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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM
------------------------------- TO
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COMMISSION FILE NUMBER 0-6516
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DATASCOPE CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-2529596
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
14 PHILIPS PARKWAY 07645
MONTVALE, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 391-8100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
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 at least the past 90 days.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X].
The aggregate market value of the common stock held by persons other than
affiliates of the registrant, as of August 30, 1996, is approximately
$238,000,000.
The number of shares outstanding of each of the registrant's classes of
common stock, as of August 30, 1996, is as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
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<S> <C>
Common Stock, par value $.01 per share 16,135,128
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's proxy statement in connection with its 1996 annual meeting
of shareholders (the "Proxy Statement") is incorporated by reference into Part
III.
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PART I
ITEM 1. BUSINESS.
Datascope Corp. (the "Company") manufactures proprietary products for
clinical health care markets in interventional cardiology, anesthesiology,
cardiovascular and vascular surgery and for use in emergency rooms and intensive
care units. The Company's products are distributed worldwide by direct sales
personnel and independent distributors. The Company was organized as a New York
corporation in 1964 and was reincorporated in Delaware in 1989.
The Company's business is primarily conducted through its four operating
divisions, Cardiac Assist, Patient Monitoring, Collagen Products and
InterVascular. The Company's core businesses are cardiac assist systems
(intra-aortic balloon pump, or "IABP", systems) and multi-function patient
monitoring devices. The Company's Collagen Products Division manufactures and
sells the VasoSeal(R) device and other hemostatic products utilized during
surgery. The VasoSeal device, announced by the Company in April 1991, is the
first device that can rapidly seal arterial punctures after procedures requiring
femoral arterial catheterization, including coronary angiography and coronary
angioplasty. On September 29, 1995, the Food and Drug Administration (the "FDA")
approved the VasoSeal device for sale in the United States, making it the first
device of its kind to be approved in the United States. See "-- Collagen
Products". InterVascular manufactures and sells a proprietary line of knitted
and woven dacron vascular grafts and patches for reconstructive vascular and
cardiovascular surgery.
The following table sets forth the relative contribution of the Company's
principal classes of products to total sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE
30,
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1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cardiac Assist.............................................. 51% 52% 47%
Patient Monitoring.......................................... 37% 38% 45%
Vascular Grafts............................................. 8% 7% 6%
Collagen Products........................................... 4% 3% 2%
</TABLE>
Cardiac Assist. The Company is widely recognized as the leading
manufacturer and distributor of IABP systems. IABP therapy increases the heart's
output and the supply of oxygen-rich blood to the heart while reducing the heart
muscle's workload and its oxygen demand. IABP therapy is used to stabilize heart
function in instances of cardiac shock, before and after open heart surgery and
in the management of heart failure. IABP also plays an important role in
supporting acute angioplasty intervention, especially in the high risk patient.
It is also used to relieve unstable angina and to correct certain instances of
medically resistant cardiac arrhythmias.
The Company, a pioneer in IABP technology, introduced the first balloon
catheter capable of percutaneous insertion (by arterial puncture through the
skin), an innovation which eliminated the need for surgical insertion and
expanded the market for IABP products from cardiac surgery to the interventional
cardiology market. The Company has continued to refine its IABP technology and
to introduce new designs.
The Company manufactures a broad line of disposable intra-aortic balloon
("IAB") catheters for use with balloon pumps. The Company offers IAB catheters
that permit sheathless insertion. Sheathless insertion results in a 30%
reduction of the cross sectional indwelling area occupied by the catheter
compared to insertion using a 10Fr. Sheath. This means less obstruction to blood
flow and better peripheral circulation. The Company produces the only IAB
catheter specifically designed and labeled for use without a sheath or
hemostasis plug.
In fiscal 1994, the Company began shipping the System 97 "Small
Wonder"(TM), a new compact IABP designed for use either at bedside or in
transport. The System 97 has the most advanced features and performance of any
console balloon pump now being sold, including a built-in computer modem that
provides telephone transmission of data for remote diagnosis. In addition, the
System 97 has been designed in a
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compact form to utilize less floor space than competing systems. The Company
believes that the market for small IABPs accounts for more than two-thirds of
the total IABP market.
The System 97 improves upon the Company's System 95 balloon pump, which was
marketed by the Company in fiscal years 1993 and 1994. The Company continues to
offer the System 95 in markets outside the United States. The Company also
markets the System 90T, which is a lighter, transportable balloon pump.
In August 1996, Datascope introduced its latest intra-aortic balloon pump,
the System 96, at the conference of the European Society of Cardiology. The
System 96 was designed to address the need for a simple, yet cost-effective pump
in markets outside the United States. The System 96 incorporates many of the
advanced features seen in earlier pumps and provides the performance and
flexibility hospitals expect in a variety of clinical situations.
Patient Monitoring. The Company manufactures and markets a broad line of
physiological monitors designed to provide for patient safety and management of
patient care. The Company's monitors are capable of continuous and simultaneous
measurement of multiple parameters, and are used in operating rooms, emergency
rooms, critical care units, post-anesthesia care units and recovery rooms,
intensive care units, and labor and delivery rooms.
The Company manufactures the PASSPORT(R) monitor, a portable,
battery-powered, multi-parameter patient monitor that offers the features of a
traditional bedside monitor, including measurement of ECG, blood pressure,
temperature, respiration and pulse oximetry (SPO2), in a transportable unit that
can move with the patient to different settings in the hospital. The Company
also offers the PASSPORT EL monitor, with a large electroluminescent display
panel providing a wide viewing angle.
The Passport monitor was significantly enhanced in 1996. New five lead
electrocardiogram (ECG) capability was added to the Passport for better
detection of the onset of cardiac ischemia. Two new display options were added
including large 10.4 inch monochrome and color screens for better viewing and
acuity. A basic version of the Passport is also available containing only ECG,
temperature, and pressure. The basic Passport is designed to allow customers to
purchase the monitor at a lower price, and upgrade as their needs warrant. In
addition, a remote color display (RCD) option was added to the Passport, which
permits the remote viewing of patient information in operating rooms and other
environments.
In addition, the Company offers the VISATM central station monitor which
can be connected with up to eight Passport monitors. The VISA central station
can communicate using hard wire, or a mix of ambulatory and telemetry
communication, simultaneously. In ambulatory communication, information is
transmitted by a miniature monitor worn by the patient; in telemetry
communication, information is transmitted from the Passport monitor attached to
the patient. These various communications options allow the patient to receive
continuous care in the appropriate facility location (bedside or other location,
for example, the X-ray suite). In addition, during 1995 a clinical or hospital
information interface capability was added to the VISA, providing the user with
the capability of communicating patient demographic and clinical information
from the VISA to their clinical or hospital information system.
In the fiscal year ended June 30, 1994, the Company introduced the
Point-of-ViewTM (POV) critical care patient monitoring system. In October 1994,
the Company placed a U.S. shipment hold on the POV after an audit conducted by
the Company disclosed a regulatory issue concerning data submitted to the FDA.
In April 1995 the Company commenced a voluntary recall of the product. In June
1995, international shipments of the POV were resumed after issues related to
the product's performance were resolved. While POV monitors continue to be sold
in international markets, it is unlikely that the product will be reintroduced
in the U.S. market because of the time and cost required to make the POV
competitive. Consequently, total sales of the POV are expected to be
substantially less than originally planned and the Company recorded a write-off
of $9.6 million, or $5.6 million after-tax, in the fourth quarter of fiscal 1996
for excess and obsolete inventory and other costs related to the POV monitor.
In fiscal 1996, the Company began selling the new Accutorr(R) Plus
non-invasive blood pressure monitor in international markets. The Accutorr Plus
measures non-invasive blood pressure and temperature. The Accutorr Plus is the
first NIBP monitor with an integrated patient database that provides automatic
record
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keeping on up to 100 measures. The Accutorr Plus is expected to be introduced in
the U.S. after the requisite 510(k) clearance is obtained.
All of the monitoring product lines offered by the Company include versions
which can monitor blood oxygen saturation. This feature uses the proprietary
FLEXISENSOR(R) sensor and SENSOR GUARD(R) sensor, which offer a low cost
disposable sensor system for pulse oximetry.
Collagen Products. The Company's Collagen Products Division manufactures
and sells two principal product lines, the VasoSeal device which can rapidly
seal femoral arterial punctures after catheterization procedures, including
coronary angioplasty and coronary angiography, and other hemostatic products
which are utilized during surgery. In 1996 physicians will perform approximately
2,125,000 coronary angiography and 500,000 coronary angioplasty procedures in
the United States, according to industry estimates. These procedures are key
tools in the battle against heart disease. Based on currently approved
indications for use, these procedures represent the potential market for
VasoSeal in the United States and are growing at an estimated 6% and 12% annual
rate for coronary angiography and coronary angioplasty, respectively.
On September 29, 1995, the VasoSeal device was approved for sale by the
FDA, making it the first device of its kind to be approved in the United States.
The Company believes that VasoSeal devices will create an entirely new market
for improved management of arterial puncture wounds made for catheterization
procedures.
The initial FDA approval for the VasoSeal device covered the claims of
reduced time to hemostasis and immediate removal of the sheath used during
certain coronary procedures, which is now left in place for around 4 hours. In
August 1996, the FDA approved revised VasoSeal labeling that includes the claim
that patients can be ambulated significantly earlier when using the VasoSeal
device than under conventional clinical practice using manual or mechanical
compression. As an example, in the clinical study submitted to support the new
labeling, where the VasoSeal device was used 80% of angiography patients were
able to ambulate within 1 hour following removal of the catheter sheath compared
with 4 to 6 hours under standard clinical practice.
Early ambulation made possible by VasoSeal should result, the Company
believes, in significant potential cost savings for hospitals because
hospitalization time may be reduced, patients may be moved earlier to care
settings that cost less, human and material resources are reduced and patient
throughput is increased. At present, upon removal of the catheterization sheath,
the patient typically requires prolonged manual compression at the arterial
puncture site followed by the application of a pressure dressing, sand bag or
other device. In addition, the patient is required to remain in bed for several
hours or even overnight. Clinical studies have shown that the VasoSeal device
can cause rapid sealing at the arterial puncture site, eliminating the need for
prolonged compression and allowing the patient to get out of bed more quickly.
The ability to claim early ambulation and its potential to lower cost and
increase revenue should accelerate the VasoSeal device's penetration of the
vascular sealing market in the United States.
The Company began limited marketing of VasoSeal devices in markets in
Europe in fiscal 1992. The Company received regulatory approvals to market
VasoSeal devices in Canada, Australia, Italy and the Netherlands in fiscal 1994.
In September 1994, the Company received regulatory approval to market VasoSeal
devices in Japan. However, the Company is awaiting approval for insurance
reimbursement in Japan. Until that time market penetration may be limited. In
addition, registration activity is proceeding in the major international markets
of Germany, France and the United Kingdom.
The Collagen Products Division also manufactures a collagen hemostatic pad
and a fibrillar collagen hemostat which are sold in the United States and
abroad. These products are used to control bleeding during surgery.
InterVascular. The Company's InterVascular subsidiary manufactures and
distributes a proprietary line of knitted and woven dacron vascular grafts and
patches for reconstructive vascular and cardiovascular surgery. InterGardTM is
InterVascular's collagen coated graft, currently sold only in international
markets. InterVascular does not yet have approval to sell the InterGard product
in Japan or the United States. The Company is continuing its efforts to obtain
regulatory approval of the InterGard in each of these important
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markets. InterVascular markets its FDA approved uncoated grafts, including the
ULP, in the U.S. and Japan. The ULP is the first graft of its kind to be
approved with the claim that preclotting is not necessary. In Europe,
InterVascular also produces a small caliber, collagen coated graft, InterGardTM
Ultra Thin, specifically for the peripheral market, which together with the rest
of the InterGard coated products is gaining acceptance as an effective
alternative to the market leader, PTFE (Teflon(R)), in this clinical
application.
In May 1993, the Company submitted a Pre-Market Approval ("PMA")
application to the FDA to market HEMAGUARD collagen-coated grafts, now known as
InterGard. The PMA was accepted for filing in August 1993, at which time the FDA
also asked for additional information regarding the PMA. The Company submitted
an amended PMA which included responses to the FDA's questions in February 1995.
Review of the PMA has been suspended pursuant to the Application Integrity
Policy. See "Business -- Regulation."
RESEARCH AND DEVELOPMENT
For the three years ended June 30, 1996, 1995 and 1994 the Company spent
approximately $24,275,000, $19,400,000 and $18,765,000, respectively, on
research and development relating to the development of new products and the
improvement of existing products. The increase in research and development
expenditures reflects the Company's continuing efforts to develop new products
such as the VasoSeal device and to expand existing product lines. The Company
has established relationships with several teaching hospitals for the purpose of
clinically evaluating new products, and also has consulting arrangements with
physicians and scientists in the areas of research, product development and
clinical evaluation.
MARKETS AND SALES
The Company's products are sold throughout the world through its own sales
force and through independent distributors. The Company's worldwide sales
organization employs over 300 people consisting of sales representatives, sales
managers, clinical education specialists and sales support personnel. The
Company's worldwide clinical education staff, most of whom are critical care
nurses, conducts seminars and provides in-service training to nurses and
physicians on a continuing basis. The Company provides support services,
including warranty service, invoicing and inventory support, to its worldwide
sales organization.
The Company's cardiac assist products are sold primarily to major hospitals
with open-heart surgery and angioplasty facilities and to community hospitals
with cardiac catheterization laboratories. More recently sales have been made,
to a growing degree, to a broader range of hospitals, where IABP is used for
temporary support to the patient's heart prior to transport to a major hospital
center where definitive procedures, such as angioplasty or open heart surgery,
can be conducted.
The Company's monitors are used in hospital operating rooms, emergency
rooms, critical care units, post-anesthesia care units and recovery rooms,
intensive care units, and labor and delivery rooms. The Company's collagen
hemostat is sold primarily to hospitals for use during surgery.
The Company provides service and maintenance to purchasers of its products
under warranty, and thereafter on a contract basis. The Company employs service
representatives in the United States and Europe and maintains service facilities
in the United States, the Netherlands, France, Germany and the United Kingdom.
Service revenues accounted for approximately 7% of the Company's revenues in
fiscal 1996. The Company conducts regional service seminars throughout the
United States for its customers and their biomedical engineers and service
technicians.
During the three fiscal years ended June 30, 1996, 1995 and 1994, foreign
sales represented approximately 36%, 34% and 31%, respectively, of the Company's
total sales. The Company is continuing to actively expand its international
presence. The Company has subsidiaries in the United Kingdom, France, Germany
and the Netherlands, and InterVascular has subsidiaries in France, Italy and
Germany. Because a portion of the Company's foreign sales are made in foreign
currencies, the Company bears the risk of adverse changes in exchange rates for
such sales. Reference is made to Notes 2 and 8 to the Financial Statements for
additional information with respect to the Company's foreign operations. The
Company's sales are broadly based and no customer accounts for more than 10% of
its total sales.
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COMPETITION
The Company believes that the choice among competing products is generally
made on the basis of product performance, features, price and service. In
general, price has become an important factor in hospital purchasing patterns as
a result of cost containment pressures on the health care industry, including
Federal and State regulations limiting reimbursement for services provided to
Medicare and Medicaid patients. Many companies, some of which are substantially
larger than the Company, are engaged in manufacturing competing products. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" for a discussion of the impact of competition on the Company's sales
in the last fiscal year.
SUPPLIERS
The Company's products are made of components which it fabricates or which
are usually available from existing and alternate sources of supply. Certain
components are purchased from single or preferred sources of supply. The use of
single or preferred sources of supply by the Company increases its exposure to
price increases and production delays. In addition, certain suppliers have been
contemplating, and in a few cases have begun, reducing or eliminating sales of
their products to medical device manufacturers. The Company is unable to predict
whether or not additional suppliers will withhold their products from medical
device manufacturers. The Company has not thus far experienced any material
disruption or delay in processing its components. A small number of the
Company's monitoring products are manufactured by unaffiliated companies.
PATENTS
The Company holds a number of United States and foreign patents. In
addition, various patent applications have been filed and are pending. The
Company does not believe the expiration or invalidity of any of its patents
would have a material adverse effect on its business as currently conducted. See
"Legal Proceedings."
EMPLOYEES
The Company currently employs approximately 1,200 persons. The Company
believes its relationship with its employees is satisfactory.
REGULATION
The medical devices manufactured and marketed by the Company are subject to
regulation by the FDA and, in some instances, by state and foreign governmental
authorities. The Medical Device Amendment of 1976 and the Safe Medical Device
Act of 1990, amendments to the Federal Food, Drug and Cosmetics Act of 1938 (the
"Act"), require manufacturers of medical devices to comply with certain controls
that regulate the composition, labeling, testing, manufacturing and distribution
of medical devices. FDA regulations known as "Good Manufacturing Practices for
Medical Devices" provide standards for medical device manufacturers with respect
to manufacturing processes, facilities and recordkeeping. Facilities used by the
Company to manufacture or assemble the Company's products are subject to routine
FDA inspections. The FDA may also conduct investigations and evaluations of the
Company's products at its own initiative or in response to customer complaints
or reports of malfunctions. The FDA also has the authority to require
manufacturers to recall or correct marketed products which it believes do not
comply with the requirements of the Act.
Under the Act, all medical devices are classified as Class I, Class II, or
Class III devices. In addition to the above requirements, Class II devices must
comply with pre-market notification (510(k)) regulations and with performance
standards or special controls established by the FDA. Subject to certain
exceptions, a Class III device must receive pre-market approval from the FDA
before it can be commercially distributed in the United States. The Company's
principal products are designated as Class II and Class III devices.
The Company believes that the trend is toward increasing regulation of
device manufacturers. The process of obtaining requisite FDA approvals for new
products and improvements to existing products is taking
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longer. The FDA has also intensified its surveillance and enforcement activities
related to medical device manufacturers.
In the normal course of business, the Company conducts regulatory audits of
its operations. In December 1993 the Company informed the FDA that in the course
of a regulatory audit conducted by the Company, certain irregularities were
found in the HEMAGUARD PMA. Following that disclosure, the FDA inspected certain
clinical facilities which were involved in developing the data used in the
HEMAGUARD PMA and, in connection therewith, issued warning letters to two of
those facilities. See "Business -- InterVascular."
In October 1994, the Company put a U.S. shipment hold on the Point of View
monitor after an internal audit disclosed a regulatory issue concerning data
submitted to the FDA and, in the fourth quarter of fiscal 1995, the Company
commenced a voluntary recall of the Point of View monitor. The Company met with
the FDA to discuss the issues and to present additional relevant data.
In April 1995, the FDA determined to apply the provisions of the
Application Integrity Policy ("AIP") to products manufactured by the Company's
Patient Monitoring Division and InterVascular, Inc. The AIP generally provides
that substantive review of marketing applications are suspended pending an
assessment by the FDA of the validity of the data contained in such
applications. While the Company believes that the independent auditing process
previously initiated by it will facilitate the assessment by the FDA of the
validity of data, the AIP will likely result in longer time frames for product
approvals for the affected business units. Since April 1995, the Company has
devoted a great deal of its resources to regulatory issues and audits and
believes it has made substantial progress with respect to the AIP. Lifting of
the AIP, which the Company hopes will occur soon, would remove a key constraint
to the introduction of new products and consequent sales growth in the United
States for both the Patient Monitoring Division and InterVascular.
In April 1995, the FDA also requested verification by an independent
auditor of certain data relating to the PMA for the VasoSeal device, which has
been provided.
The Company also receives inquiries from the FDA and other agencies and
from time to time it may disagree with positions of members of the staffs of
those agencies. To date the resolutions of such disagreements with the staffs of
the FDA and other agencies have not resulted in material expenditures by the
Company.
The Company is also subject to certain federal, state and local
environmental regulations. The cost of complying with these regulations has not
been, and the Company does not expect them to be, material to the Company's
operations.
HEALTH CARE REFORM
The U.S. Congress is currently considering a number of different proposals
for health care reform. The Company believes that concerns about potential
health care reform legislation have slowed the domestic sales of medical devices
generally. Management of the Company cannot predict at this time what impact, if
any, the adoption by the United States Congress of healthcare reform would have
on the business of the Company.
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ITEM 2. PROPERTIES.
The following table sets forth information with respect to the real
property owned or leased by the Company and its subsidiaries which the Company
considers material to its business.
<TABLE>
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OWNERSHIP OR
GENERAL CHARACTER EXPIRATION
LOCATION AND USE OF PROPERTY DATE OF LEASE
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<S> <C> <C>
Montvale, New Jersey 38,000 sq. feet, used as the Company's Owned
corporate headquarters and as offices for
the Collagen Products Division
Paramus, New Jersey 35,600 sq. feet, used for offices by the December 31, 1998
Patient Monitoring Division and for the with option to renew
corporate service facility
Paramus, New Jersey 72,700 sq. feet, used for research and December 31, 1998
development and the manufacture of with option to renew
instrumentation systems
Fairfield, New Jersey 75,000 sq. feet, used for offices by the Owned
Cardiac Assist Division and in the
manufacture of disposable products
Clearwater, Florida 25,000 sq. feet, used by InterVascular Leased until October 31,
for offices and in the manufacture of 2000 with an option to
vascular grafts purchase
La Ciotat, France 18,000 sq. feet, used by InterVascular Owned
for the production of vascular grafts
Vaals, The Netherlands 17,500 sq. feet, used in the manufacture Owned
of, and for research and development
relating to, collagen products
Hoevelaken, The Netherlands 12,700 sq. feet, used for sales and Owned
service offices
</TABLE>
The Company also leases space for offices in various locations in the
United States and for its offices in England, France and Germany. The Company
believes that its facilities and the equipment located therein are in good
working condition and are adequate for its needs.
ITEM 3. LEGAL PROCEEDINGS.
On December 22, 1981, the Company instituted patent infringement litigation
relating to an intra-aortic balloon catheter against SMEC, Inc. ("SMEC") in the
United States District Court for the District of New Jersey (the "Court"). SMEC
raised defenses of patent invalidity and non-infringement and filed an amended
counterclaim against the Company, asserting causes of action grounded in unfair
competition under the common law, unfair competition within the meaning of 15
U.S.C. sec.1125(a) and antitrust violations under the Robinson-Patman Act. SMEC
sought damages in excess of $1,000,000 for each such claim and, while the
pleading is not clear, it is arguable that treble damages were being sought
under all three causes of action in the amended counterclaim.
The Court rendered a decision on September 24, 1984 that one of the
Company's patents for the percutaneous intra-aortic balloon catheter is valid
and was infringed by SMEC. Certain claims of a second patent for the
intra-aortic balloon catheter system were held to be invalid. After the United
States Court of Appeals for the Federal Circuit upheld the lower court's
decision, a separate trial was held on the amount to which the Company was
entitled as damages from SMEC, and damages were awarded to the Company.
In August 1990, SMEC filed for protection under Chapter 11 of the Federal
Bankruptcy Code. In that bankruptcy proceeding, at the request of the Company, a
trustee was appointed for SMEC so that the debtor, SMEC, would no longer be in
possession of its assets. The trustee then filed an action in the Tennessee
Bankruptcy Court against Peter Schiff, principal stockholder and officer of
SMEC, to recover from him assets belonging to SMEC. The bankruptcy proceeding
was thereafter converted to a case under Chapter 7. In July
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1991, the Company and the SMEC trustee initiated litigation in State Court in
Massachusetts against Boston Scientific Corporation and IABP Corp. for the
wrongful acquisition of SMEC assets.
Datascope settled the Massachusetts action in the fourth quarter of fiscal
1993. In addition, in the fourth quarter of fiscal 1993, the trustee settled the
Massachusetts action and the trustee's settlement was approved by the Bankruptcy
Court in Tennessee. In connection with the settlement by the trustee, Boston
Scientific Corporation and IABP Corp. made a payment to the trustee for the
benefit of the bankruptcy estate of SMEC.
A complaint was filed on June 7, 1995 by the Trustee in Bankruptcy for SMEC
in the United States Bankruptcy Court for the Middle District of Tennessee
seeking a judgment against the Company, Boston Scientific Corporation and IABP
Corp. for actual damages in the amount of $6 million. The suit also seeks
recovery of treble damages, punitive damages, pre and post judgment interest and
attorney fees. The suit accuses the Company and Boston Scientific Corporation of
entering into an elaborate scheme to defraud the trustee in the SMEC bankruptcy
case and seeks recovery under theories of breach of fiduciary duty, fraud,
conversion, RICO, and an impermissible postpetition transfer of property by the
bankruptcy estate. In effect, the suit is a collateral attack on the order of
dismissal entered in the Massachusetts case. The Company denies the Trustee's
charges and intends to vigorously defend the lawsuit.
On November 5, 1993, plaintiff Merrill Rotter commenced an action in the
United States District Court for the District of New Jersey against the Company
and Lawrence Saper, its Chief Executive Officer. That action was consolidated
with subsequent related litigation, and culminated in the filing of a First
Consolidated and Amended Class Action Complaint on March 31, 1994 (hereinafter
referred to as the "First Consolidated Complaint"). The Company and Mr. Saper
moved to dismiss the First Consolidated Complaint on May 16, 1994. While the
motion to dismiss was pending, a related class action lawsuit was filed and
consolidated on June 13, 1994 in the United States District Court for the
District of New Jersey. Plaintiffs filed a Second Consolidated and Amended Class
Action Complaint, superseding the First Consolidated Complaint, on August 30,
1994 (hereinafter referred to as the "Second Consolidated Complaint").
The plaintiffs alleged, in substance, that Datascope and Lawrence Saper
made material misrepresentations and omissions concerning VasoSeal's safety,
efficacy, potential profitability and likelihood of FDA approval, in violation
of Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule
10b-5 promulgated thereunder. Plaintiffs also alleged securities laws violations
relating to alleged insider trading by Mr. Saper. The plaintiffs sought
unspecified damages plus interest and costs and expenses incurred in the
litigation, including reasonable attorneys' fees and experts' fees and other
costs and disbursements. The Company and Mr. Saper moved to dismiss the Second
Consolidated Complaint on October 11, 1994. The motion was granted in part, and
denied in part on April 10, 1995. On January 22, 1996, the Court granted
plaintiffs' motion for certifying a class consisting of all purchasers of
Datascope common stock during the period from November 6, 1991 through and
including September 1, 1993. In September 1996, the parties reached an oral
settlement in principle. The proposed settlement, which is subject to court
approval and final documentation, would cost the Company approximately $5.6
million, including certain legal expenses, $3.3 million after tax or $0.20 per
share. There can be no assurance that this settlement will be effectuated.
On March 4, 1996, the Company announced that Quinton Instrument Company and
Sherwood Medical Company had filed a complaint in the United States District
Court for the Eastern District of Virginia alleging that the VasoSeal device
infringes on certain patents owned by Quinton. The complaint seeks a permanent
injunction as well as an unspecified amount of monetary damages. The Company
believes that the allegations are without merit and intends to vigorously defend
the lawsuit.
The Company is subject, in the ordinary course of its business, to product
liability litigation. The Company believes it has meritorious defenses in all
material pending lawsuits and that it maintains adequate insurance against any
potential liability. The Company receives comments and recommendations with
respect to its products from the staff of the FDA and from other agencies on an
on-going basis. The Company may or may not agree with such comments and
recommendations; however, the Company is not a party to any formal regulatory
administrative proceedings. See "Business -- Regulation."
8
<PAGE> 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of Security Holders in the fourth
quarter of fiscal 1996.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth the names, ages and positions and offices
with the Company held by the Company's present officers:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES PRESENTLY HELD
- ------------------------- ---- ---------------------------------------------------------
<S> <C> <C>
Lawrence Saper........... 68 Chairman of the Board and President
Ernst Janzen............. 60 Senior Vice President
Murray Pitkowsky......... 65 Senior Vice President and Secretary
Barry Cheskin............ 36 Vice President; President, Collagen Products Division
Timothy J. Haines........ 39 Vice President; President, Patient Monitoring Division
Richard Monastersky...... 41 Vice President, Human Resources
Stanton Rowe............. 45 Vice President, Business Development; Acting President,
Cardiac Assist Division
Russell D. Van Zandt..... 55 Vice President; President, InterVascular, Inc.
Stephen E. Wasserman..... 50 Vice President, Chief Financial Officer, and Treasurer
S. Arieh Zak, Esq. ...... 35 Vice President, Regulatory Affairs and Corporate Counsel
</TABLE>
PART II
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter and is listed on the
NASDAQ National Market System. (NASDAQ symbol: DSCP). The following table sets
forth, for each quarter period during the last two fiscal years, the high and
low sale prices as reported by NASDAQ.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
--------------------------------------------------------------- ---- ---
<S> <C> <C>
1995
First Quarter................................................ 16 1/4 14
Second Quarter............................................... 19 3/4 14 1/2
Third Quarter................................................ 23 16 1/2
Fourth Quarter............................................... 21 1/8 15 1/2
1996
First Quarter................................................ 21 1/2 15 3/4
Second Quarter............................................... 27 1/4 19 1/2
Third Quarter................................................ 25 1/2 20 1/2
Fourth Quarter............................................... 24 17
</TABLE>
As of August 30, 1996, there were approximately 987 holders of record of
the Company's common stock.
The Company has never paid any cash dividends to its shareholders and
presently intends to continue its policy of retaining its earnings for facility
expansion, acquisitions and working capital purposes.
9
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial information for the fiscal
years 1992 through 1996 has been derived from the consolidated financial
statements of the Company for those years, which have been audited by Deloitte &
Touche, LLP, independent certified public accountants, whose report for fiscal
years 1994 through 1996 is included elsewhere herein. All such information is
qualified by reference to the financial statements included elsewhere herein.
SELECTED FINANCIAL INFORMATION
EARNINGS STATEMENT DATA:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net Sales........................... $211,300 $195,700 $182,800 $166,000 $156,500
-------- -------- -------- -------- --------
Cost of sales....................... 75,000 69,506 64,953 59,023 57,239
Cost of sales, Point of View
charge............................ 9,600 -- -- -- --
Research and development............ 24,275 19,400 18,765 16,704 14,176
Selling, general and
administrative.................... 89,708 84,249 78,208 72,205 68,946
Settlements of litigation........... (10,691) -- -- -- 2,842
(Gain on sale of assets) suspension
of operations of Angioplasty
Division.......................... -- -- -- (3,152) 3,992
-------- -------- -------- -------- --------
187,892 173,155 161,926 144,780 147,195
-------- -------- -------- -------- --------
Operating earnings.................. 23,408 22,545 20,874 21,220 9,305
Other (income) expense:
Interest income................... (4,226) (2,855) (1,608) (1,376) (1,668)
Interest expense.................. 50 55 24 19 184
Other, net........................ 743 366 353 500 168
-------- -------- -------- -------- --------
(3,433) (2,434) (1,231) (857) (1,316)
-------- -------- -------- -------- --------
Earnings before taxes on income..... 26,841 24,979 22,105 22,077 10,621
Taxes on income..................... 6,424 7,640 6,437 6,337 2,936
-------- -------- -------- -------- --------
Net earnings........................ $ 20,417 $ 17,339 $ 15,668 $ 15,740 $ 7,685
======== ======== ======== ======== ========
Earnings per share:
Primary and fully
diluted................. $ 1.24 $ 1.07 $ 0.97 $ 0.97 $ 0.47
</TABLE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets........................ $234,464 $206,863 $185,421 $158,001 $141,479
Long-term debt...................... -- -- -- -- --
Working capital..................... 121,359 110,744 102,943 96,475 82,835
Stockholders' equity................ 181,680 163,319 144,062 127,777 109,777
Cash dividends...................... -- -- -- -- --
</TABLE>
10
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS.
DATASCOPE CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net earnings for fiscal 1996 amounted to $20.4 million or $1.24 per share,
compared to $17.3 million or $1.07 per share in fiscal 1995. Fiscal 1994 net
earnings were $15.7 million or $0.97 per share. Included in fiscal 1996 were two
special items as follows:
(1) Income of $10.7 million or $7.9 million after-tax, equivalent to $0.47
per share, in the second quarter from the settlement of litigation
brought by Datascope's wholly owned subsidiaries, InterVascular, Inc.
and InterVascular, SA (France), against several former employees and
certain other defendants.
(2) A write-off of $9.6 million or $5.6 million after-tax, equivalent to
$0.34 per share, in the fourth quarter for excess and obsolete
inventory and other costs related to the Point of View(TM) (POV)
monitor. While sales of the POV continue in international markets,
total sales of this product are expected to be substantially less than
originally planned due to a continuation of the suspension of POV sales
in the United States that was initiated in October 1994.
Excluding the two special items, net earnings for fiscal 1996 were $18.1
million compared to $17.3 million last year, equivalent to $1.10 per share
versus $1.07 per share, respectively.
COMPARISON OF RESULTS -- FISCAL 1996 VS. FISCAL 1995
In 1996, net sales were $211.3 million, an increase of 8% compared to sales
of $195.7 million in 1995.
The following table shows the comparison of sales by product line over the
past three fiscal years.
<TABLE>
<CAPTION>
SALES BY PRODUCT LINE
(DOLLARS IN MILLIONS)
YEAR ENDED JUNE 30,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Cardiac Assist........................................... $107.8 $101.2 $ 86.8
% change from prior year............................... 7% 17% 11%
% of total sales....................................... 51% 52% 47%
Patient Monitoring....................................... $ 77.6 $ 74.8 $ 81.6
% change from prior year............................... 4% (8)% 12%
% of total sales....................................... 37% 38% 45%
Vascular Grafts.......................................... $ 17.8 $ 14.7 $ 10.7
% change from prior year............................... 21% 37% (10)%
% of total sales....................................... 8% 7% 6%
Collagen Products........................................ $ 8.1 $ 5.0 $ 3.7
% change from prior year............................... 62% 38% 17%
% of total sales....................................... 4% 3% 2%
Total Sales.............................................. $211.3 $195.7 $182.8
% change from prior year............................... 8% 7% 10%
</TABLE>
Cardiac Assist product sales increased in fiscal 1996 due to higher
worldwide unit shipments of intra-aortic balloons. The rate of sales growth of
intra-aortic balloons slowed during fiscal 1996, reflecting the general pressure
on physicians and hospital managers to reduce cost, increasing competitive
pressure primarily in the form of free intra-aortic balloons for evaluation
offered by competitors and somewhat lower prices. Sales of balloon pumps were
flat in fiscal 1996 compared to fiscal 1995, as a result of the increased
competition and
11
<PAGE> 13
constraints on medical costs causing price reductions, increased sales of lower
priced reconditioned pumps and increased shipments of balloon pumps under terms
that result in future revenues. The Company will continue to compete
aggressively in fiscal 1997 to maintain market share in the Cardiac Assist
business, aided by a planned expansion of field coverage and new product
introductions.
Patient Monitoring product sales reflected a 4% increase in fiscal 1996.
However, despite strong international sales growth, excluding the negative
effect of the U.S. POV monitor recall in fiscal 1995, patient monitoring sales
declined 1% in fiscal 1996 primarily because of the lack of new products.
The Company devoted significant resources to regulatory issues and
independent regulatory audits during fiscal 1996 and has made substantial
progress with respect to the Application Integrity Policy (AIP) that was imposed
by the Food and Drug Administration (FDA) in April 1995. Lifting of the AIP,
which the Company hopes will occur soon, would remove a key constraint to the
introduction of new products and consequent sales growth in the U.S. for both
the Patient Monitoring Division and InterVascular, Inc.
As noted earlier, POV monitors continue to be sold in international
markets. However, it is unlikely that the product will be reintroduced in the
U.S. market because of the time and cost required to make the POV competitive.
Consequently, total sales of the POV are expected to be substantially less than
originally planned and the Company recorded a write-off of $9.6 million, or $5.6
million after-tax, in the fourth quarter for excess and obsolete inventory and
other costs related to the POV monitor.
Sales of vascular grafts increased in fiscal 1996 due to international
sales growth of InterVascular's collagen coated vascular graft, InterGard(TM).
InterVascular's sales growth was noteworthy because it does not yet have
approval to sell the InterGard in Japan or the U.S. The Company is continuing
its efforts to obtain regulatory approval for the InterGard in these important
markets.
The growth in Collagen Product sales in fiscal 1996 was attributable to
sales of the VasoSeal vascular hemostasis device in the U.S. Sales of the
VasoSeal in the U.S. in the fourth quarter reached an annualized sales rate in
excess of $8 million. Fourth quarter sales of VasoSeal, introduced last
November, represents the second full quarter of sales in the U.S. The Company is
pleased with VasoSeal's clinical performance and with the U.S. market
penetration achieved thus far by the VasoSeal direct marketing organization. The
Company is continuing to expand this organization to meet expected demand.
VasoSeal is currently the only device of its kind approved for commercial sale
in the U.S. by the FDA.
In August 1996, the Company received FDA approval for revised VasoSeal
labeling that includes the claim that patients who receive VasoSeal can be
ambulated significantly earlier than under conventional clinical practice using
manual or mechanical compression. The Company believes early ambulation made
possible by VasoSeal should result in significant cost savings for hospitals
because hospitalization time is reduced, patients may be moved earlier to care
settings that cost less, human and material resources are reduced and patient
throughput is increased. The ability to claim early ambulation and its potential
to lower cost and increase revenue should accelerate VasoSeal's penetration of
the vascular sealing market in the U.S.
The foreign exchange rate effect of the weaker U.S. dollar compared to
major European currencies increased total sales by approximately $0.7 million in
fiscal 1996 compared to fiscal 1995.
Cost of Sales (excluding the impact of the POV charge) was 35.5% of sales
in fiscal 1996 and fiscal 1995. In fiscal 1996 a more favorable sales mix
resulting from greater sales of higher margin disposable products was offset by
the effect of lower average selling prices for cardiac assist and patient
monitoring products. Including the POV charge in fiscal 1996, cost of sales was
40.0%.
Research and development (R&D) expenses increased 25%, attributable to
increased activity to accelerate the introduction of new products. Cardiac
Assist research and development expense increased primarily due to the
development of the System 96 intra-aortic balloon pump for the international
market and new balloon catheter developments. Higher R&D in the Patient
Monitoring division was primarily attributable to development expenses for
enhanced versions of the Accutorr and Passport monitors and expenditures for
outside technical resources to augment the internal R&D staff. InterVascular R&D
expenses increased
12
<PAGE> 14
primarily as a result of expenditures for French International Organization for
Standardization validation, increased staffing and expenses in the U.S. for Good
Manufacturing Practices validation.
Selling, general and administrative expenses increased 7%, primarily due to
start-up costs associated with the VasoSeal market introduction, including the
buildup of the U.S. VasoSeal field sales and training organization, and higher
international sales and marketing expenses in the Cardiac Assist Division and
InterVascular, Inc.
The weakening of the U.S. dollar compared to major European currencies
increased SG&A expenses by approximately $550 thousand in fiscal 1996 compared
to fiscal 1995.
The higher interest income in fiscal 1996 compared to fiscal 1995 was
attributable to an increase in the investment portfolio, as cash was generated
from operations, and an increase in interest rates.
The Company enters into foreign exchange forward contracts to hedge a major
portion of its foreign currency exposures, primarily related to certain
receivables denominated in foreign currencies. The hedging has reduced the
Company's exposure to fluctuations in foreign currencies. The net foreign
exchange transaction gain or loss is reported in other income and expense.
Foreign exchange forward contracts outstanding at June 30, 1996 totaled $419
thousand, all of which were in European currencies, with maturities that do not
exceed 12 months.
The consolidated effective tax rate for fiscal 1996 was 23.9% compared to
30.6% for fiscal 1995. The lower tax rate in fiscal 1996 was primarily
attributable to the favorable tax effect of higher operating earnings in an
international tax exempt industrial zone, including income from settlement of
litigation.
Excluding the special charge of $5.6 million applicable to the POV
write-off and the $7.9 million income from the settlement of litigation, net
earnings in fiscal 1996 exceeded fiscal 1995 by 5%, which is a lower rate of
earnings growth than in recent years. Results of operations for fiscal 1996
reflect the impact of competitive pressures in the Company's core business,
Patient Monitoring and Cardiac Assist, and increased research and development
expenses in all businesses to accelerate the introduction of new products. The
Company believes that because of the competitive pressures in its core business
it is likely that near-term quarterly earnings comparisons to the same prior
year periods may be unfavorable. For the long-term the Company remains confident
in the future of its core business and believes that new products already
launched, under development or awaiting regulatory approvals, show good
prospects for growing existing business and may enable expansion into new
markets.
In 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
123 "Accounting for Stock-Based Compensation." This statement will apply to
fiscal 1997 and the Company will elect to disclose the required information in
the footnotes to the consolidated financial statements. In addition, FASB issued
SFAS No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," in 1995. The Company does not believe that the
adoption of this statement in fiscal 1997 will have a material impact on the
financial position or results of operations of the Company.
COMPARISON OF RESULTS -- FISCAL 1995 VS. FISCAL 1994
Net earnings for fiscal 1995 amounted to $17.3 million or $1.07 per share,
compared to $15.7 million or $0.97 per share in fiscal 1994. The improved
earnings performance in 1995 resulted primarily from continued worldwide growth
of the Cardiac Assist Division.
In 1995, net sales were $195.7 million, an increase of 7% compared to sales
of $182.8 million in 1994.
Cardiac Assist product sales increased in fiscal 1995 due to continued
strong worldwide demand for intra-aortic balloon catheters and balloon pumps
including the System 97 intra-aortic balloon pump which began shipments in the
second quarter of fiscal 1994.
Sales of the Patient Monitoring Division were adversely impacted in fiscal
1995 by events related to the POV monitor, including a voluntary hold on U.S.
shipments in October 1994 and subsequently a voluntary U.S. recall of the POV
monitor in April 1995. Aside from causing a sharp decrease in sales of this
product
13
<PAGE> 15
compared to the previous year, these actions also created a significant
diversion of selling effort and likely adversely affected sales of other
monitors.
Sales of other products increased in fiscal 1995 due to strong
international sales growth of vascular grafts, produced by Datascope's
wholly-owned subsidiary, InterVascular and Collagen Products due to
international shipments of VasoSeal devices and improved sales of surgical
hemostats to distributors in Japan and the U.S.
The foreign exchange rate effect of the weaker U.S. dollar compared to
major European currencies increased total sales by approximately $3.3 million in
fiscal 1995 compared to fiscal 1994.
Cost of Sales was 35.5% of sales in fiscal 1995 and in fiscal 1994.
Research and development expenses increased 3% primarily attributable to
development expenses for collagen products and vascular grafts, partially offset
by lower expenditures for both Patient Monitoring and Cardiac Assist products,
which were higher in the prior year due to the introduction of the POV monitor
and the System 97 intra-aortic balloon pump in 1994.
Selling, general and administrative expenses increased 8% with the increase
primarily due to increased international marketing and sales expenditures to
support the higher sales volume and expenses related to the implementation of a
new computer system.
The higher interest income earned in fiscal 1995 compared to 1994 was
attributable to a higher average investment portfolio and an increase in
interest rates.
Other expense in fiscal 1995 approximated fiscal 1994. Foreign exchange
forward contracts outstanding at June 30, 1995 totaled $1.8 million, all of
which were denominated in European currencies, with maturities that do not
exceed 12 months.
The consolidated effective tax rates of 30.6% for fiscal 1995 and 29.1% for
fiscal 1994, were favorably impacted by tax benefits from operations in an
international tax exempt industrial development zone, lower tax rates on foreign
income, tax benefits from the Company's Foreign Sales Corp. and benefits from
the research and development tax credit which was reinstated during fiscal 1994.
The higher effective tax rate in fiscal 1995 was primarily attributable to lower
research and development tax credits and lower foreign net operating loss
carryforwards utilized in 1995.
As required by the Financial Accounting Standards Board, the Company has
adopted Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" which requires accrual accounting for
postemployment benefits rather than the cash method, and Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which establishes the accounting and reporting for such
investments. The adoption of these statements did not have a material impact on
the Company's consolidated financial statements. For purposes of Statement 115,
the Company has determined that its investment portfolio will be classified as
held-to-maturity and therefore carried at amortized cost.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position strengthened further in fiscal 1996.
Working capital at June 30, 1996 was $121.4 million or $10.6 million higher than
at June 30, 1995. At June 30, 1996 the current ratio was 3.9:1 compared to 4.3:1
last year, with the decrease primarily attributable to lower inventory due to
the POV write-off and a reduction in short-term investments attributable to the
purchase of a $5 million 5-year Treasury note.
In May 1996 the Company announced a stock repurchase program of up to $20
million to buy shares of its common stock from time to time subject to market
conditions and other relevant factors affecting the Company.
Cash provided by operations was $25.0 million in fiscal 1996. Cash was used
to purchase $5.0 million of property, plant and equipment and to purchase $1.7
million of Company stock under the stock repurchase program, with the balance
invested in short- and long-term investments.
14
<PAGE> 16
Cash provided by operations was $26.4 million in fiscal 1995, aided by a
decrease in accounts receivable resulting from strong collections. Cash was used
to purchase $6.2 million of property, plant and equipment, with the balance
invested in short- and long-term investments.
Cash provided by operations was $8.7 million in fiscal 1994. The amount of
cash provided by operations was reduced by the increase in accounts receivable
resulting from higher sales and a slower rate of collections attributable to
leases and higher international sales which generally have longer payment terms.
Cash was used to purchase $8.5 million of property, plant and equipment,
including $5.6 million for the Fairfield, New Jersey Cardiac Assist headquarters
building.
Management believes that the Company's financial resources are sufficient
to meet its projected cash requirements.
The moderate rate of U.S. inflation during the past three fiscal years has
not significantly affected the Company.
This Management's Discussion includes forward-looking statements that are
subject to uncertainty because of the possibility, among others, that market
conditions such as competitive factors may change. Additional detailed
information on factors that could potentially affect the Company's financial
results may be found in the Company's filings with the Securities and Exchange
Commission.
SUBSEQUENT EVENT
In September 1996, the Company reached an oral agreement in principle to
settle certain shareholder litigation previously filed against the Company. The
proposed settlement, which is subject to court approval and final documentation,
would cost the Company approximately $5.6 million, including certain legal
expenses, $3.3 million after tax or $0.20 per share. There can be no assurance
that this settlement will be effectuated.
PART III
ITEMS 10, 11, 12 AND 13.
Except for the information included in Item 4a of this report, the
information called for by Items 10, 11, 12 and 13 of this Form 10-K is
incorporated by reference to those portions of the Company's 1996 Proxy
Statement which contain such information.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its
subsidiaries are filed on the pages listed below, as part of Part II, Item 8 of
this report:
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Report of Independent Auditors.......................................... F-1
Consolidated balance sheets -- June 30, 1996 and 1995................... F-2
Statements of consolidated earnings -- Years ended June 30, 1996,
1995 and 1994......................................................... F-3
Statements of consolidated stockholders' equity -- Years ended June 30,
1996, 1995 and 1994................................................... F-4
Statements of consolidated cash flows -- Years ended June 30, 1996, 1995
and 1994.............................................................. F-5
Notes to consolidated financial statements.............................. F-6 - F-18
</TABLE>
15
<PAGE> 17
2. FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
II -- Valuation and Qualifying Accounts................................. S-1
</TABLE>
All other schedules have been omitted because they are inapplicable, or not
required, or the information is included in the financial statements or notes
thereto.
3. EXHIBITS
<TABLE>
<C> <C> <S>
2. -- Agreement and Plan of Merger, dated as of October 25, 1989, by and between the
registrant and Datascope New York (incorporated by reference to Exhibit 2 to the
registrant's Registration Statement on Form 8-B, filed with the Commission on
January 4, 1990 (the "Form 8-B")).
3.1 -- Restated Certificate of Incorporation as filed with the Secretary of State of the
State of Delaware on October 30, 1989 (incorporated by reference as Exhibit 3.1 to
the Form 8-B).
3.2 -- By-Laws, as currently in effect (incorporated by reference to Exhibit 3.2 to Annual
Report on Form 10-K for fiscal year ended June 30, 1993 (the "1993 10-K")).
4.1 -- Specimen of certificate of Common Stock (incorporated by reference to Exhibit 4.2
to the Form 8-B).
4.2 -- Form of Certificate of Designations of the Registrant's Series A Preferred Stock
(incorporated by reference to Exhibit 2.2 to the Company's Registration Statement
on Form 8-A, filed with the Commission on May 31, 1991 (the "May 31, 1991 Form
8-A")).
4.3 -- Form of Rights Agreement, dated as of May 22, 1991, between the Company and
Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit
2.1 to the May 31, 1991 Form 8-A).
10.1 -- 1978 Employee Stock Option Plan (incorporated by reference to Exhibit 10.1 to
Annual Report on Form 10-K for the fiscal year ended June 30, 1989 (the "1989
10-K")).
10.2 -- 1981 Incentive Stock Option Plan (incorporated by reference to Exhibit 10.2.1 to
the Form 8-B).
10.3 -- Stock Redemption Agreement, dated February 26, 1991, between Lawrence Saper and the
registrant (incorporated by reference to Exhibit 10.3 to Annual Report on Form 10-K
for the fiscal year ended June 30, 1991 (the "1991 10-K")).
10.4 -- Stock Option Agreements, dated November 30, 1982, between David Altschiller,
William Asmundson, Alan Patricof and Norman Schneider, respectively, and the
registrant (incorporated by reference to Exhibit 10.5 to the 1989 10-K).
10.5 -- Stock Option Agreement, dated December 7, 1988 between Joseph Grayzel, M.D. and the
registrant (incorporated by reference to Exhibit 10.6 to the 1989 10-K).
10.6 -- Amendment No. 1 to Stock Option Agreement dated as of September 3, 1986, which
Agreement is Exhibit C to the Stock Purchase Agreement among Datascope Corp.,
InterVascular, Inc., and certain shareholders of InterVascular, Inc., dated June
26, 1986 (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K
for the fiscal year ended June 30, 1988).
10.7 -- Stock Option Agreements, dated as of March 1, 1990, between David Altschiller,
William Asmundson, Joseph Grayzel, Alan Patricof and Norman Schneider,
respectively, and the registrant (incorporated by reference to Exhibit 10.9 to
Annual Report on Form 10-K for the fiscal year ended June 30, 1990).
10.8 -- Stock Option Agreement, dated as of September 28, 1990, between David Altschiller
and the registrant (incorporated by reference to Exhibit 10.8 to the 1991 10-K).
</TABLE>
16
<PAGE> 18
<TABLE>
<C> <C> <S>
10.9 -- Letter Agreements, dated December 17, 1990 between Lawrence Saper, Ernst Janzen,
Bruce Hanson and Murray Pitkowsky, respectively, and the registrant with respect to
the termination of such officers' investment in certain subsidiaries of the
registrant (incorporated by reference to Exhibit 10.9 to the 1991 10-K).
10.10 -- Employment Agreement, dated as of June 30, 1991, by and between Lawrence Saper and
the registrant (incorporated by reference to Exhibit 10.10 to Annual Report on Form
10-K for the fiscal year ended June 30, 1992).
10.11 -- Asset Purchase Agreement, by and between Boston Scientific Corporation and the
registrant, Datascope Trademark Corp., Datascope Investment Corp., Datascope
S.A.R.L., Datascope GmbH, Datascope B.V., and Datascope Medical Company, Ltd.,
dated as of June 8, 1993 (incorporated by reference to Exhibit 10.11 to the 1993
10-K).
10.12 -- Datascope Corp. 1995 Stock Option Plan (incorporated by reference to Exhibit 4 to
Registration Statement on Form S-8 (File No. 333-00537) filed January 30, 1996 with
the Commission).
10.13 -- Amendment No. 1 to Datascope Corp. 1995 Stock Option Plan (incorporated by
reference to Exhibit 4 to Post-Effective Amendment No. 1 to Registration Statement
on Form S-8 (File No. 333-00537) filed February 21, 1996 with the Commission).
10.14 -- Agreement, dated as of July 25, 1994, by and between Datascope Corp. and Lawrence
Saper.
10.15 -- Split-Dollar Agreement made as of July 25, 1994 by and among Datascope Corp.,
Lawrence Saper and Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the
Saper Family 1994 Trust UTA. dtd. 6/28/94.
10.16 -- Modification Agreement made as of July 25, 1994 by and among Datascope Corp.,
Lawrence Saper and Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the
Saper Family 1994 Trust UTA. dtd. 6/28/94.
10.17 -- Assignment made as of July 25, 1994 by Carol Saper, Daniel Brodsky and Helen Nash,
Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94 of Metropolitan Life
Insurance Company Insurance Policy No. 940 750 122UM in favor of Datascope Corp.
10.18 -- Assignment made as of July 25, 1994 by Carol Saper, Daniel Brodsky and Helen Nash,
Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94 of Security Mutual Life
Insurance Company of New York Insurance Policy No. 11047711 in favor of Datascope
Corp.
22. -- Subsidiaries (incorporated by reference to Exhibit 22 to Annual Report on Form 10-K
for the fiscal year ended June 30, 1994).
23. -- Consent of Deloitte & Touche LLP.
</TABLE>
(B) REPORTS ON FORM 8-K
N/A
17
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATASCOPE CORP.
Date: September 30, 1996
By: /s/ LAWRENCE SAPER
------------------------------------
Lawrence Saper
Chairman of the Board and
President
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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ------------------------------ -------------------
<C> <C> <S>
/s/ LAWRENCE SAPER Chairman of the Board, September 30, 1996
- --------------------------------------------- President and Director
Lawrence Saper (Principal Executive Officer)
/s/ MURRAY PITKOWSKY Senior Vice President and September 30, 1996
- --------------------------------------------- Secretary
Murray Pitkowsky
/s/ STEPHEN E. WASSERMAN Vice President, Chief September 30, 1996
- --------------------------------------------- Financial Officer, and
Stephen E. Wasserman Treasurer
/s/ ALAN ABRAMSON Director September 30, 1996
- ---------------------------------------------
Alan Abramson
/s/ DAVID ALTSCHILLER Director September 30, 1996
- ---------------------------------------------
David Altschiller
/s/ WILLIAM ASMUNDSON Director September 30, 1996
- ---------------------------------------------
William Asmundson
/s/ JOSEPH GRAYZEL Director September 30, 1996
- ---------------------------------------------
Joseph Grayzel, M.D.
/s/ GEORGE HELLER Director September 30, 1996
- ---------------------------------------------
George Heller
/s/ ARNO NASH Director September 30, 1996
- ---------------------------------------------
Arno Nash
</TABLE>
18
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Datascope Corp.
Montvale, New Jersey
We have audited the accompanying consolidated balance sheets of Datascope
Corp. and its subsidiaries (the "Company") as of June 30, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a)(2).
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements and the 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Datascope Corp. and its
subsidiaries as of June 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1996 in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
New York, New York
August 2, 1996
(September 24, 1996 as to Note 10)
F-1
<PAGE> 21
DATASCOPE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................ $ 2,574 $ 3,096
Short-term investments (Note 2)...................................... 64,805 53,165
Accounts receivable, less allowance for doubtful accounts of
$1,198 and $1,273................................................. 50,559 45,590
Inventories (Note 3)................................................. 34,757 36,499
Prepaid expenses and other current assets............................ 10,743 5,880
-------- --------
Total Current Assets......................................... 163,438 144,230
Property, Plant and Equipment, net (Note 4)............................ 43,973 44,278
Non-Current Marketable Securities (Note 2)............................. 17,364 9,354
Other Assets........................................................... 9,689 9,001
-------- --------
$234,464 $206,863
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................................... $ 6,664 $ 7,644
Accrued expenses (Note 6)............................................ 23,372 14,149
Accrued compensation................................................. 9,946 9,384
Taxes on income (Note 5)............................................. 2,097 2,309
-------- --------
Total Current Liabilities.................................... 42,079 33,486
Other Liabilities (Note 9)............................................. 10,705 10,058
Commitments and Contingencies (Notes 2,7,9 and 10)
Stockholders' Equity (Note 7):
Preferred stock, par value $1.00 per share:
Authorized 5,000,000 shares; Issued, none......................... -- --
Common stock, par value $.01 per share:
Authorized, 45,000,000 shares; Issued and
outstanding, 16,135,427 and 16,070,689 shares..................... 161 161
Additional paid-in capital............................................. 42,548 41,837
Treasury stock at cost, 94,000 shares.................................. (1,671) --
Retained earnings...................................................... 141,764 121,347
Cumulative translation adjustments..................................... (1,122) (26)
-------- --------
181,680 163,319
-------- --------
$234,464 $206,863
======== ========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE> 22
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net Sales.................................................. $211,300 $195,700 $182,800
-------- -------- --------
Costs and Expenses:
Cost of sales............................................ 75,000 69,506 64,953
Cost of sales, Point of View charge (Note 12)............ 9,600 -- --
Research and development expenses........................ 24,275 19,400 18,765
Selling, general and administrative expenses............. 89,708 84,249 78,208
Income from settlement of litigation (Note 12)........... (10,691) -- --
-------- -------- --------
187,892 173,155 161,926
-------- -------- --------
Operating Earnings......................................... 23,408 22,545 20,874
Other (Income) Expense:
Interest income.......................................... (4,226) (2,855) (1,608)
Interest expense......................................... 50 55 24
Other, net............................................... 743 366 353
-------- -------- --------
(3,433) (2,434) (1,231)
-------- -------- --------
Earnings Before Taxes on Income............................ 26,841 24,979 22,105
Taxes on Income (Note 5)................................... 6,424 7,640 6,437
-------- -------- --------
Net Earnings............................................... $ 20,417 $ 17,339 $ 15,668
-------- -------- --------
Earnings Per Share......................................... $ 1.24 $ 1.07 $ 0.97
======== ======== ========
Weighted Average Number of Common and Common Equivalent
Shares Outstanding....................................... 16,516 16,233 16,155
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 23
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TREASURY CUMULATIVE
SHARES PAR PAID-IN RETAINED STOCK TRANSLATION
OUTSTANDING VALUE CAPITAL EARNINGS AT COST ADJUSTMENTS TOTAL
----------- ----- ---------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993...... 16,030,691 $ 160 $ 41,867 $ 88,340 $ -- $(2,590) $127,777
Exercise of stock options... 13,327 99 99
Adjustment relating to
exercise of stock
options................... (352) (352)
Acquisition of treasury
stock..................... (607) (9) (9)
Cancellation of treasury
stock..................... (9) 9 --
Currency translation........ 879 879
Net earnings................ 15,668 15,668
---------- ---- ------- -------- ------- ------- --------
Balance, June 30, 1994...... 16,043,411 160 41,605 104,008 -- (1,711) 144,062
Exercise of stock options... 32,445 1 305 306
Tax benefit relating to
exercise of stock
options................... 22 22
Acquisition of treasury
stock..................... (5,167) (95) (95)
Cancellation of treasury
stock..................... (95) 95 --
Currency translation........ 1,685 1,685
Net earnings................ 17,339 17,339
---------- ---- ------- -------- ------- ------- --------
Balance, June 30, 1995...... 16,070,689 161 41,837 121,347 -- (26) 163,319
Exercise of stock options... 79,346 1 793 794
Tax benefit relating to
exercise of stock
options................... 226 226
Treasury shares acquired
upon exercise of stock
options................... (14,608) (309) (309)
Cancellation of treasury
stock..................... (1) (308) 309 --
Treasury shares acquired
under repurchase
program................... (94,000) (1,671) (1,671)
Currency translation........ (1,096) (1,096)
Net earnings................ 20,417 20,417
---------- ---- ------- -------- ------- ------- --------
Balance, June 30, 1996...... 16,041,427 $ 161 $ 42,548 $141,764 $ (1,671) $(1,122) $181,680
========== ==== ======= ======== ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 24
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Earnings............................................ $ 20,417 $ 17,339 $ 15,668
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization........................ 8,638 8,246 6,260
Provision for supplemental pension................... 844 835 1,020
Provision for losses on accounts receivable.......... 350 494 575
Deferred income tax benefit.......................... (5,121) (809) (173)
Tax benefit (adjustment) relating to stock options
exercised.......................................... 226 22 (352)
Changes in operating assets and liabilities:
Accounts receivable.................................. (5,890) 6,079 (11,521)
Inventories.......................................... (2,557) (6,653) (10,155)
Other assets......................................... (748) 225 (2,495)
Accounts payable..................................... (868) (2,085) 1,877
Income taxes payable................................. (212) (153) 2,462
Accrued and other liabilities........................ 9,963 2,861 5,531
--------- -------- --------
Net cash provided by operating activities....... 25,042 26,401 8,697
--------- -------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment.............. (4,967) (6,166) (8,471)
Purchases of short-term investments..................... (141,688) (77,295) (76,672)
Maturities of short-term investments.................... 130,048 67,469 77,650
Purchases of long-term investments...................... (8,010) (9,354) --
--------- -------- --------
Net cash used in investing activities........... (24,617) (25,346) (7,493)
--------- -------- --------
FINANCING ACTIVITIES:
Exercise of stock options............................... 485 211 90
Treasury shares acquired under repurchase program....... (1,671) -- --
--------- -------- --------
Net cash (used in) provided by financing activities..... (1,186) 211 90
--------- -------- --------
Effect of exchange rates on cash........................ 239 (252) (68)
--------- -------- --------
(Decrease) increase in cash and cash equivalents.......... (522) 1,014 1,226
Cash and cash equivalents, beginning of period............ 3,096 2,082 856
--------- -------- --------
Cash and cash equivalents, end of period........ $ 2,574 $ 3,096 $ 2,082
========= ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest............................................. $ 50 $ 55 $ 24
--------- -------- --------
Income taxes......................................... $ 11,530 $ 7,654 $ 6,487
--------- -------- --------
Non-cash transactions:
Net transfers of inventory to fixed assets for use as
demonstration equipment............................ $ 3,775 $ 4,389 $ 6,332
--------- -------- --------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 25
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Datascope
Corp. and its subsidiaries (the "Company"). All material intercompany balances
and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid investments
which have original maturities less than 90 days.
Inventories
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Additions and improvements are capitalized, while
maintenance and repairs are expensed as incurred. Asset and accumulated
depreciation accounts are relieved for dispositions, with resulting gains or
losses reflected in earnings. Depreciation of plant and equipment is provided
using the straight-line method over the estimated useful lives of the various
assets, or for leasehold improvements, over the term of the lease, if shorter.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries have been translated at
year-end exchange rates, while revenues and expenses have been translated at
average exchange rates in effect during the year. Resulting cumulative
translation adjustments have been recorded as a separate component of
stockholders' equity.
Taxes on Income
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
use of the liability method of accounting for deferred income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates in effect for the years in which the
differences are expected to reverse.
Revenue Recognition
The Company recognizes revenue and all related costs, including warranty,
upon shipment of its products to customers. Revenue for service contracts is
recognized ratably over the term of the contract.
Earnings Per Share
Earnings per share is computed based on the weighted average number of
common shares outstanding during each year after adjustment for the dilutive
effect of stock options.
Other Assets
Goodwill resulting from the purchase of InterVascular, Inc., and
representing the excess of cost over net assets acquired, is being amortized by
the straight-line method over 20 years and is included in other assets.
Unamortized goodwill as of June 30, 1996 and 1995 amounted to $2,779,000 and
$3,012,000, respectively.
F-6
<PAGE> 26
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
The presentation of certain prior year information has been reclassified to
conform with the current year presentation.
2. FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's significant
financial instruments at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash and short-term investments.................................. $ 67,379 $67,369
------- -------
Non-current marketable securities................................ $ 17,364 $17,564
------- -------
</TABLE>
The fair value of accounts receivable and payable are assumed to equal
their carrying value because of their short maturity.
Fair values of short-term investments are based upon quoted market prices,
including accrued interest, and approximate their carrying values due to their
short maturities. Fair values of non-current marketable securities are also
based upon quoted market prices and include accrued interest.
The Company has determined that its investment portfolio will be
held-to-maturity and therefore carried at amortized cost.
As of June 30, 1996, the Company's marketable securities were classified as
follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ----------------
SHORT TERM COST GAINS LOSSES FAIR VALUE
- ------------------------------------------------------- --------- ----- ------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasury Securities............................. $53,207 $ 8 $(15) $ 53,200
Tax-Exempt Securities................................ 11,598 0 (3) 11,595
------- ---- ---- -------
Short-term total.................................. $64,805 $ 8 $(18) $ 64,795
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
LONG TERM
- -------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities............................. $12,049 $ 169 $ 0 $ 12,218
Tax-Exempt Securities................................ 5,315 31 0 5,346
------- ---- ---- -------
Long-term total................................... $17,364 $ 200 $ 0 $ 17,564
======= ==== ==== =======
Totals............................................ $82,169 $ 208 $(18) $ 82,359
======= ==== ==== =======
</TABLE>
F-7
<PAGE> 27
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Off-Balance-Sheet Risk
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company enters into
foreign currency forward exchange contracts to hedge foreign currency
transactions on a continuing basis for periods consistent with its committed
foreign currency exposures. The effect of this practice is to minimize the
impact of foreign exchange rate movements on the Company's operating results.
The Company's hedging activities do not subject the Company to exchange rate
risk because gains and losses on these contracts offset losses and gains on the
assets, liabilities and transactions being hedged.
As of June 30, 1996, the Company had $0.4 million of foreign exchange
forward contracts outstanding, all of which were in European currencies. The
foreign exchange forward contracts generally have maturities that do not exceed
12 months and require the Company to exchange foreign currencies for U.S.
dollars at maturity, at rates agreed to at inception of the contracts.
Concentration of Credit Risk
The Company invests its excess cash primarily in U.S. Treasury and tax
exempt securities. Since the Company holds all short- and long-term securities
until maturity, such investments are subject to little market risk. The Company
has not incurred losses related to these investments.
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. The
Company maintains reserves for potential credit losses and such losses, in the
aggregate, have not exceeded management's expectations.
3. INVENTORIES
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Materials........................................................ $15,711 $15,452
Work in process.................................................. 7,064 6,592
Finished goods................................................... 11,982 14,455
------- -------
$34,757 $36,499
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 4,059 $ 4,059
Buildings........................................................ 22,284 21,976
Machinery, furniture and equipment............................... 49,859 46,717
Leasehold improvements........................................... 4,134 4,207
------- -------
80,336 76,959
Less accumulated depreciation and amortization................... 36,363 32,681
------- -------
$43,973 $44,278
======= =======
</TABLE>
The Company estimates the useful life of its machinery and equipment at 5
years, furniture at 8 years and buildings at 40 years.
F-8
<PAGE> 28
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. TAXES ON INCOME
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1996 1995 1994
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................... $ 7,402 $6,316 $4,940
State................................................. 1,696 1,324 1,242
Foreign............................................... 2,447 809 428
------- ------ ------
Total current................................. 11,545 8,449 6,610
Deferred:
Federal............................................... (4,021) (695) (177)
State................................................. (1,100) (114) 4
Foreign............................................... -- -- --
------- ------ ------
Total deferred................................ (5,121) (809) (173)
------- ------ ------
Total taxes on income................................... $ 6,424 $7,640 $6,437
======= ====== ======
</TABLE>
The reconciliation of the statutory federal income tax rate to the
Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------
1996 1995 1994
-------------------- ------------------- -------------------
EFFECTIVE EFFECTIVE EFFECTIVE
AMOUNT RATE AMOUNT RATE AMOUNT RATE
------- --------- ------ --------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Tax computed at federal statutory
rate.................................. $ 9,394 35.0% $8,743 35.0% $7,737 35.0%
(Decrease) increase resulting from:
Benefit attributable to foreign sales
corp.................................. (911) (3.4) (871) (3.5) (757) (3.4)
State taxes on income, net of federal
income tax benefit.................... 387 1.4 673 2.7 812 3.7
Research and development credit, net.... -- -- (221) (0.9) (506) (2.3)
Income exempt from foreign corporate
taxes................................. (2,672) (10.0) (790) (3.1) (437) (2.0)
Rate differential on foreign income..... 70 0.3 99 0.4 (228) (1.0)
Interest income exempt from federal
income tax............................ (282) (1.0) (267) (1.1) (217) (1.0)
Other................................... 438 1.6 274 1.1 33 0.1
------- ----- ------ ---- ------ ----
Total taxes on income................... $ 6,424 23.9% $7,640 30.6% $6,437 29.1%
======= ===== ====== ==== ====== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-9
<PAGE> 29
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities as
of June 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------
1996 1995
---------------------------------- ----------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES NET ASSETS LIABILITIES NET
-------- ----------- ------- -------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Inventories........................ $ 4,591 $ -- $ 4,591 $ 2,287 $ -- $ 2,287
Warranty........................... 451 -- 451 438 -- 438
Sales returns & allowances......... 1,255 -- 1,255 -- -- --
Accrued expenses................... 637 -- 637 -- 553 (553)
------- ------ ------- ------- ------ -------
Current.................. 6,934 -- 6,934 2,725 553 2,172
------- ------ ------- ------- ------ -------
Supplemental pension............... 3,728 -- 3,728 3,397 -- 3,397
Tax loss carryforwards............. 1,838 -- 1,838 1,382 -- 1,382
Accelerated depreciation........... -- 1,770 (1,770) -- 1,506 (1,506)
Accrued pension expense............ -- 323 (323) -- 482 (482)
Other, net......................... 224 -- 224 91 -- 91
Less: Valuation allowance.......... (1,838) -- (1,838) (1,382) -- (1,382)
------- ------ ------- ------- ------ -------
Non-current.............. 3,952 2,093 1,859 3,488 1,988 1,500
------- ------ ------- ------- ------ -------
Total.............................. $ 10,886 $ 2,093 $ 8,793 $ 6,213 $ 2,541 $ 3,672
======= ====== ======= ======= ====== =======
</TABLE>
The net current deferred tax assets have been included in prepaid expenses
and other current assets and the net non-current deferred tax assets have been
included in other assets on the accompanying consolidated balance sheet.
The valuation allowance increased by $456,000 during fiscal 1996 due to the
net increase of foreign and state tax loss carryforwards. The valuation
allowance of $1,838,000 at June 30, 1996 was comprised of tax benefits of
$394,000 of foreign tax loss carryforwards and $1,444,000 of state tax loss
carryforwards. $379,000 in benefits from foreign tax loss carryforwards expire
during the period 1997 through 2001 and $15,000 may be carried forward
indefinitely. The benefits of state tax loss carryforwards expire during the
period 1998 through 2003.
It has not been necessary to provide for income taxes on cumulative
undistributed earnings of international subsidiaries. These earnings will be
either indefinitely reinvested or remitted substantially free of additional tax.
Determination of the liability that would result in the event all of these
earnings were remitted to the U.S. is impracticable.
The Company has a subsidiary in an industrial development zone in Europe.
Profits from manufacturing activities in this zone are exempt from corporation
taxes until August 1999.
F-10
<PAGE> 30
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED EXPENSES
Accrued expenses at June 30, 1996 and 1995 were comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred revenue......................................... $ 5,633 $ 5,751
Point of View accrued expenses........................... 5,500 -
General expense accruals................................. 12,239 8,398
------- -------
$23,372 $14,149
======= =======
</TABLE>
7. STOCK OPTIONS, SHAREHOLDER RIGHTS AND STOCK REPURCHASE PLANS
Stock Option Plans
The Company has two stock option plans which cover 3,825,000 shares of
common stock. The 1981 and 1995 Employee Stock Option Plans provide that options
may be granted at a price of 100% of fair market value on date of grant. Options
may be exercised in full or in installments, at the discretion of the Board of
Directors, and must be exercised within ten years from date of grant.
A summary of changes in the stock option plans is as follows:
<TABLE>
<CAPTION>
1981 EMPLOYEE STOCK 1995 EMPLOYEE STOCK
OPTION PLAN OPTION PLAN
------------------------------ ----------------------------
SHARES PRICE PER SHARE SHARES PRICE PER SHARE
--------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Balance, June 30, 1993............. 508,553 $ 3.58 -- $38.56
Granted............................ 685,700 13.88 -- 14.25
Exercised.......................... (12,747) 3.75 -- 7.83
Canceled........................... (46,567) 7.38 -- 38.56
---------
Balance, June 30, 1994............. 1,134,939 3.58 -- 31.13
Granted............................ 241,150 15.00 -- 18.25
Exercised.......................... (22,940) 7.38 -- 13.88
Canceled........................... (106,581) 3.58 -- 9.00
---------
Balance, June 30, 1995............. 1,246,568 4.81 -- 31.13
Granted............................ 81,050 21.06 -- 25.44 378,900 $17.75 -- $24.13
Exercised.......................... (51,661) 4.81 -- 22.38 --
Canceled........................... (75,288) 7.83 -- 29.00 (2,000) 21.06
--------- -------
Balance, June 30, 1996............. 1,200,669 $7.38 -- $31.13 376,900 $17.75 -- $24.13
======== =======
Exercisable portion................ 900,928 $7.38 -- $31.13 --
======== =======
Available for future grant......... 39,036 373,100
======== =======
</TABLE>
Option Agreements
The Company also has option agreements with certain consultants and members
of the Board of Directors. Options to purchase 159,300 shares were outstanding
at June 30, 1996 at prices ranging from $7.83 to $22.38 per share. During the
year ended June 30, 1996, options for 24,000 shares at prices ranging from $7.38
to $7.83 per share were exercised and 5,000 options were canceled. There were no
options granted during the year ended June 30, 1996. During the year ended June
30, 1995, 113,600 options were granted at a
F-11
<PAGE> 31
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price of $18.25 per share, 9,000 options were exercised at a price of $7.83 per
share and 3,000 options were canceled.
At June 30, 1996 there were 2,149,005 shares of common stock reserved for
the exercise of stock options.
Shareholder Rights Plan
On May 22, 1991, the Company adopted a Shareholder Rights Plan and declared
a dividend distribution of one right for each outstanding share of common stock.
Under the terms of the plan, all shareholders of common stock received for each
share owned a preferred stock purchase right entitling them to purchase from the
Company one one-thousandth of a share of Series A Preferred Stock, par value
$1.00 per share, at an exercise price of $300.00. The rights are not exercisable
until after the date on which the Company's right to redeem has expired. The
Company may redeem rights for $.01 per right at any time until the 10th business
day after the date of a public announcement (the "Stock Acquisition Date") that
a person (the "Acquiring Person") has acquired ownership of stock having 15
percent or more of the Company's general voting power.
The plan provides that, after a Stock Acquisition Date, generally each
holder of a right will be entitled to purchase, at the exercise price, a number
of the Company's shares having a market value of twice the exercise price. The
plan also provides that in the event of certain other business combinations,
generally each holder of a right will be entitled to purchase, at the exercise
price, a number of shares of the acquiring company's common stock having a
market value of twice the exercise price. Prior to the acquisition by the
Acquiring Person of 50% or more of the Common Stock outstanding, the Company may
exchange the Rights (other than Rights owned by the Acquiring Person and its
affiliates and associates, which will be null and void), in whole or in part,
for Common Stock on the basis of an exchange ratio of one share of Common Stock
for each Right (subject to adjustment). The rights will expire on June 2, 2001.
Stock Repurchase Plan
On May 3, 1996, the Company announced a stock repurchase program whereby
the Company's Board of Directors authorized the use of up to $20 million to buy
shares of its common stock from time to time, subject to market conditions and
other relevant factors affecting the Company. Share repurchases are planned when
market and business conditions are deemed favorable. As of June 30, 1996, the
Company had repurchased 94,000 shares at a cost of approximately $1,671,000.
F-12
<PAGE> 32
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT SALES
The Company develops, manufactures and markets medical systems and devices
which constitute a single business segment. The following information sets forth
geographic information on the Company's sales, profits and assets:
<TABLE>
<CAPTION>
UNITED EUROPEAN
STATES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1996:
Sales to unaffiliated customers......... $174,914 $ 36,386 $ -- $211,300
Transfers between geographic areas...... 12,757 8,395 (21,152) --
-------- ------- -------- --------
Total sales..................... $187,671 $ 44,781 $(21,152) $211,300
======== ======= ======== ========
Operating earnings........................ $ 17,919 $ 4,999 $ 490 $ 23,408
======== ======= ========
Other income, net......................... 3,433
--------
Earnings before taxes on income........... $ 26,841
========
Assets at June 30, 1996................... $207,553 $ 30,288 $ (3,377) $234,464
======== ======= ======== ========
YEAR ENDED JUNE 30, 1995:
Sales to unaffiliated customers......... $161,534 $ 34,166 $ -- $195,700
Transfers between geographic areas...... 12,714 6,177 (18,891) --
-------- ------- -------- --------
Total sales..................... $174,248 $ 40,343 $(18,891) $195,700
======== ======= ======== ========
Operating earnings........................ $ 18,235 $ 4,653 $ (343) $ 22,545
======== ======= ========
Other income, net......................... 2,434
--------
Earnings before taxes on income........... $ 24,979
========
Assets at June 30, 1995................... $181,954 $ 28,265 $ (3,356) $206,863
======== ======= ======== ========
YEAR ENDED JUNE 30, 1994:
Sales to unaffiliated customers......... $153,530 $ 29,270 $ -- $182,800
Transfers between geographic areas...... 11,764 5,359 (17,123) --
-------- ------- -------- --------
Total sales..................... $165,294 $ 34,629 $(17,123) $182,800
======== ======= ======== ========
Operating earnings........................ $ 18,066 $ 2,852 $ (44) $ 20,874
======== ======= ========
Other income, net......................... 1,231
--------
Earnings before taxes on income........... $ 22,105
========
Assets at June 30, 1994................... $164,317 $ 23,643 $ (2,539) $185,421
======== ======= ======== ========
</TABLE>
In determining operating earnings, interest income and expense, other
income and expense, and income taxes were excluded.
The Company had export sales, principally to Europe, Canada, Latin America
and the Far East, of $40,524,000, $31,951,000 and $27,023,000 in the years ended
June 30, 1996, 1995 and 1994, respectively.
9. PENSION AND RETIREMENT PLANS
Defined Benefit Plan
The Company has both domestic and foreign defined benefit pension plans
which cover substantially all employees. Pension benefits are based on years of
service, compensation and the primary social security
F-13
<PAGE> 33
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
benefits. Funding for the domestic plan is within the range prescribed under the
Employee Retirement Income Security Act of 1974. Funding for the foreign plan is
accomplished through the purchase of guaranteed insurance contracts. Total
pension expense for the domestic and foreign pension plans was $1,577,000 in
1996, $1,601,000 in 1995 and $1,485,000 in 1994.
Domestic
The components of net pension expense and the funded status of the domestic
defined benefit pension plan are set forth below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1996 1995 1994
------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the year........ $1,398 $ 1,444 $1,177
Interest cost on projected benefit obligation........... 1,417 1,339 1,245
Actual return on plan assets............................ (927) (1,440) (346)
Net amortization and deferral........................... (588) 16 (857)
------ ------- ------
Net periodic pension cost -- domestic......... $1,300 $ 1,359 $1,219
====== ======= ======
</TABLE>
The Plan's Funded Status was as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
Vested......................................................... $12,224 $ 9,675
Nonvested...................................................... 2,286 1,760
------- -------
Accumulated benefit obligation................................. 14,510 11,435
Effects of anticipated future compensation increases........... 6,674 7,354
------- -------
Projected benefit obligation................................... 21,184 18,789
Plan assets at fair value...................................... 18,429 16,981
------- -------
Projected benefit obligation in excess of plan assets.......... (2,755) (1,808)
Unamortized net transition obligation.......................... 537 608
Unrecognized prior service cost................................ (99) (108)
Unrecognized net actuarial loss................................ 3,159 2,541
------- -------
Net prepaid pension cost............................... $ 842 $ 1,233
======= =======
</TABLE>
The assumptions used to develop the actuarial present value of the
projected benefit obligation are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Weighted average discount rate......................................... 7.50% 8.25%
Rate of increase in compensation levels................................ 6.25% 6.55%
Expected long-term rate of return on plan assets....................... 8.50% 9.00%
</TABLE>
Plan assets are invested in U.S. Government and corporate securities and
include investments in the Company's common stock of $1,704,000 (96,000 shares)
at June 30, 1996. No dividends are paid on the Company's common stock.
F-14
<PAGE> 34
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign
Retirement coverage for the foreign employees of the Company is provided,
to the extent deemed appropriate, through separate plans. Funding policies are
based on local statutes. Retirement benefits are based on years of service,
final average earnings and social security benefits.
The components of net pension expense and the funded status of the foreign
defined benefit pension plans are set forth below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the year.............. $132 $ 97 $ 91
Interest cost on projected benefit obligation................. 93 65 58
Estimated return on plan assets............................... (36) (24) (18)
Net amortization and deferral................................. 41 27 26
---- ---- ----
Net periodic pension cost -- foreign................ $230 $165 $157
==== ==== ====
</TABLE>
The Plan's Funded Status was as follows:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation (fully
vested).......................................................... $ 440 $ 405
----- -----
Projected benefit obligation....................................... 1,223 1,246
Plan assets at fair value.......................................... 440 405
----- -----
Projected benefit obligation in excess of plan assets.............. (783) (841)
Unamortized net transition obligation.............................. 151 186
Unrecognized net actuarial loss.................................... 748 767
----- -----
Net prepaid pension cost................................. $ 116 $ 112
===== =====
</TABLE>
The assumptions used to develop foreign net pension cost and the actuarial
present value of projected benefit obligations are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Weighted average discount rate......................................... 7.5 % 7.5 %
Rate of increase in compensation levels................................ 6.0 % 6.0 %
Expected long-term rate of return on plan assets....................... 9.0 % 9.0 %
</TABLE>
The assets of the foreign defined benefit pension plan are invested in
guaranteed insurance contracts.
Supplemental Retirement Plan
The Company has noncontributory, unfunded supplemental retirement plans for
Mr. Saper and certain other key officers. Life insurance has been purchased by
the Company to recover a substantial portion of the net after tax cost for these
supplemental retirement plans.
Under the retirement provision of the five-year employment agreement
between the Company and Mr. Saper, Mr. Saper could retire after age 65 and
receive a pension of up to 60% of his average earnings for the three-year period
prior to retirement. The supplemental pension expense for Mr. Saper recognized
in the consolidated financial statements was $689,000, $635,000 and $794,000 for
1996, 1995 and 1994, respectively.
The supplemental retirement plan covering certain other key officers
provides that at age 65, these employees may receive, for a period of up to 15
years, a pension of up to 60% of a predetermined earnings level for the
five-year period prior to retirement. The supplemental pension expense for these
executives recognized
F-15
<PAGE> 35
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in the consolidated financial statements was $155,000, $200,000 and $226,000 for
1996, 1995 and 1994, respectively.
The actuarial present value of both the accumulated benefit obligation and
projected benefit obligation for the supplemental retirement plans was
$7,000,000 and $7,095,000 for 1996 and 1995, respectively.
The components of the total supplemental pension expense are set forth
below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
1996 1995 1994
----- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the year.......... $ 277 $ 298 $ 300
Interest cost on projected benefit obligation............. 624 554 528
Amortization of prior service cost........................ 496 511 546
Amortization of gain...................................... (553) (528) (354)
----- ----- ------
Total supplemental pension expense.............. $ 844 $ 835 $1,020
===== ===== ======
</TABLE>
Savings and Supplemental Retirement Plan
The Company maintains a 401(k) savings and supplemental retirement plan for
eligible domestic employees. This 401(k) plan was established to enhance the
existing retirement plan and to provide an incentive to employees to save and
invest regularly for their retirement. The Company contributions, which were
based on matching 50% of participating employees' contributions up to a maximum
of 6% of compensation, were $976,000 for 1996, $880,000 for 1995 and $844,000
for 1994.
10. COMMITMENTS AND CONTINGENCIES
Leases
Future minimum rental commitments under noncancellable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR (IN THOUSANDS)
--------------------------------------------------------------- --------------
<S> <C>
1997........................................................... $3,626
1998........................................................... 3,127
1999........................................................... 1,781
2000........................................................... 614
2001........................................................... 208
Thereafter..................................................... 46
------
Total future minimum rental payments................. $9,402
======
</TABLE>
Total rent expense for the years ended June 30, 1996, 1995 and 1994
amounted to approximately $4,264,000, $4,241,000 and $4,505,000, respectively.
Litigation
In September 1996, the Company reached an oral agreement in principle to
settle certain shareholder litigation previously filed against the Company. The
proposed settlement, which is subject to court approval and final documentation,
would cost the Company approximately $5.6 million, including certain legal
expenses, $3.3 million after tax or $0.20 per share. There can be no assurance
that this settlement will be effectuated.
The Company is subject to litigation in the ordinary course of its
business. The Company believes it has meritorious defenses in all material
pending lawsuits and that the outcome will not have a material adverse effect on
the Company's financial position or results of operations.
F-16
<PAGE> 36
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit Arrangements
The Company has lines of credit totaling $40,700,000, borrowings under
which bear interest principally at the lenders' respective prime rates. There
were no short-term borrowings under lines of credit at June 30, 1996 and 1995.
The lines expire as follows: $25,000,000 in March 1997, $15,000,000 in June 1997
and $200,000 in October 1997. These lines are renewable annually at the option
of the banks. The Company also has $500,000 in lines of credit with no
expiration date.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
---------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales...................... $45,900 $52,300 $54,600 $58,500 $211,300
------- ------- ------- ------- --------
Gross margin................... $30,039 $34,441 $35,537 $26,683(B) $126,700
------- ------- ------- ------- --------
Net earnings................... $ 3,102 $12,711(A) $ 5,437 $ (833)(B) $ 20,417
------- ------- ------- ------- --------
Earnings per share............. $ 0.19 $ 0.76(A) $ 0.33 $ (0.05)(B) $ 1.24
------- ------- ------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
---------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales...................... $41,600 $48,400 $50,500 $55,200 $195,700
------- ------- ------- ------- --------
Gross margin................... $26,869 $31,566 $32,560 $35,199 $126,194
------- ------- ------- ------- --------
Net earnings................... $ 2,761 $ 4,357 $ 4,519 $ 5,702 $ 17,339
------- ------- ------- ------- --------
Earnings per share............. $ 0.17 $ 0.27 $ 0.28 $ 0.35 $ 1.07
------- ------- ------- ------- --------
</TABLE>
- ---------------
(A) Q2 and FY 1996 earnings includes income from settlement of litigation
before taxes of $10.7 million, or $7.9 million after income tax, equivalent
to $0.47 per share.
(B) Q4 and FY 1996 earnings includes Point of View charge before taxes of $9.6
million, or $5.6 million after income tax, equivalent to $0.34 per share.
Quarterly and total year earnings per share are calculated independently
based on the weighted average number of shares outstanding during each period.
F-17
<PAGE> 37
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SPECIAL ITEMS
Included in fiscal 1996 earnings were two special items as follows:
Income from Settlement of Litigation
The Company settled all litigation brought by its wholly-owned
subsidiaries, InterVascular, Inc. and InterVascular S.A. (France), against
several former employees and certain other defendants. Income from the
settlement of litigation, net of related expenses, was $10.7 million or $7.9
million after-tax, equivalent to $0.47 per share.
Point of View Charge
During the fourth quarter, the Company wrote off approximately $9.6 million
or $5.6 million after-tax, equivalent to $0.34 per share, for excess and
obsolete inventory and other costs related to the Point of View(TM) (POV)
monitor. While sales of the POV continue in international markets, total sales
of this product are expected to be substantially less than originally planned
due to continued suspension of POV sales in the United States.
F-18
<PAGE> 38
DATASCOPE CORP. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN C
-------------------------
ADDITIONS
------------------------- COLUMN D
COLUMN B (2) ---------- COLUMN E
------------ (1) CHARGED TO DEDUCTIONS ----------
COLUMN A BALANCE AT CHARGED TO OTHER FROM BALANCE AT
- ----------------------------------- BEGINNING OF COSTS AND ACCOUNTS -- RESERVES -- CLOSE OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1996
Allowance for doubtful
accounts...................... $1,273 $357 $-- $432(A) $1,198
====== ==== == ==== ======
Reserve for warranty costs....... 750 60 -- -- 810
====== ==== == ==== ======
YEAR ENDED JUNE 30, 1995:
Allowance for doubtful
accounts...................... $1,188 $494 $-- $409(A) $1,273
====== ==== == ==== ======
Reserve for warranty costs....... 450 300 -- -- 750
====== ==== == ==== ======
YEAR ENDED JUNE 30, 1994:
Allowance for doubtful
accounts...................... $ 695 $575 $-- $ 82(A) $1,188
====== ==== == ==== ======
Reserve for warranty costs....... 350 100 -- -- 450
====== ==== == ==== ======
</TABLE>
- ---------------
(A) Write-offs
S-1
<PAGE> 39
EXHIBIT INDEX
-------------
<TABLE>
<C> <C> <S>
2. -- Agreement and Plan of Merger, dated as of October 25, 1989, by and between the
registrant and Datascope New York (incorporated by reference to Exhibit 2 to the
registrant's Registration Statement on Form 8-B, filed with the Commission on
January 4, 1990 (the "Form 8-B")).
3.1 -- Restated Certificate of Incorporation as filed with the Secretary of State of the
State of Delaware on October 30, 1989 (incorporated by reference as Exhibit 3.1 to
the Form 8-B).
3.2 -- By-Laws, as currently in effect (incorporated by reference to Exhibit 3.2 to Annual
Report on Form 10-K for fiscal year ended June 30, 1993 (the "1993 10-K")).
4.1 -- Specimen of certificate of Common Stock (incorporated by reference to Exhibit 4.2
to the Form 8-B).
4.2 -- Form of Certificate of Designations of the Registrant's Series A Preferred Stock
(incorporated by reference to Exhibit 2.2 to the Company's Registration Statement
on Form 8-A, filed with the Commission on May 31, 1991 (the "May 31, 1991 Form
8-A")).
4.3 -- Form of Rights Agreement, dated as of May 22, 1991, between the Company and
Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit
2.1 to the May 31, 1991 Form 8-A).
10.1 -- 1978 Employee Stock Option Plan (incorporated by reference to Exhibit 10.1 to
Annual Report on Form 10-K for the fiscal year ended June 30, 1989 (the "1989
10-K")).
10.2 -- 1981 Incentive Stock Option Plan (incorporated by reference to Exhibit 10.2.1 to
the Form 8-B).
10.3 -- Stock Redemption Agreement, dated February 26, 1991, between Lawrence Saper and the
registrant (incorporated by reference to Exhibit 10.3 to Annual Report on Form 10-K
for the fiscal year ended June 30, 1991 (the "1991 10-K")).
10.4 -- Stock Option Agreements, dated November 30, 1982, between David Altschiller,
William Asmundson, Alan Patricof and Norman Schneider, respectively, and the
registrant (incorporated by reference to Exhibit 10.5 to the 1989 10-K).
10.5 -- Stock Option Agreement, dated December 7, 1988 between Joseph Grayzel, M.D. and the
registrant (incorporated by reference to Exhibit 10.6 to the 1989 10-K).
10.6 -- Amendment No. 1 to Stock Option Agreement dated as of September 3, 1986, which
Agreement is Exhibit C to the Stock Purchase Agreement among Datascope Corp.,
InterVascular, Inc., and certain shareholders of InterVascular, Inc., dated June
26, 1986 (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K
for the fiscal year ended June 30, 1988).
10.7 -- Stock Option Agreements, dated as of March 1, 1990, between David Altschiller,
William Asmundson, Joseph Grayzel, Alan Patricof and Norman Schneider,
respectively, and the registrant (incorporated by reference to Exhibit 10.9 to
Annual Report on Form 10-K for the fiscal year ended June 30, 1990).
10.8 -- Stock Option Agreement, dated as of September 28, 1990, between David Altschiller
and the registrant (incorporated by reference to Exhibit 10.8 to the 1991 10-K).
</TABLE>
<PAGE> 40
<TABLE>
<C> <C> <S>
10.9 -- Letter Agreements, dated December 17, 1990 between Lawrence Saper, Ernst Janzen,
Bruce Hanson and Murray Pitkowsky, respectively, and the registrant with respect to
the termination of such officers' investment in certain subsidiaries of the
registrant (incorporated by reference to Exhibit 10.9 to the 1991 10-K).
10.10 -- Employment Agreement, dated as of June 30, 1991, by and between Lawrence Saper and
the registrant (incorporated by reference to Exhibit 10.10 to Annual Report on Form
10-K for the fiscal year ended June 30, 1992).
10.11 -- Asset Purchase Agreement, by and between Boston Scientific Corporation and the
registrant, Datascope Trademark Corp., Datascope Investment Corp., Datascope
S.A.R.L., Datascope GmbH, Datascope B.V., and Datascope Medical Company, Ltd.,
dated as of June 8, 1993 (incorporated by reference to Exhibit 10.11 to the 1993
10-K).
10.12 -- Datascope Corp. 1995 Stock Option Plan (incorporated by reference to Exhibit 4 to
Registration Statement on Form S-8 (File No. 333-00537) filed January 30, 1996 with
the Commission).
10.13 -- Amendment No. 1 to Datascope Corp. 1995 Stock Option Plan (incorporated by
reference to Exhibit 4 to Post-Effective Amendment No. 1 to Registration Statement
on Form S-8 (File No. 333-00537) filed February 21, 1996 with the Commission).
10.14 -- Agreement, dated as of July 25, 1994, by and between Datascope Corp. and Lawrence
Saper.
10.15 -- Split-Dollar Agreement made as of July 25, 1994 by and among Datascope Corp.,
Lawrence Saper and Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the
Saper Family 1994 Trust UTA. dtd. 6/28/94.
10.16 -- Modification Agreement made as of July 25, 1994 by and among Datascope Corp.,
Lawrence Saper and Carol Saper, Daniel Brodsky and Helen Nash, Trustees of the
Saper Family 1994 Trust UTA. dtd. 6/28/94.
10.17 -- Assignment made as of July 25, 1994 by Carol Saper, Daniel Brodsky and Helen Nash,
Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94 of Metropolitan Life
Insurance Company Insurance Policy No. 940 750 122UM in favor of Datascope Corp.
10.18 -- Assignment made as of July 25, 1994 by Carol Saper, Daniel Brodsky and Helen Nash,
Trustees of the Saper Family 1994 Trust UTA. dtd. 6/28/94 of Security Mutual Life
Insurance Company of New York Insurance Policy No. 11047711 in favor of Datascope
Corp.
21. -- Subsidiaries.
23. -- Consent of Deloitte & Touche LLP.
27. -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.14
AGREEMENT
AGREEMENT, dated as of July 25, 1994, by and between DATASCOPE
CORP., a Delaware corporation (the "Corporation"), and LAWRENCE SAPER, an
individual residing at 812 Park Avenue, New York, New York (the "Executive").
PREAMBLE
WHEREAS, the Corporation and the Executive are parties to that
certain employment agreement made as of June 30, 1991 (the "Employment
Agreement");
WHEREAS, the Corporation and the Executive are parties to that
certain redemption agreement made as of February 26, 1991 (the "Redemption
Agreement"); and
WHEREAS, the Corporation and the Executive desire to amend
certain sections of the Employment Agreement and to terminate the Redemption
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties contained in this Agreement,
the parties agree as follows:
1. Amendment. The Employment Agreement is hereby amended as follows:
(a) The second sentence of Section 5(b) is amended and
restated to read as follows:
"Effective for the fiscal year beginning July 1,
1994, the Corporation will provide the Executive with an
expense account ("Expense Account") of not less than $20,800
(which amount shall be increased by the amount of federal and
state income taxes, if any, required to be paid by the
Executive with respect to such payment (a "Tax Gross-Up")) and
for each subsequent year during the Term, of not less than the
Expense Account for the prior year (without regard to the Tax
Gross-Up for such prior year, if any) plus the percentage
increase in the Consumer Price Index--All Urban Consumers as
announced by the United States Department of Commerce for the
twelve month period ending on May 31 of the prior fiscal year
(the "CPI Adjustment") plus the applicable Tax Gross- Up, if
any."
(b) The term "Five Year Average Total Compensation" in
Sections 5(c)(i) and (ii) is replaced by the term "Three Year Average Total
Compensation."
(c)(i) The reference in Section 5(c)(i) to "the Pension Plan
at Section 8.3, option 2" shall be replaced with a reference to "the Pension
Plan at Section 8.4, option 2".
(ii) The following is added at the end of Section 5(c)(i):
"Provided, however, that in the event the Executive retires
after attaining age 65, his retirement benefit payable under
the supplemental executive retirement program, excluding all
benefits payable under the Executive's qualified retirement
<PAGE> 2
plan, shall not be less than the benefit determined as
follows. First, the lump sum actuarial value ("Value") of the
retirement benefit that would have been payable to the
Executive had his retirement occurred on his 65th birthday
shall be calculated, based on the 1983 Group Annuity Mortality
Table (male rates) and 5% interest. The Value shall be
increased by 5% per year, compounded annually, to the actual
date of the Executive's retirement, and prorated for periods
of less than one year based upon completed months. The Value
thus adjusted shall then be converted into an annual
retirement benefit based on the 1983 Group Annuity Mortality
Table (male rates) and 5% interest. The lump sum actuarial
factor used in this conversion shall be based upon the
Executive's age (to the nearest month) at his actual date of
retirement, interpolated linearly if such age is not a whole
number. The amounts so determined are shown on the attached
Schedule A."
(d) Section 5(c)(iii) is deleted in its entirety and
replaced with the following:
"Upon the death of the Executive, a trust created for
the primary benefit of the spouse and children of the
Executive (the "Trust") shall receive ten million
($10,000,000) dollars in proceeds of life insurance payable
from one or more policies of insurance on the life of the
Executive pursuant to a Split Dollar Agreement between the
Executive, the Corporation and the Trust. The premiums for
such policies shall be apportioned between the Corporation and
the Trust in accordance with the terms of such Split Dollar
Agreement and the Corporation's interest therein shall be
secured by Collateral Assignment of such policy or policies
executed by the Trust and the Corporation. In each year during
the term of such Split Dollar Agreement, the Corporation shall
reimburse the Executive for the portion of such year's
premiums that is a deemed economic benefit to the Executive
and payable by the Trust pursuant to the Split Dollar
Agreement. In addition, following the determination of the
Executive's personal state and federal income tax liability
for such year, the Executive shall receive a Tax Gross-Up for
additional state or federal income taxes, if any, payable by
the Executive and directly attributable to such deemed
economic benefit in such year."
(e) Section 5(c)(iv) is deleted in its entirety.
(f) Section 5(c)(v) is amended and restated to read as
follows:
"Three Year Average Total Compensation. For the
purposes hereof, "Three Year Average Total Compensation" shall
mean the average total compensation, comprising Base Salary
and all bonus compensation, for the three years in which the
Executive's compensation was greatest of the ten years
immediately preceding the Executive's retirement, disability
or death."
(g) The third sentence of Section 5(e) is amended and
restated to read as follows:
-2-
<PAGE> 3
"In addition, the Corporation shall pay the Executive not less
than $12,000 per annum (plus any applicable Tax Gross-Up) to
cover automobile maintenance expenses for the year ending on
the first anniversary of the Effective Date ("Maintenance
Allowance") and for each subsequent year during the Term, not
less than the Maintenance Allowance for the prior year plus
the CPI Adjustment."
2. Termination. The Redemption Agreement is hereby terminated in its
entirety as of the date hereof without any further action on the part of the
parties thereto.
3. Miscellaneous.
(a) Modification, Waiver, Assignment. Other than the aforesaid
sections of the Employment Agreement, all terms and conditions of the Employment
Agreement shall remain in full force and effect.
(b) Severability. The invalidity or enforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
(c) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
(d) Headings. The headings of the several paragraphs hereof
are inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
DATASCOPE CORP.
By: /s/ M. Pitkowsky
------------------------
Name: M. Pitkowsky
Title: Senior Vice President and Secretary
/s/ Lawrence Saper
----------------------------
Lawrence Saper
<PAGE> 4
DATASCOPE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN FOR LAWRENCE SAPER
CALCULATION OF "FLOOR" BENEFIT, i.e., MINIMUM BENEFIT AT RETIREMENT AFTER 65
<TABLE>
<CAPTION>
LUMP SUM LUMP SUM VALUE FLOOR BENEFIT
ACTUARIAL OF AGE 65 BEN. i.e., MINIMUM
AGE FACTOR** TIMES 5% PER YEAR BENEFIT***
- --- --------- ----------------- --------------
<S> <C> <C> <C>
65 10.685 8,423,637 788,361*
66 10.361 8,844,819 853,700
67 10.036 9,287,060 925,400
68 9.712 9,751,413 1,004,000
69 9.390 10,238,984 1,090,400
70 9.069 10,750,933 1,185,500
71 8.748 11,288,479 1,290,400
72 8.428 11,852,903 1,406,400
73 8.109 12,445,549 1,534,800
74 7.789 13,067,826 1,677,700
75 7.472 13,721,217 1,836,400
76 7.158 14,407,278 2,012,800
77 6.850 15,127,642 2,208,400
</TABLE>
- --------
* Age 65 Ben. is 60% of 91-93 average ($1,497,144) minus qual. plan ($109,925)
** Based on 5% interest & the 1983 Group Annuity Mortality Table (male rates)
*** Lump Sum Value from prior column divided by Lump Sum Actuarial Factor
<PAGE> 1
EXHIBIT 10.15
SPLIT-DOLLAR AGREEMENT
This Agreement made as of the 25th day of July, 1994, by and among
DATASCOPE CORP., a Delaware corporation (the "Company"), LAWRENCE SAPER (the
"Employee") and CAROL SAPER, DANIEL BRODSKY and HELEN NASH, Trustees of the
SAPER FAMILY 1994 TRUST UTA. dtd. 6/28/94 (collectively with all successors, the
"Trustees").
WITNESSETH:
WHEREAS, the Company and the Employee have agreed to amend the
Employee's employment agreement to revise, among other things, the death
benefits payable at the death of the Employee;
WHEREAS, in connection with such amendment, the Company, the Employee
and the Trustees desire to implement a split-dollar insurance plan ("Plan") to
enable the Trustees to invest in insurance on the Employee's life;
WHEREAS, the Trustees have applied for and are the owner of Insurance
Policy No. 940 750 122 UM ("Policy A") issued by the Metropolitan Life
Insurance Company (an "Insurer") having an initial face amount of Ten Million
($10,000,000) Dollars on the life of the Employee;
WHEREAS, Employee has transferred and assigned to the Trustees all
rights of ownership in and to Insurance Policy No. 110047711 ("Policy B")
issued by Security Mutual Life Insurance Company of New York (an "Insurer")
having an initial face amount of Five Million ($5,000,000) Dollars on the life
of the Employee;
WHEREAS, the Company and the Trustees agree to make Policy A and Policy
B (collectively, the "Policies") subject to this Agreement; and
WHEREAS, the Trustees agree to assign certain rights under the Policies
to the Company as collateral for amounts to be invested in the Policies by the
Company under this Agreement by instruments of collateral assignment to be
executed simultaneously herewith (the "Assignments").
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Company, the Employee and the Trustees hereby mutually
covenant and agree as follows:
1. Ownership of Insurance. The Trustees are and shall remain the owner
of the Policies, and may exercise all rights and privileges available under the
terms of each respective Policy except as specifically provided in this
Agreement, including without limitation the sole right to designate the
beneficiary of the proceeds of the Policies, the sole right to change the
beneficiary, and the sole right to select a settlement option under the
Policies. The Company shall have only the right to receive certain sums under
the Policies as set forth in this Agreement and
<PAGE> 2
the right to withdraw or borrow against the Cash Value (defined in Article 7 of
this Agreement) of the Policies so long as a change in control (as defined in
that certain Employment Agreement dated June 30, 1991, by and between the
Employee and the Company)("Change") has not occurred. The Company and the
Employee shall give written notice to the Insurers when and if a Change has
occurred. From and after the occurrence of a Change the Company shall not have
the right to withdraw or borrow against the Cash Value of the Policies.
2. Payment of Premiums on Policies.
(a) As to Policy A. (i) On the due date of the initial
premium of Policy A or within the grace period allowed by Policy A for the
payment of the premium, the Company shall pay the annual premium on Policy A.
As to each subsequent annual premium payable on the anniversary date of Policy
A beginning in 1995 and continuing through 2000, the Company shall pay, within
the grace period allowed by Policy A for the payment of premiums, the annual
premiums shown on the annexed schedule, adjusted for periodic payment modes, if
applicable. Provided, however, that each such premium amount shall be reduced
by the amount of the economic benefit attributable to the Employee for that
year computed in accordance with IRS Revenue Rulings 64-328, 1964-2 C.B. 11,
and 66-110, 1966-1 C.B. 12, and 78-420, 1978-2 C.B. 67.
(ii) In each calendar year the Trustees
shall pay to the Insuror on or before the expiration of the applicable grace
periods an amount equal to the amount of such economic benefit for such year
and shall promptly provide to the Company copies of the checks for such payment.
(b) As to Policy B. Beginning in 1995, the Company shall
pay, within the grace period allowed by Policy B for the payment of premiums,
each premium amount due on Policy B.
Each amount paid by the Company in respect of a Policy is
hereinafter referred to as an "Investment."
3. Trustees' Obligation to the Company. On the death of the
employee or in the event of the termination of this Agreement, the Trustees
shall pay to the Company the amount or amounts specified in Article 5, Article
6, and Article 7 of this Agreement.
4. Collateral Assignment of Policies. To secure the Company's
interest in the Policies, contemporaneously with the execution of this
Agreement the Trustees shall execute a collateral assignment ("Assignment") of
each Policy to the Company. As between the Trustees and the Company, the
Assignment shall take precedence over any provisions of this Agreement. The
Assignment may not be altered or changed without the consent of the Company and
the Trustees. In case of a conflict between the terms of this Agreement and
those of the Assignment, the terms of the Assignment shall govern. As long as
this Agreement is in force the Company may not, without the written consent of
the Trustees, exercise any right under the Assignment
-2-
<PAGE> 3
which would reduce or compromise the death benefit otherwise payable under
Article 5, except to the extent the Company is permitted to withdraw or borrow
against Cash Value as provided in Article 1 of this Agreement. The Trustees
shall be entitled to all other ownership rights in respect of the Policies
which are not inconsistent with the rights of the Company.
5. Death Benefits. On the death of the Employee while this
Agreement is in force, the death benefits under the Policies shall be paid as
follows and in the following order:
(a) First, the Trustees shall be entitled to receive the
sum of Ten Million ($10,000,000) Dollars from the net death proceeds of Policy
A, and to the extent that is not sufficient, from the net death proceeds of
Policy B.
(b) Second, the Company shall be entitled to receive, the
entire remaining balance of the proceeds of Policy A (if any) and Policy B.
Receipt of these amounts shall satisfy in full any then existing obligation of
the Trustees under Article 3 of this Agreement.
6. Termination of Agreement. This Agreement shall terminate on the
occurrence of any of the following events:
(a) bankruptcy, receivership or dissolution of the Company;
(b) the election of the aggrieved party if either the
Company or the Trustees fail for any reason to make any required payment
pursuant to Article 2 of this Agreement toward payment of any premium due on a
Policy, provided that any election to terminate this Agreement under this
paragraph (c) must be made within twenty (20) days after the failure to make
the required contribution; or
(c) payment in full by the Trustees to the Company of an
amount equal to the then Cash Value of the Policies as defined in Article 7,
provided that upon receipt of such payment the Company shall release the
Assignments of the Policies made by the Trustees pursuant to Article 5 of this
Agreement; or
(d) the death of the Employee.
7. Disposition of Policies on Termination of Agreement. Except as
provided in Paragraph (c) of Article 6, if this Agreement is terminated under
Article 6 for any reason other than the death of the Employee, the Trustees
shall have sixty (60) days in which to pay over to the Company the Investments
which the Company has made pursuant to Article 2, but only to the extent
available from the Cash Value of each Policy (as defined below). Upon receipt
of full payment with respect to a Policy, the Company shall release the
Assignment of the respective Policy and the Trustees shall be free of all
provisions and restrictions of the Assignment and this Agreement with respect
to such policy. If within this sixty-day period the Trustees do not repay the
Investments to the extent required in this Article, the Company may enforce any
rights which
-3-
<PAGE> 4
it has under the Assignment of the respective Policy. "Cash Value" of Policy A
will mean the total of such Policy's share of the elected sub-accounts and the
amounts of any assets transferred to the general investment account, as
calculated according to the provisions of the Policy. "Cash Value" of Policy B
will mean cash value as such term is defined within that Policy.
8. Surrender or Termination of Policies. While this Agreement is
in force and effect, the Trustees will neither sell, surrender nor otherwise
terminate the Policies without the Company's prior written consent.
9. Prior Termination of Trust Agreement.
(a) If the Trust Agreement is terminated prior to the
termination of this Agreement, the Company shall continue this Agreement in the
name of the party designated to succeed to the Trustees' interest; provided,
however, that the successor-in-interest agrees to be bound by all the terms,
rights, privileges and obligations set forth in this Agreement.
(b) The Trustees are aware that a successor-in-interest to
the Policy has not been designated. The Trustees may designate a successor or
successors-in-interest upon notification to the Company and the Insurer.
10. Amendment of Agreement. This Agreement shall not be modified
or amended except by a writing signed by the Company and the then acting
Trustees. This Agreement shall be binding upon the heirs, administrators or
executors and the successors and assigns of each party to this Agreement.
11. Not a Contract of Employment. This Agreement shall not be
deemed to constitute a contract of employment.
12. Notices. Any notice to be given under this Agreement shall be
deemed given (a) upon delivery when given by physical delivery or facsimile
transmission (provided that the facsimile transmission is followed by a copy
sent by physical delivery, registered or certified mail or overnight carrier),
(b) three (3) days after deposited in the U.S. mails if sent by registered or
certified mail, postage prepaid, return receipt requested of (c) one (1) day
after delivery to an overnight carrier. If delivered to the Company, it shall
be addressed to Company at its principal place of business, Attention:
Secretary; if mailed to the Trustees, it shall be addressed to it at its
address last known on the records of the Company; and if delivered to the
Employee, it shall be addressed to him at his address last known on the records
of the Company, or, in each case, at such other address or addresses as any
party may hereafter designate in writing to the others. A copy of any notice
mailed to the Company, the Employee or to the Trustees shall be simultaneously
mailed to: Shereff, Friedman, Hoffman & Goodman, 919 Third Avenue, 20th Floor,
New York, New York 10022, Attention: Martin Nussbaum.
13. Miscellaneous. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and
-4-
<PAGE> 5
the same document. This Agreement shall be governed by and construed according
to the laws of the State of New York, other than the State's conflict of laws
provisions.
14. Captions and Paragraph Headings. Captions and paragraph
headings used herein are for convenience only, are not a part of this
Agreement, and shall not be used in construing it.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first set forth above.
DATASCOPE CORP.
By: /s/ M. Pitkowsky
------------------------------
M. PITKOWSKY
Senior VP & Secretary
/s/ Lawrence Saper
------------------------------
LAWRENCE SAPER
/s/ Carol Saper
------------------------------
Carol Saper, as Trustee of
the SAPER FAMILY 1994 TRUST
UTA DTD 6/28/94
/s/ Daniel Brodsky
------------------------------
Daniel Brodsky, as Trustee of
the SAPER FAMILY 1994 TRUST
UTA DTD 6/28/94
/s/ Helen Nash
------------------------------
Helen Nash, as Trustee of
the SAPER FAMILY 1994 TRUST
UTA DTD 6/28/94
-5-
<PAGE> 6
SPLIT DOLLAR LIFE INSURANCE - METROPOLITAN VARIABLE LIFE
Prepared For Datascope Corporation Fixed Account Values Projected At 6%
On The Life Of Lawrence Saper
<TABLE>
<CAPTION>
DATASCOPE CORPORATION TRUST
---------------------------------------------------------------------- ----------------------
RECOVERY UPON:
-------------------------
TERMINATION DEATH ADDITIONAL
------------------------- KEYMAN CORPORATE ANNUAL
RECOVERABLE SURRENDER DEATH DEATH CHARGE TO PREMIUM DEATH
YEAR AGE PREMIUM CASH VALUE BENEFIT BENEFIT EARNINGS OUTLAY(1) BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 65 Paid 953,000 638,000 953,000 0 (315,000) Paid 47,000 9,893,000
- ---------------------------------------------------------------------------------------------------------------------------------
1995 66 Non Mec 706,000 1,307,000 1,659,000 0 (37,000) 44,000 8,341,000
1996 67 706,000 2,023,000 2,365,000 0 10,000 44,000 7,635,000
1997 68 707,000 2,788,000 3,072,000 0 58,000 43,000 6,928,000
1998 69 708,000 3,588,000 3,780,000 0 92,000 42,000 6,220,000
1999 70 709,000 4,433,000 4,489,000 0 136,000 41,000 5,511,000
2000 71 82,000 4,692,000 4,571,000 0 177,000 43,000 5,429,000
2001 72 0 4,890,000 4,571,000 0 198,000 47,000 5,429,000
2002 73 0 5,078,000 4,571,000 0 188,000 52,000 5,429,000
2003 74 0 5,266,000 4,571,000 0 188,000 57,000 5,429,000
2004 75 0 5,466,000 4,571,000 0 200,000 62,000 5,429,000
2005 76 0 5,670,000 4,571,000 0 204,000 69,000 5,429,000
2006 77 0 5,868,000 4,571,000 0 198,000 77,000 5,429,000
2007 78 0 6,082,000 4,571,000 0 214,000 86,000 5,429,000
2008 79 0 6,305,000 4,571,000 0 223,000 96,000 5,429,000
2009 80 0 6,526,000 4,571,000 0 221,000 106,000 5,429,000
2010 81 0 6,726,000 4,571,000 0 200,000 106,000 5,429,000
2011 82 0 6,925,000 4,571,000 0 199,000 106,000 5,429,000
2012 83 0 7,127,000 4,571,000 0 202,000 106,000 5,429,000
2013 84 0 7,334,000 4,571,000 0 207,000 106,000 5,429,000
2014 85 0 7,551,000 4,571,000 0 217,000 106,000 5,429,000
2015 86 0 7,783,000 4,571,000 0 232,000 106,000 5,429,000
2016 87 0 8,040,000 4,571,000 0 257,000 106,000 5,429,000
2017 88 0 8,333,000 4,571,000 0 293,000 106,000 5,429,000
2018 89 0 8,676,000 4,571,000 0 343,000 106,000 5,429,000
2019 90 0 9,091,000 4,571,000 0 415,000 106,000 5,429,000
2020 91 0 9,613,000 4,571,000 0 522,000 106,000 5,429,000
2021 92 0 10,232,000 4,571,000 0 619,000 106,000 5,429,000
2022 93 0 10,904,000 4,571,000 0 672,000 106,000 5,429,000
2023 94 0 11,644,000 4,571,000 0 740,000 106,000 5,429,000
</TABLE>
<PAGE> 7
SPLIT DOLLAR LIFE INSURANCE PLAN -- SECURITY MUTUAL UNIVERSAL LIFE
Prepared For Datascope Corporation Account Values Projected At 6.75%
On The Life Of Lawrence Saper
<TABLE>
<CAPTION>
------------------------------------------------------------------ ----------------------
DATASCOPE CORPORATION TRUST
------------------------------------------------------------------ ----------------------
--------------------
RECOVERY UPON:
--------------------
TERMINATION DEATH ADDITIONAL
==================== KEYMAN CORPORATE ANNUAL
RECOVERABLE SURRENDER DEATH DEATH CHARGE TO PREMIUM DEATH
YEAR AGE PREMIUM CASH VALUE BENEFIT BENEFIT EARNINGS OUTLAY(1) BENEFIT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 67 Non MEC 242,000 0 242,000 3,290,000 (242,000) 8,000 1,659,000
1996 68 237,000 182,000 479,000 2,547,000 (55,000) 13,000 2,365,000
1997 69 232,000 406,000 711,000 1,815,000 (8,000) 18,000 3,072,000
1998 70 225,000 638,000 936,000 1,099,000 7,000 25,000 3,780,000
1999 71 217,000 881,000 1,152,000 401,000 26,000 33,000 4,489,000
2000 72 212,000 1,130,000 1,364,000 339,000 37,000 38,000 4,571,000
2001 73 208,000 1,388,000 1,572,000 373,000 50,000 42,000 4,571,000
2002 74 203,000 1,650,000 1,775,000 417,000 59,000 47,000 4,571,000
2003 75 197,000 1,917,000 1,972,000 470,000 70,000 53,000 4,571,000
2004 76 191,000 2,186,000 2,163,000 532,000 78,000 59,000 4,571,000
2005 77 184,000 2,422,000 2,347,000 568,000 52,000 66,000 4,571,000
2006 78 176,000 2,652,000 2,523,000 606,000 54,000 74,000 4,571,000
2007 79 168,000 2,870,000 2,691,000 640,000 50,000 82,000 4,571,000
2008 80 154,000 3,073,000 2,845,000 673,000 49,000 96,000 4,571,000
2009 81 146,000 3,271,000 2,991,000 709,000 52,000 104,000 4,571,000
2010 82 130,000 3,436,000 3,121,000 744,000 35,000 120,000 4,571,000
2011 83 111,000 3,583,000 3,232,000 780,000 36,000 139,000 4,571,000
2012 84 99,000 3,705,000 3,331,000 803,000 23,000 151,000 4,571,000
2013 85 89,000 3,800,000 3,419,000 810,000 6,000 161,000 4,571,000
2014 86 61,000 3,865,000 3,480,000 814,000 4,000 189,000 4,571,000
2015 87 61,000 3,914,000 3,541,000 802,000 (12,000) 189,000 4,571,000
2016 88 45,000 3,925,000 3,586,000 768,000 (34,000) 205,000 4,571,000
2017 89 28,000 3,900,000 3,614,000 715,000 (53,000) 222,000 4,571,000
2018 90 8,000 3,847,000 3,622,000 654,000 (61,000) 242,000 4,571,000
2019 91 (14,000) 3,782,000 3,609,000 602,000 (51,000) 264,000 4,571,000
2020 92 (34,000) 3,714,000 3,574,000 569,000 (34,000) 284,000 4,571,000
2021 93 (58,000) 3,630,000 3,516,000 543,000 (26,000) 308,000 4,571,000
2022 94 (75,000) 3,505,000 3,441,000 493,000 (50,000) 325,000 4,571,000
2023 95 (135,000) 3,378,000 3,307,000 500,000 8,000 385,000 4,571,000
2024 96 (203,000) 3,190,000 3,103,000 516,000 15,000 453,000 4,571,000
</TABLE>
<PAGE> 8
SPLIT DOLLAR LIFE INSURANCE PLAN COMPOSITE
Prepared For Datascope Corporation Composite
On The Life Of Lawrence Saper
<TABLE>
<CAPTION>
------------------------------------------------------------ -----------------------
DATASCOPE CORPORATION TRUST
------------------------------------------------------------ -----------------------
-------------------
RECOVERY UPON:
-------------------
TERMINATION DEATH ADDITIONAL
=================== KEYMAN CORPORATE ANNUAL
RECOVERABLE SURRENDER DEATH DEATH CHARGE TO PREMIUM DEATH
YEAR AGE PREMIUM CASH VALUE BENEFIT BENEFIT EARNINGS OUTLAY(1) BENEFIT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 66 953,000 638,000 953,000 0 (315,000) PAID 47,000 9,893,000
- -----------------------------------------------------------------------------------------------------------------------------
1995 67 NON-MEC 948,000 1,307,000 1,901,000 3,290,000 (279,000) 52,000 10,000,000
1996 68 943,000 2,205,000 2,844,000 2,547,000 (45,000) 57,000 10,000,000
1997 69 939,000 3,194,000 3,783,000 1,815,000 50,000 61,000 10,000,000
1998 70 933,000 4,226,000 4,716,000 1,099,000 99,000 67,000 10,000,000
1999 71 926,000 5,314,000 5,641,000 401,000 162,000 74,000 10,000,000
2000 72 294,000 5,822,000 5,935,000 339,000 214,000 81,000 10,000,000
2001 73 208,000 6,278,000 6,143,000 373,000 248,000 89,000 10,000,000
2002 74 203,000 6,728,000 6,346,000 417,000 247,000 99,000 10,000,000
2003 75 197,000 7,183,000 6,543,000 470,000 258,000 110,000 10,000,000
2004 76 191,000 7,652,000 6,734,000 532,000 278,000 121,000 10,000,000
2005 77 184,000 8,092,000 6,918,000 568,000 256,000 135,000 10,000,000
2006 78 176,000 8,520,000 7,094,000 606,000 252,000 151,000 10,000,000
2007 79 168,000 8,952,000 7,262,000 640,000 264,000 168,000 10,000,000
2008 80 154,000 9,378,000 7,416,000 673,000 272,000 192,000 10,000,000
2009 81 146,000 9,797,000 7,562,000 709,000 273,000 210,000 10,000,000
2010 82 130,000 10,162,000 7,692,000 744,000 235,000 226,000 10,000,000
2011 83 111,000 10,508,000 7,803,000 780,000 235,000 245,000 10,000,000
2012 84 99,000 10,832,000 7,902,000 803,000 225,000 257,000 10,000,000
2013 85 89,000 11,134,000 7,990,000 810,000 213,000 267,000 10,000,000
2014 86 61,000 11,416,000 8,051,000 814,000 221,000 295,000 10,000,000
2015 87 61,000 11,697,000 8,112,000 802,000 220,000 295,000 10,000,000
2016 88 45,000 11,965,000 8,157,000 768,000 223,000 311,000 10,000,000
2017 89 28,000 12,233,000 8,185,000 715,000 240,000 328,000 10,000,000
2018 90 8,000 12,523,000 8,193,000 654,000 282,000 348,000 10,000,000
2019 91 (14,000) 12,873,000 8,180,000 602,000 364,000 370,000 10,000,000
2020 92 (34,000) 13,327,000 8,145,000 569,000 488,000 390,000 10,000,000
2021 93 (58,000) 13,862,000 8,087,000 543,000 593,000 414,000 10,000,000
2022 94 (75,000) 14,409,000 8,012,000 493,000 622,000 431,000 10,000,000
2023 95 (135,000) 15,022,000 7,878,000 500,000 748,000 491,000 10,000,000
</TABLE>
<PAGE> 1
EXHIBIT 10.16
MODIFICATION AGREEMENT
Modification Agreement made and dated as of July 25, 1994, by and among
DATASCOPE CORP., a Delaware corporation (the "Company"), LAWRENCE SAPER (the
"Employee") and CAROL SAPER, DANIEL BRODSKY and HELEN NASH, Trustees of the
SAPER FAMILY 1994 TRUST UTA. dtd. 6/28/94 (collectively with all successors,
the "Trustees").
Reference is made to that certain Split-Dollar Agreement (the
"Split-Dollar Agreement") by and among the Trustees, the Executive, and the
Company, dated as of July 25, 1994, and to that certain Agreement by and
between the Executive and the Company, also dated as of July 25, 1994, between
the Executive and the Company (the "Agreement"), amending the Employment
Agreement between the Executive and the Company made as of June 30, 1990. Each
capitalized term used in this instrument and not defined herein shall have the
meaning given such term in the Split-Dollar Agreement.
1. The following is added to Paragraph 5 of the Split-Dollar Agreement:
"Notwithstanding the foregoing, until the three-year
anniversary of the effective date of the assignment of Policy B to the
Trustees:
"(a) The beneficiary designation of Policy B shall name Carol
Saper as Primary Beneficiary and the Trustees as
Contingent Beneficiary;
(b) If Carol Saper survives the Executive, on the death of
the Executive, the Trustees shall retain from the
proceeds of Policy A an amount equal to the difference
between $10,000,000 and the amount payable to Carol
Saper under Policy B, and the Company shall be entitled
to receive the balance of the proceeds of Policy A.
Receipt of such amount by the Company shall satisfy any
then existing obligation of the Trustees to the Company
under Paragraph 3."
2. The following is added to Paragraph 1(d) of the Agreement:
"Notwithstanding the foregoing, until the three-year anniversary of the
assignment of a certain policy of insurance on the life of the Executive
to the Trust, if Carol Saper is living at the death of the Executive and
is his surviving spouse as such term is defined in the Trust under
Agreement dated June 28, 1994 (the "Spouse"), such death benefit shall
be paid to the Spouse and the Trust in accordance with the terms of the
Split-Dollar Agreement."
3. (a) Other than the aforesaid sections of the Split-Dollar Agreement
and the Agreement, all terms and conditions of the Split-Dollar Agreement and
the Agreement shall remain in full force and effect.
<PAGE> 2
(b) The invalidity or enforceability of any provision of this
Modification Agreement shall not affect the validity or enforceability of any
other provision of this Modification Agreement, which shall remain in full
force and effect.
(c) This Modification Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Modification
Agreement as of the day and year first set forth above.
DATASCOPE CORP.
By: /s/ M. Pitkowsky
---------------------------------
M. PITKOWSKY
/s/ Lawrence Saper
---------------------------------
LAWRENCE SAPER
/s/ Carol Saper
---------------------------------
Carol Saper, as Trustee of the
SAPER FAMILY 1994 TRUST
UTA. DTD. 6/28/94
/s/ Daniel Brodsky
---------------------------------
Daniel Brodsky, as Trustee of the
SAPER FAMILY 1994 TRUST
UTA. DTD. 6/28/94
/s/ Helen Nash
---------------------------------
Helen Nash, as Trustee of the
SAPER FAMILY 1994 TRUST
UTA. DTD. 6/28/94
<PAGE> 1
EXHIBIT 10.17
ASSIGNMENT made as of this 25th day of July 1994 by CAROL SAPER, DANIEL
BRODSKY and HELEN NASH, as Trustees (collectively with all successors, the
"Trustees") of the SAPER FAMILY 1994 TRUST UTA. dtd. 6/28/94 (the "Assignor"),
as owner and beneficiary of a certain policy of insurance on the life of
LAWRENCE SAPER, and DATASCOPE CORP., a Delaware corporation (the "Assignee").
WHEREAS, the Assignor and the Assignee are contemporaneously entering
into a split-dollar agreement (the "Agreement"); and
WHEREAS, the Assignor has agreed to furnish to Assignee collateral
security for payments to be made by Assignor to Assignee under the Agreement;
NOW, THEREFORE, the Assignor hereby assigns to the Assignee, its
successors, and assigns certain rights to the extent described in Article 3
below under Insurance Policy No. 940 750 122UM, issued by the Metropolitan Life
Insurance Company (hereinafter called the "Insurer"), and any supplementary
contracts issued in connection therewith (such policy and contracts hereinafter
collectively called the "Policy"), under which LAWRENCE SAPER is the insured
(the "Insured"), such that the Assignee shall have the rights of a revocable
creditor beneficiary of the Policy, subject to all the terms of the Policy.
The Assignor agrees, and the Assignee, by the acceptance hereof, agrees
to the following conditions:
1. Liabilities secured. This assignment is made and the Policy is to
be held as collateral security for certain liabilities of the Assignor to the
Assignee, either now existing with respect to the Policy or that may hereafter
arise with respect to the Policy, as and to the extent set forth in the
Agreement.
2. Representation of solvency. The Assignor declares that no
proceedings in bankruptcy are pending against the Assignor and that the Trust
property is not subject to any assignment for the benefit of creditors.
3. Specific rights assigned. Without detracting from the generality of
the foregoing, the following specific rights are revocably granted to the
Assignee in this assignment as follows, namely: (a) on the death of the Insured
during the term of the Agreement, the right to receive all net death proceeds
of the Policy in excess of the sum of Ten Million ($10,000,000) Dollars; (b) in
the event the Policy is surrendered or cancelled by the Trustees, the right to
be repaid all then outstanding Investments by recovering the same to the extent
available from the Cash Value of the Policy (as defined below); (c) the right
to select the investments in sub-accounts and the general investment account as
provided in the Policy; and (d) the right to withdraw or borrow against the
Cash Value of the Policy as described in and subject to the terms of the
Agreement.
The Assignee shall have no other rights, options, privileges or powers
in and to the
<PAGE> 2
Policy as a result of this Assignment. "Cash Value of the Policy" will mean the
total of the Policy's share of the elected sub-accounts and the amounts of any
assets transferred to the general investment account, as calculated according
to the provisions of the Policy.
4. Rights reserved. The following specific rights, so long as the
Policy has not been surrendered, are reserved and excluded from this
Assignment: (a) the sole right to surrender or cancel the Policy and receive
the Cash Value thereof (subject to Article 3(b) of this Assignment and Article
9 of the Agreement) at any time provided by the terms of the Policy and at such
other times as the Insurer may allow; (b) the sole right to assign the Policy;
(c) the sole right to designate and change the beneficiary of the Policy; and
(d) the sole right to elect any optional mode of settlement permitted by the
Policy or allowed by the Insurer.
The Assignor agrees not to obtain any loans or advances on the Policy,
either from the Insurer or from other persons, or to pledge or assign the
Policy as security for such loans or advances as long as this Assignment is in
force and effect.
5. Covenants of Assignee. The Assignee covenants as follows:
(a) Any balance of sums received hereunder from the Insurer
remaining after payment to the Assignee as provided in the Agreement in the
event the Agreement is terminated will be paid by the Assignee to the persons
who would be entitled thereto under the terms of the Policy had this Assignment
not been executed.
(b) The Assignee will, upon request, forward the Policy without
unreasonable delay to the Insurer for endorsement of any designation or change
of beneficiary, or any election of an optional mode of settlement.
6. Authorization to Insurer. Unless the Insuror has been given written
notice by the Assignor and the Assignee to the contrary, the Insurer is hereby
authorized to recognize the Assignee's claims to rights hereunder without
investigating the reason for any action taken by the Assignee, or the validity
or amount of the liabilities, or the existence of any default therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. The signature of the Assignee shall be sufficient for the exercise of
its rights under the Policy, and the receipt of the Assignee for any sums
received shall be a full discharge and release therefor to the Insurer. Checks
for all or any part of the sums payable under the Policy shall be drawn to the
exclusive order of the Assignee, if so requested by the Assignee.
7. Exercise of Rights. The exercise of any right given herein to the
Assignee shall be at the option of the Assignee, but the Assignee may exercise
any such right without notice to, or assent by the Assignor, without affecting
the liability of, or releasing any interest hereby assigned by the Assignor.
8. Termination and Amendment of Assignment. This Assignment may not be
altered or changed without the consent of the Assignee and the Assignor. As
long as this Agreement is in force, the Assignee may not, without the prior
written consent of the Assignor, exercise any right under this Assignment that
would reduce or compromise the death benefit
<PAGE> 3
payable under Article 6 of the Agreement.
9. Insurer Protected. The Insurer shall be fully protected in
recognizing any request made by the Assignor with respect to the exercise of
any incident of ownership in and to the Policy, with or without the consent of
the Assignee, and upon surrender of the Policy, the Policy shall be terminated
and be of no further force or effect.
10. Construction. In the event of any conflict between the
provisions of this Assignment and the provisions of the Agreement, the
provisions of the Agreement shall control.
11. Payment of Assignee's Obligation. Upon the full payment to the
Assignee of the Assignor's obligation under Article 4 of the Agreement, the
Assignee shall release this Assignment, and the ownership of the Policy shall
be free of all provisions and restrictions of this Assignment.
IN WITNESS WHEREOF, the Assignor and Assignee have duly executed this
Assignment on the day and year first set forth above.
/s/ Carol Saper
-------------------------------
CAROL SAPER, as Trustee of
the SAPER FAMILY 1994
TRUST UTA. DTD. 6/28/94
/s/ Daniel Brodsky
-------------------------------
DANIEL BRODSKY, as Trustee of
the SAPER FAMILY 1994
TRUST UTA. DTD. 6/28/94
/s/ Helen Nash
-------------------------------
HELEN NASH, as Trustee of
the SAPER FAMILY 1994
TRUST UTA. DTD. 6/28/94
DATASCOPE CORP.
By: /s/ M. Pitkowsky
-------------------------------
Title: Senior Vice President
and Secretary
------------------------
<PAGE> 1
EXHIBIT 10.18
ASSIGNMENT made as of this 25th day of July, 1994, by CAROL SAPER,
DANIEL BRODSKY and HELEN NASH, as Trustees (collectively with all successors,
the "Trustees") of the SAPER FAMILY 1994 TRUST UTA. dtd. 6/28/94 (the
"Assignor"), as owner and beneficiary of a certain policy of insurance on the
life of LAWRENCE SAPER, and DATASCOPE CORP., a Delaware corporation (the
"Assignee").
WHEREAS, the Assignor and the Assignee are contemporaneously entering
into a split-dollar agreement (the "Agreement"); and
WHEREAS, the Assignor has agreed to furnish to Assignee collateral
security for payments to be made by Assignor to Assignee under the Agreement;
NOW, THEREFORE, the Assignor hereby assigns to the Assignee, its
successors, and assigns certain rights to the extent described in Article 3
below under Insurance Policy No. 110047711, issued by Security Mutual Life
Insurance Company of New York (hereinafter called the "Insuror"), and any
supplementary contracts issued in connection therewith (collectively, the
"Policy"), under which LAWRENCE SAPER is the insured (the "Insured"), such that
the Assignee shall have the rights of a revocable creditor beneficiary of the
Policy, subject to all the terms of the Policy.
The Assignor agrees, and the Assignee, by the acceptance hereof, agrees
to the following conditions:
1. Liabilities secured. This assignment is made and the Policy is
to be held as collateral security for the liabilities of the Assignor to the
Assignee, either now existing with respect to the Policy or that may hereafter
arise with respect to the Policy, as and to the extent set forth in the
Agreement.
2. Representation of solvency. The Assignor declares that no
proceedings in bankruptcy are pending against the Assignor and that the Trust
property is not subject to any assignment for the benefit of creditors.
3. Specific rights assigned. Without detracting from the
generality of the foregoing, the following specific rights are revocably
granted to the Assignee in this assignment as follows, namely: (a) on the death
of the Insured during the term of the Agreement, the right to receive the
amount due to Assignee pursuant to Article 5 of the Agreement from the net
death proceeds of the Policy; (b) in the event the Policy is surrendered or
cancelled by the Trustees, the right to be repaid all then outstanding
Investments by recovering the same from the Cash Value (as defined below) of
the Policy; and (c) the right to withdraw or borrow against the Cash Value of
the Policy as described in and subject to the terms of the Agreement.
The Assignee shall have no other rights, options, privileges or powers
in and to the Policy as a result of this Assignment. "Cash Value of the Policy"
will have the meaning set forth
<PAGE> 2
in the provisions of the Policy.
4. Rights reserved. The following specific rights, so long as the
Policy has not been surrendered, are reserved and excluded from this
Assignment: (a) the sole right to surrender or cancel the Policy and receive
the Cash Value thereof (subject to Article 3(b) of this Assignment and Article
9 of the Agreement) at any time provided by the terms of the Policy and at such
other times as the Insuror may allow; (b) the sole right to assign the Policy;
(c) the sole right to designate and change the beneficiary of the Policy; and
(d) the sole right to elect any optional mode of settlement permitted by the
Policy or allowed by the Insuror.
The Assignor agrees not to obtain any loans or advances on the Policy,
either from the Insuror or from other persons, or to pledge or assign the
Policy as security for such loans or advances as long as this Assignment is in
force and effect.
5. Covenants of Assignee. The Assignee covenants as follows:
(a) Any balance of sums received hereunder from the Insuror
remaining after payment to the Assignee as provided in the Agreement in the
event the Agreement is terminated will be paid by the Assignee to the persons
who would be entitled thereto under the terms of the Policy had this Assignment
not been executed.
(b) The Assignee will, upon request, forward the Policy without
unreasonable delay to the Insuror for endorsement of any designation or change
of beneficiary, or any election of an optional mode of settlement.
6. Authorization to Insuror. Unless the Insuror has been given written
notice by the Assignor and the Assignee to the contrary, the Insuror is hereby
authorized to recognize the Assignee's claims to rights hereunder without
investigating the reason for any action taken by the Assignee, or the validity
or amount of the liabilities, or the existence of any default therein, or the
application to be made by the Assignee of any amounts to be paid to the
Assignee. The signature of the Assignee shall be sufficient for the exercise
of its rights under the Policy, and the receipt of the Assignee for any sums
received shall be a full discharge and release therefor to the Insuror. Checks
for all or any part of the sums payable under the Policy shall be drawn to the
exclusive order of the Assignee, if so requested by the Assignee.
7. Exercise of Rights. The exercise of any right given herein to the
Assignee shall be at the option of the Assignee, but the Assignee may exercise
any such right without notice to, or assent by the Assignor, without affecting
the liability of, or releasing any interest hereby assigned by the Assignor.
8. Termination and Amendment of Assignment. This Assignment may not be
altered or changed without the consent of the Assignee and the Assignor. As
long as this Agreement is in force, the Assignee may not, without the prior
written consent of the Assignor, exercise any right under this Assignment that
would reduce or compromise the death benefit payable under Article 6 of the
Agreement.
<PAGE> 3
9. Insuror Protected. The Insuror shall be fully protected in
recognizing any request made by the Assignor with respect to the exercise of
any incident of ownership in and to the Policy, with or without the consent of
the Assignee, and upon surrender of the Policy, the Policy shall be terminated
and be of no further force or effect.
10. Construction. In the event of any conflict between the provisions
of this Assignment and the provisions of the Agreement, the provisions of the
Agreement shall control.
11. Payment of Assignee's Obligation. Upon the full payment to the
Assignee of the Assignor's obligation under Article 4 of the Agreement, the
Assignee shall release this Assignment, and the ownership of the Policy shall
be free of all provisions and restrictions of this Assignment.
IN WITNESS WHEREOF, the Assignor and Assignee have duly executed this
Assignment as of the day and year first set forth above.
/s/ Carol Saper
------------------------------
CAROL SAPER, as Trustee of
The Saper Family 1994 Trust
UTA DTD 6/28/94
/s/ Daniel Brodsky
------------------------------
DANIEL BRODSKY, as Trustee
of the Saper Family 1994 Trust
UTA DTD 6/28/94
/s/ Helen Nash
------------------------------
HELEN NASH, as Trustee of
the Saper Family 1994 Trust
UTA DTD 6/28/94
DATASCOPE CORP.
By: /s/ M. Pitkowsky
----------------------------
Title: Senior Vice President
and Secretary
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
333-00537, 33-60169, 33-69922 and 33-33373 of Datascope Corp. on Form S-8 of our
report dated August 2, 1996 (September 24, 1996 as to Note 10), appearing in
this Annual Report on Form 10-K of Datascope Corp. for the year ended June 30,
1996.
New York, New York
September 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,574
<SECURITIES> 64,805
<RECEIVABLES> 51,757
<ALLOWANCES> (1,198)
<INVENTORY> 34,757
<CURRENT-ASSETS> 163,438
<PP&E> 80,336
<DEPRECIATION> (36,363)
<TOTAL-ASSETS> 234,464
<CURRENT-LIABILITIES> 42,079
<BONDS> 0
0
0
<COMMON> 161
<OTHER-SE> 181,519
<TOTAL-LIABILITY-AND-EQUITY> 234,464
<SALES> 211,300
<TOTAL-REVENUES> 211,300
<CGS> 84,600
<TOTAL-COSTS> 84,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 26,841
<INCOME-TAX> 6,424
<INCOME-CONTINUING> 20,417
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,417
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
