<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30,1996 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 0-18053
LASERSCOPE
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0049527
(State of Incorporation) (I.R.S. Employer Identification No.)
3052 ORCHARD DRIVE, SAN JOSE, CALIFORNIA 95134-2011
(Address of principal executive offices)
Registrant's telephone number: (408) 943-0636
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
The number of shares of Registrant's common stock issued and outstanding as of
July 31, 1996 was 7,189,421.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION............................................................................ 3
Item 1. Condensed Consolidated Balance Sheets..................................................... 3
Condensed Consolidated Statements of Operations ......................................... 4
Condensed Consolidated Statements of Cash Flows........................................... 5
Notes to Condensed Consolidated Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................. 7
Results of Operations..................................................................... 7
Liquidity and Capital Resources........................................................... 9
PART II. OTHER INFORMATION.............................................................................. 10
Item 1. Legal Proceedings........................................................................ 10
Item 2. Changes in Securities.................................................................... 10
Item 3. Defaults upon Senior Securities.......................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders...................................... 10
Item 5. Other Items.............................................................................. 12
Item 6. Exhibits and Reports on Form 8-K........................................................ 12
SIGNATURES ........................................................................................ 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
LASERSCOPE
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(thousands) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............ $ 3,432 $ 2,278
Accounts receivable, net ............. 6,263 5,543
Inventories .......................... 9,002 10,292
Other current assets ................. 535 692
-------- --------
Total current assets ........ 19,232 18,805
Property and equipment, net ............... 2,430 2,663
Investment in NWL ......................... 1,681 1,681
Other assets .............................. 678 433
-------- --------
Total assets ................ $ 24,021 $ 23,582
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable .......................... $ 1,640 $ 1,455
Accrued compensation ...................... 1,369 1,156
Other current liabilities ................. 3,233 3,630
-------- --------
Total current liabilities ............ 6,242 6,241
Obligations under capital leases .......... 8 15
Commitments and contingencies
Shareholders' equity:
Common stock ..................... 37,404 37,248
Accumulated deficit .............. (18,908) (19,296)
Translation adjustments .......... (350) (251)
Notes receivable from shareholders (375) (375)
-------- --------
Total shareholders' equity ....... 17,771 17,326
-------- --------
Total liabilities and shareholders' equity $ 24,021 $ 23,582
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 4
LASERSCOPE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(thousands except per share amounts) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues ........................... $ 8,481 $ 6,879 $ 16,203 $ 16,094
Cost of sales .......................... 4,288 3,078 8,140 7,461
-------- -------- -------- --------
Gross margin ........................... 4,193 3,801 8,063 8,633
Operating expenses:
Research and development .......... 522 1,118 1,151 2,039
Selling, general and administrative 3,401 3,643 6,493 7,366
-------- -------- -------- --------
3,923 4,761 7,644 9,405
Operating income (loss) ................ 270 (960) 419 (772)
Interest and other income, net ......... 15 89 22 188
-------- -------- -------- --------
Income (loss) before income taxes ...... 285 (871) 441 (584)
Provision for income taxes ............. 34 (36) 53 --
-------- -------- -------- --------
Net income (loss) ...................... $ 251 $ (835) $ 388 $ (584)
======== ======== ======== ========
Net income (loss) per share ............ $ 0.03 $ (0.12) $ 0.05 $ (0.08)
======== ======== ======== ========
Shares used in per share calculations .. 7,657 6,984 7,512 6,984
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 5
LASERSCOPE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ......................................................... $ 388 $ (584)
Adjustments to reconcile net income to cash
cash provided by operating activities:
Depreciation and amortization ......................................... 513 818
Increase (decrease) from changes in:
Accounts receivable .............................................. (720) 2,376
Inventories ...................................................... 1,290 (1,946)
Other current assets ............................................. 157 (191)
Other assets ..................................................... (245) 47
Accounts payable ................................................. 185 442
Accrued compensation ............................................. 213 131
Other current liabilities ........................................ (397) (371)
------- -------
Cash provided by operating activities .......................................... 1,384 722
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................................... (280) (396)
Purchases of held-to-maturity investments ................................. -- --
Funding of agreement with NWL ............................................. -- (1,674)
Maturities of held-to-maturity investments ............................... -- 997
Other ..................................................................... (99) (26)
------- -------
Cash used by investing activities .............................................. (379) (1,099)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on obligations under capital leases .............................. (7) (5)
Proceeds on sale of common stock .......................................... 156 --
------- -------
Cash provided (used) by financing activities ................................... 149 (5)
------- -------
Increase (decrease) in cash and cash equivalents ............................... 1,154 (382)
Cash and cash equivalents, beginning of period ................................. 2,278 4,604
------- -------
Cash and cash equivalents, end of period ....................................... $ 3,432 $ 4,222
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period
for:
Interest ......................................................... $ 6 $ 22
Income taxes ..................................................... $ 32 $ 26
</TABLE>
See notes to condensed consolidated financial statements NOTES TO CONDENSED
5
<PAGE> 6
CONSOLIDATED FINANCIAL STATEMENTS:
1. The accompanying condensed consolidated financial statements include
Laserscope (the "Company") and its wholly and majority-owned
subsidiaries. All intercompany transactions and balances have been
eliminated. While the financial information in this report is
unaudited, in the opinion of management, all adjustments (which
included only normal recurring adjustments) necessary to present fairly
the financial position and results of operations as of and for the
periods indicated have been recorded. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto for the year
ended December 31, 1995 included in the Company's annual report. The
results of operations for the three and six month periods ended June
30, 1996 are not necessarily indicative of the results expected for the
full year.
2. Inventory was comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------- -------
<S> <C> <C>
Sub-assemblies and purchased parts $ 6,312 $ 7,201
Finished goods 2,690 3,091
------- -------
$ 9,002 $10,292
======= =======
</TABLE>
3. Net income (loss) per share is based upon the weighted average number
of shares of common stock outstanding and dilutive common equivalent
shares from stock options (using the treasury stock method).
4. The Company invests its excess cash in high-quality debt instruments.
The Company considers cash equivalents to be financial instruments that
are readily convertible to cash, subject to no more than insignificant
interest rate risk and that have original maturities of three months or
less. Short-term investments consist of financial instruments with less
than one year to maturity.
At June 30, 1996 and December 31, 1995 the Company's cash equivalents
were in the form of institutional money market accounts and totaled
$1.77 million and $1.10 million, respectively. At June 30, 1996 and
December 31, 1995 the Company had no investment in short-term financial
instruments.
5. During April 1996, the Company and Heraeus MED, GmbH signed a
definitive agreement for the acquisition of Heraeus Surgical, Inc. (a
wholly-owned subsidiary of Heraeus MED, GmbH). The transaction is
subject to approval by the shareholders of the Company as well as the
obtaining of necessary governmental consents. Heraeus MED will receive
approximately 4.6 million shares of newly issued Laserscope common
stock and a $2.00 million cash payment in exchange for all of the
outstanding shares of Heraeus Surgical, Inc. and certain assets and
liabilities of Heraeus MED's German laser distribution organization.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Except for the historical information contained in this Quarterly Report on Form
10-Q, the matters discussed herein are forward-looking statements made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements are subject to
certain risks and uncertainties that could cause the actual results to differ
materially from those projected. Factors that could cause actual results to
differ materially include, but are not limited to, the timing of orders and
shipments, the Company's ability to balance its inventory and production
schedules, the timely development and market acceptance of new products and
surgical/therapeutic procedures, the impact of competitive products and pricing,
the Company's ability to expand further into international markets, public
policy relating to health care reform in the United States and other countries,
approval of its products by government agencies such as the United States Food
and Drug Administration as well as government agencies in other countries, the
Company's ability to integrate successfully acquired businesses and other risks
included from time to time in the Company's press announcements and public
disclosure filings with the United States Securities and Exchange Commission,
copies of which are available upon request from Laserscope's Investor Relations
Department. The Company assumes no obligation to update any forward-looking
statements contained herein.
RESULTS OF OPERATIONS:
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included in Part I -- Item 1
of this Quarterly Report and the audited financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1995 contained in the Company's
Annual Report on Form 10K, as amended.
Net revenues for the quarter and six months ended June 30, 1996 were $8.48
million and $16.20 million, respectively. Compared to the corresponding quarter
and six months of 1995, these revenues increased approximately 23% and 1%,
respectively. Net revenues increased during the quarter and six months ended
June 30, 1996 relative to the corresponding period of 1995 as a result of higher
unit shipments of the Company's KTP/YAG Surgical Laser Systems, partially offset
by lower average selling prices, lower shipments of disposable supplies and
instrumentation and, to a lesser extent, lower sales of services.
Revenues from the sales of capital equipment comprised approximately 47% and 43%
of total net revenues during the quarter and six months ended June 30, 1996,
respectively, compared to approximately 24% and 30% of total net revenues during
the corresponding periods in 1995. In absolute dollars, during the quarter and
six months ended June 30, 1996 these revenues increased 140% and 44%,
respectively, compared to the corresponding periods in 1995. Laser unit
shipments were 195% and 79% higher in the quarter and six months ended June 30,
1996, respectively, than the corresponding periods of 1995. However, average
unit prices decreased during these periods as a combined result of greater
shipments of lower priced Aura office laser units as well as increased shipments
to independent international distributors. The Company believes that the
continuing trend toward reduced health care costs in the United States is still
a factor which continues to impact negatively capital equipment procurement by
its hospital customers in the United States. As a result, the Company expects
that its revenue mix trends for capital equipment in the U.S. market will
continue to shift toward its lower priced Aura office laser.
7
<PAGE> 8
Revenues from the sales of disposable supplies, instrumentation and service
comprised approximately 53% and 57% of total net revenues during the quarter and
six months ended June 30, 1996, respectively, compared to approximately 76% and
70% of total net revenues in the corresponding periods in 1995. The decreases
are primarily the result of lower shipments of its side-firing devices used in
prostate surgeries due to fewer prostate surgeries using laser surgical
techniques being performed during the quarter and six months ended June 30, 1996
than in the corresponding periods of 1995. The Company believes that this was
caused principally by increased drug treatment of those patients with mild to
moderate prostate disorders as well as adoption of alternative electrosurgical
techniques to perform prostate surgeries.
The Company believes that acceptance of lasers in aesthetic surgery,
dermatology, urology, ear, nose and throat surgery, will continue to be
important to its business. In addition, the adoption of photodynamic therapy by
medical practitioners will be important. The Company continues to invest in
developing new instrumentation for emerging surgical applications and to educate
surgeons in the United States and internationally to encourage the adoption of
such new applications. Finally, penetration of the international market,
although increasing, has been limited and the Company continues to view this as
a significant opportunity.
Gross margin as a percentage of net revenues for the quarter ended June 30, 1996
was 49%, compared to 55% for the corresponding quarter in 1995. During the six
months ended June 30, 1996, gross margin as a percentage of net revenues was 50%
compared to 54% in the corresponding period in 1995. The decreases are due in
part to a higher proportion of revenues from sales to independent international
distributors during the first six months of 1996 than in the corresponding
period of 1995. These revenues generally generate lower gross margins than those
generated through the Company's direct sales force. In addition, the Company
continued to balance its inventories with product demand and it reduced
production volumes in the first six months of 1996 relative to the first six
months of 1995 which further negatively impacted gross margins during the first
six months of 1996. The Company expects that gross margin as a percentage of
revenues for the remainder of 1996 may vary from quarter to quarter as it
continues to balance production volumes and inventory levels with product demand
and as product and distribution mix varies.
Research and development expenses, which are the result of activities related to
the development of new laser, instrumentation and disposable products and the
enhancement of the Company's existing products were approximately 53% and 44%
lower in the quarter and six months ended June 30, 1996, respectively, when
compared to the corresponding periods in 1995. As a percentage of net revenues
these expenses were 6% and 7% in the quarter and six months ended June 30, 1996,
respectively, compared to 16% and 13% in the corresponding periods in 1995,
respectively. These decreases are the combined result of expense control
measures implemented by the Company during the fourth quarter of 1995 and
reduced spending on the Company's Aura office laser which the Company shipped
commercially commencing in December 1995. The Company expects, however, to
continue to make significant investments in research and development during 1996
and beyond.
Selling, general and administrative expenses in absolute terms decreased
approximately 7% and 12% in the quarter and six months ended June 30, 1996,
respectively, compared to the corresponding periods of 1995. As a percentage of
net revenues, selling, general and administrative expenses were 40% for each of
the quarter and six months ended June 30, 1996 compared to 53% and 46% in the
corresponding periods of 1995. The reduction in the expense level is the
combined result of lower direct selling expenses resulting from a higher
8
<PAGE> 9
proportion of revenues being generated from sales to independent international
distributors and expense reduction measures implemented by the Company during
the fourth quarter of 1995. The Company expects selling, general and
administrative expenses to remain at relatively high levels during 1996 since
the Company expects to continue to invest significant amounts in international
expansion, marketing programs and educational support.
During the six months ended June 30, 1996 the Company recorded income tax
provisions representing an effective tax rate of 12%. The amount is below the
combined federal and state rates primarily as a result of the utilization of
available net operating loss carryforwards. During the corresponding period of
1995, the Company recorded no income tax provision due to the cumulative net
operating loss for the period.
LIQUIDITY AND CAPITAL RESOURCES:
Total assets and liabilities as of June 30, 1996 were $24.02 million and $6.24
million respectively, compared to assets and liabilities of $23.58 million and
$6.24 million at December 31, 1995. Working capital increased $0.43 million from
$12.56 million at December 31, 1995 to $12.99 million at June 30, 1996 while
cash and cash equivalents increased $1.15 million during the period. The net
increase in cash and cash equivalents was primarily due to cash provided by
inventory reductions of $1.29 million. The Company anticipates that future
changes in cash and working capital will be dependent on the levels of its
business.
At June 30, 1996, cash and cash equivalents amounted to approximately $3.43
million. The Company currently has in place a $5.00 million revolving bank line
of credit which expires in October 1996 and under which no borrowings were
outstanding at June 30, 1996.
The Company's need for capital is affected by the current and anticipated demand
for its products as well as procurement and production lead times in its
manufacturing operations. Changes in these factors can have a significant impact
on capital requirements.
From time to time, the Company may also consider the acquisition of, or evaluate
investments in, certain products and businesses complementary to the Company's
business. Any such acquisition or investment may require additional capital
resources. During April 1996, the Company and Heraeus MED, GmbH signed a
definitive agreement for the acquisition of Heraeus Surgical, Inc. (a
wholly-owned subsidiary of Heraeus MED, GmbH). The transaction is subject to
approval by the shareholders of the Company as well as the obtaining of
necessary governmental consents. Heraeus MED will receive approximately 4.6
million shares of newly issued Laserscope common stock and a $2.00 million cash
payment in exchange for all of the outstanding shares of Heraeus Surgical, Inc.
and certain assets and liabilities of Heraeus MED's German laser distribution
organization. The Company is exploring alternatives for financing its
acquisition of Heraeus Surgical, Inc. including debt, equity or the use of the
Company's currently existing cash resources. In the event the Company finances
the Heraeus Surgical, Inc. acquisition using its existing cash resources, the
Company anticipates that, while its remaining cash resources will be sufficient
to fund its short term operating needs, additional financing either through the
Company's bank line of credit or otherwise would be required for the Company's
currently envisioned long term needs.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings arising in the ordinary
course of business. While it is not feasible to predict or determine the outcome
of the actions brought against it, the Company believes that the ultimate
resolution of these claims will not ultimately have a material adverse effect on
its financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES
Reference is made to Item 1 "Description of the First Amendment dated
as of April 22, 1996 to the Common Share Rights Agreement dated as of
October 31, 1991" of the Company's Registration Statement on Form 8-A/A
filed June 12, 1996 which is incorporated herein by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders was held on June 7, 1996.
(b) The first matter voted upon at the meeting was the election of
directors and the results of that vote were as follows:
<TABLE>
<CAPTION>
Present but
For Withheld Abstained Not Voting
--- ------ --------- ----------
<S> <C> <C> <C> <C>
Benjamin L. Holmes 6,077,124 466,352 0 0
E. Walter Lange 6,077,124 466,352 0 0
Robert V. McCormick 6,072,544 470,932 0 0
Rodney Perkins, M.D 6,072,724 470,752 0 0
Robert J. Pressley, Ph.D 6,076,524 466,952 0 0
</TABLE>
(c) The second matter voted upon at the meeting and the results of that
vote were as follows:
<TABLE>
<CAPTION>
Present but
For Opposed Abstained Not Voting
--- ------- --------- ----------
<S> <C> <C> <C> <C>
To authorize an 5,413,830 991,818 57,138 80,690
amendment to the
Company's 1994 Stock
Option Plan to increase the
number of shares for issuance
thereunder by 150,000 shares to
an aggregate of 725,000 shares
</TABLE>
10
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(d) The third matter voted upon at the meeting and the results of that vote
were as follows:
<TABLE>
<CAPTION>
Present but
For Opposed Abstained Not Voting
--- ------- --------- ----------
<S> <C> <C> <C> <C>
To authorize an 5,868,733 370,307 50,389 254,047
amendment to the
Company's 1989 Stock
Purchase Plan to increase the
number of shares for issuance
thereunder by 200,000 shares to
an aggregate of 450,000 shares
</TABLE>
(e) The fourth matter voted upon at the meeting and the results of that
vote were as follows:
<TABLE>
<CAPTION>
Present but
For Opposed Abstained Not Voting
--- ------- --------- ----------
<S> <C> <C> <C> <C>
To ratify the appointment 6,424,891 29,503 89,082 0
of Ernst & Young LLP as
the independent auditors
for the Company for the
fiscal year ending
December 31, 1996
</TABLE>
11
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ITEM 5. OTHER ITEMS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed herewith (numbered in accordance with Item 601 of
Regulation S-K):
Exhibit
Number Description
- ------- -----------
4.1 First Amendment to Common Shares Rights Agreement between the
Company and American Stock Transfer & Trust Company as Rights
Agent dated as of April 22, 1996.+
10.11M Modification to Loan Agreement between the Registrant and
Silicon Valley Bank dated May 23, 1996.
(b) Reports on Form 8-K: None
+ Incorporated by reference to Exhibit 1 of the Company's
Registration Statement on Form 8-A/A filed June 12, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASERSCOPE
Registrant
/s/ Dennis LaLumandiere
------------------------------------
Dennis LaLumandiere
Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: August 12, 1996
12
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EXHIBIT 10.11M
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CONSENT AND MODIFICATION AGREEMENT
This Consent and Modification Agreement (this "Agreement") is entered
into as of May 23, 1996 by and between Laserscope ("Laserscope" also referred to
as "Borrower") and Silicon Valley Bank ("Bank").
RECITALS
A. Whereas, Bank has heretofore made a loan to Borrower pursuant to, among
other documents, an Amended and Restated Promissory Note dated March 18, 1996,
as may be amended from time to time (the "Note"). The Note is governed by the
terms of an Amended and Restated Business Loan Agreement dated March 18, 1996,
as may be further amended from time to time. Hereinafter, all indebtedness owing
by Borrower to Lender shall be referred to as the "Indebtedness."
B. Whereas, repayment of the Indebtedness is secured by a Commercial
Security Agreement dated March 18, 1996.
C. Whereas, hereinafter, the above-described security documents and
guaranties, together with all other documents securing payment of the
Indebtedness shall be referred to as the "Security Documents." Hereinafter, the
Security Documents, together with all other documents evidencing or securing the
Indebtedness shall be referred to as the "Existing Loan Documents."
D. Whereas, Borrower has proposed to undergo a corporate acquisition,
pursuant to which, among other things, Borrower will acquire Heraeus Systems,
Inc. (a Corporation existing under the laws of the State of Delaware)
("Heraeus") (the foregoing being referred to as the "Acquisition").
E. Whereas, the Acquisition is prohibited under the terms of the Existing
Loan Documents.
F. Whereas, Borrower and Heraeus each request that Bank consent to the
Acquisition, and Bank has agreed, subject to the terms and conditions of this
Agreement.
G. Whereas, Borrower and Bank desire to modify the terms of the Loan
Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements contained
herein, the parties agree as follows:
AGREEMENT
1. Bank hereby consents to the Acquisition, subject to the following:
Affirmation. Borrower hereby affirms all present and future
obligations under the Existing Loan Documents, without any defense, offset or
counterclaim of any kind whatsoever. Borrower's affirmation includes, without
limitation, Borrower's grant of a security interest pursuant to the Existing
Loan Documents to secure all Indebtedness of Borrower to Bank. Notwithstanding
the foregoing, upon completion of the Acquisition, Bank reserves the right to
restructure the Existing Loan Documents in any manner as Bank may deem
appropriate, including, without limitation, additional documentation, new
financing statements and a full collateral audit.
2. Consent. Bank hereby consents to the Acquisition and waives any and
all defaults or events of default under the Existing Loan Documents that may
occur as a result of the Acquisition. The execution and delivery of this
Agreement shall constitute a cure of any such default of event of default.
Bank's consent to the current Acquisition shall in no way be deemed a consent to
future acquisitions or reorganizations by Borrower.
3. Modification(s) to Loan Agreement.
a. Notwithstanding that the Loan Agreement provides that Borrower
shall be profitable on a quarterly basis and for the fiscal
year end, with allowance for one loss not to exceed
$300,000.00, Lender shall not test the profitability covenant
for the quarter ending September 30, 1996.
<PAGE> 15
b. The tangible net worth covenant as provided in the paragraph
entitled "Financial Covenants" is hereby amended to read, in
its entirety:
Borrower shall maintain, on a quarterly basis, a minimum
tangible net worth of $23,000,000.00.
4. Consistent Changes. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. Payment of Loan Fee. Borrower shall pay to Lender a fee in the
amount of one Thousand and 00/100 Dollars ($1,000.00) (the "Loan Fee").
6. Defined Terms. Defined terms used but not otherwise defined herein
shall have the same meaning as in the Loan Agreement.
7. No Defenses of Borrower. Borrower (and each guarantor and pledgor
signing below) agrees that, as of this date, it has no defenses against the
Indebtedness to pay any amounts under the Indebtedness.
8. Continuing Validity. Borrower (and each guarantor and pledgor
signing below) understands and agrees that in modifying the existing
Indebtedness, Bank is relying upon Borrower's representations, warranties, and
agreements, as set forth in the Existing Loan Documents. Except as expressly
modified pursuant to this Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Agreement in no way shall obligate
Bank to make any future modifications to the Indebtedness. Nothing in this
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Bank and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released by
Bank in writing. No maker, endorser, or guarantor will be released by virtue of
this Agreement
This Agreement is executed as of the date first written above.
BORROWER: BANK:
LASERSCOPE SILICON VALLEY BANK
By: /s/ Dennis LaLumandiere By: Mary T. Toomey
-------------------------------- ---------------------------
Name: Dennis LaLumandiere Name: Mary T. Toomey
------------------------------ ------------------------
Title: Vice President of Finance Title: Vice President
----------------------------- ------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,432
<SECURITIES> 0
<RECEIVABLES> 6,573
<ALLOWANCES> 490
<INVENTORY> 9,002
<CURRENT-ASSETS> 19,232
<PP&E> 13,542
<DEPRECIATION> 11,112
<TOTAL-ASSETS> 24,021
<CURRENT-LIABILITIES> 6,242
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0
0
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<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
