-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ToDxuDUUU8FvjyT0+B4NVFS4kHDcTABShlB9ZaDn3koe57roWWgT2xU5AGSSQDGH vS7SfZJP9Wr8YDEiRafPBA== 0000950123-96-005283.txt : 19961001 0000950123-96-005283.hdr.sgml : 19961001 ACCESSION NUMBER: 0000950123-96-005283 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960930 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATASCOPE CORP CENTRAL INDEX KEY: 0000027096 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 132529596 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-06516 FILM NUMBER: 96636842 BUSINESS ADDRESS: STREET 1: 14 PHILLIPS PKWY CITY: MONTVALE STATE: NJ ZIP: 07645-9998 BUSINESS PHONE: 2013918100 MAIL ADDRESS: STREET 1: 14 PHILIPS PARKWAY CITY: MONTVALE STATE: NJ ZIP: 07645 10-K405 1 FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 ------------------------------- COMMISSION FILE NUMBER 0-6516 ------------------------ DATASCOPE CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 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)
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:
CLASS NUMBER OF SHARES - --------------------------------------------- --------------------------------------------- Common Stock, par value $.01 per share 16,135,128
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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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:
FISCAL YEAR ENDED JUNE 30, ------------------------ 1996 1995 1994 ---- ---- ---- Cardiac Assist.............................................. 51% 52% 47% Patient Monitoring.......................................... 37% 38% 45% Vascular Grafts............................................. 8% 7% 6% Collagen Products........................................... 4% 3% 2%
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 3 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 2 4 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 3 5 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. 4 6 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 5 7 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. 6 8 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.
OWNERSHIP OR GENERAL CHARACTER EXPIRATION LOCATION AND USE OF PROPERTY DATE OF LEASE - ---------------------------- ----------------------------------------- ------------------------- 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
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 7 9 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 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:
NAME AGE POSITIONS AND OFFICES PRESENTLY HELD - ------------------------- ---- --------------------------------------------------------- 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
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.
FISCAL YEAR HIGH LOW --------------------------------------------------------------- ---- --- 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
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 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:
YEAR ENDED JUNE 30, ------------------------------------------------------------ 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 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
BALANCE SHEET DATA:
JUNE 30, ------------------------------------------------------------ 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (IN THOUSANDS) 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...................... -- -- -- -- --
10 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.
SALES BY PRODUCT LINE (DOLLARS IN MILLIONS) YEAR ENDED JUNE 30, ---------------------------- 1996 1995 1994 ------ ------ ------ 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%
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 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 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 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 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:
PAGE ---------- 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
15 17 2. FINANCIAL STATEMENT SCHEDULES II -- Valuation and Qualifying Accounts................................. S-1
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 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).
16 18 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.
(B) REPORTS ON FORM 8-K N/A 17 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.
SIGNATURES TITLE DATE - --------------------------------------------- ------------------------------ ------------------- /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
18 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 21 DATASCOPE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, --------------------- 1996 1995 -------- -------- 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 ======== ========
See notes to consolidated financial statements F-2 22 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JUNE 30, ---------------------------------- 1996 1995 1994 -------- -------- -------- 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 ======== ======== ========
See notes to consolidated financial statements F-3 23 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
COMMON STOCK ------------------- ADDITIONAL TREASURY CUMULATIVE SHARES PAR PAID-IN RETAINED STOCK TRANSLATION OUTSTANDING VALUE CAPITAL EARNINGS AT COST ADJUSTMENTS TOTAL ----------- ----- ---------- -------- -------- ----------- -------- 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 ========== ==== ======= ======== ======= ======= ========
See notes to consolidated financial statements. F-4 24 DATASCOPE CORP. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED JUNE 30, ----------------------------------- 1996 1995 1994 --------- -------- -------- 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 --------- -------- --------
See notes to consolidated financial statements. F-5 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 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:
CARRYING FAIR AMOUNT VALUE -------- ------- (IN THOUSANDS) Cash and short-term investments.................................. $ 67,379 $67,369 ------- ------- Non-current marketable securities................................ $ 17,364 $17,564 ------- -------
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:
GROSS UNREALIZED AMORTIZED ---------------- SHORT TERM COST GAINS LOSSES FAIR VALUE - ------------------------------------------------------- --------- ----- ------ ---------- (IN THOUSANDS) 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 ======= ==== ==== =======
LONG TERM - ------------------------------------------------------- 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 ======= ==== ==== =======
F-7 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
JUNE 30, ------------------- 1996 1995 ------- ------- (IN THOUSANDS) Materials........................................................ $15,711 $15,452 Work in process.................................................. 7,064 6,592 Finished goods................................................... 11,982 14,455 ------- ------- $34,757 $36,499 ======= =======
4. PROPERTY, PLANT AND EQUIPMENT
JUNE 30, ------------------- 1996 1995 ------- ------- (IN THOUSANDS) 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 ======= =======
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 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:
YEAR ENDED JUNE 30, ----------------------------- 1996 1995 1994 ------- ------ ------ (IN THOUSANDS) 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 ======= ====== ======
The reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:
YEAR ENDED JUNE 30, ------------------------------------------------------------------ 1996 1995 1994 -------------------- ------------------- ------------------- EFFECTIVE EFFECTIVE EFFECTIVE AMOUNT RATE AMOUNT RATE AMOUNT RATE ------- --------- ------ --------- ------ --------- (IN THOUSANDS) 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% ======= ===== ====== ==== ====== ====
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 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:
YEAR ENDED JUNE 30, ------------------------------------------------------------------------ 1996 1995 ---------------------------------- ---------------------------------- DEFERRED DEFERRED DEFERRED DEFERRED TAX TAX TAX TAX ASSETS LIABILITIES NET ASSETS LIABILITIES NET -------- ----------- ------- -------- ----------- ------- (IN THOUSANDS) 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 ======= ====== ======= ======= ====== =======
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 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:
YEAR ENDED JUNE 30, ------------------- 1996 1995 ------- ------- (IN THOUSANDS) Deferred revenue......................................... $ 5,633 $ 5,751 Point of View accrued expenses........................... 5,500 - General expense accruals................................. 12,239 8,398 ------- ------- $23,372 $14,149 ======= =======
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:
1981 EMPLOYEE STOCK 1995 EMPLOYEE STOCK OPTION PLAN OPTION PLAN ------------------------------ ---------------------------- SHARES PRICE PER SHARE SHARES PRICE PER SHARE --------- ---------------- ------- ---------------- 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 ======== =======
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 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 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:
UNITED EUROPEAN STATES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------ ------------ (IN THOUSANDS) 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 ======== ======= ======== ========
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 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:
YEAR ENDED JUNE 30, ----------------------------- 1996 1995 1994 ------ ------- ------ (IN THOUSANDS) 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 ====== ======= ======
The Plan's Funded Status was as follows:
JUNE 30, ------------------- 1996 1995 ------- ------- (IN THOUSANDS) 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 ======= =======
The assumptions used to develop the actuarial present value of the projected benefit obligation are as follows:
1996 1995 ---- ---- 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%
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 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:
YEAR ENDED JUNE 30, ---------------------- 1996 1995 1994 ---- ---- ---- (IN THOUSANDS) 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 ==== ==== ====
The Plan's Funded Status was as follows:
JUNE 30, ----------------- 1996 1995 ------ ------ (IN THOUSANDS) 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 ===== =====
The assumptions used to develop foreign net pension cost and the actuarial present value of projected benefit obligations are as follows:
1996 1995 ---- ---- 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 %
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 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:
YEAR ENDED JUNE 30, -------------------------- 1996 1995 1994 ----- ----- ------ (IN THOUSANDS) 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 ===== ===== ======
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:
YEAR (IN THOUSANDS) --------------------------------------------------------------- -------------- 1997........................................................... $3,626 1998........................................................... 3,127 1999........................................................... 1,781 2000........................................................... 614 2001........................................................... 208 Thereafter..................................................... 46 ------ Total future minimum rental payments................. $9,402 ======
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 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)
YEAR ENDED JUNE 30, 1996 --------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 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 ------- ------- ------- ------- --------
YEAR ENDED JUNE 30, 1995 --------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- -------- 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 ------- ------- ------- ------- --------
- --------------- (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 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 38 DATASCOPE CORP. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
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 - ----------------------------------- ------------ ---------- ---------- ---------- ---------- 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 ====== ==== == ==== ======
- --------------- (A) Write-offs S-1 39 EXHIBIT INDEX ------------- 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).
40 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
EX-10.14 2 AGREEMENT DATED JULY 25, 1994 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 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- 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 4 DATASCOPE CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN FOR LAWRENCE SAPER CALCULATION OF "FLOOR" BENEFIT, i.e., MINIMUM BENEFIT AT RETIREMENT AFTER 65
LUMP SUM LUMP SUM VALUE FLOOR BENEFIT ACTUARIAL OF AGE 65 BEN. i.e., MINIMUM AGE FACTOR** TIMES 5% PER YEAR BENEFIT*** - --- --------- ----------------- -------------- 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
- -------- * 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 EX-10.15 3 SPLIT-DOLLAR AGREEMENT OF JULY 25, 1994 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 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- 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- 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- 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- 6 SPLIT DOLLAR LIFE INSURANCE - METROPOLITAN VARIABLE LIFE Prepared For Datascope Corporation Fixed Account Values Projected At 6% On The Life Of Lawrence Saper
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 - --------------------------------------------------------------------------------------------------------------------------------- 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
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
------------------------------------------------------------------ ---------------------- 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 - ---------------------------------------------------------------------------------------------------------------------- 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
8 SPLIT DOLLAR LIFE INSURANCE PLAN COMPOSITE Prepared For Datascope Corporation Composite On The Life Of Lawrence Saper
------------------------------------------------------------ ----------------------- 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 - ----------------------------------------------------------------------------------------------------------------------------- 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
EX-10.16 4 MODIFICATION AGREEMENT OF JULY 25, 1994 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. 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 EX-10.17 5 ASSIGNMENT MADE AS OF JULY 25, 1994 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 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 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 ------------------------ EX-10.18 6 ASSIGNMENT MADE AS OF JULY 25, 1994 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 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. 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 EX-23 7 CONSENT OF DELOITTE & TOUCHE LLP 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 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS. 1,000 YEAR JUN-30-1996 JUL-01-1995 JUN-30-1996 2,574 64,805 51,757 (1,198) 34,757 163,438 80,336 (36,363) 234,464 42,079 0 0 0 161 181,519 234,464 211,300 211,300 84,600 84,600 0 0 50 26,841 6,424 20,417 0 0 0 20,417 1.24 1.24
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