustee to directly manage investment of the Trust Fund assets then the Trustee
shall invest the assets of the Trust Fund with the principal goal of preserving
capital and obtaining a reasonable return on investments in accordance with the
restrictions on Eligible Investments set forth in Section 1.6 and 2.4 of the
Plan. The Trustee shall not be required to make any separate investment of the
Trust Fund for the account of any Beneficiary but shall invest the Trust Fund
as a single investment fund.
2.4 Exercise of Trustee's Duties. The Trustee shall discharge its
duties hereunder solely in the interest of the Beneficiaries, and:
(a) for the exclusive purpose of:
(i) providing benefits to the Beneficiaries; and
(ii) defraying the reasonable expenses of
administering the Plan;
(b) with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of
a like character and with like aims; and
(c) subject to the provisions of Section 2.3, by
diversifying the investment of the Trust Fund so as
to minimize the risk of large losses, unless under
the circumstances it is clearly prudent not to do so.
2.5 General Powers. Subject to the provisions of Sections 2.3 and
2.4, with respect to the Trust Fund, the Trustee shall have the following
powers, rights and duties in addition to those provided elsewhere in this Trust
Agreement or by law:
Page 23 of 30
<PAGE> 3
(a) to invest and reinvest the Trust Fund in bonds,
stocks, mortgages, notes, bank deposits, options,
futures contracts, limited partnership interests,
shares of registered investment companies, or other
property of any kind, real or personal, domestic or
foreign, suitable for the investment of trust funds;
(b) to receive and hold all contributions paid to it
under the Plan; except that the Trustee shall have no
duty to require any contributions to be made, or to
determine that any of the contributions received
comply with the conditions and limitations of the
Plan;
(c) to deposit any part or all of the Trust Fund in any
common trust fund or other collective investment fund
maintained by the Trustee for trust investment
purposes;
(d) to manage, operate, sell, contract to sell, convey,
exchange, partition, transfer, abandon and otherwise
deal with all property, real or personal, in such
manner, for such considerations, and on such terms
and conditions as the Trustee shall decide;
(e) to retain in cash (pending investment, reinvestment
or payment of benefits) any reasonable portion of the
Trust Fund and to deposit cash in any depository;
(f) to compromise, contest, arbitrate, settle or abandon
claims and demands;
(g) to begin, maintain or defend any litigation necessary
in connection with the administration of the Trust;
(h) to have all rights of an individual owner, including
the power to give proxies, to vote stocks, to join in
or oppose (alone or jointly with others) voting
trusts, mergers, consolidations, foreclosures,
reorganizations, recapitalizations or liquidations,
and to exercise or sell stock subscription or
conversion rights;
(i) to hold securities or other property in the name of
the Trustee or any nominee or nominees of the
Trustee, or in such other form as the Trustee shall
determine, including corporate depositories, with or
without disclosing the Trust relationship, provided
that the records of the Trustee shall indicate the
actual ownership of such securities or other
property;
(j) to participate in and use a book-entry system for the
deposit and transfer of securities;
(k) to retain any funds or property subject to any
dispute without liability for the payment of
interest, or to decline to make payment or delivery
thereof until final adjudication is made by a court
of competent jurisdiction;
(l) to employ agents, attorneys, investment counsel,
accountants, actuaries or other persons for such
purposes as the Trustee considers desirable subject
to consent by the Company, which consent will not be
unreasonably withheld;
(m) to furnish the Company and the Advisor with such
information in the Trustee's possession as the
Company or Advisor may need for tax or other
purposes; and
Page 24 of 30
<PAGE> 4
(n) to perform any and all other acts which are, in the
reasonable judgment of the Trustee, necessary or
appropriate for the proper and advantageous
management, investment and distribution of the Trust
Fund.
ARTICLE III
Accounting
3.1 Separate Accounts. The following accounts shall be maintained
by the Advisor for the Trust: (i) a separate account for the Beneficiary with
respect to his benefits under the Plan which are payable in whole or in part by
the Trust; (ii) such other accounts as may be required for the administration
of the Trust Fund.
3.2 Allocation of Company Contributions. Subject to the following
provisions of this paragraph, Company contributions shall be allocated and
credited to the Beneficiary's account under the Plan by the Advisor as directed
by the Company at the time of the contribution.
3.3 Distributions. Distributions from the Trust Fund shall be
charged by the Advisor to the accounts with respect to which they are made or
allocated in accordance with Article IV.
3.4 Statement of Accounts. As soon as practicable after each
periodic reporting period agreed upon by the Company and the Trustee (the
"Accounting Date"), the Trustee shall furnish to the Company and the Advisor a
written report showing the fair market value of the Trust Fund as of that
Accounting Date, all investments of the Trust Fund, and receipts and
disbursements and other transactions made by the Trustee since the preceding
Accounting Date, with respect to the Trust Fund and such other information as
the Trustee may possess which the Company requires for the administration of
the Plan or the Advisor requires to advise the Trustee, the Beneficiaries or
the Company. After receipt of the Trustee's statement of account, and based on
such statement, the Advisor shall furnish such statement to the Beneficiary.
ARTICLE IV
Distribution of Trust Assets
4.1 Benefit Payments. Subject to the following provisions of this
Article, as of the commencement date (as determined under Section 4.2) of the
Beneficiary's benefit, the Trustee shall commence distribution of such benefit
to the Beneficiary as directed by the Advisor provided that:
(a) In no event shall the Trustee make a distribution to
or on account of the Beneficiary in excess of the
amount then allocated to his account in accordance
with the provisions of Article III.
(b) The Trustee shall have no responsibility to inquire
whether a payee is entitled to the payment, or
whether a payment is proper, and shall have no
liability for a payment made in good faith without
actual notice or knowledge of the changed condition
or status of the payee.
(c) If any check for any payment directed to be made from
the Trust Fund is mailed by the Trustee by regular
United States mail to the last address of the payee
furnished to the Trustee and is returned unclaimed,
the Trustee shall notify the Advisor of that fact and
such check or funds shall be retained
Page 25 of 30
<PAGE> 5
in the Trust. The Trustee and Advisor shall be
required to make reasonable efforts to ascertain the
location of any Beneficiaries.
(d) The Trustee may reserve such reasonable amount from
any payment as it shall deem necessary to pay any
estate, inheritance, income or other tax, charge or
assessment attributable to any payment or may require
such release or other document from any taxing
authority and such indemnity from the intended payee
as the Trustee shall deem necessary for its
protection.
4.2 Commencement Date. Subject to the provisions of Sections 4.3
and 5.3, the commencement date and the form of payment from the Trust of the
Beneficiary's benefits with respect to the principal amount held by the Trust
shall be determined in accordance with the terms of the Plan, including any
rights thereunder to disclaim, defer the commencement date or extend the
payment period for all or any portion of the benefits payable to him under this
Trust. Any amount of Trust principal not paid pursuant to Article IV of the
Plan due to the limitations of Article VI of the Plan shall be paid to the
Company. Notwithstanding the foregoing, the Trustee shall distribute to the
Beneficiary the current investment earnings of the Trust on a yearly basis as
soon as practicable following the close of each calendar year.
4.3 Reversion to Company.
(a) Subject to the provisions of Sections 4.2, this 4.3,
and 4.4, no part of the corpus or income of the Trust
Fund shall revert to the Company or be used for, or
diverted to, purposes other than the exclusive
benefit of the Beneficiaries.
(b) If Executive resigns from the Company, is dismissed
for "Cause" (as such term is defined in paragraph 4.3
of the Plan), or dies prior to any Change in Control
(as such term is defined in the Plan), all funds held
by the Trust shall revert to the Company.
4.4 Insolvency of the Company. If the Company becomes insolvent
or its affairs become the subject of a reorganization or liquidation proceeding
under federal bankruptcy laws, then notwithstanding any other provisions of
this Trust, the Trustee shall cease all benefit payments and hold Trust assets
for the benefit of the Company's general creditors, including the Beneficiaries
of the Plan. Beneficiaries with claims against the Company by virtue of
participation in the Plan shall be granted no greater rights to Trust assets
than are other creditors. The Trustee shall transfer Trust assets to satisfy
the claims of the Company's general creditors as directed by a court of
competent jurisdiction. The Company shall have the duty to inform the Trustee
promptly if the Company becomes unable to pay its debts as they mature or
becomes subject to proceedings as a debtor under federal bankruptcy laws.
4.5 Benefits May Not Be Assigned or Alienated. Subject to the
provisions of Section 4.4, the interests of the Beneficiaries under the Trust
may not be voluntarily or involuntarily assigned, alienated or encumbered.
ARTICLE V
Tax Matters
5.1 Nature of Trust. This Trust Agreement is intended to
constitute a grantor trust, as described in section 671 et seq. of the Internal
Revenue Code of 1986, as amended from time to time. The Company agrees that
all income of the Trust is attributable to it as owner for income tax purposes
and will be income to the Company.
Page 26 of 30
<PAGE> 6
5.2 Federal and State Reporting Requirements. The Trustee shall
withhold Federal, state and local taxes which are assessable on amounts paid to
a Beneficiary at such rate as may be certified by the Company at the
appropriate rate under applicable laws or such larger amounts as may be
requested by the Beneficiary, and shall transmit the amount withheld to the
applicable taxing authority at the direction of the Company.
5.3 Taxation Prior to Receipt. If the Internal Revenue Service
determines that a Beneficiary is subject to federal income taxation on any
amounts held in the Trust for his benefit in a calendar year prior to the
calendar year in which he would otherwise receive such benefits, the Advisor
shall, at the written request of the Beneficiary accompanied by evidence
satisfactory to the Advisor of such tax treatment, notify the Trustee thereof
and, based upon such notification, the Trustee shall distribute the amount of
the benefits determined to be taxable to the Beneficiary as soon as
practicable.
ARTICLE VI
Compensation, Expenses and Liability
6.1 Compensation and Expenses. The Company shall pay the Trustee
reasonable compensation, if any, as agreed upon from time to time by the
Trustee and the Company and shall reimburse the Trustee for all expenses, taxes
and charges incurred by it in connection with the collection, administration,
management and distribution of the Trust Fund. If the Company fails to pay any
such compensation or expense due, if any, under this paragraph the Trustee may
charge such compensation or expense to the Trust Fund.
6.2 Liability of Trustee and Advisor. Neither the Trustee nor the
Advisor shall be liable for any act or failure to act under this Agreement,
except for willful misconduct or gross negligence. In no event shall the
Trustee or the Advisor be liable for any act or failure to act of the other.
6.3 Indemnification. The Company hereby agrees to indemnify the
Trustee for, and hold it harmless against, and defend it against any and all
liabilities, losses, costs or expenses (including reasonable attorneys' fees)
of whatsoever kind and nature which may be imposed on, incurred by or asserted
against it at any time by reason of carrying out in good faith the
responsibilities delegated to or directions given it under this Agreement, or
by reason of any act or failure to act under this Agreement.
ARTICLE VII
Changes of Trustee
7.1 Resignation. A Trustee may resign at any time by giving
fourteen (14) days' advance written notice to the Company. A copy of such
notice shall be promptly provided to the Advisor and the Beneficiaries by the
Company.
7.2 Removal of Trustee. The Company, by action of its Board of
Directors or a person designated by resolutions of its Board of Directors, may
remove the Trustee or any successor Trustee by giving fourteen (14) days'
advance written notice to the Trustee, subject to providing the removed Trustee
with satisfactory written evidence of the appointment of a successor Trustee
and of the successor Trustee's acceptance of the trusteeship. Copies of such
notice of removal shall be promptly provided to the Advisor by the Company.
7.3 Appointment of Successor Trustee. In the event of the
resignation or removal of the Trustee then a successor Trustee shall be
appointed by the Company. Notwithstanding the foregoing provisions of this
paragraph, a successor Trustee shall not be appointed under this Trust unless
it (i) is a corporate
Page 27 of 30
<PAGE> 7
trustee which has trust assets in excess of one hundred million dollars and
such successor Trustee specifically agrees in writing to comply with the
provisions of this Agreement or (ii) the Beneficiary consents to appointment of
other than a corporate trustee as specified in clause (i); provided, however,
in no event shall the Beneficiary, or any person who is a member of the
Beneficiary's family, as defined in Internal Revenue Code Section 267(c)(4), be
the Trustee. In the event that the Company appoints a successor Trustee in
accordance with the foregoing provisions of this paragraph, the Advisor and the
Beneficiaries shall be promptly notified of such appointment by the Company.
7.4 Duties of Resigned or Removed Trustee and of Successor
Trustee. If the Trustee resigns or is removed, such resigned or removed
Trustee shall promptly transfer and deliver the assets of the Trust Fund to the
successor Trustee, after reserving such reasonable amount as it shall deem
necessary to provide for expenses and any sums chargeable against the Trust
Fund. Within 120 days, the resigned or removed Trustee shall furnish to the
Company, the successor Trustee and the Advisor an account of the administration
of the Trust from the date of the last account with respect to the resigned or
removed Trustee and any records or reports which the resigned or removed
Trustee may possess which the Company may require to administer any Plan or the
Advisor may require to advise the successor Trustee, the Beneficiaries or the
Company. Each successor Trustee shall succeed to the Trust Fund vested in his
predecessor without the signing or filing of any further instrument, but any
resigned or removed Trustee shall execute all documents and do all acts
necessary to vest the Trust Fund in any successor Trustee. Each successor
Trustee shall have all the powers, rights and duties conferred by this
Agreement as if originally named as Trustee. No successor Trustee shall be
personally liable for any act or failure to act of a predecessor Trustee.
7.5 Approval of Accounts. An account of the Trustee may be
approved by the Company by written notice delivered to the Trustee or by
failure to object to the account by written notice delivered to the Trustee
within six months of the date upon which the account was delivered to the
Company. The approval of an account shall constitute a full and complete
discharge to the Trustee as to all matters set forth in that account as if the
account had been settled by a court of competent jurisdiction in an action or
proceeding to which the Company and the Trustee were parties. In no event
shall the Trustee be precluded from having its accounts settled by judicial
proceeding.
ARTICLE VIII
Miscellaneous
8.1 Persons Dealing with Trustee. No person dealing with the
Trustee shall be required to see to the application of any money paid or
property delivered to the Trustee, or to determine whether or not the Trustee
is acting pursuant to any authority granted under this Trust Agreement.
8.2 Evidence. Evidence required of anyone under this Trust
Agreement may be by certificate, affidavit, document or other instrument which
the person acting in reliance thereon considers pertinent and reliable, and
signed, made or presented by the proper party.
8.3 Notice and Waiver of Notice. Any notice or document required
to be filed under this Trust will be properly filed if delivered or mailed by
registered mail postage prepaid, and: (i) if to the Company, in care of
President at W 238 N 1650 Rockwood Drive, Waukesha, Wisconsin 53188, (ii) if to
the Trustee, to David H. Sanders and (iii) if to the Advisor, in care of
President at W 238 N 1650 Rockwood Drive, Waukesha, Wisconsin 53188. Any
notice required under this Trust Agreement may be waived by the person entitled
thereto.
Page 28 of 30
<PAGE> 8
8.4 Counterparts. This Trust Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, and no other
counterpart need be produced.
8.5 Words of Gender. Words of the masculine gender may, and where
necessary shall, be construed as denoting the feminine and neuter gender.
8.6 Governing Laws. This Trust Agreement shall be construed and
administered according to the laws of the State of Illinois.
8.7 Successors, Etc. The provisions of this Trust Agreement shall
be binding on the Company and the Trustee and their successors and on all
persons entitled to benefits under the Plan or the Trust and their respective
heirs and legal representatives.
8.8 Terms. Capitalized words not otherwise defined in this
Agreement shall have the meaning ascribed to them under the Plan.
ARTICLE IX
Amendment, Revocation and Termination
9.1 Amendment and Revocation. This Trust Agreement shall be
revocable by the Company at any time prior to 30 days following the Company's
receipt of a favorable ruling by the Internal Revenue Service; thereafter, this
Trust Agreement shall be irrevocable. In the event that a ruling by the
Internal Revenue Service is not requested within 60 days after execution of
this Trust Agreement this Trust Agreement shall become irrevocable upon
expiration of the 60-day period.
9.2 Termination. If the Plan is terminated, all of the provisions
of the Trust evidenced by this Trust Agreement, as applied to the Plan,
nevertheless shall continue in effect until the portion of the Trust Fund
attributable to the Plan has been distributed by the Trustee. This Trust
Agreement shall terminate on the earlier of the date of which all assets of the
Trust have been paid to Beneficiaries in satisfaction of all benefit
obligations under the Plan or twenty years from the Effective Date. On
termination of the Trust, the Trustee, as directed by the Advisor, shall make a
payment to each Beneficiary of the lump sum value of all remaining benefits
with respect to which the Beneficiary has an interest based upon calculations
by the Advisor.
IN WITNESS WHEREOF, the Company and the Trustee have caused this
Agreement to be signed and attested to by their duly authorized officers the
day and year first above written.
Biochem International Inc.
By
-------------------------------
Its
------------------------------
ATTEST:
- --------------------------
Its
----------------------
----------------------------------
David H. Sanders, as Trustee
Page 29 of 30
<PAGE> 9
SCHEDULE A
Compensation Agreement,
dated February 24, 1996
by and between Biochem International Inc. and
Frank Katarow
Page 30 of 30
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,550
<SECURITIES> 0
<RECEIVABLES> 4,333
<ALLOWANCES> 0
<INVENTORY> 2,896
<CURRENT-ASSETS> 12,918
<PP&E> 2,393
<DEPRECIATION> 979
<TOTAL-ASSETS> 14,620
<CURRENT-LIABILITIES> 2,046
<BONDS> 0
0
0
<COMMON> 262
<OTHER-SE> 12,312
<TOTAL-LIABILITY-AND-EQUITY> 14,620
<SALES> 7,169
<TOTAL-REVENUES> 7,169
<CGS> 3,251
<TOTAL-COSTS> 3,251
<OTHER-EXPENSES> 1,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,066
<INCOME-TAX> 778
<INCOME-CONTINUING> 1288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1288
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
