<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________to_______________________
Commission file number 0-10728
GISH BIOMEDICAL, INC.
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(Exact name of registrant as specified in its charter)
California 95-3046028
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2681 Kelvin Avenue Irvine, California 92614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 756-5485
N/A
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Former name, former address and former fiscal year, if
changed since last report.
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 is required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
The number of shares outstanding of each of the issuer's classes of
common stock, as of November 7, 1997: 3,439,195.
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GISH BIOMEDICAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I. Financial Information
Item 1: Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of 3
September 30, 1997 and June 30, 1997.
Condensed Consolidated Statements of Operations 4
for the three months ended September 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flows 5
for the three months ended September 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 6, 7, 8
Item 2: Management's Discussion and Analysis of 9, 10, 11
Financial Condition and Results of Operations
PART II. Other Information
Item 6: Exhibits and Reports on Form 8-K 11
</TABLE>
2
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GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1997
------------------ -------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,464,100 $ 3,977,100
Short-term investments 1,031,600 1,031,600
Accounts receivable, net 3,476,600 3,970,100
Inventories 7,027,500 6,698,700
Deferred tax assets 646,000 646,000
Prepaid expenses 385,700 380,000
------------ ------------
Total current assets 17,031,500 16,703,500
Property and equipment, at cost 10,493,800 10,386,900
Less accumulated depreciation (6,608,000) (6,374,100)
------------ ------------
Net property and equipment 3,885,800 4,012,800
Deferred tax assets 194,000 194,000
Other assets 114,100 117,700
------------ ------------
$ 21,225,400 $ 21,028,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 754,800 $ 729,400
Accrued compensation and related items 601,400 533,700
Other accrued liabilities 110,900 99,700
------------ ------------
Total current liabilities 1,467,100 1,362,800
Deferred rent 319,900 317,300
Shareholders' equity:
Preferred stock, 2,250,000 shares authorized;
no shares outstanding
Common stock, no par value, 7,500,000 shares
authorized, 3,439,195 shares issued and
outstanding (3,430,145 shares at June 30, 1997) 10,097,100 10,078,300
Note receivable - officer stock purchase (53,800) (35,000)
Retained earnings 9,395,100 9,304,600
------------ ------------
Total shareholders' equity 19,438,400 19,347,900
------------ ------------
$ 21,225,400 $ 21,028,000
============ ============
</TABLE>
See accompanying notes
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GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net sales $5,317,700 $5,312,600
Cost of sales 3,635,500 3,513,100
---------- ----------
Gross profit 1,682,200 1,799,500
Research and development 237,400 347,200
Selling and marketing 950,000 913,200
General and administrative 419,800 491,900
---------- ----------
Total operating expenses 1,607,200 1,752,300
---------- ----------
Operating income 75,000 47,200
Interest income 73,400 53,600
---------- ----------
Income before provision for taxes 148,400 100,800
Provision for taxes 57,900 39,300
---------- ----------
Net income $ 90,500 $ 61,500
========== ==========
Net income per share: $ .03 $ .02
========== ==========
Average common and common
equivalent shares: 3,512,000 3,519,678
========== ==========
</TABLE>
See accompanying notes
4
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GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 90,500 $ 61,500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 233,900 221,700
Amortization 6,100 56,600
Deferred rent 2,600 9,300
Changes in operating assets and liabilities 263,300 (181,300)
----------- -----------
Net cash provided by operating activities 596,400 167,800
Cash flows from investing activities:
Purchases of property and equipment (106,900) (126,300)
Increase in other assets (2,500) (4,200)
----------- -----------
Net cash used in investing activities (109,400) (130,500)
Cash flows from financing activities:
Payment (increase) in note receivable from officer (18,800) 10,000
Proceeds from stock options exercised 18,800 50,900
----------- -----------
Net cash provided by financing activities -- 60,900
Net increase in cash and cash equivalents 487,000 98,200
Cash and cash equivalents at beginning of period 3,977,100 3,314,200
----------- -----------
Cash and cash equivalents at end of period $ 4,464,100 $ 3,412,400
=========== ===========
</TABLE>
See accompanying notes
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GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. General
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the results of operations and cash flows for the three
month periods ended September 30, 1997 and 1996, and financial position
at September 30, 1997, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures in such condensed
consolidated financial statements are adequate to make the information
presented not misleading, these condensed consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements and the notes thereto included in the Company's
Annual Report filed with the Securities and Exchange Commission on Form
10-K for the year ended June 30, 1997.
Statement of Cash Flows
Changes in operating assets and liabilities as shown in the condensed
consolidated statements of cash flows comprise:
<TABLE>
<CAPTION>
Three months ended September 30, 1997 1996
-------------------------------- ---- ----
<S> <C> <C>
Decrease (increase) in:
Accounts receivable $ 493,500 $ 123,900
Inventories (328,800) 10,300
Prepaid expenses (5,700) (65,100)
Increase (decrease) in:
Accounts payable 25,400 (261,000)
Accrued compensation and related items 67,700 34,500
Accrued income taxes -- 4,600
Other accrued liabilities 11,200 (28,500)
--------- ---------
Change in operating assets and liabilities $ 263,300 $(181,300)
========= =========
</TABLE>
The Company did not pay any Federal or State income taxes during the
three month period ended September 30, 1997.
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GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net
realizable value and are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1997
------------------ -------------
<S> <C> <C>
Raw materials $3,613,700 $3,529,800
Work in progress 1,173,200 1,225,800
Finished goods 2,240,600 1,943,100
---------- ----------
$7,027,500 $6,698,700
========== ==========
</TABLE>
3. Earnings per share
Earnings per share is based on the weighted average number of common
and, where dilutive, common equivalent shares outstanding during the
period. Common equivalent shares include the potential dilution from the
exercise of stock options and warrants, reduced by the number of common
shares which are assumed to have been purchased with the income tax
benefits and proceeds from the exercise of such instruments. Fully
diluted earnings per share reflects additional dilution, from the
assumed exercise of the dilutive common stocks options at the beginning
of the period.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The Company has not yet determined what the impact of
Statement 128 will be on the calculation of fully diluted earnings per
share, but it is not expected to be material.
4. Acquisition
On September 13, 1995, the Company entered into an agreement to acquire
the assets and technology of Creative Medical Development, Inc. ("CMD")
a manufacturer of ambulatory infusion pumps and began to operate the
business under a management agreement whereby Gish assumed the risks and
rewards of the operation of the acquired assets until the closing date
of the acquisition. The agreement provided for a payment of $600,000 in
cash and $2,000,000 of Gish Biomedical, Inc. common stock for these
assets. The Company assumed ownership of the net assets and technology
acquired from CMD on April 17, 1996 and entered into a one-year lease
for
7
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GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
the building CMD occupied. The Company also executed one-year employment
agreements with four key employees which included provisions for the
issuance of up to 53,500 shares of the Company's common stock to those
employees upon completion of certain performance criteria.
In November 1996, two of the former CMD employees were terminated. In
February 1997, the Company was released from its lease obligation for
the northern California facility and ceased operations in that facility.
Total shares issued to former CMD employees under the employment
contracts were 13,876.
During the fourth quarter of fiscal 1997, due to the low level of
infusion pump sales and negative cash flow projections, the Company
determined that the unamortized goodwill of $1,824,200 associated with
the purchase of the infusion pump from CMD had little, if any future
value. Accordingly, the Company recorded an impairment of goodwill of
$1.8 million in fiscal 1997 to write-off the goodwill associated with
this product line.
8
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GISH BIOMEDICAL, INC.
SEPTEMBER 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations: On September 13, 1995, the Company entered into an
agreement to acquire the assets and technology of Creative Medical Development,
Inc. ("CMD") a manufacturer of ambulatory infusion pumps and began to operate
the business under a management agreement whereby Gish assumed the risks and
rewards of the operation of the acquired assets until the closing date of the
acquisition. The agreement provided for a payment of $600,000 in cash and
$2,000,000 of Gish Biomedical, Inc. common stock for these assets. The Company
assumed ownership of the net assets and technology acquired from CMD on April
17, 1996 and entered into a one-year lease for the building CMD occupied. The
Company also executed one-year employment agreements with four key employees
which included provisions for the issuance of up to 53,500 shares of the
Company's common stock to those employees upon completion of certain performance
criteria.
In November 1996, two of the former CMD employees were terminated. In February
1997, the Company was released from its lease obligation for the northern
California facility and ceased operations in that facility. Total shares issued
to former CMD employees under the employment contracts were 13,876. During the
fourth quarter of fiscal 1997, due to the low level of infusion pump sales and
negative cash flow projections, the Company determined that the unamortized
goodwill of $1,824,200 associated with the purchase of the infusion pump from
CMD had little, if any future value. Accordingly, the Company recorded a charge
to earnings to write-off the unamortized balance.
Sales for the three month period ended September 30, 1997 were comparable to the
corresponding period of fiscal 1997. In September 1997, the Company was informed
by two of its major distributors, Specialized Medical Systems (SMS) and
CardioVascular Concepts (CVC), that they were electing to terminate their
distributor relationships with the Company effective December 1997. For the
fiscal year ended, June 30, 1997 SMS and CVC represented 15% and 7% of the
Company's total sales, respectively. However, the two distributors only
accounted for 12% and 5%, respectively, of the Company's gross profit for the
same period.
The Company intends to engage, during the second quarter of fiscal 1998, a
direct sales force of approximately seven persons to replace the two distributor
sales organizations.
The conversion of these territories to direct sales representation should afford
the Company better marketing opportunities with respect to its new oxygenator.
Gish had previously excluded these two territories from its initial marketing
plan for the launch of its new Vision(TM) oxygenator, scheduled for November
1997, because these distributors represented a competing oxygenator product.
With the conversion of these territories to a direct sales force, the Company
will be able to sell the Vision(TM) in conjunction with custom tubing packs,
cardioplegia systems, cardiotomy reservoirs and oxygen saturation monitors
without limitations.
9
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GISH BIOMEDICAL, INC.
SEPTEMBER 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Cost of sales for the period ended September 30, 1997 was 68% of sales as
compared to 66% of sales for the corresponding period of fiscal 1997. The
increase in cost of sales of 2% for the period ended September 30, 1997 is
primarily due to downward pricing pressures in the cardiovascular device segment
of the medical industry combined with general price increases on materials,
labor and other cost of sales components.
Research and development expenses for the period ended September 30, 1997
decreased $110,000 over the corresponding period of fiscal 1997. The decrease is
primarily due to elimination of a separate engineering staff for the pump
acquired from CMD. The Company is actively engaged in several new product
development projects and ISO 9002 certification, which will require expenditures
approximating $350,000 per quarter for the foreseeable future.
Selling and marketing expenses for the period ended September 30, 1997 increased
$37,000 or 4% over the corresponding period of fiscal 1997. The increase was due
to increases in marketing activity in anticipation of full market release of the
Company's recently completed Vision(TM) oxygenator.
The Company currently has plans to expand its direct sales force within the
United States commencing the second quarter of fiscal 1998. The Company
anticipates that its selling and marketing expenses will increase during the
second and third quarters of fiscal 1998 as the Company adds several new sales
positions for the new direct territories and incurs additional marketing
expenses associated with the launch of its new Vision(TM) oxygenator.
General and administrative expenses decreased by $72,000 for the period ended
September 30, 1997 over the corresponding period of fiscal 1997. The decrease is
due to cessation of operations of the northern California facility. The Company
anticipates general and administrative expenses to be approximately $450,000 to
$500,000 per quarter for the remainder of this fiscal year.
The provision for taxes is based upon a combined federal and state effective tax
rate of 39% for all periods presented.
The effects of inflation have not been a significant factor in the results of
operations. The cardiovascular surgery market has been experiencing downward
pricing pressures which are reflected in lower sales dollars per unit sold.
Liquidity and capital resources: At September 30, 1997, the Company had
$15,564,400 of working capital, an increase of $223,700 from working capital at
June 30, 1997. The increase is primarily due to increases in cash offset by an
increase in trade accounts payable and a decrease in accounts receivable.
10
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GISH BIOMEDICAL, INC.
SEPTEMBER 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
For the period ended September 30, 1997 cash provided by operations of $596,400
was primarily due to profitable operations as adjusted for non cash expenses and
an increase in inventories offset by a decrease in accounts receivable. For the
period ended September 30, 1996 cash provided by operations of $167,800 was
primarily due to profitable operations and a decrease in accounts receivable.
For the period ended September 30, 1997 cash used in investing activities of
$109,400 was primarily due to purchases of property and equipment for the
manufacture of new products and to improve operating efficiencies. For the
period ended September 30, 1996 cash used in investing activities of $130,500
was primarily due to purchases of property and equipment for the manufacture of
new products.
For the period ended September 30, 1997 no cash was provided by financing
activities. For the period ended September 30, 1996 cash provided by financing
activities of $60,900 was primarily due to proceeds from the exercise of stock
options.
The Company believes that cash generated from operations together with available
cash will be adequate to meet the Company's planned expenditures and liquidity
needs for fiscal 1998.
This Quarterly Report on Form 10-Q contains certain forward-looking statements
that are based on current expectations. In light of the important factors that
can materially affect results, including those set forth below and elsewhere in
this Quarterly Report on Form 10-Q, the inclusion of forward-looking information
herein should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved. The Company
may encounter competitive, technological, financial and business challenges
making it more difficult than expected to continue to develop and market its
products; the market may not accept the Company's existing and future products;
the Company may be unable to retain existing key management personnel; and there
may be other material adverse changes in the Company's operations or business.
Certain important factors affecting the forward-looking statements made herein
include, but are not limited to (i) continued downward pricing pressures in the
Company's targeted markets, (ii) the continued acquisition of the Company's
customers by certain of its competitors and (iii) the decision by the Company to
replace its distributor network with a direct sales force in certain geographic
territories. Assumptions relating to budgeting, marketing, product development
and other management decisions are subjective in many respects and thus
susceptible to interpretations and periodic revisions based on actual experience
and business developments, the impact of which may cause the Company to alter
its marketing, capital expenditure or other budgets, which may in turn affect
the Company's financial position and results of operations. The reader is
therefore cautioned not to place undue reliance on forwarding-looking statements
contained herein, which speak as of the date of this Report.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8K.
10.1 Severance Compensation Agreement between the Registrant
and Jack Brown dated August 15, 1997.
10.2 Severance Compensation Agreement between the Registrant
and Jeanne Miller dated August 15, 1997.
27.1 Financial Data Schedule
11
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GISH BIOMEDICAL, INC.
SEPTEMBER 30, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GISH BIOMEDICAL, INC.
Date: 12/2/98 /s/ JEANNE M. MILLER
---------------------------
JEANNE M. MILLER
Chief Financial Officer
12
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
10.1 Severance Compensation Agreement between the Registrant
and Jack Brown dated August 15, 1997.
10.2 Severance Compensation Agreement between the Registrant
and Jeanne Miller dated August 15, 1997.
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
SEVERANCE COMPENSATION AGREEMENT
SEVERANCE COMPENSATION AGREEMENT dated as of August 15, 1997, between
GISH BIOMEDICAL, INC. a California corporation ("Company"), and Jack Brown
("Executive").
The Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of Executive
to his assigned duties and to provide to Executive fixed severance compensation
in the event of termination under certain circumstances.
This Agreement sets forth the severance compensation that the Company
agrees it will pay to Executive if Executive's employment with the Company
terminates under one of the circumstances described herein.
1. Term. The term of this Agreement shall commence on the date hereof
and shall end on the later of (i) the second anniversary of the date of this
Agreement or (ii) two (2) years following the date on which notice of
non-renewal or termination of this Agreement is given by either the Company or
Executive to the other. Thus, this Agreement shall be renewable automatically on
a daily basis so that the outstanding term is always two (2) years following any
effective notice of non-renewal or of termination given by the Company or
Executive.
2. Severance Payment. In the event that Executive's employment is
terminated for any reason other than (i) death, (ii) Disability (as defined in
Section 3(a)) or (iii) a Voluntary Termination of Employment Without Good Reason
(as defined in Section 3(b)):
(a) Subject to Section 2(b) below, Executive shall be entitled to
a severance payment equal to 299% of his "base amount" as such term is defined
in Internal Revenue Code ("Code") Section 280G ("Base Amount"), payable in a
lump sum within thirty (30) days of the date of termination. In the event that
Executive's employment is terminated for death, Disability or a Voluntary
Termination of Employment Without Good Reason or in the event of a "Qualified
Rehire" as such term is defined in Section 3(d), Executive shall not be entitled
to a severance payment.
(b) Limitation. To the extent that any or all of the payments and
benefits provided for in this Agreement constitute "parachute payments" within
the meaning of Section 280G of the Code and, but for this Section 2(b), would be
subject to the excise tax imposed by Section 4999 of the Code, the aggregate
amount of such payments and benefits shall be reduced such that the present
value thereof (as determined under the Code and applicable regulations) is equal
to 2.99 times Executive's Base Amount. The determination of any reduction of any
payment or benefits under this Section 2 pursuant to the foregoing provision
shall be made by a nationally recognized public accounting firm chosen by the
Company in good faith, and such determination shall be conclusive and binding on
the Company and Executive.
3. Definitions.
(a) The term "Disability" as used in this agreement shall mean
three (3) months of substantially continuous disability. Disability shall be
deemed "substantially continuous" if, as a
<PAGE> 2
practical matter, Executive, by reason of mental or physical health, is unable
to sustain reasonably long periods of substantial performance of her duties.
(b) The term "Voluntary Termination of Employment Without Good
Reason" shall mean Executive's termination of employment by the action of
Executive, other than a voluntary termination following a Change in Control (as
defined in Section 3(c)) or a voluntary termination due to (i) material breach
by the Company of any representation, covenant or agreement contained in this
Agreement, (ii) a change in Executive's title or a reduction or alteration of
the duties of Executive which are materially consistent with the duties
generally performed by a chief executive officer, (iii) a reduction in
Executive's base salary or (iv) a requirement that Executive relocate outside
Orange County California.
(c) A "Change in Control" shall be deemed to have occurred if (i)
there shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the merger have
substantially the same proportionate ownership of at least 80% of common stock
of the surviving corporation immediately after the merger, or (y) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, (ii)
the stockholders of the Company approve any plan or proposal for the liquidation
or dissolution of the Company, (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 20% or more of the Company's outstanding
shares of Common Stock (other than any such person who had record or beneficial
ownership of at least 20% of the Company's outstanding shares of Common Stock on
the date hereof), or (iv) during any period of two consecutive years during the
term of this Agreement, individuals who at the beginning of the two year period
constituted the entire Board of Directors do not for any reason constitute a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
(d) A "Qualified Rehire" shall have occurred, effective upon
consummation of a Change in Control, when the respective successor or surviving
entity to the Company employs Executive with such duties and compensation terms
as are materially consistent with those duties and compensation terms as were in
effect between the Company and Executive prior to the consummation of such
Change in Control.
4. Notice of Termination. Any termination by the Company pursuant to
which the Company asserts that a severance payment is not due Executive under
Section 2 shall be communicated by a Notice of Termination. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice which shall
indicate those specific provisions in this Agreement relied upon and which set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment without a severance payment. For
purposes of this Agreement, no such purported termination by the Company shall
be effective without such Notice of Termination.
2
<PAGE> 3
5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights; No Employment Contract.
(a) Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by Executive as the result
of employment by another employer after the date of termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish Executive's existing rights, or rights which would accrue solely as a
result of the passage of time, under any benefit plan, incentive plan,
employment agreement or other contract, plan or arrangement.
(c) Nothing herein shall be deemed to give Executive any right to
continue as an Employee of the Company, and the Company shall have the right,
subject to compliance with this Agreement, to terminate Executive at any time.
6. Successors. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts are still payable to [him/her] hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legatee, or other
designee or, if there be no such designee, to Executive's estate.
7. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Gish Biomedical, Inc.
Kelvin Avenue
Irvine, California 92714-5821
Attention: Secretary
If to Executive:
Jack Brown
11791 Las Palmas
Santa Ana, CA 92705
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and the Company. No waiver by either party hereto
at any time of any breach by
3
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the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. This Agreement shall
be governed by and construed in accordance with the laws of the State of
California.
9. Validity. The invalidity or unenforceability of any provisions 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.
10. 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 will constitute one and the same instrument.
11. Entire Agreement. This Agreement contains all of the terms agreed
upon between Executive and the Company with respect to the subject matter hereof
and replaces and supersedes all prior Severance Compensation Agreements between
Executive and the Company. Executive and the Company agree that no term,
provision or condition of this Agreement shall be held to be altered, amended,
changed or waived in any respect except by subsequent written agreement of
Executive and the Company.
12. Arbitration, Legal Fees and Expenses. In the event of any
controversy, claim or dispute between the parties hereto arising out of or
relating to this Agreement, the matter shall be determined by arbitration, which
shall take place in Orange County, California, under the rules of the American
Arbitration Association; and a judgment upon such award may be entered in any
court having jurisdiction thereof. Any decision or award of such arbitrator
shall be final and binding upon the parties and shall not be appealable. The
parties hereby consent to the jurisdiction of such arbitrator and of any court
having jurisdiction to enter judgment upon and enforce any action taken by such
arbitrator. The Company shall pay all legal fees and expenses which Executive
may incur as a result of the Company's contesting the validity, enforceability
or Executive's interpretation of, or determinations under, this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
"COMPANY" "EXECUTIVE"
GISH BIOMEDICAL, INC.
By: /S/ Dick Dutrisac /S/ Jack Brown
------------------------------- -----------------------------
Its: Authorized Agent Jack Brown
-------------------------------
4
<PAGE> 1
EXHIBIT 10.2
SEVERANCE COMPENSATION AGREEMENT
SEVERANCE COMPENSATION AGREEMENT dated as of August 15, 1997, between
GISH BIOMEDICAL, INC. a California corporation ("Company"), and Jeanne Miller
("Executive").
The Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of Executive
to her assigned duties and to provide to Executive fixed severance compensation
in the event of termination under certain circumstances.
This Agreement sets forth the severance compensation that the Company
agrees it will pay to Executive if Executive's employment with the Company
terminates under one of the circumstances described herein.
1. Term. The term of this Agreement shall commence on the date hereof
and shall end on the later of (i) the second anniversary of the date of this
Agreement or (ii) two (2) years following the date on which notice of
non-renewal or termination of this Agreement is given by either the Company or
Executive to the other. Thus, this Agreement shall be renewable automatically on
a daily basis so that the outstanding term is always two (2) years following any
effective notice of non-renewal or of termination given by the Company or
Executive.
2. Severance Payment. In the event that Executive's employment is
terminated for any reason other than (i) death, (ii) Disability (as defined in
Section 3(a)) or (iii) a Voluntary Termination of Employment Without Good Reason
(as defined in Section 3(b)):
(a) Subject to Section 2(b) below, Executive shall be entitled to
a severance payment equal to 299% of her "base amount" as such term is defined
in Internal Revenue Code ("Code") Section 280G ("Base Amount"), payable in a
lump sum within thirty (30) days of the date of termination. In the event that
Executive's employment is terminated for death, Disability or a Voluntary
Termination of Employment Without Good Reason or in the event of a "Qualified
Rehire" as such term is defined in Section 3(d), Executive shall not be entitled
to a severance payment.
(b) Limitation. To the extent that any or all of the payments and
benefits provided for in this Agreement constitute "parachute payments" within
the meaning of Section 280G of the Code and, but for this Section 2(b), would be
subject to the excise tax imposed by Section 4999 of the Code, the aggregate
amount of such payments and benefits shall be reduced such that the present
value thereof (as determined under the Code and applicable regulations) is equal
to 2.99 times Executive's Base Amount. The determination of any reduction of any
payment or benefits under this Section 2 pursuant to the foregoing provision
shall be made by a nationally recognized public accounting firm chosen by the
Company in good faith, and such determination shall be conclusive and binding on
the Company and Executive.
3. Definitions.
(a) The term "Disability" as used in this agreement shall mean
three (3) months of substantially continuous disability. Disability shall be
deemed "substantially continuous" if, as a
<PAGE> 2
practical matter, Executive, by reason of mental or physical health, is unable
to sustain reasonably long periods of substantial performance of her duties.
(b) The term "Voluntary Termination of Employment Without Good
Reason" shall mean Executive's termination of employment by the action of
Executive, other than a voluntary termination following a Change in Control (as
defined in Section 3(c)) or a voluntary termination due to (i) material breach
by the Company of any representation, covenant or agreement contained in this
Agreement, (ii) a change in Executive's title or a reduction or alteration of
the duties of Executive which are materially consistent with the duties
generally performed by a chief financial officer, (iii) a reduction in
Executive's base salary or (iv) a requirement that Executive relocate outside
Orange County California.
(c) A "Change in Control" shall be deemed to have occurred if (i)
there shall be consummated (x) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Common Stock immediately prior to the merger have
substantially the same proportionate ownership of at least 80% of common stock
of the surviving corporation immediately after the merger, or (y) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, (ii)
the stockholders of the Company approve any plan or proposal for the liquidation
or dissolution of the Company, (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of 20% or more of the Company's outstanding
shares of Common Stock (other than any such person who had record or beneficial
ownership of at least 20% of the Company's outstanding shares of Common Stock on
the date hereof), or (iv) during any period of two consecutive years during the
term of this Agreement, individuals who at the beginning of the two year period
constituted the entire Board of Directors do not for any reason constitute a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
(d) A "Qualified Rehire" shall have occurred, effective upon
consummation of a Change in Control, when the respective successor or surviving
entity to the Company employs Executive with such duties and compensation terms
as are materially consistent with those duties and compensation terms as were in
effect between the Company and Executive prior to the consummation of such
Change in Control.
4. Notice of Termination. Any termination by the Company pursuant to
which the Company asserts that a severance payment is not due Executive under
Section 2 shall be communicated by a Notice of Termination. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice which shall
indicate those specific provisions in this Agreement relied upon and which set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment without a severance payment. For
purposes of this Agreement, no such purported termination by the Company shall
be effective without such Notice of Termination.
2
<PAGE> 3
5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights; No Employment Contract.
(a) Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by Executive as the result
of employment by another employer after the date of termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish Executive's existing rights, or rights which would accrue solely as a
result of the passage of time, under any benefit plan, incentive plan,
employment agreement or other contract, plan or arrangement.
(c) Nothing herein shall be deemed to give Executive any right to
continue as an Employee of the Company, and the Company shall have the right,
subject to compliance with this Agreement, to terminate Executive at any time.
6. Successors. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts are still payable to [him/her] hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legatee, or other
designee or, if there be no such designee, to Executive's estate.
7. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
Gish Biomedical, Inc.
Kelvin Avenue
Irvine, California 92714-5821
Attention: Secretary
If to Executive:
Jeanne Miller
263 East 23rd Street
Costa Mesa, CA 92627
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and the Company. No waiver by either party hereto
at any time of any breach by
3
<PAGE> 4
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. This Agreement shall
be governed by and construed in accordance with the laws of the State of
California.
9. Validity. The invalidity or unenforceability of any provisions 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.
10. 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 will constitute one and the same instrument.
11. Entire Agreement. This Agreement contains all of the terms agreed
upon between Executive and the Company with respect to the subject matter hereof
and replaces and supersedes all prior Severance Compensation Agreements between
Executive and the Company. Executive and the Company agree that no term,
provision or condition of this Agreement shall be held to be altered, amended,
changed or waived in any respect except by subsequent written agreement of
Executive and the Company.
12. Arbitration, Legal Fees and Expenses. In the event of any
controversy, claim or dispute between the parties hereto arising out of or
relating to this Agreement, the matter shall be determined by arbitration, which
shall take place in Orange County, California, under the rules of the American
Arbitration Association; and a judgment upon such award may be entered in any
court having jurisdiction thereof. Any decision or award of such arbitrator
shall be final and binding upon the parties and shall not be appealable. The
parties hereby consent to the jurisdiction of such arbitrator and of any court
having jurisdiction to enter judgment upon and enforce any action taken by such
arbitrator. The Company shall pay all legal fees and expenses which Executive
may incur as a result of the Company's contesting the validity, enforceability
or Executive's interpretation of, or determinations under, this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
"COMPANY" "EXECUTIVE"
GISH BIOMEDICAL, INC.
By: /S/ Dick Dutrisac /S/ Jeanne Miller
------------------------------ ---------------------------------
Its: Authorized Agent Jeanne Miller
------------------------------
4
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,464,100
<SECURITIES> 1,031,600
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<PP&E> 10,493,800
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0
0
<COMMON> 10,097,100
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