-----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, DS35yNpVko8soOgFVAyXeu1Ystk7QtDnNFx142POAe2T40GVBlQUmDNqUdNEpYUJ O2FjfYe9tTKZeGGQ4gclCg== 0000892569-98-003228.txt : 19981203 0000892569-98-003228.hdr.sgml : 19981203 ACCESSION NUMBER: 0000892569-98-003228 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19981202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GISH BIOMEDICAL INC CENTRAL INDEX KEY: 0000700945 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 953046028 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-10728 FILM NUMBER: 98762718 BUSINESS ADDRESS: STREET 1: 2681 KELVIN AVE CITY: IRVINE STATE: CA ZIP: 92714 BUSINESS PHONE: 9497565485 MAIL ADDRESS: STREET 1: 2681 KELVIN AVE CITY: IRVINE STATE: CA ZIP: 92714 10-Q/A 1 FORM 10-Q/A FOR PERIOD ENDED SEPTEMBER 30, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________to_______________________ Commission file number 0-10728 GISH BIOMEDICAL, INC. ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) California 95-3046028 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2681 Kelvin Avenue Irvine, California 92614 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (714) 756-5485 N/A ------------------------------------------------------------------------------ Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant is required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] The number of shares outstanding of each of the issuer's classes of common stock, as of November 7, 1997: 3,439,195. 1 2 GISH BIOMEDICAL, INC. INDEX
Page PART I. Financial Information Item 1: Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheets as of 3 September 30, 1997 and June 30, 1997. Condensed Consolidated Statements of Operations 4 for the three months ended September 30, 1997 and 1996 Condensed Consolidated Statements of Cash Flows 5 for the three months ended September 30, 1997 and 1996 Notes to Condensed Consolidated Financial Statements 6, 7, 8 Item 2: Management's Discussion and Analysis of 9, 10, 11 Financial Condition and Results of Operations PART II. Other Information Item 6: Exhibits and Reports on Form 8-K 11
2 3 GISH BIOMEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 June 30, 1997 ------------------ ------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 4,464,100 $ 3,977,100 Short-term investments 1,031,600 1,031,600 Accounts receivable, net 3,476,600 3,970,100 Inventories 7,027,500 6,698,700 Deferred tax assets 646,000 646,000 Prepaid expenses 385,700 380,000 ------------ ------------ Total current assets 17,031,500 16,703,500 Property and equipment, at cost 10,493,800 10,386,900 Less accumulated depreciation (6,608,000) (6,374,100) ------------ ------------ Net property and equipment 3,885,800 4,012,800 Deferred tax assets 194,000 194,000 Other assets 114,100 117,700 ------------ ------------ $ 21,225,400 $ 21,028,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 754,800 $ 729,400 Accrued compensation and related items 601,400 533,700 Other accrued liabilities 110,900 99,700 ------------ ------------ Total current liabilities 1,467,100 1,362,800 Deferred rent 319,900 317,300 Shareholders' equity: Preferred stock, 2,250,000 shares authorized; no shares outstanding Common stock, no par value, 7,500,000 shares authorized, 3,439,195 shares issued and outstanding (3,430,145 shares at June 30, 1997) 10,097,100 10,078,300 Note receivable - officer stock purchase (53,800) (35,000) Retained earnings 9,395,100 9,304,600 ------------ ------------ Total shareholders' equity 19,438,400 19,347,900 ------------ ------------ $ 21,225,400 $ 21,028,000 ============ ============
See accompanying notes 3 4 GISH BIOMEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
1997 1996 ---- ---- Net sales $5,317,700 $5,312,600 Cost of sales 3,635,500 3,513,100 ---------- ---------- Gross profit 1,682,200 1,799,500 Research and development 237,400 347,200 Selling and marketing 950,000 913,200 General and administrative 419,800 491,900 ---------- ---------- Total operating expenses 1,607,200 1,752,300 ---------- ---------- Operating income 75,000 47,200 Interest income 73,400 53,600 ---------- ---------- Income before provision for taxes 148,400 100,800 Provision for taxes 57,900 39,300 ---------- ---------- Net income $ 90,500 $ 61,500 ========== ========== Net income per share: $ .03 $ .02 ========== ========== Average common and common equivalent shares: 3,512,000 3,519,678 ========== ==========
See accompanying notes 4 5 GISH BIOMEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
1997 1996 ---- ---- Cash flows from operating activities: Net income $ 90,500 $ 61,500 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 233,900 221,700 Amortization 6,100 56,600 Deferred rent 2,600 9,300 Changes in operating assets and liabilities 263,300 (181,300) ----------- ----------- Net cash provided by operating activities 596,400 167,800 Cash flows from investing activities: Purchases of property and equipment (106,900) (126,300) Increase in other assets (2,500) (4,200) ----------- ----------- Net cash used in investing activities (109,400) (130,500) Cash flows from financing activities: Payment (increase) in note receivable from officer (18,800) 10,000 Proceeds from stock options exercised 18,800 50,900 ----------- ----------- Net cash provided by financing activities -- 60,900 Net increase in cash and cash equivalents 487,000 98,200 Cash and cash equivalents at beginning of period 3,977,100 3,314,200 ----------- ----------- Cash and cash equivalents at end of period $ 4,464,100 $ 3,412,400 =========== ===========
See accompanying notes 5 6 GISH BIOMEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) 1. General The condensed consolidated financial statements included herein have been prepared by the Company, without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and cash flows for the three month periods ended September 30, 1997 and 1996, and financial position at September 30, 1997, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures in such condensed consolidated financial statements are adequate to make the information presented not misleading, these condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and the notes thereto included in the Company's Annual Report filed with the Securities and Exchange Commission on Form 10-K for the year ended June 30, 1997. Statement of Cash Flows Changes in operating assets and liabilities as shown in the condensed consolidated statements of cash flows comprise:
Three months ended September 30, 1997 1996 -------------------------------- ---- ---- Decrease (increase) in: Accounts receivable $ 493,500 $ 123,900 Inventories (328,800) 10,300 Prepaid expenses (5,700) (65,100) Increase (decrease) in: Accounts payable 25,400 (261,000) Accrued compensation and related items 67,700 34,500 Accrued income taxes -- 4,600 Other accrued liabilities 11,200 (28,500) --------- --------- Change in operating assets and liabilities $ 263,300 $(181,300) ========= =========
The Company did not pay any Federal or State income taxes during the three month period ended September 30, 1997. 6 7 GISH BIOMEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED) 2. Inventories Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and are summarized as follows:
September 30, 1997 June 30, 1997 ------------------ ------------- Raw materials $3,613,700 $3,529,800 Work in progress 1,173,200 1,225,800 Finished goods 2,240,600 1,943,100 ---------- ---------- $7,027,500 $6,698,700 ========== ==========
3. Earnings per share Earnings per share is based on the weighted average number of common and, where dilutive, common equivalent shares outstanding during the period. Common equivalent shares include the potential dilution from the exercise of stock options and warrants, reduced by the number of common shares which are assumed to have been purchased with the income tax benefits and proceeds from the exercise of such instruments. Fully diluted earnings per share reflects additional dilution, from the assumed exercise of the dilutive common stocks options at the beginning of the period. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The Company has not yet determined what the impact of Statement 128 will be on the calculation of fully diluted earnings per share, but it is not expected to be material. 4. Acquisition On September 13, 1995, the Company entered into an agreement to acquire the assets and technology of Creative Medical Development, Inc. ("CMD") a manufacturer of ambulatory infusion pumps and began to operate the business under a management agreement whereby Gish assumed the risks and rewards of the operation of the acquired assets until the closing date of the acquisition. The agreement provided for a payment of $600,000 in cash and $2,000,000 of Gish Biomedical, Inc. common stock for these assets. The Company assumed ownership of the net assets and technology acquired from CMD on April 17, 1996 and entered into a one-year lease for 7 8 GISH BIOMEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1997 (UNAUDITED) the building CMD occupied. The Company also executed one-year employment agreements with four key employees which included provisions for the issuance of up to 53,500 shares of the Company's common stock to those employees upon completion of certain performance criteria. In November 1996, two of the former CMD employees were terminated. In February 1997, the Company was released from its lease obligation for the northern California facility and ceased operations in that facility. Total shares issued to former CMD employees under the employment contracts were 13,876. During the fourth quarter of fiscal 1997, due to the low level of infusion pump sales and negative cash flow projections, the Company determined that the unamortized goodwill of $1,824,200 associated with the purchase of the infusion pump from CMD had little, if any future value. Accordingly, the Company recorded an impairment of goodwill of $1.8 million in fiscal 1997 to write-off the goodwill associated with this product line. 8 9 GISH BIOMEDICAL, INC. SEPTEMBER 30, 1997 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: On September 13, 1995, the Company entered into an agreement to acquire the assets and technology of Creative Medical Development, Inc. ("CMD") a manufacturer of ambulatory infusion pumps and began to operate the business under a management agreement whereby Gish assumed the risks and rewards of the operation of the acquired assets until the closing date of the acquisition. The agreement provided for a payment of $600,000 in cash and $2,000,000 of Gish Biomedical, Inc. common stock for these assets. The Company assumed ownership of the net assets and technology acquired from CMD on April 17, 1996 and entered into a one-year lease for the building CMD occupied. The Company also executed one-year employment agreements with four key employees which included provisions for the issuance of up to 53,500 shares of the Company's common stock to those employees upon completion of certain performance criteria. In November 1996, two of the former CMD employees were terminated. In February 1997, the Company was released from its lease obligation for the northern California facility and ceased operations in that facility. Total shares issued to former CMD employees under the employment contracts were 13,876. During the fourth quarter of fiscal 1997, due to the low level of infusion pump sales and negative cash flow projections, the Company determined that the unamortized goodwill of $1,824,200 associated with the purchase of the infusion pump from CMD had little, if any future value. Accordingly, the Company recorded a charge to earnings to write-off the unamortized balance. Sales for the three month period ended September 30, 1997 were comparable to the corresponding period of fiscal 1997. In September 1997, the Company was informed by two of its major distributors, Specialized Medical Systems (SMS) and CardioVascular Concepts (CVC), that they were electing to terminate their distributor relationships with the Company effective December 1997. For the fiscal year ended, June 30, 1997 SMS and CVC represented 15% and 7% of the Company's total sales, respectively. However, the two distributors only accounted for 12% and 5%, respectively, of the Company's gross profit for the same period. The Company intends to engage, during the second quarter of fiscal 1998, a direct sales force of approximately seven persons to replace the two distributor sales organizations. The conversion of these territories to direct sales representation should afford the Company better marketing opportunities with respect to its new oxygenator. Gish had previously excluded these two territories from its initial marketing plan for the launch of its new Vision(TM) oxygenator, scheduled for November 1997, because these distributors represented a competing oxygenator product. With the conversion of these territories to a direct sales force, the Company will be able to sell the Vision(TM) in conjunction with custom tubing packs, cardioplegia systems, cardiotomy reservoirs and oxygen saturation monitors without limitations. 9 10 GISH BIOMEDICAL, INC. SEPTEMBER 30, 1997 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Cost of sales for the period ended September 30, 1997 was 68% of sales as compared to 66% of sales for the corresponding period of fiscal 1997. The increase in cost of sales of 2% for the period ended September 30, 1997 is primarily due to downward pricing pressures in the cardiovascular device segment of the medical industry combined with general price increases on materials, labor and other cost of sales components. Research and development expenses for the period ended September 30, 1997 decreased $110,000 over the corresponding period of fiscal 1997. The decrease is primarily due to elimination of a separate engineering staff for the pump acquired from CMD. The Company is actively engaged in several new product development projects and ISO 9002 certification, which will require expenditures approximating $350,000 per quarter for the foreseeable future. Selling and marketing expenses for the period ended September 30, 1997 increased $37,000 or 4% over the corresponding period of fiscal 1997. The increase was due to increases in marketing activity in anticipation of full market release of the Company's recently completed Vision(TM) oxygenator. The Company currently has plans to expand its direct sales force within the United States commencing the second quarter of fiscal 1998. The Company anticipates that its selling and marketing expenses will increase during the second and third quarters of fiscal 1998 as the Company adds several new sales positions for the new direct territories and incurs additional marketing expenses associated with the launch of its new Vision(TM) oxygenator. General and administrative expenses decreased by $72,000 for the period ended September 30, 1997 over the corresponding period of fiscal 1997. The decrease is due to cessation of operations of the northern California facility. The Company anticipates general and administrative expenses to be approximately $450,000 to $500,000 per quarter for the remainder of this fiscal year. The provision for taxes is based upon a combined federal and state effective tax rate of 39% for all periods presented. The effects of inflation have not been a significant factor in the results of operations. The cardiovascular surgery market has been experiencing downward pricing pressures which are reflected in lower sales dollars per unit sold. Liquidity and capital resources: At September 30, 1997, the Company had $15,564,400 of working capital, an increase of $223,700 from working capital at June 30, 1997. The increase is primarily due to increases in cash offset by an increase in trade accounts payable and a decrease in accounts receivable. 10 11 GISH BIOMEDICAL, INC. SEPTEMBER 30, 1997 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) For the period ended September 30, 1997 cash provided by operations of $596,400 was primarily due to profitable operations as adjusted for non cash expenses and an increase in inventories offset by a decrease in accounts receivable. For the period ended September 30, 1996 cash provided by operations of $167,800 was primarily due to profitable operations and a decrease in accounts receivable. For the period ended September 30, 1997 cash used in investing activities of $109,400 was primarily due to purchases of property and equipment for the manufacture of new products and to improve operating efficiencies. For the period ended September 30, 1996 cash used in investing activities of $130,500 was primarily due to purchases of property and equipment for the manufacture of new products. For the period ended September 30, 1997 no cash was provided by financing activities. For the period ended September 30, 1996 cash provided by financing activities of $60,900 was primarily due to proceeds from the exercise of stock options. The Company believes that cash generated from operations together with available cash will be adequate to meet the Company's planned expenditures and liquidity needs for fiscal 1998. This Quarterly Report on Form 10-Q contains certain forward-looking statements that are based on current expectations. In light of the important factors that can materially affect results, including those set forth below and elsewhere in this Quarterly Report on Form 10-Q, the inclusion of forward-looking information herein should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. The Company may encounter competitive, technological, financial and business challenges making it more difficult than expected to continue to develop and market its products; the market may not accept the Company's existing and future products; the Company may be unable to retain existing key management personnel; and there may be other material adverse changes in the Company's operations or business. Certain important factors affecting the forward-looking statements made herein include, but are not limited to (i) continued downward pricing pressures in the Company's targeted markets, (ii) the continued acquisition of the Company's customers by certain of its competitors and (iii) the decision by the Company to replace its distributor network with a direct sales force in certain geographic territories. Assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter its marketing, capital expenditure or other budgets, which may in turn affect the Company's financial position and results of operations. The reader is therefore cautioned not to place undue reliance on forwarding-looking statements contained herein, which speak as of the date of this Report. PART II. OTHER INFORMATION ITEM 6. Exhibits and reports on Form 8K. 10.1 Severance Compensation Agreement between the Registrant and Jack Brown dated August 15, 1997. 10.2 Severance Compensation Agreement between the Registrant and Jeanne Miller dated August 15, 1997. 27.1 Financial Data Schedule 11 12 GISH BIOMEDICAL, INC. SEPTEMBER 30, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GISH BIOMEDICAL, INC. Date: 12/2/98 /s/ JEANNE M. MILLER --------------------------- JEANNE M. MILLER Chief Financial Officer 12 13 EXHIBIT INDEX SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------- ----------- ------------ 10.1 Severance Compensation Agreement between the Registrant and Jack Brown dated August 15, 1997. 10.2 Severance Compensation Agreement between the Registrant and Jeanne Miller dated August 15, 1997. 27.1 Financial Data Schedule EX-10.1 2 SEVERANCE COMPENSATION AGREEMENT - JACK BROWN 1 EXHIBIT 10.1 SEVERANCE COMPENSATION AGREEMENT SEVERANCE COMPENSATION AGREEMENT dated as of August 15, 1997, between GISH BIOMEDICAL, INC. a California corporation ("Company"), and Jack Brown ("Executive"). The Company's Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of Executive to his assigned duties and to provide to Executive fixed severance compensation in the event of termination under certain circumstances. This Agreement sets forth the severance compensation that the Company agrees it will pay to Executive if Executive's employment with the Company terminates under one of the circumstances described herein. 1. Term. The term of this Agreement shall commence on the date hereof and shall end on the later of (i) the second anniversary of the date of this Agreement or (ii) two (2) years following the date on which notice of non-renewal or termination of this Agreement is given by either the Company or Executive to the other. Thus, this Agreement shall be renewable automatically on a daily basis so that the outstanding term is always two (2) years following any effective notice of non-renewal or of termination given by the Company or Executive. 2. Severance Payment. In the event that Executive's employment is terminated for any reason other than (i) death, (ii) Disability (as defined in Section 3(a)) or (iii) a Voluntary Termination of Employment Without Good Reason (as defined in Section 3(b)): (a) Subject to Section 2(b) below, Executive shall be entitled to a severance payment equal to 299% of his "base amount" as such term is defined in Internal Revenue Code ("Code") Section 280G ("Base Amount"), payable in a lump sum within thirty (30) days of the date of termination. In the event that Executive's employment is terminated for death, Disability or a Voluntary Termination of Employment Without Good Reason or in the event of a "Qualified Rehire" as such term is defined in Section 3(d), Executive shall not be entitled to a severance payment. (b) Limitation. To the extent that any or all of the payments and benefits provided for in this Agreement constitute "parachute payments" within the meaning of Section 280G of the Code and, but for this Section 2(b), would be subject to the excise tax imposed by Section 4999 of the Code, the aggregate amount of such payments and benefits shall be reduced such that the present value thereof (as determined under the Code and applicable regulations) is equal to 2.99 times Executive's Base Amount. The determination of any reduction of any payment or benefits under this Section 2 pursuant to the foregoing provision shall be made by a nationally recognized public accounting firm chosen by the Company in good faith, and such determination shall be conclusive and binding on the Company and Executive. 3. Definitions. (a) The term "Disability" as used in this agreement shall mean three (3) months of substantially continuous disability. Disability shall be deemed "substantially continuous" if, as a 2 practical matter, Executive, by reason of mental or physical health, is unable to sustain reasonably long periods of substantial performance of her duties. (b) The term "Voluntary Termination of Employment Without Good Reason" shall mean Executive's termination of employment by the action of Executive, other than a voluntary termination following a Change in Control (as defined in Section 3(c)) or a voluntary termination due to (i) material breach by the Company of any representation, covenant or agreement contained in this Agreement, (ii) a change in Executive's title or a reduction or alteration of the duties of Executive which are materially consistent with the duties generally performed by a chief executive officer, (iii) a reduction in Executive's base salary or (iv) a requirement that Executive relocate outside Orange County California. (c) A "Change in Control" shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of at least 80% of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of the Company's outstanding shares of Common Stock (other than any such person who had record or beneficial ownership of at least 20% of the Company's outstanding shares of Common Stock on the date hereof), or (iv) during any period of two consecutive years during the term of this Agreement, individuals who at the beginning of the two year period constituted the entire Board of Directors do not for any reason constitute a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. (d) A "Qualified Rehire" shall have occurred, effective upon consummation of a Change in Control, when the respective successor or surviving entity to the Company employs Executive with such duties and compensation terms as are materially consistent with those duties and compensation terms as were in effect between the Company and Executive prior to the consummation of such Change in Control. 4. Notice of Termination. Any termination by the Company pursuant to which the Company asserts that a severance payment is not due Executive under Section 2 shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate those specific provisions in this Agreement relied upon and which set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment without a severance payment. For purposes of this Agreement, no such purported termination by the Company shall be effective without such Notice of Termination. 2 3 5. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights; No Employment Contract. (a) Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as the result of employment by another employer after the date of termination, or otherwise. (b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan, incentive plan, employment agreement or other contract, plan or arrangement. (c) Nothing herein shall be deemed to give Executive any right to continue as an Employee of the Company, and the Company shall have the right, subject to compliance with this Agreement, to terminate Executive at any time. 6. Successors. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts are still payable to [him/her] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be no such designee, to Executive's estate. 7. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Gish Biomedical, Inc. Kelvin Avenue Irvine, California 92714-5821 Attention: Secretary If to Executive: Jack Brown 11791 Las Palmas Santa Ana, CA 92705 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and the Company. No waiver by either party hereto at any time of any breach by 3 4 the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 9. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Entire Agreement. This Agreement contains all of the terms agreed upon between Executive and the Company with respect to the subject matter hereof and replaces and supersedes all prior Severance Compensation Agreements between Executive and the Company. Executive and the Company agree that no term, provision or condition of this Agreement shall be held to be altered, amended, changed or waived in any respect except by subsequent written agreement of Executive and the Company. 12. Arbitration, Legal Fees and Expenses. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the American Arbitration Association; and a judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The Company shall pay all legal fees and expenses which Executive may incur as a result of the Company's contesting the validity, enforceability or Executive's interpretation of, or determinations under, this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. "COMPANY" "EXECUTIVE" GISH BIOMEDICAL, INC. By: /S/ Dick Dutrisac /S/ Jack Brown ------------------------------- ----------------------------- Its: Authorized Agent Jack Brown ------------------------------- 4 EX-10.2 3 SEVERANCE COMPENSATION AGREEMENT - JEANNE MILLER 1 EXHIBIT 10.2 SEVERANCE COMPENSATION AGREEMENT SEVERANCE COMPENSATION AGREEMENT dated as of August 15, 1997, between GISH BIOMEDICAL, INC. a California corporation ("Company"), and Jeanne Miller ("Executive"). The Company's Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of Executive to her assigned duties and to provide to Executive fixed severance compensation in the event of termination under certain circumstances. This Agreement sets forth the severance compensation that the Company agrees it will pay to Executive if Executive's employment with the Company terminates under one of the circumstances described herein. 1. Term. The term of this Agreement shall commence on the date hereof and shall end on the later of (i) the second anniversary of the date of this Agreement or (ii) two (2) years following the date on which notice of non-renewal or termination of this Agreement is given by either the Company or Executive to the other. Thus, this Agreement shall be renewable automatically on a daily basis so that the outstanding term is always two (2) years following any effective notice of non-renewal or of termination given by the Company or Executive. 2. Severance Payment. In the event that Executive's employment is terminated for any reason other than (i) death, (ii) Disability (as defined in Section 3(a)) or (iii) a Voluntary Termination of Employment Without Good Reason (as defined in Section 3(b)): (a) Subject to Section 2(b) below, Executive shall be entitled to a severance payment equal to 299% of her "base amount" as such term is defined in Internal Revenue Code ("Code") Section 280G ("Base Amount"), payable in a lump sum within thirty (30) days of the date of termination. In the event that Executive's employment is terminated for death, Disability or a Voluntary Termination of Employment Without Good Reason or in the event of a "Qualified Rehire" as such term is defined in Section 3(d), Executive shall not be entitled to a severance payment. (b) Limitation. To the extent that any or all of the payments and benefits provided for in this Agreement constitute "parachute payments" within the meaning of Section 280G of the Code and, but for this Section 2(b), would be subject to the excise tax imposed by Section 4999 of the Code, the aggregate amount of such payments and benefits shall be reduced such that the present value thereof (as determined under the Code and applicable regulations) is equal to 2.99 times Executive's Base Amount. The determination of any reduction of any payment or benefits under this Section 2 pursuant to the foregoing provision shall be made by a nationally recognized public accounting firm chosen by the Company in good faith, and such determination shall be conclusive and binding on the Company and Executive. 3. Definitions. (a) The term "Disability" as used in this agreement shall mean three (3) months of substantially continuous disability. Disability shall be deemed "substantially continuous" if, as a 2 practical matter, Executive, by reason of mental or physical health, is unable to sustain reasonably long periods of substantial performance of her duties. (b) The term "Voluntary Termination of Employment Without Good Reason" shall mean Executive's termination of employment by the action of Executive, other than a voluntary termination following a Change in Control (as defined in Section 3(c)) or a voluntary termination due to (i) material breach by the Company of any representation, covenant or agreement contained in this Agreement, (ii) a change in Executive's title or a reduction or alteration of the duties of Executive which are materially consistent with the duties generally performed by a chief financial officer, (iii) a reduction in Executive's base salary or (iv) a requirement that Executive relocate outside Orange County California. (c) A "Change in Control" shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have substantially the same proportionate ownership of at least 80% of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, (ii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 20% or more of the Company's outstanding shares of Common Stock (other than any such person who had record or beneficial ownership of at least 20% of the Company's outstanding shares of Common Stock on the date hereof), or (iv) during any period of two consecutive years during the term of this Agreement, individuals who at the beginning of the two year period constituted the entire Board of Directors do not for any reason constitute a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. (d) A "Qualified Rehire" shall have occurred, effective upon consummation of a Change in Control, when the respective successor or surviving entity to the Company employs Executive with such duties and compensation terms as are materially consistent with those duties and compensation terms as were in effect between the Company and Executive prior to the consummation of such Change in Control. 4. Notice of Termination. Any termination by the Company pursuant to which the Company asserts that a severance payment is not due Executive under Section 2 shall be communicated by a Notice of Termination. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate those specific provisions in this Agreement relied upon and which set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment without a severance payment. For purposes of this Agreement, no such purported termination by the Company shall be effective without such Notice of Termination. 2 3 5. No Obligation to Mitigate Damages; No Effect on Other Contractual Rights; No Employment Contract. (a) Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as the result of employment by another employer after the date of termination, or otherwise. (b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan, incentive plan, employment agreement or other contract, plan or arrangement. (c) Nothing herein shall be deemed to give Executive any right to continue as an Employee of the Company, and the Company shall have the right, subject to compliance with this Agreement, to terminate Executive at any time. 6. Successors. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amounts are still payable to [him/her] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there be no such designee, to Executive's estate. 7. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Gish Biomedical, Inc. Kelvin Avenue Irvine, California 92714-5821 Attention: Secretary If to Executive: Jeanne Miller 263 East 23rd Street Costa Mesa, CA 92627 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 8. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and the Company. No waiver by either party hereto at any time of any breach by 3 4 the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 9. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Entire Agreement. This Agreement contains all of the terms agreed upon between Executive and the Company with respect to the subject matter hereof and replaces and supersedes all prior Severance Compensation Agreements between Executive and the Company. Executive and the Company agree that no term, provision or condition of this Agreement shall be held to be altered, amended, changed or waived in any respect except by subsequent written agreement of Executive and the Company. 12. Arbitration, Legal Fees and Expenses. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the American Arbitration Association; and a judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The Company shall pay all legal fees and expenses which Executive may incur as a result of the Company's contesting the validity, enforceability or Executive's interpretation of, or determinations under, this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. "COMPANY" "EXECUTIVE" GISH BIOMEDICAL, INC. By: /S/ Dick Dutrisac /S/ Jeanne Miller ------------------------------ --------------------------------- Its: Authorized Agent Jeanne Miller ------------------------------ 4 EX-27.1 4 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 4,464,100 1,031,600 3,476,600 0 7,027,500 17,031,500 10,493,800 6,608,000 21,225,400 1,467,100 0 0 0 10,097,100 (53,800) 21,225,400 5,317,700 5,317,700 3,635,500 3,635,500 1,607,200 0 0 148,400 57,900 90,500 0 0 0 90,500 .03 .03
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