As filed with the Securities and Exchange Commission on July 10, 1995
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ANGEION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA
(State or jurisdiction of incorporation or organization)
41-1579150
(I.R.S. Employer Identification No.)
3650 ANNAPOLIS LANE, SUITE 170
PLYMOUTH, MINNESOTA 55447-5434
(612) 550-9388
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID L. CHRISTOFFERSON
3650 ANNAPOLIS LANE, SUITE 170
PLYMOUTH, MINNESOTA 55447-5434
(612) 550-9388
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
THOMAS C. THOMAS, ESQ.
OPPENHEIMER WOLFF & DONNELLY
3400 PLAZA VII
45 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 344-9300
JAMES R. TANENBAUM, ESQ.
STROOCK & STROOCK & LAVAN
7 HANOVER SQUARE
NEW YORK, NEW YORK 10004
(212) 806-6048
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend reinvestment plans, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C>
Common Stock, $.01 par value 2,500,000 shares $4.9375 $12,343,750 $4,257
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee puruant to Rule 457(c) under the Securities Act of 1993,
based upon the average of the bid and asked prices of registrant's Common
Stock in the national over-the-market on July 5, 1995, as reported by
Nasdaq.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION DATED JULY 10, 1995
[LOGO]
2,500,000 SHARES OF COMMON STOCK
Angeion Corporation (the "Company") is offering hereby 2,500,000 shares of
its Common Stock, par value $.01 per share (the "Shares"). The Common Stock of
the Company is traded over-the-counter on the Nasdaq SmallCap Market System
under the symbol "ANGN" and is also listed on the Boston Stock Exchange under
the symbol "ANI." On July 5, 1995, the closing bid price of the Common Stock, as
reported on the Nasdaq SmallCap Market System, was $5.00.
SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION INVESTORS SHOULD CONSIDER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PRICE TO COMMISSION PROCEEDS TO
PUBLIC AND FEES(1) COMPANY(2)(3)
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
(1) The Shares are being offered by the Company principally to selected
investors purchasing for investment. Raymond James & Associates, Inc. (the
"Placement Agent") has been retained to act, on a best efforts basis, as
agent for the Company in connection with the arrangement of this
transaction. The Company has agreed, among other things, (i) to pay the
Placement Agent a fee equal to 6.5% of the Price to Public in connection
with the arrangement of this financing, and (ii) to indemnify the Placement
Agent against certain liabilities including liabilities under the Securities
Act of 1933, as amended. See "Plan of Distribution."
(2) Prior to the closing date of this best efforts, all or nothing offering, all
investor funds will promptly be placed in escrow with Citibank, N.A., as
escrow agent ("Citibank"), in an escrow account established for the benefit
of the investors. Upon receipt of notice from Citibank that investors have
affirmed purchase of the Shares and deposited the requisite funds in the
escrow account, the Company will deposit with the Depository Trust Company
the Shares to be credited to the accounts of the investors and will collect
the investor funds from Citibank. In the event that investor funds are not
received in the full amount necessary to satisfy the requirements of the
offering, all funds deposited in the Citibank escrow account will promptly
be returned to the investors. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $217,500.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is July __, 1995.
[A photo of the Company's ICD system includes a computer monitor which sits on
top of a programmer unit with a built-in device similar to a large scale
television remote control, the ICD device and leads.]
The Company's Sentinel Implantable Cardioverter Defibrillator ("ICD") and dual
transvenous leads are implanted in a patient to monitor the heart for irregular
heartbeats, and, when necessary, provide an appropriate amount of electrical
energy to convert the irregular heartbeat back to a normal rhythm.
[A photo of the Company's ICD device with two attached leads.]
The Sentinel ICD System includes the ICD, a computer programmer, an external
defibrillation test system, a smart wand and transvenous leads.
[A 3-part illustration depicts: a patient with an ICD device and lead system
implanted in the heart and arterial system; a physician during the implantation
procedure, stands in front of a computer console and programs the ICD; a
clinician using a small hand held device, during a patient follow-up visit,
checks the activity of the implanted device.]
Defibrillation Test System
and Programmer during
implant procedure.
Sentinel ICD and Dual Transvenous
Lead System is implanted pectorally.
Programmer/Interrogator
for patient follow-up in
physician's clinic.
IN JANUARY 1995, THE COMPANY INITIATED LIMITED HUMAN CLINICAL TRIALS OF ITS
SENTINEL(TM) ICD SYSTEM IN GERMANY. THERE CAN BE NO ASSURANCE, HOWEVER, THAT THE
COMPANY WILL RECEIVE APPROVAL FROM THE FDA OR FOREIGN REGULATORY AUTHORITIES TO
COMMENCE HUMAN CLINICAL TRIALS IN THE U.S. OR EXPAND FOREIGN CLINICAL TRIALS OR,
IF SUCH APPROVAL IS RECEIVED, TO COMMENCE COMMERCIAL MARKETING. THE ABOVE
DIAGRAMS DEPICT AN IMPLANTED SENTINEL ICD AND RELATED ACCESSORIES.
SUMMARY
This summary is intended only for convenience and is not a complete
presentation of all relevant facts. It is qualified in its entirety by the
detailed information and financial statements contained elsewhere herein. The
entire Prospectus should be read and understood by prospective investors.
THE COMPANY
Angeion Corporation is engaged in designing, developing and manufacturing
two types of products to treat and potentially cure irregular heartbeats
(arrhythmias). The Company's Implantable Technology Division is developing the
Sentinel series of implantable cardioverter defibrillators ("ICDs"), which are
designed to treat rapid heartbeats in the ventricular (or lower) chambers of the
heart, a condition known as ventricular tachycardia ("VT"), and a severe form of
VT known as ventricular fibrillation ("VF") which if not terminated will lead to
a sudden cardiac death ("SCD") episode. The Company believes, based upon
industry analyses and attendance by management at industry meetings, that its
first product, the Sentinel 2000, is the smallest and one of the most
technologically advanced ICDs under development today. The Company's
Interventional Technology Division is developing a radio frequency ("RF")
catheter ablation system that it believes will provide a potential cure for
certain forms of atrial fibrillation (rapid heartbeats originating in the upper
chambers of the heart), and a laser catheter ablation system that it believes
will provide a potential cure for certain forms of VT. The Company is actively
pursuing a strategic alliance to accelerate the continued development and
commercialization of the products and technologies in the Company's
Interventional Technology Division.
Current treatments for VT consist primarily of medication, ICDs and open
heart surgery. The Company believes that the most effective treatment for
individuals at risk of experiencing a SCD episode, in light of currently
available technology, is an ICD. The ICD and lead market has grown from
approximately $160 million in 1990 to approximately $530 million in 1994,
representing a compounded annual growth rate of approximately 35%. The ICD
market is expected to continue to grow by at least 20% to 25% per year to reach
in excess of $1 billion per year by the end of the decade.
An ICD is implanted within the body to monitor the patient's heartbeat and,
in the event of VT or VF, to deliver an electrical shock to the heart sufficient
to terminate the arrhythmia. The most advanced ICDs currently in human clinical
trials or market approved are devices characterized by (i) tiered therapy
(electrical shocks of varying intensity depending on the type and severity of
the arrhythmia), (ii) programmability (allows the physician to customize therapy
to the patient's condition both before and, more importantly, after implant),
(iii) improved transvenous lead systems (allows implantation of the lead through
a vein so that open chest surgery is not required), (iv) electrogram storage
capability (storage of intracardiac EKGs), (v) a biphasic waveform (an
electrical shock of alternating polarity), and (vi) limited pectoral implant
capability.
The Company is developing the Sentinel series of ICDs, which offers certain
advantages over ICDs currently in human clinical trials or market approved,
including the following: (i) reduced size and weight specifications that will
allow for universal pectoral implant capability; (ii) Small Cap(tm) biphasic
waveform, a more efficient output waveform that delivers energy at a higher
average current and in a shorter time and thereby lowers defibrillation energy
thresholds; (iii) Hot Can(tm) electrode system that uses the Sentinel housing as
an efficient electrode that can be programmed on and off; (iv) a dual battery
system that increases the potential lifetime of the ICD from five years to up to
seven years; (v) Energy Steering(tm) delivery system that permits the device to
increase shock effectiveness by directing the current more uniformly throughout
the heart; and (vi) special algorithms for more effective discrimination between
VT, VF and supraventricular tachycardia ("SVT") (a feature greatly enhanced in
the Sentinel 2001). Electrogram storage capability will first be introduced in
the Company's Sentinel 2001 . See "Business -- Products."
The Company's products are subject to a lengthy and expensive premarket
approval process with the U.S. Food and Drug Administration ("FDA"). With
respect to the Sentinel 2000 and the Company's RF catheter ablation system, the
Company is currently scheduled to submit applications to the FDA for
investigational device exemptions ("IDEs") in the second half of calendar 1995.
The Company has received an IDE for its laser catheter ablation system that
permits the Company to conduct up to 15 procedures at two medical centers. See
"Business -- Products" and " -- Government Regulation."
The Company's products are also subject to regulation by agencies
comparable to the FDA in foreign countries. The Company has initiated limited
human clinical trials of the Sentinel 2000 in Germany. Initial regulatory
documents and requests to conduct human clinical trials in Italy were filed in
the second half of calendar 1994 and in the United Kingdom in the first half of
calendar 1995. The Company is currently scheduled to complete these
international documents and file for expanded clinical trials in Germany during
the second half of calendar 1995. Upon completion of clinical trial requirements
for the Sentinel 2000 in the European Community ("EC"), the Company will file
for a CE mark in one of the countries in which clinical trials have been
conducted, approval of which will allow the Company to commence commercial
marketing throughout the EC. The Company currently expects to file for a CE mark
in the first calendar quarter of 1996. The Company has contracted with a
manufacturer in Scotland to perform final assembly of its products for use in
clinical trials in the EC, which facility has received ISO 9002 certification.
See "Business -- Governmental Regulation."
The Company has a strategic alliance with Pacesetter, Inc. ("Pacesetter"),
a subsidiary of St. Jude Medical, Inc. This arrangement, among other things,
provides Pacesetter with worldwide OEM marketing rights, on a co-exclusive basis
with the Company, to certain of the Company's products for a period that may not
be less than seven years. The Company retains the right to market and sell
defibrillator and laser catheter products worldwide under its own label and,
subject to certain specified limitations and qualifications, to manufacture the
products it sells to Pacesetter. See "Business -- Sales and Distribution" and "
- -- Manufacturing."
RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk
due to a number of factors, including, but not limited to: (i) the Company's
operating losses and need to obtain substantial additional financing, technical,
manufacturing and marketing resources than the Company, (ii) the Company's
ability to complete development and obtain regulatory approval to commence
commercial marketing of the Sentinel series and its two catheter ablation
systems, (iii) competition with other ICD manufacturers that have greater
financial technical, manufacturing and marketing resources than the Company,
(iv) uncertainty of third party reimbursement, (v) the Company's ability to
prosecute its patent portfolio, obtain new patents and avoid infringement of the
proprietary rights of others, (vi) the Company's ability to fulfill the
manufacturing requirements of the Pacesetter arrangement, (vii) the Company's
ability to establish an effective system for manufacturing, selling and
distributing its products, and (viii) the uncertainty of market acceptance of
the Company's products. See "Risk Factors."
THE OFFERING
SHARES OFFERED 2,500,000 Shares. See "Plan of Distribution."
PRICE PER SHARE $
COMMON STOCK TO BE
OUTSTANDING AFTER
THE OFFERING 19,802,526 Shares (excludes 6,428,587 shares issuable
upon exercise of outstanding options and warrants)
NASDAQ TRADING SYMBOL ANGN (Common Stock)
BOSTON STOCK
SYMBOL EXCHANGE ANI (Common Stock)
USE OF PROCEEDS The Company intends to apply the net proceeds of the
sale of the Shares for research and development
(including clinical trials), investment in capital
equipment and leasehold improvements, and general
corporate purposes, including working capital.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30, YEAR ENDED JULY 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales $ 0 $ 0 $ 0 $ 137,982 $ 77,615
Research and development
expenses 5,268,028 3,629,800 5,158,738 4,485,818 2,996,845
Merger expense for in-process
research and development 0 1,435,124 1,450,499 0 0
General and administrative
expenses 1,508,635 1,032,172 1,493,424 1,353,502 1,021,078
Loss from continuing
operations (6,673,157) (5,768,779) (7,675,743) (5,915,558) (4,054,919)
Net loss (6,673,157) (5,768,779) (7,675,743) (2,708,438) (4,161,455)
Net loss per share $ (0.41) $ (0.55) $ (0.72) $ (0.26) $ (0.42)
Weighted average number of
shares outstanding (1) 16,291,900 10,519,777 10,657,311 10,296,812 9,901,592
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1995
JULY 31, 1994 ACTUAL AS ADJUSTED(2)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,127,358 $4,700,977 $16,170,977
Working capital (1,175,384) 4,030,294 15,500,294
Total assets 4,752,630 7,756,628 19,226,628
Long-term debt, less current
installments 1,504,187 1,501,917 1,501,917
Shareholders' equity (deficit) (596,320) 5,262,766 16,732,766
</TABLE>
(1) Computed on the basis described for net loss per share in Note 2 of Notes to
Financial Statements.
(2) Adjusted to give effect to application of the net proceeds of this
offering at an assumed per share offering price of $5.00. See "Use of
Proceeds."
RISK FACTORS
In analyzing this offering, prospective investors should consider
carefully, among others, the following risk factors relating to the Company and
this offering:
CONTINUING OPERATING LOSSES; PROFITABILITY UNCERTAIN
The Company has incurred net operating losses from continuing operations in
each year since its inception in 1986. At April 30, 1995, the Company's
accumulated deficit was approximately $24,215,537. Such losses have resulted
principally from costs incurred in the research and development of the Company's
products. The Company has had no significant revenue since the sale of its
medical accessory products division in September 1992. The Company expects to
incur additional operating losses over the next several years as the Company
continues to fund research and development (including clinical trials) relating
to its ICDs and catheter ablation systems. The Company's ability to achieve
profitability is dependent in part on obtaining regulatory approvals for its
products and developing the capacity to manufacture and sell its products
successfully. There can be no assurance that the Company will obtain the
required regulatory approvals on a timely basis or at all, successfully develop,
commercialize, manufacture and market its products, or ever achieve
profitability. See "Business -- Government Regulation."
NEED FOR ADDITIONAL FINANCING
The proceeds from this offering will be used for research and development
(including clinical trials), investment in capital equipment and leasehold
improvements, and general corporate purposes, including working capital. See
"Use of Proceeds." If the Company's operations progress as anticipated, of which
there can be no assurance, the Company expects that the net proceeds from this
offering will allow the Company to meet its cash requirements for a period of
approximately 12 months after the closing of this offering. The timing of the
Company's future capital requirements, however, will depend on a number of
factors, including progress with preclinical and clinical trials; time and costs
involved in obtaining regulatory approvals; costs involved in filing,
prosecuting and enforcing patents or defending against patent infringement
claims; competing technological and market developments; and costs of
manufacturing and marketing scale-up. In any event, the Company will require
substantial additional capital beyond the net proceeds of this offering to
complete development and commence commercial manufacturing and marketing of its
products. There can be no assurance, however, that such additional financing
will be available on acceptable terms, or at all. If additional funds are raised
by issuing equity securities, further dilution to then existing shareholders may
result. If the Company is unable to obtain additional funds as needed, the
Company may be required to significantly curtail one or more of its research and
development programs or cease operations entirely, in which case investors in
this offering could lose their entire investment.
LACK OF PMA APPROVAL; INITIAL U.S. REVENUES MAY BE LIMITED
The Company will not be able to commence marketing and commercial sales of
its products in the U.S. until it receives FDA approval, which will only be
granted following filing of a Pre-Market Approval ("PMA") application. An IDE
submission, a necessary first step prior to filing a PMA, is expected to be
filed for the Sentinel 2000 system in the second half of calendar 1995. At such
time as an IDE is approved in connection with the Sentinel 2000 system, and
until the Company receives PMA approval, the Company will be subject to
FDA-imposed limitations on the number of patients who may receive Sentinel 2000
implants and the number and location of clinical sites at which implants may be
performed. The Company would be unable to sell additional Sentinel 2000 systems
in the U.S. should the number of implants reach the limits authorized by the FDA
and such limitation could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company obtained an
IDE with respect to its laser catheter ablation system that permits up to 15
clinical trials at two medical centers. The Company intends to file an IDE with
respect to its RF catheter ablation system in the second half of calendar 1995
and to pursue this technology more aggressively as funding becomes available.
The timing of both the IDE and PMA review processes is unpredictable and
uncertain. There can be no assurance as to when or whether the Company will
receive IDE or PMA approvals. Failure to obtain IDE or PMA approval or to obtain
such approval on a timely basis would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
Products" and " -- Government Regulation."
COMPETITION
Competition in the ICD market is intense. Although the Company's ICDs will
also compete with alternative treatments for VT, such as drug therapy, open
heart surgery and cardiac ablation, the Company believes that ICD manufacturers
constitute its primary competition. Although no assurance can be given that PMA
approval will ever be obtained for the Sentinel series products, or that
competitors will not introduce new products with similar features or that the
market will accept the Sentinel series, the Company believes the Sentinel series
will be able to compete effectively with other ICD devices currently in the
market due to its smaller size and certain other proprietary features that will
ease implantation, improve patient therapy and improve monitoring capability.
Most of the Company's competitors in the ICD market have greater financial,
manufacturing, marketing, distribution and technical resources and greater name
recognition than the Company. Although there can be no assurance that the
Company's strategic alliance with Pacesetter will be successful, the Company
believes that this strategic alliance will assist the Company in addressing the
greater resources and name recognition of its competitors. See "Business --
Competition."
A number of companies are believed to be developing ablation devices to
treat SVT, certain of which are larger companies with significant resources. To
date, however, few companies have focused on ablation devices to treat VT. There
can be no assurance, however, that competitors of the Company will not be able
to develop and introduce cardiac ablation systems that may be more effective in
treating VT. In addition, catheter ablation technologies also compete with drug
therapy. While historically drug therapy has had limited effectiveness and
caused adverse side effects, new drugs under development may offer improved
treatment outcomes. See "Business -- Competition."
UNCERTAINTY OF THIRD PARTY REIMBURSEMENT AND HEALTH CARE REFORM
The Company's ability to market its products successfully in the U.S. will
depend in part on the extent to which reimbursement for the cost of such
products and related treatment will be available from government health
administration authorities (such as the Health Care Financing Administration
("HCFA"), which determines Medicare reimbursement levels), private health
insurers, health maintenance organizations and other third-party payors. Payors
are increasingly challenging the need for and prices of medical products and
services. Payors may deny reimbursement for procedures that they deem
experimental or for devices that are used other than for FDA-approved
indications. Currently, HCFA is not allowing Medicare reimbursement for products
and related procedures that have not received FDA approval, and certain private
third-party payors have also begun denying such reimbursement. With respect to
the laser catheter ablation system, even if the Company obtains a PMA, some
payors may deny coverage until the procedure becomes generally accepted by the
medical profession. The inability of hospitals and other providers to obtain
reimbursement from third-party payors for the Company's products and related
procedures would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Third Party
Reimbursement."
The Company expects that there will be continued pressure on
cost-containment throughout the U.S. health care system. Reforms may include
mandated basic health care benefits, controls on health care spending through
limitations on the growth of private health insurance premiums and Medicare and
Medicaid spending, the creation of large insurance purchasing groups and
fundamental changes to the health care delivery system. The Company anticipates
that Congress and state legislatures will continue to review and assess
alternative health care delivery systems and payment methodologies and public
debate of these issues will likely continue in the future. Due to uncertainties
regarding the ultimate features of reform initiatives and their enactment and
implementation, the Company cannot predict which, if any, of such reform
proposals will be adopted, when they may be adopted or what impact they may have
on the Company. See "Business -- Third Party Reimbursement."
INTELLECTUAL PROPERTY PROTECTION
As of June 30, 1995, the Company had 43 U.S. issued patents and 16 U.S.
patents which have been allowed but have not yet issued, relating to its
research and development products. As of this date, the Company also had 34 U.S.
patent applications pending, 17 foreign patent applications pending and 13 U.S.
patent applications in preparation with respect to its research and development
products. The Company also owns certain registered trademarks and has applied
for several other trademarks in the U.S. and certain foreign countries. There
can be no assurance that patents and trademarks will be granted in the future,
or that any patents and trademarks that the Company now holds or may be granted
or under which it has been granted licenses will be valid or otherwise be of
value to the Company. Even if the Company's patents and trademarks are valid,
others may be able to introduce non-infringing products that are competitive
with those of the Company.
The Company is conducting an ongoing evaluation of potential infringement
of any proprietary rights of third parties by the products the Company intends
to market. Regardless of the Company's efforts to evaluate the potential
infringement of any proprietary rights of third parties, there can be no
assurance that such infringements do not exist or may not arise in the future.
There has been substantial litigation regarding patent and other intellectual
property rights in the medical device industry, particularly in the ICD market.
Litigation, which could result in substantial cost to and diversion of effort by
the Company, may be necessary to enforce patents issued to or licensed by the
Company, to protect trade secrets or know-how owned by the Company or to defend
the Company against claimed infringement of the rights of others and to
determine the scope and validity of the proprietary rights of others. Adverse
determinations in litigation could subject the Company to significant
liabilities to third parties or could require the Company to seek licenses from
third parties. Although patent and intellectual property disputes in the medical
device area have often been settled through licensing or similar arrangements,
costs associated with such arrangements may be substantial and there can be no
assurance that necessary licenses would be available to the Company on
satisfactory terms or at all. Accordingly, an adverse determination in a
judicial or administrative proceeding or failure to obtain necessary licenses
could prevent the Company from manufacturing and selling its products, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. The Company is not currently a party to any
patent or other litigation. In the event that litigation or licensing of the
Company's patents were to occur, the license agreement currently in existence
between the Company and Pacesetter may affect the ability of the Company to
settle any intellectual property disputes related to the Company's products on
reasonable terms or at all, which could have a material adverse effect on the
Company's business. See "Business -- Intellectual Property."
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance, however, that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known to or independently developed by competitors.
REQUIREMENTS OF PACESETTER RELATIONSHIP
The Company and Pacesetter are parties to a Preferred Stock, Preferred
Stock Option and Subordinated Debenture Purchase Agreement (the "Purchase
Agreement"), an OEM Marketing and Manufacturing Agreement (the "OEM Agreement")
and a License Agreement (the "License Agreement"). Pursuant to the OEM
Agreement, if the Company fails to fulfill all product quantity, quality and
specification requirements, Pacesetter may elect to manufacture these products
and pay the Company a royalty that is less than the transfer price payment the
Company would have received had it manufactured the products and sold them to
Pacesetter. No assurance can be given that the Company will be able to fulfill
these requirements, and the failure to do so could have a material adverse
effect on the Company's operations. See "Business -- Manufacturing." In
addition, the License Agreement, on its face, contains certain conditional
rights and obligations for both Pacesetter and the Company with respect to
sublicensing of the Company's defibrillator patents and patent applications in
existence at the time of the License Agreement. In the event that litigation or
licensing of the Company's patents were to occur, the License Agreement may
affect the ability of the Company to settle any intellectual property disputes
related to the Company's products on reasonable terms or at all, which could
have a material adverse effect on the Company's business. See "Business --
Intellectual Property."
The Purchase Agreement provides that, until one year after PMA approval of
the Company's first ICD (other than the Sentinel 2000), Pacesetter will have a
right of first refusal any time the Company receives an offer for the purchase,
license, lease or transfer of all or a substantial portion of the Company's
assets or business or for the purchase of a majority interest in the capital
stock of the Company. In connection with this right of first refusal, Pacesetter
will have 21 days after notice to determine whether it will exercise its right
by proceeding with the transaction on the same terms and conditions as are set
forth in the offer. This right of first refusal could have the effect of
delaying, deferring or preventing a change in control of the Company, which
could operate to deny shareholders the receipt of a premium on their Common
Stock and could have a depressive effect on the market price for the Common
Stock.
GOVERNMENT REGULATION
The medical products the Company intends to market are subject to
regulation in the U.S. by the FDA. The process of complying with such
regulations with respect to new products can be costly and time-consuming. The
Company's ICD products and its catheter ablation systems are subject to a
lengthy and expensive pre-market approval process with the FDA. The Company
expects to file for an IDE in the U.S. in the second half of calendar 1995 with
respect to its Sentinel 2000. Upon approval of the IDE, the Company will
initiate clinical trials of the Sentinel 2000 system in the U.S. During the
second half of calendar 1995, the Company is also planning to file for an IDE on
its RF catheter ablation system. The Company has received an IDE with respect to
its laser catheter ablation system permitting it to perform up to 15 procedures
at two medical centers. The data collected in clinical trials (both in and
outside the U.S.) of the Company's Sentinel 2000 and its catheter ablation
systems will be used to prepare the PMA applications for such products. If such
PMA applications are accepted for filing by the FDA, they will be reviewed
further by the FDA and subsequently by the FDA Circulatory System Devices Panel.
After considering the panel's recommendation, the FDA will determine whether to
approve such PMA applications. Approval of the Company's applications for PMAs
for the Sentinel series and its catheter ablation systems will depend on a wide
variety of factors, many of which are outside the Company's control. Approval
will also require an inspection by the FDA to determine whether the Company's
operations conform with the FDA's current Good Manufacturing Practices. There
can be no assurance that the Company will be successful in obtaining an IDE for
its Sentinel series or its RF catheter ablation system, or that the Company will
be successful in obtaining a PMA for its products, in a timely manner, or at
all. Delays in obtaining marketing approvals and clearances in the U.S. could
have significant adverse consequences on the Company and its operations. The
Company is also subject to certain FDA regulations governing manufacturing
practices, packaging and labelling. Further, the FDA regulates the export of
medical devices that have not been approved or cleared for marketing in the
United States. Prior to commencement of sales outside the U.S., the Company will
be required either to obtain export approval from the FDA or to establish a
manufacturing capacity abroad. See "Business -Government Regulation."
The Company's products are also subject to regulation by agencies
comparable to the FDA in foreign countries. The Company has initiated limited
human clinical trials of the Sentinel 2000 in Germany. Initial regulatory
documents and requests to conduct human clinical trials in Italy were filed in
the second half of calendar 1994 and in the United Kingdom in the first half of
calendar 1995. The Company is currently scheduled to complete these
international documents and file for expanded clinical trials in Germany during
the second half of calendar 1995. Under the Active Implantable Medical Device
Directive, which was fully implemented in the EC in January 1995, regulatory
documents and test information must be submitted to the governmental agency of
each country in which the Company intends to conduct human clinical trials, and
the Company is in the process of complying with these regulatory requirements.
Upon completion of the clinical trial requirements, the Company will file for a
CE mark in one of the countries in which clinical trials have been conducted,
approval of which will allow the Company to commence commercial marketing of its
products throughout the EC. There can be no assurance, however, that the Company
will be allowed to conduct the necessary human clinical studies of the Sentinel
2000 in Europe or that the Company will obtain CE mark approval, on a timely
basis or at all. The Company has contracted with a manufacturer in Scotland to
perform final assembly of its products for use in clinical trials in Europe, and
this facility has received ISO 9002 certification.
MARKET ACCEPTANCE
Market acceptance of the Company's products will depend, in part, on the
therapeutic capabilities and operating features of its products as compared to
competing products and will also depend on the Company's ability to convince the
medical community of the clinical efficacy of its products. Failure of the
Company's products to gain market acceptance would have a material adverse
effect on the Company's business, financial condition and results of operations.
POSSIBLE OBSOLESCENCE DUE TO TECHNOLOGICAL CHANGE
The medical device industry is subject to rapid technological innovation
and, consequently, the life cycle of a particular product tends to be relatively
short. The Company is engaged in a field characterized by extensive research and
development efforts. There can be no assurance that alternative treatments or
other discoveries and developments with respect to ICDs or catheter ablation
systems will not render the Company's products obsolete. The greater financial
and other resources of many of the Company's competitors may permit such
competitors to respond more rapidly than the Company to technological advances.
See "Business -- Competition."
LIMITED MANUFACTURING OR MARKETING EXPERIENCE
Although management of the Company has limited manufacturing and marketing
experience with respect to the Sentinel series and the catheter ablation
systems, key members of management do have experience in manufacturing and
marketing ICDs and other medical products. While there can be no assurance that
the Company will be able to develop an effective manufacturing and marketing
function, the Company believes that the OEM Agreement entered into with
Pacesetter will support and enhance these efforts. Failure to develop an
effective manufacturing function could also result in the failure of the Company
to meet Pacesetter's product requirements, resulting in a royalty from
Pacesetter that is lower than the transfer price payment the Company would have
otherwise received. See "Business -- Manufacturing" and " -- Sales and
Marketing."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends largely on its senior management and other
key personnel. Accordingly, the loss of the services of key individuals could
have a material adverse effect on the Company's operations and on its current
and future product development efforts. See "Management."
APPLICABILITY OF "PENNY STOCK RULES"
If, during the time in which the Common Stock is quoted on Nasdaq SmallCap
Market, the Common Stock is priced below $5.00 per share, trading of the Common
Stock will be subject to federal regulations governing "penny stocks" (the
"Penny Stock Rules"). Common Stock will be deemed a penny stock for the limited
purpose of enabling the Commission to prohibit previously sanctioned persons
from participating in penny stock activities. This provision requires brokers to
take reasonable steps to avoid distributing the Common Stock to such previously
sanctioned persons. If the Penny Stock Rules are not followed by the broker, the
investor has no obligation to purchase the security. Accordingly, application of
the Penny Stock Rules may make it more difficult for brokers to sell the Common
Stock, and purchasers of the Common Stock offered hereby may have difficulty in
selling their shares in the future in the secondary trading market.
DILUTION
Purchasers of the shares of Common Stock offered hereby will experience an
immediate dilution in net tangible book value. See "Dilution."
CONTROL BY DIRECTORS AND OFFICERS
Upon completion of this offering, the directors and officers of the Company
will own or control approximately 9.1% of the Company's outstanding Common
Stock. If outstanding options and warrants are exercised in full and promissory
notes are converted, and assuming no other change in ownership of the Common
Stock, the total number of shares of Common Stock owned or controlled by
directors and officers of the Company after this offering will represent
approximately 11.8% of the outstanding Common Stock. As a result, directors and
officers, if they act together, would have the ability to exercise substantial
control over the Company's affairs. See "Principal Shareholders and Beneficial
Ownership of Management."
LACK OF PROSPECTIVE DIVIDENDS
The Company has not paid dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company intends
to retain any earnings to finance the development of its business. There can be
no assurance that the Company will ever pay cash dividends. See "Dividend
Policy."
SUFFICIENCY OF PRODUCT LIABILITY INSURANCE
The Company currently carries product liability insurance covering its
products with policy limits of $5.0 million per occurrence and $5.0 million in
the aggregate. It cannot be predicted, however, whether such insurance is
sufficient, or if not, whether the Company will be able to obtain such insurance
as is sufficient, to cover the risks associated with the Company's business or
whether such insurance will be available at premiums that are economically
feasible. Lack of sufficient insurance could expose the Company to suits for
substantial damages.
USE OF PROCEEDS
The Company estimates that the net proceeds to be received by the Company
in this offering, after deducting estimated offering expenses and selling
commissions, will be approximately $11,470,000, assuming an offering price of
$5.00.
The Company estimates that it will use the proceeds of this offering in the
following manner:
Research and development (including clinical trials) $ 8,070,000
Capital equipment and leasehold improvements in
connection with start-up of manufacturing operations 1,200,000
General corporate purposes, including working capital 2,200,000
Total $11,470,000
The table above represents the Company's best estimate of its allocation of
the net proceeds of this offering, based upon its current plans and current
economic, industry and regulatory conditions. These estimates are subject to
change based upon factors such as progress of preclinical and clinical trials,
the time and costs involved in obtaining regulatory approvals, the costs
involved in filing, prosecuting and enforcing patents and defending against
patent infringement claims, competing technologies and market developments and
the cost of manufacturing and marketing scale-up.
If the Shares offered hereby are sold and the Company's operations progress
at expected levels, the Company expects that net proceeds of this offering will
allow the Company to meet its cash requirements for approximately 12 months from
the date of the closing of this offering. If the Company's operations exceed or
fall short of expected levels, the Company may require additional capital
earlier than expected. In any event, and particularly if the Company's
operations do not achieve expected levels, the Company will require substantial
amounts of additional capital.
Prior to the use of the proceeds of this offering, the Company will invest
such proceeds in short-term interest-bearing instruments, such as certificates
of deposit and short-term governmental obligations.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
April 30, 1995, and as adjusted to reflect the issuance and sale of the Shares
offered hereby at an assumed offering price of $5.00 per share.
<TABLE>
<CAPTION>
APRIL 30, 1995(1)
ACTUAL AS ADJUSTED
<S> <C> <C>
Long-Term Debt $ 1,500,000 $ 1,500,000
Shareholders' Equity:
Preferred Stock, Series A, $.01 par value; authorized 1,475,000
shares; issued and outstanding 875,000 shares 3,166,425 3,166,425
Common Stock, $.01 par value; authorized 35,000,000 shares;
issued and outstanding 17,145,819 shares, 19,645,819 shares as
adjusted 171,458 196,458
Additional Paid-in Capital 26,140,420 37,585,420
Accumulated Deficit (24,215,537) (24,215,537)
Total Shareholders' Equity 5,262,766 16,732,766
Total Capitalization $ 6,762,766 $ 18,232,766
</TABLE>
(1) Excludes 6,580,576 shares of Common Stock issuable upon exercise of options
and warrants outstanding at April 30, 1995.
MARKET PRICE FOR COMMON STOCK
The Common Stock is traded over-the-counter on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") SmallCap Market System under
the symbol "ANGN" and is listed on the Boston Stock Exchange under the symbol
"ANI." The following table sets forth the high and low bid prices of the Common
Stock from the first calendar quarter of 1992 through July 5, 1995, as reported
by Nasdaq. Such information represents prices between dealers, without markup,
markdown or commission, and does not necessarily represent actual transactions.
COMMON STOCK
HIGH LOW
1995
Third calendar quarter (through July 5, 1995) $5.000 $4.875
Second calendar quarter 5.000 3.375
First calendar quarter 4.125 2.500
1994
Fourth calendar quarter $3.250 $2.375
Third calendar quarter 3.125 2.000
Second calendar quarter 3.125 1.750
First calendar quarter 3.625 2.375
1993
Fourth calendar quarter $2.875 $2.000
Third calendar quarter 3.125 2.250
Second calendar quarter 4.500 3.250
First calendar quarter 5.250 3.750
1992
Fourth calendar quarter $4.250 $2.500
Third calendar quarter 3.375 1.875
Second calendar quarter 3.750 2.250
First calendar quarter 5.875 3.125
For a recent bid price for the Common Stock, see the cover page to this
Prospectus. As of June 30, 1995, the Common Stock was held of record by 495
persons. The Company's Common Stock is held beneficially by more than 3,200
persons.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company intends
to retain any earnings to finance the development of its business. There can be
no assurance that the Company will ever pay cash dividends.
DILUTION
The net tangible book value of the Common Stock of the Company as of April
30, 1995 (based on the unaudited financial statements included herein), was
$889,747 or $0.05 per share. "Net tangible book value" per share of Common Stock
represents the total tangible assets of the Company reduced by the total
liabilities and convertible preferred stock of the Company and divided by the
number of shares of Common Stock outstanding. Upon completion of this offering,
after deducting estimated offering expenses and selling commissions and at an
assumed offering price of $5.00 per share, the adjusted net tangible book value
of the Common Stock of the Company as of April 30, 1995 would have been
$12,359,747 or $0.63 per share. The increase in net tangible book value of $0.58
per share would be due solely to the purchase of the Shares in this offering.
Purchasers in this offering will immediately incur a dilution of $4.37 per share
from the $5.00 assumed offering price of the Shares sold hereby. "Dilution" is
determined by subtracting net tangible book value per share after the offering
from the offering price.
SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statements
of Operations Data" and "Balance Sheet Data" for, and as of the end of, each of
the years in the five-year period ended July 31, 1994, are derived from the
financial statements of the Company, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected financial data presented below for the nine-month periods ended April
30, 1995 and 1994, are derived from the unaudited financial statements of the
Company included elsewhere in this Prospectus. In the opinion of management, the
unaudited financial statements reflect all normal recurring adjustments
necessary to present fairly the financial data for the unaudited periods
described above. The financial statements as of July 31, 1994 and 1993, and for
each of the years in the three-year period ended July 31, 1994, and the report
thereon, are included elsewhere in this Prospectus. The results of operations of
the Company for the nine-month period ended April 30, 1995 should not
necessarily be taken as indicative of the results of operations that may be
expected for the entire fiscal year ending July 31, 1995. Unless otherwise
noted, the following discussion of financial condition and results of operations
relates only to the continuing operations of the Company.
The selected financial data should be read in conjunction with the
financial statements as of July 31, 1994 and 1993, and for each of the years in
the three-year period ended July 31, 1994, the related notes and the independent
auditors' report, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED APRIL 30, JULY 31,
STATEMENTS OF OPERATIONS DATA: 1995 1994 1994
<S> <C> <C> <C>
Net sales $ 0 $ 0 $ 0
Research and development expenses 5,268,028 3,629,800 5,158,738
Merger expense for in-process research
and development 0 1,435,124 1,450,499
General and administrative expenses 1,508,635 1,032,172 1,493,424
Loss from continuing operations (6,673,157) (5,768,779) (7,675,743)
Gain on sale of discontinued
operations 0 0 0
Income (loss) discontinued operations 0 0 0
Net income (loss) (6,673,157) (5,768,779) (7,675,743)
Net loss per share from continuing
operations (0.41) (0.58) (0.72)
Net income (loss) per share from
discontinued operations 0 0.03 0
Net loss per share $ (0.41) $ (0.55) $ (0.72)
Weighted average number of shares
outstanding (1) 16,291,900 10,519,777 10,657,311
</TABLE>
(TABLE CONTINUED)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA: 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net sales $ 137,982 $ 77,615 $ 3,030 $ 0
Research and development expenses 4,485,818 2,996,845 1,175,986 300,000
Merger expense for in-process research
and development 0 0 0 0
General and administrative expenses 1,353,502 1,021,078 824,516 149,206
Loss from continuing operations (5,915,558) (4,054,919) (1,892,420) (297,881)
Gain on sale of discontinued
operations 3,207,120 0 0 0
Income (loss) discontinued operations 0 (106,536) 125,817 325,369
Net income (loss) (2,708,438) (4,161,455) (1,766,603) 27,488
Net loss per share from continuing
operations (0.57) (0.41) (0.22) (0.04)
Net income (loss) per share from
discontinued operations 0.31 (0.01) 0.01 0.04
Net loss per share $ (0.26) $ (0.42) $ (0.21) $ 0
Weighted average number of shares
outstanding (1) 10,296,812 9,901,592 8,536,984 8,270,634
</TABLE>
<TABLE>
<CAPTION>
AS OF APRIL 30, AS OF JULY 31,
BALANCE SHEET DATA: 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $4,700,977 $ 468,849 $ 2,127,358 $4,842,033 $ 927,620 $1,185,759 $1,138,666
Working capital 4,030,294 438,132 (1,175,384) 4,692,607 2,989,426 4,097,908 4,244,354
Total assets 7,756,628 3,245,190 4,752,630 7,329,146 5,905,146 4,903,150 4,704,407
Long-term debt, less current
installments 1,501,917 1,504,880 1,504,187 1,513,516 76,045 117,604 448,457
Shareholders' equity
(deficit) 5,262,766 1,071,639 (596,320) 5,207,346 4,404,409 4,544,481 4,125,014
</TABLE>
(1) Computed on the basis described for net loss per share in Note 2 of Notes to
Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
In September 1992, the Company completed the sale of its Angeion Medical
Products ("AMP") division, an accessory products business, to the B. Braun
Cardiovascular Division of Burron Medical Inc. The sale price consisted of $6.2
million cash at closing, plus a royalty of 10% and 5% of AMP product sales in
fiscal 1993 and 1994, respectively. The Company's continuing operations consist
of the research and development efforts of its two divisions, the Implantable
Technology Division and the Interventional Technology Division. These divisions
are developing medical devices to treat various types of arrhythmias (irregular
heartbeats). The operations conducted by these divisions were previously
conducted by the Company's two greater-than-90% owned subsidiaries, which were
merged into the Company effective December 20, 1993. See Note 3 of Notes to
Financial Statements.
Unless otherwise noted, the following discussion of financial condition and
results of operations relates only to the continuing operations of the Company.
RESULTS OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 1995 COMPARED TO THE NINE MONTHS ENDED APRIL
30, 1994. Research and development expenses increased from $3,629,800 in the
nine months ended April 30, 1994 to $5,268,028 in the nine months ended April
30, 1995. This increase of $1,638,228 was due to an acceleration of research and
development activity on the Company's ICDs. Research and development activity
focused on the development of its Sentinel series which accounted for $4,530,065
of the expense for the nine months ended April 30, 1995, while the catheter
ablation development activities accounted for $737,963 of the expense. Research
and development expenses will continue to increase, reflecting the Company's
intent to move these products through their development stages as rapidly as
possible and initiate human clinical trials.
The nine months ended April 30, 1994, included a charge of $1,435,124,
representing the purchase of in-process research and development in connection
with the merger of the AngeLase, Inc. and AngeMed, Inc. subsidiaries into the
Company. See Note 3 of Notes to Financial Statements.
General and administrative expenses increased from $1,032,172 in the nine
months ended April 30, 1994 to $1,508,635 in the nine months ended April 30,
1995. The increase is due mainly to $132,708 of expense associated with bridge
notes that were repaid or converted in the first quarter of fiscal 1995. The
remaining increase is due to other financing costs and increased legal, payroll
and consulting expenses.
The net loss for the nine months ended April 30, 1995 was $6,673,157 or
$0.41 per share, compared to net loss of $5,768,779 or $0.55 per share for the
nine months ended April 30, 1994. The Company's aggressive research and
development program and related expenses will continue to adversely impact
results of operations in fiscal 1995 and 1996.
YEAR ENDED JULY 31, 1994 COMPARED TO 1993. Net sales decreased from
$137,982 in fiscal 1993 to zero in fiscal 1994. This decrease was due to the
termination of a contract with the Company's only OEM customer.
Research and development expenses increased from $4,485,818 in fiscal 1993
to $5,158,738 in fiscal 1994. This increase of $672,920 was due to an
acceleration of research and development activity on its Sentinel series.
Research and development activity relating to the development of the Sentinel
series accounted for $3,981,905 of the expense for fiscal 1994, while the
catheter ablation development activities accounted for $1,176,833 of the
expense. Research and development expenses will continue to increase, reflecting
the Company's intent to move these products through their development stages as
rapidly as possible and initiate human clinical trials.
During fiscal 1994, there was a charge of $1,450,499 representing the
purchase of in process research and development in connection with the mergers
of AngeLase, Inc. and AngeMed, Inc. into the Company. See Note 3 of Notes to
Financial Statements.
General and administrative expenses increased from $1,353,502 in fiscal
1993 to $1,493,424 in fiscal 1994. This increase was due to an increase in
payroll expenses and financing expenses.
The gain on sale of discontinued operations of $3,207,120 in fiscal 1993
resulted from the sale of the AMP division. See Note 4 of Notes to Financial
Statements.
The net loss for fiscal 1994 was $7,675,743 or $0.72 per share, compared to
a net loss of $2,708,438 or $0.26 per share, for fiscal 1993, which included the
gain on sale of discontinued operations.
YEAR ENDED JULY 31, 1993 COMPARED TO 1992. Net sales increased from $77,615
in fiscal 1992 to $137,982 in fiscal 1993. This increase was due to the sale of
fiberoptic catheters manufactured for an OEM customer. The contract with that
OEM customer was terminated in the quarter ended January 31, 1993.
Research and development expenses increased from $2,996,845 in fiscal 1992
to $4,485,818 in fiscal 1993. This increase of $1,488,973 was due to an
acceleration of research and development activity on the Sentinel series,
external temporary pacemaker and the laser catheter ablation system. In fiscal
1993, the Sentinel series and external temporary pacemaker accounted for
$2,996,319 of the expense, while the laser catheter ablation system development
activities accounted for $1,489,499 of the expense.
General and administrative expenses increased from $1,021,078 in fiscal
1992 to $1,353,502 in fiscal 1993. The increase was due to non-cash compensation
expense and increases in insurance expense.
The gain on sale of discontinued operations of $3,207,120 in fiscal 1993 is
described in Note 4 of Notes to Financial Statements.
The net loss including the gain on the sale of discontinued operations for
fiscal 1993 was $2,708,438, or $0.26 per share, compared to a net loss of
$4,161,455, or $0.42 per share, for fiscal 1992.
FINANCIAL POSITION
OPERATING ACTIVITIES. Net cash used in operating activities was $5,813,173
and $4,217,590 in the nine months ended April 30, 1995 and 1994, respectively.
The cash used was primarily related to research and development activities of
the Company's operating divisions.
INVESTING ACTIVITIES. Net cash used in investing activities was $1,084,523
and $491,929 in the nine months ended April 30, 1995 and 1994, respectively. The
Company invested $281,234 in patents during the nine months ended April 30,
1995, primarily for its Sentinel series. The Company also purchased fixed assets
of $803,289 consisting primarily of computer and production equipment.
FINANCING ACTIVITIES. Net cash provided by financing activities was
$9,471,315 and $336,335 in the nine months ended April 30, 1995 and 1994,
respectively. Cash was provided from proceeds of a public offering of 4.9
million shares of Common Stock and 4.9 million warrants in the nine months ended
April 30, 1995. See Note 5 of Notes to Financial Statements. The public offering
proceeds were offset by repayments of notes payable. See Note 4 of Notes to
Financial Statements. Cash of $344,221 was provided from royalty proceeds
related to the sale of the AMP division in the nine months ended April 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at April 30, 1995 were $4,700,977. The proceeds
from this offering will be used for research and development, investment in
capital equipment and leasehold improvements, and general corporate purposes,
including working capital. See "Use of Proceeds." If the Company progresses as
anticipated, of which there can be no assurance, the Company expects that the
net proceeds from this offering will allow the Company to meet its cash
requirements for a period of approximately 12 months after completion of this
offering. To the extent that the Company's operations do not proceed as
anticipated, additional funds will be needed earlier. In any event, substantial
additional funds will be needed by the Company.
In September 1994, the Company completed a public offering of 4.9 million
shares of Common Stock and 4.9 million warrants (the "Warrants"). Each Warrant
entitles the holder to purchase at any time up to 3:30 pm. Eastern time on March
12, 1996, the expiration date of the Warrants, one-half of a share of Common
Stock at an exercise price per whole share of $4.75, subject to certain
adjustments for changes in capitalization. There can be no assurance, however,
that the Warrants will be exercised or that additional funds will be available
from other sources on acceptable terms or at all. If the Company is unable to
obtain additional funds as needed, the Company may be required to curtail
significantly one or more of its research and development programs, or cease
operations entirely, in which case investors in this offering could lose their
entire investment.
The Company has net operating loss carryforwards for financial reporting
and federal income tax purposes of approximately $20,000,000, which can be used
to offset taxable income and income taxes in future years. Sales of the
Company's equity during the three fiscal years preceding this offering, along
with sales of equity securities earlier in fiscal 1995 and the completion of
this offering, may cause changes in ownership under Section 382 of the Internal
Revenue Code of 1986, which would limit the use of the Company's net operating
loss carryforwards existing as of the date of the ownership change to
approximately $4,000,000 per year. Given that the Company anticipates continued
losses during the next few years, it is not anticipated that this limitation
will have a material adverse effect.
BUSINESS
GENERAL
Angeion Corporation is engaged in designing, developing and manufacturing
two types of products to treat and potentially cure irregular heartbeats
(arrhythmias). The Company's Implantable Technology Division is developing the
Sentinel series of implantable cardioverter defibrillators ("ICDs"), which are
designed to treat rapid heartbeats in the ventricular (or lower) chambers of the
heart, a condition known as ventricular tachycardia ("VT"), and a severe form of
VT known as ventricular fibrillation ("VF"). The Company believes, based upon
industry analyses and attendance by management at industry meetings, that its
first product, the Sentinel 2000, is the smallest and one of the most
technologically advanced ICDs under development today. The Company's
Interventional Technology Division is developing a radio frequency ("RF")
catheter ablation system, that it believes will provide a potential cure for
certain forms of atrial fibrillation (rapid heartbeats originating in the upper
chambers of the heart), and a laser catheter ablation system, that it believes
will provide a potential cure for certain forms of VT.
BACKGROUND AND MARKETS
Arrhythmias, abnormal rhythms of the heart muscle, arise from numerous
causes, including congenital defects, tissue damage due to previous heart
attacks or atherosclerosis and certain other diseases. Arrhythmias originate in
either the atria (upper two chambers of the heart) where they are generally not
life-threatening, or the ventricles (the lower two chambers of the heart), where
they can significantly interfere with the pumping of oxygenated blood and can
therefore be life-threatening. VT occurs when the ventricles beat at an
abnormally rapid rate, depriving the ventricles of sufficient time to fill with
blood prior to each contraction and therefore reducing the amount of blood
pumped out of the heart. As a result, tissues and organs are deprived of the
oxygen carried by the blood, causing dizziness, unconsciousness, cardiac arrest
and possibly death.
Episodes of VT occur unpredictably and tend to become more serious over
time. VT can progress to the most serious type of cardiac arrhythmia,
ventricular fibrillation ("VF"). In VF, the heart's normal electrical impulses
become disorganized and erratic. Unlike VT, where the heart continues to
contract in an organized fashion though at an abnormally high rate, in VF the
heart ceases to pump blood through the body. If VF is not terminated quickly,
the individual will experience a sudden cardiac death ("SCD") episode resulting
in unconsciousness due to the heart's failure to pump oxygenated blood to the
body's tissues and organs. Without prompt medical intervention, the individual
typically will die.
Industry analysts estimate that in excess of 1.4 million people in the U.S.
have some form of VT and that more than 450,000 people die from SCD episodes
each year. It is estimated that approximately 100,000 people survive SCD
episodes each year and that approximately 150,000 people are diagnosed each year
with sustained chronic VT. These individuals are considered to have a very high
risk of experiencing a SCD episode. Current treatments for VT consist primarily
of medication, ICDs and open heart surgery.
IMPLANTABLE CARDIOVERTER DEFIBRILLATORS. The Company believes that the most
effective treatment for individuals at risk of experiencing an SCD episode, in
light of currently available technology, is an ICD. The ICD and lead market has
grown from approximately $160 million in 1990 to approximately $530 million in
1994, representing a compounded annual growth rate of approximately 35%. By
1996, the worldwide ICD market is expected to reach $830 million per year. The
ICD and lead market is further expected to grow by at least 20% to 25% per year
to reach in excess of $1 billion per year by the end of the decade. The Company
believes this growth rate is attributable to a number of factors, including (i)
the expansion of the indications for use of an ICD, (ii) less invasive surgical
procedures for implanting the device as a result of transvenous leads and
pectoral implant capability, (iii) the poor performance of drug therapy and (iv)
the increasing survival rate for SCD episodes.
An ICD is an electronic device that is permanently implanted in the
patient, typically in the patient's abdomen, and is connected to the heart with
defibrillation leads and sensing/pacing leads. The ICD is designed to monitor
the patient's heartbeat and, in the event of VT or VF, to deliver electric
pulses or shocks to the heart to terminate the VT or VF. Early ICD devices
delivered primarily high-energy shocks that were both painful to the patient,
provided more energy than needed to treat the VT or VF and had short life spans,
requiring replacement every two or three years. The limitations of these early
devices led to the development of more sophisticated devices which are currently
on the market today and which are characterized by (i) tiered therapy
(electrical shocks of varying intensity depending on the type and severity of
the arrhythmia), (ii) programmability (allows the physician to customize therapy
to the patient's condition both before and, more importantly, after implant),
(iii) improved transvenous lead systems (allows implantation of the lead through
a vein so that open chest surgery is not required), (iv) electrogram storage
capability (storage of intracardiac EKGs), (v) a biphasic waveform (an
electrical shock of alternating polarity), and (vi) limited pectoral implant
capability.
CATHETER ABLATION. Catheter ablation is an emerging therapeutic procedure
that, in many cases, offers the curative benefit of surgery but has the
advantages of being a minimally invasive procedure that exposes the patient to a
lower risk of complications or death, generally involves hospitalization of only
one or two days and is much less expensive than open chest surgery. In catheter
ablation procedures, a special electrophysiological mapping catheter is guided
through an artery or vein into the patient's heart and to the site of the
arrhythmogenic tissue (oxygen deprived heart tissue and areas of scar tissue
resulting from sustained VT which conduct electrical impulses more slowly than
normal tissue and increase the risk of occurrence of an arrhythmia). The mapping
catheter identifies the specific site(s) of electrical malfunction. A catheter
attached to an energy source is then used to transmit energy from an external
source into the arrhythmogenic tissue in an amount sufficient to thermally
damage tissue. The ablated tissue is replaced with scar tissue, the pathway
generating the conflicting electrical impulse is thereby eliminated and the
normal conduction of electrical activity is restored.
The market for catheter ablation devices in the treatment of
tachyarrhythmias is much less defined, and in a much earlier stage of
development, than the ICD market. As a result of certain deficiencies in
available electrophysiologic mapping technology, the potential growth of the
catheter ablation market depends upon the condition to be treated. The use of
catheters utilizing RF energy, for the treatment of supraventricular tachycardia
("SVT"), is growing quickly because atrial ablation sites are easily accessible
using current catheter technology and the RF energy is able to penetrate the
thinner tissue of the atria. The Company believes a more significant market
potential for laser catheter ablation devices, however, is in the treatment of
VT. The market for VT is supported by the same patient population for whom drug
therapy is not an acceptable treatment regimen. While not well defined, the
Company believes that the potential market for VT catheter ablation could equal
the market for ICD devices since (i) catheter ablation offers a potential cure
for certain forms of VT rather than simply managing the symptoms of VT, and (ii)
catheter ablation offers a minimally invasive procedure similar to angioplasty.
PRODUCTS
IMPLANTABLE CARDIOVERTER DEFIBRILLATOR SYSTEM. The Company's Sentinel
series system consists of an ICD, a specialized computer programmer connected to
a programming wand (smart wand) via the serial port, an external defibrillation
test system and transvenous leads which connect the ICD to the patient's heart.
The Sentinel series offers certain advantages over ICDs currently in human
clinical trials or market approved, including the following:
* REDUCED SIZE AND WEIGHT. The Company believes that its Sentinel ICD
products are the smallest ICDs under development (approximately 60 cubic
centimeters and weighing approximately 110 grams), thereby increasing
patient comfort and simplifying implantation procedures. The reduced size
allows for universal pectoral implant capability. Pectoral implantation,
in combination with transvenous leads, eliminates the need for abdominal
surgery and/or a thoracotomy (a complex and difficult surgical procedure
involving the opening of the chest wall), thereby reducing patient
recovery time and hospitalization costs.
* SMALL CAP BIPHASIC WAVEFORM. The Company believes that its proprietary
waveform is more efficient than competitive waveforms. The Sentinel
series delivers electrical shocks to the patient in a monophasic or
biphasic waveform. A monophasic waveform has only positive or negative
polarity in each pulse of electrical current. In contrast, a biphasic
waveform reverses the polarity of the electrical current during each
pulse. The Company's Small Cap(tm) biphasic waveform lowers
defibrillation energy thresholds by delivering energy at a higher average
current and in a shorter time than competing biphasic waveforms for ICDs
currently market approved.
* HOT CAN ELECTRODE SYSTEM. The Company's Hot Can electrode system utilizes
the Sentinel housing as an efficient electrode which the physician can
program on and off. The ability to program the electrode on or off allows
for either an abdominal or pectoral implant, unlike certain other ICDs
currently in human clinical trials or market approved.
* DUAL BATTERY. The Sentinel series dual battery system increases the life
of the device by as much as 40% compared to current devices in the
market. The ICDs currently in the market are powered by a single battery,
which provides the energy for both continuously monitoring the heart's
activity and delivering the shock to cardiovert or defibrillate the
heart. The Company's proprietary dual battery system in the Sentinel
series allows a higher energy density battery to monitor continuously the
heart's activity while a second high power battery is available solely to
deliver the shock necessary to cardiovert or defibrillate the heart. The
dual battery system increases the potential lifetime of the device from
five years, as is the case with current generation devices, to up to
seven years depending on the number of shocks delivered.
* ENERGY STEERING DELIVERY SYSTEM. Energy Steering delivery system, a new
feature developed by the Company which is not offered by competitors,
allows the Sentinel series to increase energy efficiency by directing the
electrical current emitted by the ICD more uniformly throughout the
heart, thereby requiring less energy to defibrillate the heart. In
conjunction with the dual battery system, this feature will add to the
longevity of the device.
* SPECIAL ALGORITHMS. The Company's Sentinel 2000 uses a sophisticated
sensing system and a complex set of special algorithms to monitor
continuously the patient's heart rate and to discriminate more
effectively between VT, VF and SVT.
In addition to the features found in the Sentinel 2000, the Sentinel 2001
will have electrogram storage capabilities and is expected to have enhanced VT,
VF and SVT discrimination capabilities. The Company is also developing a patient
follow-up interrogator and fax transmitter for the Sentinel 2001. The patient
interrogator is a small handheld device that will be used by the patient to
check the ICD memory on demand. The interrogator will evaluate the data from the
ICD and give the patient a brief message as to recent device activity. This
information can then be relayed to the physician via telephone or, with an
optional fax transmitter, the data can be sent to the physician in a more
detailed form. See "Business -- Research and Development."
The Sentinel series system is designed for simplicity, efficiency, ease of
use and mobility. The programmer is capable of both transmitting to and
receiving data from the device through a smart wand. The defibrillation test
system is used in conjunction with the specialized computer/programmer at the
time of implant to emulate the ICD in order to test and appropriately program
the patient's defibrillation thresholds before actual implant.
The Company is also developing several models of transvenous leads for the
Sentinel series. One model, the AngeFlex dual transvenous lead system, is
currently undergoing preclinical testing and is expected to enter human clinical
trials in the second half of calendar 1995. The Company also expects to begin
testing the AngeFlex single pass transvenous lead system in the second half of
calendar 1995. Certain leads manufactured by competitors are also under
preclinical evaluation to demonstrate compatibility with the Sentinel series.
In January 1995, the first fully functional model of the Sentinel 2000 was
successfully implanted in two human patients as part of a limited clinical trial
in Bonn, Germany. Follow-up evaluations of the two patients has confirmed that
the Sentinel 2000 is performing as anticipated. Additional clinical testing of
the device outside of the U.S. is currently expected to allow the Company to
generate limited clinical sales of the Sentinel 2000 system in calendar 1995.
The Company intends to file its IDE with the FDA in the second half of
calendar 1995. There can be no assurance, however, that the Company will be able
to meet this filing schedule. See "Risk Factors -- Governmental Regulations."
The Company will conduct human clinical trials of the Sentinel 2000 in the U.S.
at such time as approval of its IDE is obtained, although there is no assurance
that the Company's IDE will be approved on a timely basis or at all. See
"Business -- Government Regulation."
The Company expects that the first human implant of the Sentinel 2001
outside of the U.S. will be performed during mid-calendar 1996, as an expansion
of the Sentinel 2000 clinical testing. There can be no assurance, however, that
the Company will be able to meet this development schedule. See "Risk Factors --
Governmental Regulation" and " -- Need for Additional Financing."
CATHETER ABLATION SYSTEMS. The Company is developing two catheter-based
systems for nonsurgical, percutaneous elimination of various forms of cardiac
arrhythmias: an RF catheter ablation system and a laser catheter ablation
system. The Company is also developing a steerable guide/mapping catheter that
can be used in conjunction with both its RF and laser catheter ablation systems.
RF Catheter Ablation System. The Company's RF catheter ablation system
consists of the Company's proprietary single use, disposable catheter coupled to
a standard RF generator. Additional support devices are supplied by the
hospital. The Company believes that its RF catheter is a major improvement over
the RF catheters currently in use. The effectiveness of these existing catheters
is hindered by blood coagulation on overheated catheter electrodes. To address
this problem, the Company's RF catheter uses a porous metal tip electrode.
During RF energy delivery, irrigation fluid flows through the catheter and is
forced through the pores in the tip. The flushing fluid cools, purges and
insulates the electrode from blood contact and thereby minimizes blood
coagulation on the catheter tip while maximizing lesion size. A patent covering
the Company's porous tip RF catheter ablation system has recently been allowed.
The Company has completed preclinical studies with respect to its RF
catheter ablation system at the Enders Pediatric Research Center in Boston.
These studies demonstrated the viability of the cool tip RF catheter for the
treatment of SVT. The Company currently expects to file for an IDE in the second
half of calendar 1995.
Laser Catheter Ablation System. The Company's laser catheter ablation
system is targeted at the VT market. Laser energy appears to produce, with
minimal trauma, lesions of a size and depth most likely to achieve consistently
favorable results in the ventricle.
The Company has completed IDE feasibility studies that have demonstrated
the laser catheter's ability to desiccate heart tissue thermally, thereby
relieving symptoms of obstructive hypertrophic cardiomyopathy, and to eliminate
successfully a patient's VT in an open chest procedure. Currently, the Company
is conducting a feasibility study to demonstrate the ability of the Company's
laser catheter to eliminate VT through a percutaneous procedure, and the Company
has received an IDE permitting the Company to conduct up to 15 human clinical
procedures at two medical centers.
To date, the Company has treated 11 patients in the U.S. and Germany with
its laser catheter ablation system. Of the 11 patients treated, 7 were treated
with the Company's steerable guide/mapping catheter (see below) with 5 patients
successfully treated.
Steerable Guide/Mapping Catheter. The Company has also developed a
steerable guide/mapping catheter that allows local mapping and accurate,
flexible positioning of the ablation catheter at the proper site. This steerable
guide/mapping catheter can be used with both the Company's RF and laser catheter
ablation systems.
The steerable guide/mapping catheter has been studied in preclinical trials
and has been approved by the FDA for use in connection with the Company's laser
catheter human clinical trials. Early indications are that this steerable
catheter will allow a physician to position the ablation catheter more
accurately within the ventricle.
Since December 1993, the Company has allocated the majority of its
resources to its Implantable Technology Division, which the Company views as a
rapidly growing existing market with significant near-term potential. Although
the catheter ablation market shows substantial promise with significant business
potential as an emerging alternative treatment for arrhythmias, the Company's
resources, even after completion of this offering, preclude it from aggressively
pursuing both the ICD and catheter ablation markets simultaneously. As a result,
the Company is actively pursuing a strategic alliance to accelerate the
continued development and commercialization of the Company's catheter ablation
products and technologies.
Late in calendar 1994, the Company also made the decision to focus its
interventional technology resources on the development of its RF catheter
ablation system. The market for atrial RF catheter ablation already exists and
therefore provides greater near-term potential, while the market for VT ablation
is still developing.
COMPETITION
IMPLANTABLE CARDIOVERTER DEFIBRILLATORS. Competition in the ICD market is
intense and most of the Company's primary competitors have substantially greater
financial, manufacturing, marketing, distribution and technical resources than
those of the Company. While antiarrhythmic drugs and cardiac ablation therapies
(like the Company's laser catheter ablation system) compete in this same market,
other manufacturers of ICD devices have claimed a significant share of the
market and are believed to be the Company's primary competitors. Three companies
(Medtronic, Inc. ("Medtronic"), Cardiac Pacemakers, Inc. ("CPI"), a division of
Guidant Corporation and Ventritex, Inc. ("Ventritex")) currently have
PMA-approved products in the ICD market and control virtually all of that market
today.
CPI was the first company to capitalize on the market potential of
implantable defibrillators. In August 1985, the FDA approved CPI's first
commercial defibrillator to be marketed in the U.S. CPI received PMA approval
for its Ventak PRxIII ICD in May 1995 and filed a PMA application in June 1995
to begin marketing a smaller version of the Ventak PRxIII called the Mini.
Medtronic received PMA approval for its PCD in February 1993 and for its Jewel
PCD 7219D, widely believed to be the most advanced FDA market-approved ICD, in
March 1995. Ventritex received PMA approval for its Cadence ICD in April 1993
and filed a PMA application in June 1995 to begin marketing a smaller version of
the Cadence called the Cadet. Intermedics, Inc. and Telectronics, Inc. also have
ICD products of their own in clinical trials.
The Company believes, based upon industry analyses and attendance by
management at industry meetings, that its first product, the Sentinel 2000 is
the smallest and one of the most technologically advanced ICDs currently under
development. Competitors of the Company, however, many of whom have greater
financial and technical resources than the Company, are developing and
conducting human clinical trials of ICDs with certain similar features. See
"Risk Factors -- Governmental Regulation."
Any product developed by the Company that gains regulatory approval will
have to compete for market acceptance and market share. See "Risk Factors
- -Market Acceptance." The timing of market introduction of competitive products
could adversely affect the competitiveness of the Company's products.
Accordingly, the relative speed with which the Company can develop products,
complete clinical testing and the regulatory approval process and supply
commercial quantities of the product to the market are expected to be important
competitive factors. See "Risk Factors -- Limited Manufacturing or Marketing
Experience." The Company expects that competition will also be based on the
availability of defibrillation leads that can be implanted through less invasive
surgical procedures, ease of programmability, ability to provide diagnostic
capability, size and weight of the device, product reliability, physician
familiarity with the device, patent protection, sales and marketing capability,
third-party reimbursement policies, reputation and price.
CATHETER ABLATION. Although catheter ablation offers a potential cure,
rather than a treatment, of VT, catheter ablation technologies must nonetheless
compete with drug therapy, open heart surgery and ICDs. While drug therapy has
in the past experienced limited effectiveness and adverse side effects, new
drugs currently under development may offer the potential of improved treatment
outcomes. Catheter ablation does not currently compete, to a significant extent,
with ICDs since catheter ablation is currently used as a treatment for SVT
rather than for VT. As ablation products evolve and demonstrate efficacy in the
treatment of VT, the Company believes that ablation will increasingly compete
with the ICD market.
Competition in the current catheter ablation market includes C.R. Bard,
Inc., Cordis Corp. (which purchased Webster Laboratories, Inc.), Boston
Scientific Corporation, Medtronic, EP Technologies, Inc., and Electro Catheter
Corporation. These companies are primarily involved in the treatment of SVT with
RF energy-based catheters. RF catheters are not currently considered effective
treatments relating to the ventricle, however, certain of such companies are
experimenting with the use of RF energy, as well as other forms of energy, in
the ventricle.
MANUFACTURING
Pursuant to the OEM Agreement, the Company has the right to manufacture the
products it sells to Pacesetter so long as the Company fulfills all product
quantity, quality and specification requirements. If the Company fails to
fulfill these requirements, Pacesetter may elect to manufacture the Company's
first commercially available defibrillator and laser catheter products and pay
the Company an agreed upon royalty. Even if the Company has fulfilled all
product quantity, quality and specification requirements, Pacesetter may elect
to manufacture up to 50% of Pacesetter's aggregate product requirements but will
be required to pay to the Company a payment that approximates the net margin on
the products had the Company manufactured the products and sold them to
Pacesetter.
In light of the OEM Agreement and in recognition of the late stage of
development of the Company's Sentinel 2000 ICD, the Company has recently devoted
substantial time and resources to its manufacturing capability. In the first
half of calendar 1995, the Company developed a dedicated manufacturing
organization with the capability to satisfy its product requirements for the
next 18 to 24 months. In October 1994, the Company hired a Vice President of
Operations to lead the development of the Company's manufacturing capability.
This individual has extensive medical device manufacturing experience, including
direct experience in implantable defibrillator manufacturing. During the spring
of 1995, the Vice President of Operations sought, among other things, to define
the Company's manufacturing strategy and organizational and facility needs.
The Company's manufacturing strategy is to use outside component suppliers
and process vendors whenever possible. Use of outside sources minimizes facility
and equipment investment at a time when the Company is producing product at low
volumes. Key high quality component suppliers have been identified for all
components in the Sentinel 2000. The Company has verified that the component
suppliers have high volume capabilities which can meet an increasing product
demand. The key process vendors identified and utilized by the Company provide
laser welding, electronic assembly, sterilization, and other process
requirements. In addition, the Company has contracted with a manufacturer in
Scotland that will be responsible for final assembly, testing, packaging,
sterilization and labeling of its ICDs and associated external products for use
in the Company's international clinical trials.
The Company has defined its organizational needs for all manufacturing
functions and has hired experienced personnel to perform these functions. As of
June 30, 1995, the manufacturing organization employed 22 people with the
required specialized skills in engineering, production, testing, materials
management and quality assurance. The Company is currently in the process of
hiring and training production operators to meet expected monthly production
demand through the next 18 to 24 months. The Company has defined its
manufacturing facility needs and capital equipment requirements. In the spring
of 1995, the Company completed the renovation of its production facility,
resulting in expansion and definition of specific locations for material
receiving, electronic board assembly, test and inspection, and final assembly
operations. The current facility and organization is estimated to be adequate to
satisfy the Company's implantable defibrillator product needs for the next 18 to
24 months.
The Company is currently producing implantable defibrillator products to
meet preclinical and clinical requirements. Engineering, prototype, and pilot
builds have been completed and the Company has documented and validated its key
ICD manufacturing processes. In addition, the Company intends to receive ISO
9002 certification by the end of calendar year 1995. This certification, which
relates to manufacturing quality standards, in conjunction with the Company's
clinical trials and testing data, will be used in the Company's application for
CE mark approval.
The Company's efforts to define and establish its manufacturing strategy
and capability have been predominantly focused on its ICD products. The Company
currently has limited manufacturing capability to produce the products needed to
support its catheter ablation clinical studies. Currently, these needs are being
defined, and a plan is under development regarding how the Company will provide
production capability to the Company's Interventional Technology Division. It is
anticipated that the Company can generate this capability within the constraints
of the current facility and organization, but failure to provide manufacturing
capability for the catheter ablation products could cause a delay in the
catheter ablation program.
Manufacturing ability is a key element that the Company must have in place
to ensure success in its ICD and catheter ablation clinical trials and the
expanded laser catheter clinical trials. Failure to produce products in a timely
manner could cause a delay in the market release of such products, and could
result in the failure of the Company to meet Pacesetter's product requirements,
resulting in a royalty from Pacesetter that is lower than the transfer price the
Company would have received. See "Risk Factors -- Limited Manufacturing or
Marketing Experience."
SALES AND MARKETING
The Company intends to utilize a dual approach to marketing and
distribution of its ICD and catheter ablation products on a worldwide basis.
Under the first approach, the Company will directly market and sell its
products under its own label through its own sales force or through independent
sales representatives or distributors, provided that under the OEM Agreement
with Pacesetter such independent sales representatives or distributors may not
also sell ICDs or laser catheter products that are manufactured by other
companies. In addition, the Company may not market and sell products under its
own label until it has satisfied all of Pacesetter's quantity requirements for
such products. On June 6, 1995, the Company entered into a distribution
agreement with C. Nicolai GmbH & Co. KG to market and distribute the Company's
Sentinel products in Germany. The Company is currently negotiating with
distributors in Italy and the United Kingdom for such markets, and anticipates
initiating discussions with other independent sales representatives or
distributors for other countries.
To coordinate and effectuate the Company's sales and marketing efforts, the
Company intends to hire a Vice President of Sales and Marketing in the second
half of calendar 1995. This person will have extensive experience in marketing
medical devices as well as direct defibrillator product experience. The Vice
President of Sales and Marketing will be responsible for developing and
implementing a strategic plan for worldwide sales and marketing of the Company's
products.
Under the second approach, the Company will sell its products through
Pacesetter under the terms and conditions of the OEM Agreement. Pursuant to this
agreement, Pacesetter was granted worldwide marketing and distribution rights,
on a co-exclusive basis with the Company, to all defibrillator and laser
catheter products that are first commercially marketed within two years of the
first commercial sales of defibrillator and laser catheter products, as the case
may be, incorporating certain features. With respect to defibrillator products,
it is anticipated that commercial marketing of the Sentinel 2001 will begin this
two-year period. This co-exclusive marketing period will continue for at least
seven years, and thereafter will be contingent upon certain defined minimum
product purchases by Pacesetter and its affiliates. Pacesetter's marketing
rights will continue on a non-exclusive basis in the event that the exclusive
period terminates. The Company believes that the worldwide OEM marketing
capability of Pacesetter will be of significant value in establishing market
presence for the Company's products.
RESEARCH AND DEVELOPMENT
Research and development expenditures for continuing operations were
$5,158,738, $4,485,818 and $2,996,845 in fiscal 1994, 1993 and 1992,
respectively. Research and development expenditures for the nine months ended
April 30, 1995 were $5,268,028. The Company's research and development is
primarily directed at the development of its existing products and the clinical
trials relating to such products. Approximately 75%, 89% and 70% of the Company
research and development expenditures in fiscal 1994, 1993 and 1992,
respectively, were directly attributable to the Implantable Technology Division,
most of which was spent on the Sentinel series. Approximately 86% of the
Company's research and development expenditures in the nine months ended April
30, 1995 was directly attributable to the Sentinel series.
In addition to the Sentinel 2000, the Company's ICD research and
development expenditures relate to the development of the Sentinel 2001 and the
Sentinel 2010. In addition to the features found in the Sentinel 2000, the
Sentinel 2001 will have electrogram storage capabilities, enhanced VT, VF and
SVT discrimination capability, a patient interrogator, a patient data fax
transmitter and telephonic interrogation capabilities. The Sentinel 2010 is
expected to possess the following additional features: (i) smaller size and
weight; (ii) lower defibrillation energy threshold waveform; (iii) pulse
pretreatment threshold lowering therapy; (iv) new anti-tachyarrhythmia pacing
therapy; (v) dual chamber pacing; and (vi) atrial defibrillation capability.
Patent applications have been filed or are in process for a number of the
features of the Company's Sentinel 2001 and 2010.
THIRD PARTY REIMBURSEMENT
The Company's ability to commercialize its products successfully in the
United States will depend in part on the extent to which reimbursement for the
cost of such products and related treatment will be available from government
health administration authorities (such as HCFA which determines Medicare
reimbursement levels), private health insurers, health maintenance organizations
and other third-party payors. Payors are increasingly challenging the prices of
medical products and services. Payors may deny reimbursement for procedures
which they deem experimental or for devices that are used for other than
FDA-approved indications. Currently, HCFA is not allowing Medicare reimbursement
for products and related procedures that have not received FDA approval and
certain private third-party payors have also begun denying such reimbursement.
Although there is legislation currently pending in Congress that would address
certain of these HCFA reimbursement issues, there can be no assurance that such
legislation will be passed. Even if the Company obtains a PMA for the laser
catheter ablation system, some payors may deny coverage until the device and
related procedures become generally accepted by the medical profession. The
inability of hospitals and other providers to obtain reimbursement from
third-party payors for the Company's products would have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company expects that there will be continued pressure on cost-containment
throughout the United States health care system. This pressure could adversely
affect the amount the Company is able to charge for its products. See "Risk
Factors -Dependence on Third Party Reimbursement; Uncertainty of Health Care
Reform."
Fees for physicians' and surgeons' services are paid by Medicare and
certain other payors on the basis of what they have historically charged for
their services. Beginning in 1992, Medicare payments to physicians and surgeons
began shifting, over the course of a five-year period, to a fee scale based on
the relative value of the services rendered. This fee scale may reduce the
amount of fees paid to physicians who perform defibrillator implants. Other
payors may adopt similar payment methods for surgical services. At this time,
the Company is unable to determine whether any such limitations on physicians'
fees could adversely affect the Company's business.
GOVERNMENT REGULATION
The Company's products are all classified as medical devices by the Food,
Drug and Cosmetic Act (the "FDC Act"), and as such, are subject to regulation
and supervision by the FDA, and to regulation by foreign governmental
authorities. As such, these medical devices are subject to ongoing controls and
regulations, including registration by the manufacturer, compliance with
established manufacturing practices, device tracking, record-keeping,
advertising, packaging and compliance to standards. Comparable agencies in
certain states and foreign countries also regulate the Company's activities. The
Company's products are subject to recall at any time by the FDA or the Company
if it appears that use of the products could result in unwarranted health risks.
All medical devices intended for human use that are to be marketed in the
United States are placed into one of three regulatory classifications, depending
on the degree of regulatory control to which the device will be subject. Class
III devices, which include life support and life sustaining devices or implants,
are subject to the most stringent controls and require FDA approval prior to
marketing. The Company's ICD products and its catheter ablation systems are
classified as Class III devices.
FDA requirements for both the Company's ICD and catheter ablation products
involve obtaining formal FDA premarket approval. The first stage of obtaining
formal FDA premarket approval is submission of an application for an
investigational device exemption ("IDE"). The IDE permits clinical evaluations
of products on human subjects under controlled experimental conditions by
designated qualified medical institutions. To obtain an IDE, approval of the
investigational plan for the applicable system is required from the
institutional review board within each participating medical institution as well
as from the FDA.
The second stage of formal FDA premarket approval is the Pre-Market
Approval ("PMA") application. The PMA, which is submitted after clinical
evaluations are completed under the IDE, is a comprehensive report of all data
and information obtained by the applicant throughout the product's development
and testing. The FDA will grant a PMA if it finds that the safety and
effectiveness of the product have been sufficiently demonstrated and that the
product complies with all applicable regulations and standards. The FDA may
require further clinical evaluation of the product, terminate the clinical
trials, grant premarket approval but restrict the number of devices distributed,
or require additional patient follow-up for an indefinite period of time. There
can be no assurance that the Company will be successful in obtaining IDEs or
expanded IDEs for its products or that the company will be successful in
obtaining a PMA for such products, which is necessary to market Company's
products commercially in the U.S., in a timely manner, or at all. Delays in
obtaining marketing approvals and clearances in the U.S. could have significant
adverse consequences on the Company and its operations.
The Company is required to and does keep detailed records relating both to
its maintenance of good manufacturing practices and to defective products and
complaints about its products. The FDA has authority to inspect the Company's
facilities to assure compliance with the FDC Act and regulations thereunder.
Many foreign countries have similar regulatory requirements concerning the
marketing of new medical devices. In January 1995, the Active Implantable
Medical Device Directive ("AIMD") was fully implemented in the EC. Prior to the
enactment of the AIMD, the foreign regulatory requirements varied widely from
country to country. Under the AIMD, the EC regulatory requirements are expected
to be more consistent. The time required to obtain approvals required by foreign
countries may be longer or shorter than that required for FDA approval and
requirements for licensing may differ from FDA requirements. The Company is also
subject to certain FDA regulations governing manufacturing practices, packaging
and labelling. Further, the FDA regulates the export of medical devices that
have not been approved or cleared for marketing in the United States. Prior to
commencement of sales outside the U.S., the Company will be required either to
obtain export approval from the FDA or to establish a manufacturing capacity or
expand its contract manufacturing capabilities abroad. See "Business --
Manufacturing."
The Company has initiated limited human clinical trials of the Sentinel
2000 in Germany. Initial regulatory documents and requests to conduct human
clinical trials in Italy were filed in the second half of calendar 1994 and in
the United Kingdom in the first half of calendar 1995. The Company is currently
scheduled to complete these international documents and file for expanded
clinical trials in Germany during the second half of calendar 1995. Under the
AIMD, the Company is subject to "prior notice" of intent to conduct clinical
trials in the EC. This process, similar to the FDA IDE process, requires
regulatory documents and test information to be submitted to the governmental
agency, known as the Competent Authority, of each country in which the Company
intends to conduct clinical trials. The Company is in the process of complying
with these regulatory requirements with the necessary Competent Authorities.
Upon completion of these clinical trial requirements, the Company will file for
a CE mark, approval of which is required before the Company can commence
commercial marketing of its products in the EC. There can be no assurance,
however, that the Company will be allowed to conduct additional human clinical
trials of the Sentinel 2000 in Europe or that the Company will obtain CE mark
approval, on a timely basis or at all. The Company has contracted with a
manufacturer in Scotland to perform final assembly of its products for use in
clinical trials in Europe, and this facility has received ISO 9002
certification.
INTELLECTUAL PROPERTY
The Company believes strongly in protecting its intellectual property and
intends to undertake efforts to obtain patents, when available, in connection
with its research and product development programs. As of June 30, 1995, the
Company has 43 U.S. issued patents and 16 U.S. patents which have been allowed
but have not yet issued, relating to its research and development products.
These patents cover various features and technologies. With payment of
maintenance fees, the Company's patents will begin to expire in the year 2008.
As of June 30, 1995, the Company also had 34 U.S. patent applications pending,
17 foreign patent applications pending, and 13 U.S. patent applications in
preparation with respect to its research and development products. There can be
no assurance, however, that any patents held by the Company will be valid or
otherwise of value to the Company or that any patent applied for will be
granted.
There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry, particularly in the
ICD market. To date, many patent and intellectual property disputes in the
medical device area have been settled through licensing or similar arrangements.
In contemplation of such an environment, the Company has developed a strategy of
expanding its patent portfolio in those areas where the Company believes
litigation is most likely to develop in the ICD market, and where the Company
has proven expertise, including defibrillation waveforms, electrode systems,
additional therapies, reduced size and increased device lifetime. While no
assurance can be given that the Company's strategy will be effective or that the
Company's patents in these areas are valid or will be of value in potential
negotiations with third parties, the Company continues to pursue patents in
those areas which it has identified as critical to ICD development. See "Risk
Factors -- Intellectual Property Protection" and " -- Pacesetter Relationship."
The Company also relies on trade secrets and proprietary know-how. The
Company typically requires its key technical employees and consultants to agree
in writing to keep its proprietary information confidential and, within certain
limitations, to assign all inventions relating to the Company's business to the
Company.
The Company acquired the technology for its continuous-wave laser catheter
system from Dr. Jeffrey Isner and Dr. Richard Clark in 1989. Pursuant to the
assignment agreement, the Company agreed to pay Dr. Isner and Dr. Clark a
royalty of 5% on sales of patented products incorporating this technology for
the life of any patent on this technology. Additionally, in exchange for Dr.
Svenson's efforts in connection with the laser catheter ablation system, the
Company has agreed to pay Dr. Svenson and Carolinas Medical Center a royalty,
when certain conditions are met, of 2% and 3%, respectively, on all paid sales
of the Company's laser catheter ablation products.
Pursuant to the License Agreement, the Company and Pacesetter have agreed
to cross license certain of their patents and patent applications. Under this
agreement, Pacesetter grants the Company certain non-exclusive rights to certain
patents and patent applications relating to Pacesetter's defibrillator products
as well as to manufacturing improvements made by Pacesetter with respect to the
Company's defibrillator products. With respect to the Company's defibrillator
products, the License Agreement divides the Company's patents and patent
applications into two categories: a first category for which the License
Agreement, on its face, grants certain exclusive rights, and a second category
for which the License Agreement grants certain non-exclusive rights. The License
Agreement also grants certain non-exclusive rights to the Company's laser
catheter patents and patent applications. Since the time of the License
Agreement, the Company has prepared and filed new patent applications relating
to future defibrillator products of the Company which are not within the scope
of the License Agreement, and the Company intends to continue to prepare and
file such additional patent applications in the future.
The License Agreement, on its face, also grants Pacesetter a conditional
right to sublicense the first category of patents to as many as three separate
parties, provided that the Company receives the same patent rights from the
sublicensee as Pacesetter receives (or that Pacesetter uses its best efforts to
secure such similar rights for the Company if, in the particular sublicensing
transaction, Pacesetter also licenses 20 or more of its own patents or patent
applications). The License Agreement provides that the Company always has the
right to sublicense its patents and patent applications to third parties to
avoid or settle a pending patent infringement lawsuit, provided that during the
purported exclusive period the Company obtains for Pacesetter as part of any
such settlement the same rights and benefits received by the Company with
respect to any patents that are required or useful to Pacesetter in
manufacturing and marketing the Company's products.
EMPLOYEES
As of June 30, 1995, the Company had 87 full-time employees, including 8
engaged in administration, 22 in manufacturing and 57 in research and
development. There are no unions representing the Company's employees. The
Company believes that its relations with its employees are good. There are no
pending or threatened labor or material employment disputes or work
interruptions.
FACILITIES
The Company leases approximately 25,000 square feet of office and
manufacturing space in the Plymouth Business Center I Complex, located in
Plymouth, Minnesota. This space serves as the Company's corporate headquarters,
as well as the research and development and manufacturing facilities for the ICD
and catheter ablation systems programs. Rent payments under the lease are
approximately $229,000 per year, including shared real estate taxes and
operating expenses. The current lease agreement extends through December 31,
1997. The Company's current space may not be adequate to satisfy the needs of
the Company through the end of the lease. The Company believes, however, it will
be able to secure additional or alternative space at a reasonable price when
needed.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of June
30, 1995 are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Whitney A. McFarlin 54 Chairman, Chief Executive Officer and President
David L. Christofferson 58 Vice President, Chief Financial Officer and Secretary
Robert S. Garin 52 Vice President, Human Resources
Mark W. Kroll, Ph.D. 42 Vice President, Research and Product Planning
Jennifer M. Marrone 39 Vice President, Regulatory and Clinical Affairs
Gary Payment 52 Vice President, Operations
William J. Rissmann 45 Vice President, Engineering
Arnold A. Angeloni 53 Director
Dennis E. Evans 56 Director
Sally E. Howard 59 Director
Lyle D. Joyce, M.D., Ph.D. 47 Director
Joseph C. Kiser, M.D. 62 Director
Glen Taylor 54 Director
</TABLE>
WHITNEY A. MCFARLIN has been President, Chief Executive Officer and
Chairman of the Board of the Company since September 15, 1993. From June 1990 to
September 1993, Mr. McFarlin was President, Chief Executive Officer, Chairman of
the Board and a founder of Clarus Medical Systems, Inc., a private medical
device company manufacturing products for the orthopedic surgical market
("Clarus"). Prior to founding Clarus, Mr. McFarlin was President and Chief
Executive Officer of Everest & Jennings International, Ltd., a manufacturer of
durable medical equipment from June 1985 to May 1990. From December 1977 to May
1985, Mr. McFarlin was an officer of Medtronic, a leading pacemaker
manufacturer, most recently as Executive Vice President where he was responsible
for the U.S. pacing business. He serves on the Board of Directors of several
corporations, including Clarus, Zero Corp. and PSICOR, Inc.
DAVID L. CHRISTOFFERSON joined the Company as Vice President and Chief
Financial Officer in January 1991. From April 1988 to December 1990, he was a
Division Manager for Excel Office Products ("Excel"). From 1987 through 1989, he
was Chief Financial Officer and Chairman of Medical Wellness Technologies, Inc.,
a distributor of pain control devices. In 1986, Mr. Christofferson founded
Excel, which was acquired in 1988 by General Office Products Company. Prior to
that, Mr. Christofferson was employed by Medtronic for over 13 years in various
management positions, most recently as Director of Finance and Administration
for the Drug Administration Devices and Systems Division.
ROBERT S. GARIN joined the Company as Vice President of Human Resources in
January 1995. Prior to joining the Company, Mr. Garin served as a management
consultant to the Company. From 1985 through 1993, Mr. Garin was a partner in
Garin and Associates, a management and human resources consulting firm. From
1971 to 1985, Mr. Garin was employed by Medtronic in various positions including
Director of Lead Operations and Director of Human Resources for Latin American
Manufacturing and Sales Operations. From 1973 to 1981, Mr. Garin served as
Director of Human Resources for Micro-Rel, Inc., a medical semi-conductor
subsidiary of Medtronic.
MARK W. KROLL, PH.D. joined the Company in 1991 as Director of Research and
Development and is now Vice President of Research and Product Planning. Prior to
joining the Company, Dr. Kroll was Vice President of Research and Development of
Vital Heart Systems, formerly called Cherne Medical, Inc., a cardiovascular
instrumentation company. He has served as Director of Research at several
medical device companies in the Twin Cities during his 21-year career. He has
numerous patents to his credit and has authored a number of medical papers,
several of which have been published in peer-reviewed journals. He has also made
a significant number of presentations at medical conferences and has authored
chapters in or has served as editor of several medical textbooks.
JENNIFER M. MARRONE joined the Company in April 1995, as Vice President of
Regulatory and Clinical Affairs. She has more than 16 years of experience in the
medical device industry. Most recently, Ms. Marrone was Director of Regulatory,
Clinical and Quality Assurance/Compliance at Empi, Inc., a rehabilitative and
urologic products company. From 1979 to 1993, Ms. Marrone served in a number of
capacities of increasing responsibility at Medtronic including Manager of
Regulatory Affairs for the bradyarrhythmia and tachyarrhythmia products where
she prepared and managed Medtronic's PMA applications for its tachyarrhythmia
management devices and transvenous leads. She joined Medtronic in 1979 as Study
Director in Preclinical Research.
GARY PAYMENT joined the Company in 1994 as Vice President of Operations.
During his 23 years of experience in the medical device industry, Mr. Payment
has held various positions at CPI, most recently as Director of Manufacturing.
Prior to joining CPI in 1985, Mr. Payment held several positions at Medtronic,
including Director of Operations, Manufacturing Program Manager and Director of
Quality Assurance.
WILLIAM J. RISSMANN joined the Company in 1994 as Vice President of
Engineering. He has more than 18 years of experience in the medical device
industry. Most recently, Rissmann was Director of Research and Development in
the Advanced Tachy Products division at CPI. While at CPI, he held several
positions including Director of Quality Control and Test Engineering and Manager
of Product Planning and Administration. From 1983 to 1985, Mr. Rissmann was an
engineering project manager at St. Jude Medical, Inc., where he was responsible
for microprocessor-based medical devices, and from 1980 to 1983 Mr. Rissmann
held several engineering management positions at Medtronic.
ARNOLD A. ANGELONI is President of the Business Systems Division of Deluxe
Corporation, a provider of check products and services to the financial payments
industry. Mr. Angeloni is responsible for the check printing and Business
Systems operations. Mr. Angeloni has been employed by Deluxe Corporation in
various administrative, marketing, and operations positions since 1961.
DENNIS E. EVANS has been President and Chief Executive Officer of Hanrow
Financial, a merchant banking partnership since February 1989. He serves on the
Board of Directors of Minnesota Power and Astrocom Corporation.
SALLY E. HOWARD has been Director of Health Sciences Public Relations at
the University of Minnesota for more than five years. In addition, Ms. Howard
serves on the board of directors of several private corporations and is an
active civic leader, having served on the Minneapolis City Council.
LYLE D. JOYCE, M.D., PH.D. has been a cardiothoracic surgeon with the
Minneapolis Heart Institute for more than five years, and is currently the
President of Minnesota Thoracic Group, P.A.
JOSEPH C. KISER, M.D. is a cardiothoracic surgeon and a founder of the
Minneapolis Heart Institute and the Minneapolis Heart Institute Foundation. Dr.
Kiser is also a founder of the Minnesota Thoracic Group, P.A. He has practiced
cardiothoracic surgery at Abbott Northwestern Hospital as well as other Twin
Cities hospitals for more than 20 years.
GLEN TAYLOR has been the Chief Executive Officer and Chairman of the Board
of Taylor Corporation for more than five years. Taylor Corporation employs more
than 6,800 individuals throughout 41 operating divisions in 11 states and three
Canadian provinces. Mr. Taylor also is the owner of Taylor Bancshares, which
includes five banks in Minnesota, and the Minnesota Timberwolves, a National
Basketball Association franchise. From 1980 to 1990, Mr. Taylor served as a
Minnesota State Senator.
MEDICAL ADVISORS
In addition to the Company's Board of Directors and full-time employees,
the Company maintains a number of Medical Advisors who possess knowledge and
experience in technical and medical areas related to the Company's products. The
Medical Advisors consult with management of the Company concerning the products
being developed and their use by health professionals. The following is a brief
summary of the accomplishments of the Medical Advisors.
DAVID G. BENDITT, M.D. has served as a Medical Advisor to the Company since
1992. Dr. Benditt is a Professor of Medicine and Director of the Cardiac
Electrophysiology Laboratory and Arrhythmia Service at the University of
Minnesota Medical School in Minneapolis, Minnesota.
JEFFREY M. ISNER, M.D. has served as a Medical Advisor to the Company since
1989. Dr. Isner is the Chief of Cardiovascular Research at St. Elizabeth's
Hospital in Boston, Massachusetts and Professor of Medicine and Pathology at
Tufts University School of Medicine. In the Company's first IDE study, Dr. Isner
successfully demonstrated the laser catheter's ability to thermally destroy
heart tissue and relieve symptoms of obstructive hypertrophic cardiomyopathy
("OHCM"), a disease which causes thickening on the inside of the heart wall and
therefore reduces blood flow from the heart to the rest of the body. He is one
of the inventors of the first generation laser catheter to treat OHCM.
ROBERT H. SVENSON, M.D. has served as a Medical Advisor to the Company
since 1991. Dr. Svenson is currently the Director of Laser and Applied
Technologies Laboratory at the Carolinas Medical Center in Charlotte, North
Carolina and is Adjunct Professor of Medicine at the University of North
Carolina. He is considered a pioneer in the use of laser energy for JVT
elimination in open heart procedures. Dr. Svenson has performed percutaneous
laser catheter procedures in the Company's IDE studies.
LYLE D. JOYCE, M.D., PH.D. has served as a Medical Advisor to the Company
since 1988. Dr. Joyce, a director of the Company, is a cardiothoracic surgeon
with the Minneapolis Heart Institute in Minneapolis, Minnesota and is currently
the President of the Minnesota Thoracic Group, P.A. Dr. Joyce was an assistant
surgeon on the team which implanted the artificial heart in Barney Clark.
Subsequently, he was the first surgeon to implant the Jarvik VII artificial
heart in the Twin Cities area. Among his many awards, he has received the Arnold
Award for Excellence in Research from the Baylor College of Medicine.
JOSEPH C. KISER, M.D. has served as a Medical Advisor to the Company since
1988. Dr. Kiser, a director of the Company, is a cardiothoracic surgeon and a
founder of the Minneapolis Heart Institute and the Minneapolis Heart Institute
Foundation. Dr. Kiser has been active in the medical community having co-founded
an international children's charity dedicated to treating children with heart
disease around the world.
PATRICK J. TCHOU, M.D. has served as a Medical Advisor to the Company since
1991. Dr. Tchou is the Director of the Cardiac Electrophysiology Laboratory at
the Cleveland Clinic in Cleveland, Ohio. He is a prolific author and researcher
in many topics of electrophysiology.
FABIO LEONELLI, M.D. has served as a Medical Advisor to the Company since
1992. Dr. Leonelli is Assistant Professor of Medicine at the University of
Kentucky, Lexington, Kentucky. Dr. Leonelli is a clinical electrophysiologist
and an active researcher in the impact of waveforms and electrodes on
defibrillation.
MARK A. WOOD, M.D. has served as a Medical Advisor to the Company since
1993. Dr. Wood is Assistant Professor of Internal Medicine at the Medical
College of Virginia in Richmond, Virginia and the Co-Director of Cardiac
Electrophysiology Laboratories at the Medical College of Virginia and the
McGuire Veterans Administration Medical Center in Richmond, Virginia. He is a
well known author on the topic of clinical use of implantable defibrillators.
ROBERT G. HAUSER, M.D. has served as a Medical Advisor to the Company since
July of 1994. In addition, Dr. Hauser serves as a special advisor to the
Chairman and Chief Executive Officer of the Company. Dr. Hauser is the President
of, and a cardiologist with, the Minneapolis Heart Institute. He was a founding
member of the North American Society of Pacing and Electrophysiology and served
as president in 1983. He was Editor-in-Chief of Clinical Progress in
Electrophysiology and Pacing for five years and has served on the editorial
board of Pacing and Clinical Electrophysiology publication. Dr. Hauser was Chief
Executive Officer of CPI from 1988 to 1992.
The number of Medical Advisors may be expanded in the future. The duties of
the Medical Advisors are based upon the specific requests of the Company and at
the convenience of the individuals. The Medical Advisors may limit time spent on
such Company matters as they desire and receive fees determined on an hourly,
monthly or other basis as may be agreed in writing for specific tasks undertaken
at the request of the Company.
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of June 28, 1995, unless
otherwise noted, (a) by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each director
and current executive officer, and (c) by all executive officers and directors
of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)(2)
PERCENT
NAME AMOUNT OF CLASS
<S> <C> <C>
Pacesetter, Inc. 1,125,000 (3) 6.1%
15900 Valley View Court
P.O. Box 9221
Sylmar, California 91392
Whitney A. McFarlin 208,110 (4) 1.2%
David L. Christofferson 147,547 (5) *
Robert S. Garin 2,000 *
Mark W. Kroll, Ph.D. 67,156 (6) *
Jennifer M. Marrone 0 *
Gary Payment 2,800 *
William J. Rissman 0 *
Arnold A. Angeloni 67,096 (7) *
Dennis E. Evans 735,129 (8)(9) 4.2%
Sally E. Howard 48,796 (7) *
Lyle D. Joyce, M.D., Ph.D. 275,179 (10) 1.6%
Joseph C. Kiser, M.D. 390,030 (11) 2.2%
Glen Taylor 710,785 (12) 4.1%
All current directors and executive officers as a group (13 persons) 2,654,628 (13) 14.6%
</TABLE>
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or member of a group to acquire them within 60 days are treated
as outstanding only when determining the amount and percent owned by such
person or group.
(2) Unless otherwise noted, all of the shares shown are held by individuals or
entities possessing sole voting and investment power with respect to such
shares.
(3) As set forth in a Schedule 13D filed with the Securities and Exchange
Commission on October 11, 1994, this amount includes (i) 875,000 shares of
Common Stock which may be acquired within 60 days upon the conversion of
Preferred Stock, and (ii) 250,000 shares of Common Stock which may be
acquired within 60 days upon the conversion of a $1,500,000 convertible
subordinated debenture.
(4) Includes 205,156 shares which may be acquired within 60 days upon the
exercise of stock options.
(5) Includes 147,247 shares which may be acquired within 60 days upon the
exercise of stock options.
(6) Includes 15,578 shares which may be acquired within 60 days upon the
exercise of stock options.
(7) Includes 18,500 shares which may be acquired within 60 days upon the
exercise of stock options.
(8) Includes 30,000 shares owned by Hanrow Capital Fund and 580,000 shares
owned by Hanrow Capital Fund III. Hanrow Financial is the General Partner
of Hanrow Capital Fund and Hanrow Capital Fund III, and Mr. Evans, a
Director of the Company, is the President and Chief Executive Officer of
Hanrow Financial.
(9) Includes 18,500 shares which may be acquired within 60 days upon the
exercise of stock options granted to Dennis E. Evans, a Director of the
Company and the President and Chief Executive Officer of Hanrow Financial.
Also includes 83,333 shares which may be acquired within 60 days by Hanrow
Finance, Inc., an affiliate of Mr. Evans, upon the exercise of warrants.
(10) Includes 57,333 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
(11) Includes 78,333 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
(12) Includes 202,500 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
(13) Includes 844,980 shares which may be acquired within 60 days upon the
exercise of warrants and stock options.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 35,000,000 shares
of Common Stock, par value $.01 per share, 1,475,000 shares of Preferred Stock,
Series A, par value $.01 per share (the "Series A Preferred"), and 1,525,000
shares of Preferred Stock, par value $.01 per share, the designation, rights and
preferences of which have not been determined (the "Undesignated Preferred").
COMMON STOCK
As of June 28, 1995, there were 17,302,526 shares of Common Stock issued
and outstanding and options and warrants outstanding to purchase a total of
6,428,587 shares of Common Stock. All outstanding shares of Common Stock are
fully paid and nonassessable.
The holders of the Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Subject to
the preferential rights of the holders of the Undesignated Stock with respect to
dividends, holders of the Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. Holders of the Common Stock have no preemptive rights and no
right to convert their Common Stock into any other securities.
Promptly upon completion of this offering, the Company intends to file an
application with the National Association of Securities Dealers for the
quotation of the Company's Common Stock on the Nasdaq National Market System
(the "NMS"). If the Company's Common Stock is not accepted for quotation on the
NMS, it will continue to be quoted on the Nasdaq SmallCap Market System.
SERIES A PREFERRED
As of June 28, 1995, there were 875,000 shares of Series A Preferred issued
and outstanding. Series A Preferred, at the option of the holder, may be
converted into Common Stock at the rate of one share of Common Stock for each
share of Series A Preferred, subject to certain antidilution adjustments. The
holders of the Series A Preferred are entitled to vote on any matter submitted
to a vote of the holders of the Common Stock of the Company as if the Series A
Preferred had been converted into Common Stock. All shares of Series A Preferred
are entitled to a liquidation preference in cash equal to $4.00 per share before
the payment, distribution or setting apart for payment or distribution of any
amount for the holders of the Common Stock. In addition, as long as shares of
Series A Preferred are outstanding, dividends may not be declared on the Common
Stock of the Company, and, in the event that dividends are declared on the
Common Stock of the Company, holders of the Series A Preferred shall be entitled
to receive a comparable dividend on the basis of the number of shares of Common
Stock into which such holder's shares of Series A Preferred are then
convertible.
UNDESIGNATED PREFERRED
Under Minnesota law, no action by the Company's shareholders is necessary,
and only action by the Board of Directors is required, to authorize the issuance
of any of the undesignated shares of Undesignated Preferred. Subject to certain
limitations, the Board of Directors is empowered to establish, and to designate
the name of each class or series of the shares of Undesignated Preferred and to
set the terms of such shares (including terms with respect to redemption,
sinking fund, dividend, liquidation, preemptive, conversion and voting rights
and preferences). The Board of Directors can issue shares of such class or
series to, among other individuals, the holders of another class or series of
Undesignated Preferred or to the holders of the Common Stock. Accordingly, the
Board of Directors without shareholder approval can issue Undesignated Preferred
with voting or conversion rights which could adversely affect the voting power
of the holders of the Common Stock. The Undesignated Preferred may have the
effect of discouraging an attempt, through acquisition of a substantial number
of shares of the Common Stock, to acquire control of the Company with a view to
effecting a merger, sale or exchange of assets or a similar transaction.
WARRANTS
The Company has outstanding warrants to purchase an aggregate of 3,890,000
shares of its Common Stock. The average exercise price per share is $3.85. Such
warrants are exercisable at present and for periods of up to four and one-half
years. The Company is not able to determine whether or when any such warrants
will be exercised or what impact, if any, any such exercise might have on the
price of the Common Stock.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION
The Company's Restated Articles of Incorporation limit the liability of its
directors to the fullest extent permitted by the Minnesota Business Corporation
Act. Specifically, directors of the Company will not be personally liable for
monetary damages for breach of fiduciary duty as directors, except liability for
(i) any breach of the duty of loyalty to the Company or its shareholders, (ii)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) dividends or other distributions of corporate
assets that are in contravention of certain statutory or contractual
restrictions, (iv) violations of certain Minnesota securities laws, or (v) any
transaction from which the director derives an improper personal benefit.
Liability under federal securities law is not limited by the Restated Articles.
The Minnesota Business Corporation Act requires that the Company indemnify
any director, officer or employee made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity of the person,
against judgments, penalties, fines, settlements and reasonable expenses
incurred in connection with the proceeding if certain statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including a derivative
action in the name of the Company. Reference is made to the detailed terms of
the Minnesota indemnification statute (Minn. Stat. S. 302A.521) for a complete
statement of such indemnification rights. The Company's Restated Articles of
Incorporation also require the Company to provide indemnification to the fullest
extent of the Minnesota indemnification statute.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company is aware that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
SECTIONS 302A.671 AND 302A.673 OF MINNESOTA BUSINESS CORPORATION ACT
The Company is governed by the provisions of Sections 302A.671 and 302A.673
of the Minnesota Business Corporation Act. These anti-takeover provisions may
eventually operate to deny shareholders the receipt of a premium on their Common
Stock and may also have a depressive effect on the market price of the Company's
Common Stock. Section 302A.671 basically provides that the shares of a
corporation acquired in a "control share acquisition" have no voting rights
unless voting rights are approved by the shareholders in a prescribed manner. A
"control share acquisition" is generally defined as an acquisition of beneficial
ownership of shares that would, when added to all other shares beneficially
owned by the acquiring person, entitle the acquiring person to have voting power
of 20% or more in the election of directors. Section 302A.673 prohibits a public
corporation from engaging in a "business combination" with an "interested
shareholder" for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions. An "interested
shareholder" is a person who is the beneficial owner, of 10% or more of the
corporation's voting stock. Reference is made to the detailed terms of Sections
302A.671 and 302A.673 of the Minnesota Business Corporation Act.
Furthermore, Section 3.5 of Article III of the Company's Restated Articles
of Incorporation provides that the affirmative vote of the holders of two-thirds
of the voting power of the shares entitled to vote is required for shareholder
approval of a plan of merger, exchange of securities, or transfer of assets, as
described in Section 302A.601 of the Minnesota Business Corporation Act.
REGISTRATION RIGHTS
Under the terms of various warrant agreements, the Company has granted
certain demand and "piggyback" registration rights covering the possible
disposition of up to 1,440,000 shares issuable upon the exercise of such
warrants. The warrants containing such registration rights are exercisable at
present. In addition, pursuant to the Purchase Agreement, Pacesetter has certain
demand and "piggyback" registration rights covering the possible disposition of
up to 1,125,000 shares of Common Stock issuable upon conversion of preferred
stock and convertible debenture. The Company is not able to determine whether or
when any such registration rights will be exercised or what impact, if any, the
exercise of such rights might have on the price of the Common Stock.
PLAN OF DISTRIBUTION
The Shares are being offered for sale by the Company on a best efforts, all
or nothing basis, principally to selected investors purchasing for investment.
Raymond James & Associates, Inc. (the "Placement Agent") has been retained to
act as the exclusive agent for the Company in connection with the arrangement of
such offers and sales on a best efforts basis. The Placement Agent is not
obligated to and does not intend to itself take (or purchase) any of the Shares.
It is anticipated that the Placement Agent will obtain indications of interest
from potential investors for the amount of the offering and that effectiveness
of the Registration Statement will not be requested and no investor funds will
be accepted until indications of interest have been received for the amount of
the offering. Confirmation and definitive prospectuses will be distributed to
all investors at the time of pricing, informing investors of the closing date,
which will be scheduled for three business days after pricing. No investor funds
will be accepted prior to effectiveness of the Registration Statement. Prior to
the closing date, all investor funds will promptly be placed in escrow with
Citibank, N.A., as escrow agent ("Citibank"), in an escrow account established
for the benefit of the investors. The escrow agent will invest such funds in
accordance with Rule 15c2-4 promulgated under the Securities Exchange Act of
1934, as amended. Prior to the closing date, Citibank will advise the Company
that payment for the purchase of the Shares has been affirmed by the investors
and that the investors have deposited the requisite funds in the escrow account
at Citibank. Upon receipt of such notice, the Company will deposit with the
Depository Trust Company the Shares to be credited to the respective accounts of
the investors. Investor funds, together with interest thereon, if any, will be
collected by the Company through the facilities of Citibank on the scheduled
closing date. The offering will not continue after the closing date. In the
event that investor funds are not received in the full amount necessary to
satisfy the requirements of the offering, all funds deposited in the Citibank
escrow account will promptly be returned. The Company has agreed (i) to pay the
Placement Agent 6.5% of the proceeds of this offering as the selling commission,
(ii) to indemnify the Placement Agent against certain liabilities, including
liabilities under the Securities Act and (iii) to reimburse the Placement Agent
for up to $100,000 for certain of its out-of-pocket expenses in connection with
the offering. Certain officers and directors of the Company have agreed that
they will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable for, or
any rights to purchase or acquire, Common Stock for a period of ninety (90) days
after the date of this Prospectus, without the prior written consent of the
Placement Agent.
The Company has agreed that, during the period ending three years after the
closing of this offering, Raymond James shall have a right of first refusal to
act as lead manager or agent in connection with any proposed offering of
securities by the Company or by any affiliates thereof, to act as the investment
banker to the Company in connection with any merger, acquisition or
consolidation involving the Company or any affiliate, and to serve as the
investment banker to the Company in connection with any other transaction with
respect to which the Company proposes to engage an investment banker. If Raymond
James agrees to render its assistance for any such transaction, it shall be for
fees and expenses competitive with those which would likely be charged by
comparable investment banking firms. Pursuant to an agreement, dated November 3,
1994, the Company engaged Raymond James to assist the Company in locating a
partner for the Company's Interventional Technology Division for purposes of
forming a strategic alliance to accelerate the continued development and
commercialization of the products and technology of the Interventional
Technology Division.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Oppenheimer Wolff &
Donnelly, Minneapolis, Minnesota. Certain legal matters will be passed upon for
the Placement Agent by Stroock & Stroock & Lavan, New York, New York.
EXPERTS
The financial statements and financial statement schedules of Angeion
Corporation as of July 31, 1994 and 1993, and for each of the years in the
three-year period ended July 31, 1994, included and incorporated herein and in
the registration statement by reference, have been so included and incorporated
herein by reference in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, included or incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Office of the Commission: New York Regional Office, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, Northwestern Atrium Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such reports, proxy
statements and other information concerning the Company may be inspected at the
offices of the Boston Stock Exchange, Inc., One Boston Place, Boston,
Massachusetts 02108.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-17019) are incorporated into this Prospectus by reference:
(a) Annual Report on Form 10-K for the year ended July 31, 1994; and
(b) Quarterly Reports on Form 10-Q for the quarters ended October 31, 1994
and January 31 and April 30, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereunder shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which are incorporated by
reference in this Prospectus, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Written
requests for such copies should be directed to Angeion Corporation, 3650
Annapolis Lane, Suite 170, Minneapolis, Minnesota 55447-5434, Attention: David
L. Christofferson, Chief Financial Officer; telephone number (612) 550-9388.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Independent Auditors' Report F-2
Balance Sheets as of July 31, 1994 and 1993 F-3
Statements of Operations for the years ended July 31, 1994, 1993 and 1992 F-4
Statements of Shareholders' Equity for the years ended
July 31, 1994, 1993 and 1992 F-5
Statements of Cash Flows for the years ended July 31, 1994, 1993 and 1992 F-6
Notes to Financial Statements F-7 - F-11
Unaudited Balance Sheets as of April 30, 1995 and July 31, 1994 F-12
Unaudited Statements of Operations for the nine months ended
April 30, 1995 and 1994 F-13
Unaudited Statements of Cash Flows for the nine months ended
April 30, 1995 and 1994 F-14
Notes to Unaudited Financial Statements F-15
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Angeion Corporation:
We have audited the accompanying balance sheets of Angeion Corporation as
of July 31, 1994 and 1993, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the years in the
three-year period ended July 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Angeion Corporation as of
July 31, 1994 and 1993, and the results of its operations and its cash flows for
each of the years in the three-year period ended July 31, 1994, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 19, 1994
ANGEION CORPORATION
BALANCE SHEETS
JULY 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,127,358 $ 4,842,033
Other receivable 38,697 36,094
Royalty receivable 144,978 217,756
Inventories 230,211 139,759
Prepaid expenses and other current assets 128,135 65,249
Total current assets 2,669,379 5,300,891
Property and equipment, net 998,876 1,077,495
Patents and trademarks, net 905,875 737,028
Other assets 178,500 213,732
Total assets $ 4,752,630 $ 7,329,146
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of discount of $167,000 $ 2,833,000 $ 0
Current installments of capital lease obligations 9,328 12,910
Accounts payable 415,825 367,622
Accrued payroll, vacation and related costs 337,758 138,145
Other accrued expenses 248,852 89,607
Total current liabilities 3,844,763 608,284
Long-term debt 1,500,000 1,500,000
Capital lease obligations, less current installments 4,187 13,516
Total liabilities 5,348,950 2,121,800
Shareholders' Equity (Deficit):
Class A Convertible Preferred Stock, $.01 par value.
Authorized 1,475,000 shares; issued and
outstanding 875,000 shares 3,166,425 3,166,425
Common stock, $.01 par value, authorized 25,000,000
shares;
issued and outstanding 11,152,935 shares in 1994 and
10,322,225 shares in 1993 111,529 103,222
Additional paid-in capital 13,668,107 11,804,337
Accumulated deficit (17,542,381) (9,866,638)
Total shareholders' equity (deficit) (596,320) 5,207,346
Commitments
Total liabilities and shareholders' equity $ 4,752,630 $ 7,329,146
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales $ 0 $ 137,982 $ 77,615
Cost of goods sold 0 147,755 169,587
Gross margin 0 (9,773) (91,972)
Operating expenses:
Research and development 5,158,738 4,485,818 2,996,845
Merger expense for in-process research
and development 1,450,499 0 0
General and administrative 1,493,424 1,353,502 1,021,078
Total operating expenses 8,102,661 5,839,320 4,017,923
Operating loss from continuing operations (8,102,661) (5,849,093) (4,109,895)
Other income (expense):
Royalty income 482,853 0 0
Other expense 0 (106,298) 0
Interest income 72,250 115,852 75,741
Interest expense (128,185) (76,019) (20,765)
Other income (expense) 426,918 (66,465) 54,976
Loss from continuing operations (7,675,743) (5,915,558) (4,054,919)
Gain on sale of discontinued operations 0 3,207,120 0
Loss from discontinued operations,
net of income tax benefit 0 0 (106,536)
Net loss $(7,675,743) $(2,708,438) $(4,161,455)
Net loss per share from continuing
operations (0.72) (0.57) (0.41)
Net income (loss) per share from
discontinued operations 0 0.31 (0.01)
Net loss per share $ (0.72) $ (0.26) $ (0.42)
Weighted average number of shares
outstanding 10,657,311 10,296,812 9,901,592
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JULY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
NUMBER NUMBER
OF SHARES PAR VALUE OF SHARES PAR VALUE
<S> <C> <C> <C> <C>
Balance at July 31, 1991 0 $ 0 8,701,159 $ 87,012
Stock options exercised 0 0 6,000 60
Exercise of stock warrants 0 0 80,000 800
Shares issued at $3.00 per
share, net of issuance costs 0 0 1,443,275 14,432
Net loss 0 0 0 0
Balance at July 31, 1992 0 0 10,230,434 102,304
Shares issued at $4.00 per
share, net of issuance costs 875,000 3,166,425 0 0
Stock options exercised 0 0 8,093 81
Director stock issued 0 0 68,698 687
Stock issued in settlement
of litigation 0 0 15,000 150
Compensation expense on grant of
options 0 0 0 0
Net loss 0 0 0 0
Balance at July 31, 1993 875,000 3,166,425 10,322,225 103,222
Stock issued in connection with
merger of subsidiaries 0 0 663,610 6,636
Stock options exercised 0 0 115,530 1,155
Director stock issued 0 0 36,570 366
Stock issued for consulting
services 0 0 15,000 150
Compensation expense on grant of
options 0 0 0 0
Issuance of common
stock warrants 0 0 0 0
Net loss 0 0 0 0
Balance at July 31, 1994 875,000 $3,166,425 11,152,935 $111,529
</TABLE>
(TABLE CONTINUED)
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED
PAID-IN CAPITAL DEFICIT TOTAL
<S> <C> <C> <C>
Balance at July 31, 1991 $ 7,454,214 $ (2,996,745) $ 4,544,481
Stock options exercised 8,580 0 8,640
Exercise of stock warrants 190,400 0 191,200
Shares issued at $3.00 per
share, net of issuance costs 3,807,111 0 3,821,543
Net loss 0 (4,161,455) (4,161,455)
Balance at July 31, 1992 11,460,305 (7,158,200) 4,404,409
Shares issued at $4.00 per
share, net of issuance costs 0 0 3,166,425
Stock options exercised 28,675 0 28,756
Director stock issued 215,288 0 215,975
Stock issued in settlement
of litigation 59,850 0 60,000
Compensation expense on grant of
options 40,219 0 40,219
Net loss 0 (2,708,438) (2,708,438)
Balance at July 31, 1993 11,804,337 (9,866,638) 5,207,346
Stock issued in connection with
merger of subsidiaries 1,443,863 0 1,450,499
Stock options exercised 4,222 0 5,377
Director stock issued 95,634 0 96,000
Stock issued for consulting
services 52,350 0 52,500
Compensation expense on grant of
options 67,301 0 67,301
Issuance of common
stock warrants 200,400 0 200,400
Net loss 0 (7,675,743) (7,675,743)
Balance at July 31, 1994 $13,668,107 $(17,542,381) $ (596,320)
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating activities:
Net loss $(7,675,743) $(2,708,438) $(4,161,455)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of discontinued operations 0 (3,207,120) 0
Depreciation and amortization 534,025 416,193 125,817
Expense on grant of stock options and issuance of
stock 215,801 316,194 0
Merger expense for in-process research and
development 1,450,499 0 0
Changes in operating assets and liabilities:
Other receivable (2,603) (6,094) (30,000)
Trade accounts receivable 0 77,615 (77,615)
Royalty receivable 72,778 (217,756) 0
Inventories (90,452) (81,954) (48,561)
Prepaid expenses and other current assets (62,886) 53,633 (34,539)
Net assets of discontinued operations 0 0 (142,569)
Accounts payable 101,903 (105,845) 349,433
Accrued expenses 305,158 117,614 62,419
Net cash used in operating activities (5,151,520) (5,345,958) (3,957,070)
Investing activities:
Payments for purchases of property and equipment (244,254) (430,234) (770,649)
Increase in other assets (311,767) (523,185) (220,132)
Net cash used in investing activities (556,021) (953,419) (990,781)
Financing activities:
Proceeds from issuance of preferred stock, net 0 3,166,425 0
Proceeds from issuance of convertible
subordinated debentures 0 1,500,000 0
Proceeds from sale of discontinued operations, net 0 6,409,315 0
Proceeds from exercise of stock options 5,377 28,756 8,640
Proceeds from sale and exercise of stock warrants 200,400 0 191,200
Proceeds from issuance of common stock, net 0 0 3,821,543
Proceeds from issuance of notes payable 2,800,000 0 750,000
Repayments of debt (12,911) (890,706) (81,671)
Net cash provided by financing activities 2,992,866 10,213,790 4,689,712
Net increase (decrease) in cash and cash equivalents (2,714,675) 3,914,413 (258,139)
Cash and cash equivalents:
Beginning of year 4,842,033 927,620 1,185,759
End of year $ 2,127,358 $ 4,842,033 $ 927,620
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 59,115 $ 22,310 $ 19,000
Supplemental schedule of noncash investing and financing activities:
During 1992, $61,887 of capital lease assets were acquired under capital lease
obligations.
During 1993, 15,000 shares of common stock valued at $60,000 were issued in
settlement of litigation.
During 1994, 15,000 shares of common stock valued at $52,500 were issued as
compensation for consulting services.
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
1. DESCRIPTION OF BUSINESS
Angeion Corporation (the "Company") is developing arrhythmia and
electrophysiology products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
INVENTORIES: Inventories are stated at the lower of cost (determined on a
first in, first out basis) or market. Inventories consist primarily of material
costs.
PROPERTY AND EQUIPMENT: Property and equipment are carried at cost.
Equipment and furniture and fixtures are depreciated using the straight-line
method over five to seven years. Leasehold improvements are depreciated using
the straight-line method over the lease term. Expenditures for repairs and
maintenance are charged to expense as incurred.
PATENTS AND TRADEMARKS: The costs incurred to register patents and
trademarks are capitalized as incurred. Amortization of these costs commences
when the related patent or trademark is filed. The costs are amortized over the
estimated useful life of the patent or trademark, generally seven years.
INCOME TAXES: The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
NET LOSS PER SHARE: Net loss per share is computed by dividing net loss for
the period by the weighted average number of shares of common stock and common
equivalent shares outstanding during the period. Common equivalent shares
representing stock warrants and options were excluded because of their
antidilutive effect.
STATEMENTS OF CASH FLOWS: For purposes of the statements of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
3. MERGER OF SUBSIDIARIES
Effective December 20, 1993, AngeMed, Inc. ("AngeMed") and AngeLase, Inc.
("AngeLase"), greater-than-90% owned subsidiaries of the Company, were merged
with and into the Company (the "Mergers"), with the Company being the surviving
entity after the Mergers. Pursuant to the Mergers, each share of common stock of
AngeMed and each share of common stock of AngeLase was converted into shares of
Angeion common stock. In addition, each option to purchase AngeMed or AngeLase
common stock was converted into an option to purchase Angeion common stock based
upon the respective exchange ratios.
Certain of the former AngeMed and AngeLase shareholders dissented from the
Mergers (the "Dissenters") and sought a higher value for the shares of AngeMed
and AngeLase common stock held by such shareholders in accordance with the
applicable provisions of Minnesota corporate law (the "Dissenters' Claims").
Effective May 31, 1994, a Settlement and Release Agreement was entered into by
and among the Company and the AngeMed Dissenters (the "Settlement Agreement").
Pursuant to the terms of the Settlement Agreement, the AngeMed Dissenters agreed
to terminate their claims against the Company and the directors and the Company
agreed to issue an aggregate of 630,004 shares of the Company's common stock to
the AngeMed Dissenters in exchange for their AngeMed common stock and to issue
options to the AngeMed Dissenters to purchase an aggregate of 348,596 shares of
the Company's common stock in exchange for their options to purchase AngeMed
common stock. Effective June 21, 1994, a settlement was reached with the sole
AngeLase Dissenter pursuant to which the AngeLase Dissenter terminated his
Dissenters' Claim and agreed to exchange his AngeLase common stock for an
aggregate of 6,000 shares of Angeion common stock.
The fair market value of Angeion common stock issued in connection with the
Mergers was accounted for as a purchase of in-process research and development
and, accordingly, a charge of $1,450,499 is included in the statement of
operations with an offsetting credit to additional paid-in capital.
4. DISCONTINUED OPERATIONS
On September 22, 1992, the Company sold its Angeion Medical Products
("AMP") division effective as of July 31, 1992. The 1992 financial statements of
the Company have been reclassified to report separately the operating results of
the discontinued operation in 1992. Net sales of AMP were $6,777,346 in fiscal
1992. The sale price consisted of $6.2 million cash at closing, plus a royalty
of 5% and 10% of AMP product sales in fiscal 1994 and 1993, respectively. A gain
of $3,207,120 (including $770,366 of royalties) was recognized in 1993 and
royalty income of $482,853 was recognized in fiscal 1994. There are no further
royalties to be recognized.
5. PROPERTY AND EQUIPMENT:
At July 31 property and equipment consists of the following:
1994 1993
Production equipment $ 296,495 $ 214,956
Furniture and fixtures 117,465 102,611
Computer equipment 538,793 470,144
Research and development equipment 616,772 540,042
Leasehold improvements 187,071 184,589
1,756,596 1,512,342
Less accumulated depreciation and
amortization 757,720 434,847
$ 998,876 $1,077,495
6. ALLIANCE AND LONG TERM DEBT
On February 4, 1993, Angeion and Pacesetter entered into an agreement which
provided for an investment by Pacesetter in Angeion and the grant by Angeion of
certain licensing, manufacturing and marketing rights with respect to certain of
the products being developed by the Company. The investment by Pacesetter
consisted of the purchase of 875,000 shares of Angeion preferred stock, Class A,
at $4.00 per share. The preferred stock is convertible at any time on a
one-for-one basis into Angeion common stock. Pacesetter's investment also
includes the purchase of a $1,500,000 convertible subordinated debenture with an
interest rate of 7.16%, interest payable semi-annually, which is convertible at
any time into Angeion common stock at $6.00 per share. The debenture is due in
semi-annual installments of $150,000, beginning July 1, 1998 through July 1,
2003.
7. NOTES PAYABLE
During June and July of 1994, the Company raised a total of $3,000,000 in
the form of short-term bridge loans (the "Bridge Financing") to fund its
operations until it could complete an equity financing. All loans under the
Bridge Financing are evidenced by promissory notes accruing interest at a rate
of 12% per year. The promissory notes are due on December 8, 1994, or such
earlier time as the Company completes a permanent equity financing raising at
least $6,000,000 in gross proceeds. The promissory notes are secured by certain
assets of the Company and may be converted into Angeion common stock at a
conversion price of $2.00 per share. In connection with such loans, each lender
received a warrant to purchase, at an exercise price of $2.00 per share, that
number of shares of common stock equal to 50% of the principal amount of the
loan divided by the exercise price of the warrant. The warrants expire on
December 8, 1997. The warrants issued were valued at $200,400 which is reflected
as a discount and is being amortized as interest expense over the term of the
Bridge Financing. Certain directors of the Company participated in the Bridge
Financing and invested $1,000,000 in exchange for promissory notes and warrants
to purchase 250,000 shares at $2.00 per share.
8. SHAREHOLDERS' EQUITY
STOCK OPTIONS. The Company's shareholders have approved the 1993, 1991,
1989 and 1988 Stock Incentive Plans (the "Plans"). The Plans provide that
incentive stock options and nonqualified stock options to purchase shares of
common stock may be granted at prices determined by the Compensation Committee,
except that the purchase price of incentive stock options may not be less than
100% of the fair market value of the stock at date of grant. All options expire
not later than ten years from date of grant.
In connection with the Mergers (note 3), options under the AngeLase and
AngeMed Plans were converted into options to purchase Angeion stock under the
Plans. Changes in options outstanding under the Plans are as follows:
SHARES RANGE OF OPTION
UNDER OPTION PRICE PER SHARE
Balance at July 31, 1991 1,019,371 $0.100-9.375
Granted in fiscal 1992 371,000 2.500-5.000
Exercised in fiscal 1992 (6,000) 1.440
Forfeited in fiscal 1992 (114,250) 1.560-4.280
Balance at July 31, 1992 1,270,121 0.100-9.375
Granted in fiscal 1993 104,465 2.062-3.875
Exercised in fiscal 1993 0 --
Forfeited in fiscal 1993 (556,000) 1.560-9.375
Balance at July 31, 1993 818,586 0.100-9.062
Granted in fiscal 1994 818,296 1.970-3.500
Conversion of subsidiary options 541,738 0.032-2.160
Exercised in fiscal 1994 (115,530) 0.032-0.100
Forfeited in fiscal 1994 (54,000) 2.062-4.062
Balance at July 31, 1994 2,009,090 $0.032-9.062
Options for the purchase of 1,244,571 shares were exercisable at July 31,
1994. Options to purchase 530,984 shares were available for grant under the
Plans at July 31, 1994.
The Company has granted options, outside the Plans, to purchase 353,787
shares at prices ranging from $2.50 to $3.63 per share. At July 31, 1994, these
options were exercisable.
Options have also been granted under the Non-Employee Director Plan to
purchase 24,000 shares at $2.94 and 24,000 shares at $3.19 per share. In
addition under this plan, annual stock grants valued at $16,000 of common stock
are awarded to each non-employee director.
WARRANTS. In connection with issuing a note payable to a shareholder in
fiscal 1992, the Company issued a warrant to such shareholder to purchase 75,000
shares of common stock at $2.50 per share. This warrant expires on July 27,
1999.
In connection with the Bridge Financing (note 7), warrants to purchase
835,000 shares of common stock were issued at an exercise price of $2.00 per
share. These warrants expire on December 8, 1997.
In connection with a consulting agreement, warrants to purchase 40,000
shares of common stock were issued at an exercise price of $2.50 per share.
These warrants expire on December 15, 1998.
9. LEASES
The Company leases office and production space under an operating lease.
The lease provides for executory costs which are subject to escalation based on
increases in the lessor's underlying costs. In addition, the Company leases
certain equipment under cancelable operating leases. Rent expense was
approximately $116,000, $113,000 and $197,000, for the years ended July 31,
1994, 1993 and 1992, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) are approximately
$167,000 and $42,000 in 1995 and 1996.
10. INCOME TAXES
The Company has a tax net operating loss carryforward at July 31, 1994 of
approximately $16,200,000 which is available to reduce income taxes payable in
future years. If not used, this carryforward will begin to expire in 2004. Under
the Tax Reform Act of 1986, the utilization of these carryforwards may be
limited as a result of significant changes in ownership.
The actual tax expense differs from the expected tax expense (benefit)
computed by applying the U.S. federal corporate income tax rate of 34% to the
net loss as follows:
1994 1993 1992
Federal statutory rate (34.0)% (34.0)% (34.0)%
State income taxes, net (6.0) (6.0) (6.0)
Expense on mergers of subsidiaries 6.4 0 0
Miscellaneous 1.0 (1.7) (1.7)
Change in valuation allowance 32.6 41.7 41.7
Effective income tax rate 0% 0% 0%
Deferred taxes, calculated using an effective tax rate of 39% as of July 31
consist of the following:
1994 1993
Net operating loss carryforwards $ 6,511,000 $ 3,880,000
AMP sale 0 176,000
Other 25,000 (22,000)
Total net deferred tax assets 6,536,000 4,034,000
Less valuation allowance (6,536,000) (4,034,000)
Deferred income taxes $ 0 $ 0
The net deferred assets at July 31, 1994 and 1993, are fully offset by a
valuation allowance. The amount of the valuation allowance will be reviewed
annually.
11. RETIREMENT SAVINGS PLAN
The Angeion Corporation Tax Deferred Savings and Employees Stock Ownership
Plan (the "Plan") provides for contributions in the form of a salary reduction
cash or deferred arrangement, discretionary matching employer contributions,
discretionary supplemental employer contributions and voluntary, after-tax
contributions by participating employees. Generally, all employees of the
Company who have completed six months of service with the Company are eligible
to participate in the Plan. Contribution expense was insignificant in all years
presented.
12. ROYALTY COMMITMENTS
The Company acquired the technology for its continuous-wave laser catheter
system. As part of this acquisition, the Company agreed to pay a royalty of 5%
on sales of patented products incorporating this technology for the life of any
related patent. Additionally, in exchange for a doctor's efforts in connection
with the laser catheter ablation system, the Company has agreed to pay the
doctor and Carolinas Medical Center a royalty, when certain conditions are met,
of 2% and 3%, respectively, on all collected sales of tachycardia devices. The
Company has incurred no royalties through July 31, 1994 related to the above
commitments.
13. SUBSEQUENT EVENT
On September 19, 1994, the Company completed a public offering of 4.9
million shares of newly issued common stock and 4.9 million warrants to purchase
one-half of a share of common stock, which raised proceeds of approximately
$10,730,000, net of expenses. The exercise price of the warrants per whole share
is $4.75 per share and these warrants expire in March 1996. The Company intends
to apply the net proceeds of the sale of the securities for research and
development, investment in capital equipment and leasehold improvements, general
corporate purposes, including working capital, and for the repayment of
unconverted short-term bridge loans. In September 1994, $1,500,000 of the bridge
notes were converted and $1,500,000 were repaid (see note 7). If the Company's
operations progress as anticipated, management believes the net proceeds of this
offering along with cash on hand will fund operations through September 1995, at
which time the Company will need to raise additional capital. There can be no
assurance that efforts to raise additional capital will be successful.
ANGEION CORPORATION
BALANCE SHEETS
APRIL 30, 1995 AND JULY 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,700,977 $ 2,127,358
Other receivable 0 38,697
Royalty receivable 0 144,978
Inventories 229,781 230,211
Prepaid expenses and other current assets 91,481 128,135
Total current assets 5,022,239 2,669,379
Property and equipment, net 1,527,795 998,876
Patents and trademarks, net 1,046,705 905,875
Other assets 159,889 178,500
Total assets $ 7,756,628 $ 4,752,630
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable, net of discount of $167,000 $ 0 $ 2,833,000
Current installments of capital lease obligations 2,599 9,328
Accounts payable 550,826 415,825
Accrued payroll, vacation and related costs 285,791 337,758
Other accrued expenses 152,729 248,852
Total current liabilities 991,945 3,844,763
Long-term debt 1,500,000 1,500,000
Capital lease obligations, less current installments 1,917 4,187
Total liabilities 2,493,862 5,348,950
Shareholders' Equity (Deficit):
Convertible Preferred Stock, Series A, $.01 par value.
Authorized 1,475,000 shares; issued and outstanding
875,000 shares at April 30, 1995, and July 31, 1994 3,166,425 3,166,425
Common Stock, $.01 par value, authorized 35,000,000 shares;
issued and outstanding 17,145,819 shares at April 30, 1995,
and 11,152,935 at July 31, 1994 171,458 111,529
Additional paid-in capital 26,140,420 13,668,107
Accumulated deficit (24,215,537) (17,542,381)
Total shareholders' equity (deficit) 5,262,766 (596,320)
Total Liabilities and Shareholders' Equity $ 7,756,628 $ 4,752,630
</TABLE>
See accompanying notes to financial statements.
ANGEION CORPORATION
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED APRIL 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30
1995 1994
<S> <C> <C>
Net sales $ 0 $ 0
Cost of goods sold 0 0
Gross margin 0 0
Operating expenses:
Research and development 5,268,028 3,629,800
Merger expense for in-process research and
development 0 1,435,124
General and administrative 1,508,635 1,032,172
Total operating expenses 6,776,663 6,097,096
Operating loss from continuing operations (6,776,663) (6,097,096)
Other income (expense):
Royalty income 0 344,221
Interest income 245,354 68,890
Interest expense (141,848) (84,794)
Other income 103,506 328,317
Net loss $(6,673,157) $(5,768,779)
Net loss per share $ (.41) $ (.55)
Weighted average number of shares outstanding 16,291,900 10,519,777
</TABLE>
See accompanying notes to financial statements.
ANGEION CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(6,673,157) $(5,768,779)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 433,385 381,797
Compensation expense on grant of stock and
stock options 117,182 196,334
Notes payable discount amortization 83,500 0
Expense on merger of subsidiaries (note 3) 0 1,435,124
Changes in operating assets and liabilities:
Employee receivable 38,697 (1,952)
Other receivable 144,978 83,656
Materials inventories 430 (173,135)
Prepaid expenses and other current assets 36,654 (87,665)
Accounts payable 135,001 (32,136)
Accrued expenses (129,843) 93,387
Net cash used in operating activities (5,813,173) (3,873,369)
INVESTING ACTIVITIES:
Payments for purchases of property and
equipment (803,289) (170,340)
Increase in other assets (281,234) (321,589)
Net cash used in investing activities (1,084,523) (491,929)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and
warrants, net 10,599,122 0
Proceeds from exercise of stock options and
warrants 381,192 1,614
Repayments of notes payable (1,508,999) (9,500)
Net cash provided by financing activities 9,471,315 (7,886)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,573,619 (4,373,184)
Cash and cash equivalents:
Beginning of period 2,127,358 4,842,033
End of period $ 4,700,977 $ 468,849
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $ 160,533 $ 57,944
During the nine month period ended April 30, 1995, Notes Payable of
$1,500,000 were converted into common stock.
</TABLE>
See accompanying notes to financial statements.
ANGEION CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
APRIL 30, 1995
1. BASIS OF PRESENTATION
The unaudited interim financial statements have been prepared by the
Company in accordance with generally accepted accounting principles, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements have been omitted or condensed pursuant to such rules and
regulations. The accompanying unaudited interim financial statements should be
read in conjunction with the financial statements and related notes included in
the Company's July 31, 1994 Annual Report to Shareholders.
The information furnished reflects, in the opinion of the management of
Angeion Corporation, all adjustments (of only a normally recurring nature),
necessary to present a fair statement of the results for the interim periods
presented.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing the net income (loss)
for the period by the weighted average number of shares of common stock
outstanding during the period. Common equivalent shares representing stock
warrants and options were excluded in the fiscal 1994 and 1995 periods presented
due to their antidilutive effect.
3. MERGER OF SUBSIDIARIES
Effective December 20, 1993, AngeMed, Inc. ("AngeMed") and AngeLase, Inc.
("AngeLase"), greater than 90%-owned subsidiaries of the Company, were merged
with and into the Company (the "Mergers"), with the Company being the surviving
entity after the Mergers. Pursuant to the Mergers, each share of common stock of
AngeMed and each share of common stock of AngeLase was converted into shares of
Angeion common stock. In addition, each option to purchase AngeMed or AngeLase
common stock was converted into an option to purchase Angeion common stock based
upon the respective exchange ratios.
The fair market value of Angeion common stock issued in connection with the
Mergers was accounted for as a purchase of in-process research and development
and, accordingly, a charge of $1,450,499 is included in the fiscal 1994
statement of operations with an offsetting credit to additional paid-in capital.
4. NOTES PAYABLE
During June and July of 1994, the Company raised a total of $3,000,000 in
the form of short-term bridge loans (the "Bridge Financing") to fund its
operations until it could complete an equity financing. All loans under the
Bridge Financing were evidenced by promissory notes accruing interest at a rate
of 12% per year. In connection with such loans, each lender received a warrant
to purchase, at an exercise price of $2.00 per share, that number of shares of
common stock equal to 50% of the principal amount of the loan divided by the
exercise price of the warrant. The warrants expire on December 8, 1997. The
warrants issued were valued at $200,400 which was reflected as a discount and
was amortized over the term of the Bridge Financing. Certain directors of the
Company participated in the Bridge Financing and invested $1,000,000 in exchange
for promissory notes and warrants to purchase 250,000 shares. In September 1994,
$1,500,000 of the bridge notes were converted into common stock and $1,500,000
were repaid.
5. PUBLIC OFFERING
On September 19, 1994, the Company completed a public offering of 4.9
million shares of newly issued common stock and 4.9 million warrants to purchase
one-half of a share of common stock, which raised proceeds of approximately
$10,600,000 net of expenses. The exercise price of the warrants per whole share
is $4.75 per share and they expire in March 1996. The Company is using the net
proceeds of the sale of the securities for research and development, investment
in capital equipment and leasehold improvements, general corporate purposes,
including working capital, and for the repayment of uncovered short-term bridge
loans.
[A photo of the tip of the Company's RF porous catheter.]
The Company's radio frequency catheter ablation system has a patented cooled,
porous tip which minimizes blood coagulation while maximizing lesion size. This
device is being developed for the nonsurgical treatment of irregular heartbeats
in the atrial chambers of the heart.
[A photo of the laser catheter.]
The Company's laser catheter ablation system is being evaluated in human
clinical trials for the nonsurgical treatment of irregular heartbeats in the
ventricular chambers of the heart.
ANGEION CORPORATION'S CATHETER ABLATION SYSTEM
[A 3-part illustration depicts the insertion of a catheter into the femoral
artery in the leg and up and into the patient's heart. Cross-section diagram of
the heart with a mapping catheter and ablation catheter placed in the
appropriate ventricles. Close-up of the ablation catheter emitting energy at the
site of abnormal electrical pathways located in the ventricular wall of the
heart.]
An open lumen mapping catheter is inserted into the femoral artery in the leg
and threaded up and into the heart. The mapping catheter identifies the location
of cells causing the irregular heartbeat. An ablation catheter is threaded
through the opening of the mapping catheter. Radio frequency or laser energy
(depending on the location of the arrhythmia) is delivered to the site in the
heart tissue to eliminate the abnormal electrical pathways.
THE COMPANY HAS BEGUN LIMITED U.S. HUMAN CLINICAL TRIALS OF THE LASER
CATHETER ABLATION SYSTEM, DEPICTED ABOVE, UNDER AN IDE APPROVED BY THE FDA. THE
COMPANY PLANS TO FILE FOR AN IDE DURING THE SECOND HALF OF CALENDAR 1995 FOR ITS
RF CATHETER ABLATION SYSTEM. THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL
RECEIVE AN IDE FROM THE FDA TO CONDUCT HUMAN CLINICAL TRIALS OF THE RF CATHETER
ABLATION SYSTEM OR RECEIVE FDA APPROVAL TO COMMENCE COMMERCIAL MARKETING OF ANY
OF THE COMPANY'S PRODUCTS.
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE PLACEMENT AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
COMMON STOCK TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AT ANY TIME AFTER THE DATE HEREOF.
TABLE OF CONTENTS
Page
Summary 3
Risk Factors 6
Use of Proceeds 12
Capitalization 12
Market Price for Common Stock 13
Dividend Policy 13
Dilution 13
Selected Financial Data 14
Management's Discussion and Analysis of
Results of Operations and Financial
Condition 15
Business 18
Management 29
Principal Shareholders and Beneficial
Ownership of Management 32
Description of Securities 33
Plan of Distribution 35
Legal Matters 36
Experts 36
Available Information 36
Documents Incorporated by Reference 36
Index to Financial Statements F-1
[LOGO]
2,500,000
SHARES OF COMMON STOCK
P R O S P E C T U S
RAYMOND JAMES &
ASSOCIATES, INC.
JULY , 1995
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The table below sets forth estimated expenses in connection with the
issuance and distribution of the Common Stock being offered hereby. All of such
expenses are estimates, except for the SEC registration fee and the NASD fee.
SEC registration fee $ 4,257
NASD fee 1,735
Printing expenses 20,000
Fees and expenses of counsel for the Company 50,000
Fees and expenses of accountants for the
Company 30,000
Fees and Expenses of Placement Agent for the
Company 912,500
Blue Sky fees and expenses 10,000
Miscellaneous 1,508
Total $1,030,000
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Minnesota Statutes Section 302A.521 provides that a Minnesota business
corporation shall indemnify any director, officer, employee or agent of the
corporation made or threatened to be made a party to a proceeding, by reason of
the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights.
Article V of the Company's Bylaws provides that each director, officer,
employee or agent, past of present, of the Company, and each person who serves
or may have served at the request of the Company as a director, officer,
employee or agent of another corporation or employee benefit plan, and their
respective heirs, administrators and executors, shall be indemnified by the
Company in accordance with, and to the fullest extent permissible by, applicable
state law.
The Company maintains directors' and officers' liability insurance,
including a reimbursement policy in favor of the Company.
Pursuant to Section 7 of the Placement Agency Agreement, the directors and
officers of the Company are indemnified against certain civil liabilities that
they may incur under the Securities Act in connection with this Registration
Statement and the related Prospectus.
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
1.1 Form of Placement Agency Agreement (filed herewith).
3.1 Articles of Merger, including Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3A
contained in the Registration Statement on Form 8-A (File No.
0-17019)).
3.2 Amended Bylaws (incorporated by reference to Exhibit 3B
contained in the Registration Statement on Form S-4 (File No.
33-20761)).
4.1 Amended Form of Common Stock Certificate (incorporated by
reference to Exhibit 4A to the Registration Statement on Form
8-A (File No. 0-17019)).
4.2 Certificate of Designation of Preferred Stock, Series A
(incorporated by reference to Exhibit 4.1 contained in the
Current Report on form 8-K filed February 9, 1993).
4.3 Specimen Form of Warrant Certificate (incorporated by reference
to Exhibit 4.3 contained in the Registration Statement on Form
S-2 (File No. 33-82084)).
4.4 Form of Warrant Agreement (incorporated by reference to Exhibit
4.4 contained in the Registration Statement on Form S-2 (File
No. 33-82084)).
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly (filed
herewith).
10.1 1988 Stock Option Plan (incorporated by reference to Exhibit 10
to the Annual Report on Form 10-K for the year ended April 30,
1988).
10.2 1989 Omnibus Stock Option Plan, as amended effective May 16,
1989 (incorporated by reference to Exhibit 10.2 to the Annual
Report on Form 10-K for the year ended July 31, 1990).
10.3 Non-Employee Director Plan (incorporated by reference to
Exhibit 10.3 contained in the Annual Report on Form 10-K for
the year ended July 31, 1992).
10.4 Executive Bonus Program, effective November 21, 1989
(incorporated by reference to Exhibit 10.3 to the Annual Report
on Form 10-K for the year ended July 31, 1990).
10.5 Development Agreement between AngeLase, Inc. and Dr. Robert H.
Svenson dated January 15, 1991 (incorporated by reference to
Exhibit 10.7 contained in the Annual Report on Form 10-K for
the year ended July 31, 1991).
10.6 Stock Purchase Agreement dated September 21, 1990 relating to
the acquisition of XMED, Inc. (incorporated by reference to
Exhibit 10.9 contained in the Annual Report on Form 10-K for
the year ended July 31, 1991).
10.7 Form of Warrant to purchase an aggregate of $250,000 shares
dated December 1, 1990 (incorporated by reference to Exhibit
10.10 contained in the Annual Report on Form 10-K for the year
ended July 31, 1991).
10.8 Warrant dated July 27, 1992 in the name of Glen Taylor
(incorporated by reference to Exhibit 10.10 contained in the
Annual Report on Form 10-K for the year ended July 31, 1991).
10.9 CryoLife Joint Venture Agreement for Development of Biological
Pacemaker (incorporated by reference to Exhibit 10A contained
in the Annual Report on Form 10-K for the year ended July 31,
1989).
10.10 Agreement with Jeffrey Isner, M.D. for Laser Catheter
Technology (incorporated by reference to Exhibit 10B contained
in the Annual Report on Form 10-K for the year ended July 31,
1989).
10.11 Stock Purchase Agreement dated September 13, 1990 between
Hanrow Financial Group, Ltd. and the Company (incorporated by
reference to Exhibit 10.10 contained in the Annual Report on
Form 10-K for the year ended July 31, 1990).
10.12 Asset Purchase Agreement dated September 22, 1992 between
Burron Medical, Inc. and the Company (incorporated by reference
to Exhibit 2.1 contained in the Current Report on Form 8-K
filed October 7, 1992).
10.13 Preferred Stock, Preferred Stock Option and Subordinated
Debenture Purchase Agreement dated February 4, 1993 between the
Company, AngeMed, AngeLase and Pacesetter, Inc. (incorporated
by reference to Exhibit 28.1 contained in the Current Report on
Form 8-K filed February 9, 1993).
10.14 Preferred Stock Option Agreement dated February 4, 1993 between
the Company and Pacesetter, Inc. (incorporated by reference to
Exhibit 28.2 contained in the Current Report on Form 8-K filed
February 9, 1993).
10.15 Convertible Subordinated Debenture dated February 4, 1993
(incorporated by reference to Exhibit 28.3 contained in Current
Report on Form 8-K filed February 9, 1993).
10.16 OEM Marketing and Manufacturing Agreement dated February 4,
1993 between the Company and Pacesetter, Inc. (incorporated by
reference to Exhibit 28.4 contained in the Current Report on
Form 8-K filed February 9, 1993).
10.17 License Agreement dated February 4, 1993 between the Company
and Pacesetter, Inc. (incorporated by reference to Exhibit 28.5
contained in the Current Report on Form 8-K filed February 9,
1993).
10.18 Employment Agreement with Whitney A. McFarlin dated September
15, 1993 (incorporated by reference to Exhibit 10.20 contained
in the Annual Report on Form 10-K filed October 28, 1993).
10.19 Employment Agreement with David L. Christofferson dated April
20, 1993 (incorporated by reference to Exhibit 10.21 contained
in the Annual Report on Form 10-K filed October 28, 1993).
10.20 1993 Stock Incentive Plan (incorporated by reference to Exhibit
10.22 contained in the Company's Annual Report on Form 10-K for
the year ended July 31, 1994).
10.21 1994 Non-Employee Director Option Plan (incorporated by
reference to Exhibit 10.23 contained in the Company's Annual
Report on Form 10-K for the year ended July 31, 1994).
10.22 Lease Agreement dated July 21, 1991 with Gopher XI, a Texas
limited partnership (incorporated by reference to Exhibit 10.26
contained in the Company's Annual Report on Form 10-K for the
year ended July 31, 1994).
10.23 Addendum No. 1 to Lease Agreement dated June 26, 1991
(incorporated by reference to Exhibit 10.27 contained in the
Company's Annual Report on Form 10-K for the year ended July
31, 1994).
10.24 Addendum No. 2 to Lease Agreement dated February 24, 1992
(incorporated by reference to Exhibit 10.28 contained in the
Company's Annual Report on Form 10-K for the year ended July
31, 1994).
10.25 Lease Agreement dated September 23, 1992 (incorporated by
reference to Exhibit 10.29 contained in the Company's Annual
Report on Form 10-K for the year ended July 31, 1994).
10.26 Addendum No. 3 to Lease Agreement dated September 24, 1992
(incorporated by reference to Exhibit 10.30 contained in the
Company's Annual Report on Form 10-K for the year ended July
31, 1994).
10.27 Sublease Agreement effective as of October 26, 1994 with Sharpe
Endosurgical Corporation (incorporated by reference to Exhibit
10.31 contained in the Company's Annual Report on Form 10-K for
the year ended July 31, 1994).
11.1 Computation of Net Income (Loss) Per Share (filed herewith).
23.1 Consent of KPMG Peat Marwick LLP (filed herewith).
23.2 Consent of Oppenheimer Wolff & Donnelly (see Exhibit 5.1).
24.1 Power of Attorney (included on page II-5 of this Registration
Statement).
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis and State of Minnesota, on July 6, 1995.
ANGEION CORPORATION
By: /S/ WHITNEY A. MCFARLIN
Whitney A. McFarlin
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Whitney A. McFarlin and David L. Christofferson as his
or her true and lawful attorney-in-fact and agent, with full powers of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on July 6, 1995
in the capacities indicated.
SIGNATURE TITLE
/s/ WHITNEY A. MCFARLIN Chief Executive Officer (Principal Executive
Whitney A. McFarlin Officer), President and Chairman of the Board
/s/ DAVID L. CHRISTOFFERSON Vice President, Chief Financial Officer
David L. Christofferson (Principal Financial Officer and Principal
Accounting Officer) and Secretary
/s/ ARNOLD A. ANGELONI Director
Arnold A. Angeloni
/s/ DENNIS E. EVANS Director
Dennis E. Evans
/s/ SALLY E. HOWARD Director
Sally E. Howard
/s/ LYLE D. JOYCE Director
Lyle D. Joyce, M.D., Ph.D.
/s/ JOSEPH C. KISER Director
Joseph C. Kiser, M.D.
/s/ GLEN TAYLOR Director
Glen Taylor
ANGEION CORPORATION
EXHIBIT INDEX TO REGISTRATION STATEMENT ON FORM S-3
<TABLE>
<CAPTION>
ITEM NO. ITEM METHOD OF FILING
<S> <C> <C>
1.1 Form of Placement Agency Agreement Filed herewith, page .
3.1 Articles of Merger, including Amended and Incorporated by reference to Exhibit 3A
Restated Articles of Incorporation contained in Form 8-A (File No. 0-17019).
3.2 Amended Bylaws Incorporated by reference to Exhibit 3B
contained in the registration statement on Form
S-4 (File No. 33-20761).
4.1 Amended Form of Common Stock Certificate Incorporated by reference to Exhibit 4A
contained in the registration statement on Form
8-A (File No. 0-17019).
4.2 Certificate of Designation of Preferred Incorporated by reference to Exhibit 4.1
Stock, Series A contained in the current report on Form 8-K
filed February 9, 1993.
4.3 Specimen Form of Warrant Certificate Incorporated by reference to Exhibit 4.3
contained in the Registration Statement on Form
S-2 (File No. 33-82084).
4.4 Form of Warrant Agreement Incorporated by reference to Exhibit 4.4
contained in the Registration Statement on Form
S-2 (File No. 33-82084).
5.1 Opinion and Consent of Oppenheimer Wolff & Filed herewith, page .
Donnelly
10.1 1988 Stock Option Plan Incorporated by reference to Exhibit 10
contained in the Annual Report on Form 10-K for
the year ended April 30, 1988.
10.2 1989 Omnibus Stock Option Plan, as amended Incorporated by reference to Exhibit 10.2
effective May 16, 1989 contained in the Annual Report on Form 10-K for
the year ended July 31, 1990.
10.3 Non-Employee Director Plan Incorporated by reference to Exhibit 10.3
contained in the Annual Report on Form 10-K for
the year ended July 31, 1992.
10.4 Executive Bonus Program, effective November Incorporated by reference to Exhibit 10.3
21, 1989 contained in the Annual Report on Form 10-K for
the year ended July 31, 1990.
10.5 Development Agreement between AngeLase, Incorporated by reference to Exhibit 10.7
Inc. and Dr. Robert H. Svenson dated contained in the Annual Report on Form 10-K for
January 15, 1991 the year ended July 31, 1991.
10.6 Stock Purchase Agreement dated September Incorporated by reference to Exhibit 10.9
21, 1990 relating to the acquisition of contained in the Annual Report on Form 10-K for
XMED, Inc. the year ended July 31, 1991.
10.7 Form of Warrant to purchase an aggregate of Incorporated by reference to Exhibit 10.10
250,000 shares dated December 1, 1990 contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.8 Warrant dated July 27, 1992 in the name of Incorporated by reference to Exhibit 10.10
Glen Taylor contained in the Annual Report on Form 10-K for
the year ended July 31, 1991.
10.9 CryoLife Joint Venture Agreement for Incorporated by reference to Exhibit 10A
Development of Biological Pacemaker contained in the Annual Report on Form 10-K for
the year ended July 31, 1989.
10.10 Agreement with Jeffrey Isner, M.D. for Incorporated by reference to Exhibit 10B
Laser Catheter Technology contained in the Annual Report on Form 10-K for
the year ended July 31, 1989.
10.11 Stock Purchase Agreement dated September Incorporated by reference to Exhibit 10.10
13, 1990 between Hanrow Financial Group, contained in the Annual Report on Form 10-K for
Ltd. and the Company the year ended July 31, 1990.
10.12 Asset Purchase Agreement dated September Incorporated by reference to Exhibit 2.1
22, 1992 between Burron Medical Inc. and contained in the Current Report on Form 8-K
the Company filed October 7, 1992.
10.13 Preferred Stock, Preferred Stock Option and Incorporated by reference to Exhibit 28.1
Subordinated Debenture Purchase contained in the Current Report on Form 8-K dated
Agreement February 4, 1993 between the filed February 9, 1993.
Company, AngeMed, AngeLase and Pacesetter,
Inc.
10.14 Preferred Stock Option Agreement dated Incorporated by reference to Exhibit 28.2
February 4, 1993 between the Company and contained in the Current Report on Form 8-K
Pacesetter, Inc. filed February 9, 1993.
10.15 Convertible Subordinated Debenture dated Incorporated by reference to Exhibit 28.3
February 4, 1993 contained in the Current Report on Form 8-K
filed February 9, 1993.
10.16 OEM Marketing and Manufacturing Agreement Incorporated by reference to Exhibit 28.4
dated February 4, 1993 between the Company contained in the Current Report on Form 8-K
and Pacesetter, Inc. filed February 9, 1993.
10.17 License Agreement dated February 4, 1993 Incorporated by reference to Exhibit 28.5
between the Company and Pacesetter, Inc. contained in the Current Report on Form 8-K
filed February 9, 1993.
10.18 Employment Agreement with Whitney A. Incorporated by reference to Exhibit 10.20
McFarlin dated September 15, 1993 contained in the Annual Report on Form 10-K
filed October 28, 1993.
10.19 Employment Agreement with David L. Incorporated by reference to Exhibit 10.21
Christofferson dated April 20, 1993 contained in the Annual Report on Form 10-K
filed October 28, 1993.
10.20 1993 Stock Incentive Plan Incorporated by reference to Exhibit 10.22
contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.21 1994 Non-Employee Director Option Plan Incorporated by reference to Exhibit 10.23
contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.22 Lease Agreement dated July 21, 1991 with Incorporated by reference to Exhibit 10.26
Gopher XI, a Texas limited partnership contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.23 Addendum No. 1 to Lease Agreement dated Incorporated by reference to Exhibit 10.27
June 26, 1991 contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.24 Addendum No. 2 to Lease Agreement dated Incorporated by reference to Exhibit 10.28
February 24, 1992 contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.25 Lease Agreement dated September 23, 1992 Incorporated by reference to Exhibit 10.29
contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.26 Addendum No. 3 to Lease Agreement dated Incorporated by reference to Exhibit 10.30
September 24, 1992 contained in the Company's Annual Report on
Form 10-K for the year ended July 31, 1994.
10.27 Sublease Agreement effective as of October Incorporated by reference to Exhibit 10.31
26, 1994 with Sharpe Endosurgical contained in the Company's Annual Report on
Corporation Form 10-K for the year ended July 31, 1994.
11.1 Computation of Net Income (Loss) Per Share Filed herewith, page .
23.1 Consent of KPMG Peat Marwick LLP Filed herewith, page .
23.2 Consent of Oppenheimer Wolff & Donnelly See Exhibit 5.1.
24.1 Power of Attorney Included on page II-5 of this Registration
Statement.
</TABLE>
EXHIBIT 1.1
ANGEION CORPORATION
2,500,000 Shares of Common Stock, $0.01 par value per share
FORM OF PLACEMENT AGENCY AGREEMENT
________________________, 1995
Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
As Placement Agent
Dear Sir or Madam:
Angeion Corporation, a Minnesota corporation (the "Company"), proposes
to issue and sell 2,500,000 shares (the "Shares") of common stock, par value
$.01 per share (the "Common Stock"), to certain investors (collectively, the
"Investors"). The Company desires to engage you as its placement agent (the
"Placement Agent") in connection with such issuance and sale. The Common Stock,
is more fully described in the Registration Statement (as hereinafter defined).
The Company hereby confirms as follows its agreements with the
Placement Agent.
1. Agreement to Act as Placement Agent.
On the basis of the representations, warranties and agreements of
the Company herein contained and subject to all the terms and conditions of this
Agreement, the Placement Agent agrees to act as the Company's exclusive
placement agent in connection with the issuance and sale, on a best efforts
basis, by the Company of the Shares to the Investors. The Company shall pay to
the Placement Agent 6.5% of the proceeds received by the Company from the sale
of the Shares as set forth on the cover page of the Prospectus (as hereinafter
defined)
2. Delivery and Payment. Concurrently with the execution and delivery
of this Agreement, the Company, the Placement Agent, and Citibank, N.A., as
escrow agent (the "Escrow Agent"), shall enter into an Escrow Agreement
substantially in the form of Exhibit A attached hereto (the "Escrow Agreement"),
pursuant to which an escrow account will be established, at the Company's
expense, for the benefit of the Investors (the "Escrow Account"). Prior to the
Closing Date (defined below), (i) each of the Investors will deposit an amount
equal to the price per Security multiplied by the number of Shares purchased by
it in the Escrow Account, and (ii) the Escrow Agent will notify the Company and
the Placement Agent in writing whether the Investors have deposited in the
Escrow Account funds in the amount equal to the proceeds of the sale of all of
the Shares offered hereby (the "Requisite Funds") into the Escrow Account. At
10:00 a.m., New York City time, on , or at such other time on such other date as
may be agreed upon by the Company and the Placement Agent but in no event prior
to the date on which the Escrow Agent shall have received all of the Requisite
Funds (such date is hereinafter referred to as the "Closing Date"), the Escrow
Agent will release the Requisite Funds from the Escrow Account for collection by
the Company and the Placement Agent as provided in the Escrow Agreement and the
Company shall deliver the Shares to the Investors, which delivery may be made
through the facilities of the Depository Trust Company. The closing (the
"Closing") shall take place at the office of Stroock & Stroock & Lavan, Seven
Hanover Square, New York, New York 10004. All actions taken at the Closing shall
be deemed to have occurred simultaneously.
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the Placement
Agent shall request by written notice to the Company. For the purpose of
expediting the checking and packaging of certificates for the Shares, the
Company agrees to make such certificates available for inspection at least 24
hours prior to delivery to the Investors.
3. Representations and Warranties of the Company. The Company
represents and warrants and covenants to the Placement Agent that:
(a) A registration statement (Registration No. 33- ) on Form S-3
relating to the Shares, including a preliminary prospectus relating to the
Shares and such amendments to such registration statement as may have been
required to the date of this Agreement, has been prepared by the Company, under
the provisions of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (collectively referred to as the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder, and has
been filed with the Commission. The Commission has not issued any order
preventing or suspending the use of the Prospectus or the Preliminary Prospectus
(as defined below). The term "Preliminary Prospectus" as used herein means a
preliminary prospectus relating to the Shares as contemplated by Rule 430 or
Rule 430A ("Rule 430A") of the Rules and Regulations included at any time as
part of the registration statement. Copies of such registration statement and
amendments and of each related Preliminary Prospectus have been delivered to the
Placement Agent. If such registration statement has not become effective, a
further amendment to such registration statement, including a form of final
prospectus, necessary to permit such registration statement to become effective
will be filed promptly by the Company with the Commission. If such registration
statement has become effective, a final prospectus relating to the Shares
containing information permitted to be omitted at the time of effectiveness by
Rule 430A will be filed by the Company with the Commission in accordance with
Rule 424(b) of the Rules and Regulations promptly after execution and delivery
of this Agreement. The term "Registration Statement" means the registration
statement as amended at the time it becomes or became effective (the "Effective
Date"), including all material incorporated by reference therein and any
information deemed to be included by Rule 430A. The term "Prospectus" means the
prospectus relating to the Shares as first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or, if no such filing is required, the
form of final prospectus relating to the Shares included in the Registration
Statement at the Effective Date, in either case, including all material, if any,
incorporated by reference therein.
(b) On the date that any Preliminary Prospectus was filed with
the Commission, the date the Prospectus is first filed with the Commission
pursuant to Rule 424(b) (if required), at all times subsequent to and including
the Closing Date and when any post-effective amendment to the Registration
Statement becomes effective or any amendment or supplement to the Prospectus is
filed with the Commission, the Registration Statement, each Preliminary
Prospectus and the Prospectus (as amended or as supplemented if the Company
shall have filed with the Commission any amendment or supplement thereto),
including the financial statements included in the Prospectus, did or will
comply with all applicable provisions of the Act and the Rules and Regulations
and did or will contain all statements required to be stated therein in
accordance with the Act and the Rules and Regulations. On the Effective Date and
when any post-effective amendment to the Registration Statement becomes
effective, no part of the Registration Statement or any such amendment did or
will contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. At the Effective Date, at the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission and at
the Closing Date the Prospectus did not or will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company has not distributed any offering material in
connection with the offering or sale of the Common Stock, other than the
Registration Statement, the Preliminary Prospectus and the Prospectus.
(c) The Company is, and at the Closing Date will be, duly
organized, validly existing and in good standing under the laws of Minnesota.
The Company has, and at the Closing Date will have, full power and authority to
conduct all the activities conducted by it, to own or lease all the assets owned
or leased by it and to conduct its business as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, in the
most recent Preliminary Prospectus). The Company is, and at the Closing Date
will be, duly licensed or qualified to do business and in good standing as a
foreign organization in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such
licensing or qualification necessary. Except as disclosed in the Registration
Statement, the Company does not own, and at the Closing Date will not own,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity. Complete and correct
copies of the articles or certificate of incorporation and of the bylaws of the
Company and all amendments thereto have been delivered to the Placement Agent,
and no changes therein will be made subsequent to the date hereof and prior to
the Closing Date.
(d) The issued and outstanding shares of capital stock of the
Company have been duly authorized, validly issued, are fully paid and
nonassessable and are not subject to any preemptive or similar rights. The
Company has an authorized, issued and outstanding capitalization as set forth in
the Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus). The description of the securities of the Company in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) is, and at the Closing
Date will be, complete and accurate in all respects. Except as set forth in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus), the Company does not have
outstanding, and at the Closing Date will not have outstanding, any options to
purchase, or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or exchangeable for, or any contracts or
commitments to issue or sell, any shares of capital stock or other securities.
(e) This Agreement has been duly authorized and validly executed
and delivered by the Company and is a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms. The Escrow
Agreement has been duly authorized and validly executed and delivered by the
Company and is a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms.
(f) The issuance and sale of the Shares have been duly authorized
by the Company, and the Shares, when issued and paid for in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable and
will not be subject to preemptive or similar rights. The holders of the Shares
will not be subject to personal liability by reason of being such holders. The
Shares, when issued, will conform to the description thereof set forth in the
Prospectus.
(g) The financial statements and the related notes and schedules
included in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, in the most recent Preliminary Prospectus) present fairly
the financial condition of the Company as of the date thereof and the results of
operations, stockholders' equity (deficit) and cash flows of the Company at the
dates and for the periods covered thereby, all in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the entire period involved, except as otherwise disclosed therein. No other
financial statements or schedules of the Company, any former Subsidiaries (the
"Subsidiaries") or any other entity are required by the Act or the Rules and
Regulations to be included in the Registration Statement or the Prospectus. KPMG
Peat Marwick (the "Accountants"), who have reported on such financial statements
and schedules, are independent accountants with respect to the Company and its
Subsidiaries as required by the Act and the Rules and Regulations. The
statements included in the Registration Statement with respect to the
Accountants pursuant to Rule 509 of Regulation S-K of the Rules and Regulations
are true and correct in all material respects. The financial statements of the
Company and the related notes and schedules included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, in the
most recent Preliminary Prospectus) have been prepared in conformity with the
requirements of the Act and the Rules and Regulations and present fairly the
information shown therein. The pro forma financial data set forth in the
Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus), under the captions "Summary Financial Information" and
"Selected Financial Data" have been prepared on a basis consistent with the
consolidated financial statements of the Company.
(h) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, except as set forth in or contemplated by the Registration Statement and
the Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company other than non-material changes in the ordinary
course of business, or any material adverse change in the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company arising for any reason whatsoever, (ii) the Company has not
incurred nor will it incur any material liabilities or obligations, direct or
contingent, nor has the Company entered into nor will it enter into any material
transactions other than pursuant to this Agreement, the Registration Statement
and the transactions referred to herein and therein and (iii) the Company has
not and will not have paid or declared any dividends or other distributions of
any kind on any class of its capital stock.
(j) Any real property and buildings held under lease to the
Company are held or leased by the Company under valid, binding and enforceable
leases conforming to the description thereof set forth in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, in the
most recent Preliminary Prospectus), with such exceptions as do not interfere
with the use made and proposed to be made of such property and buildings by the
Company.
(k) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act").
(l) Except as set forth in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus), there are no actions, suits or proceedings pending or
to the Company's best knowledge, threatened against or affecting the Company or
any of its officers in their capacity as such, before or by any Federal or state
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
might materially adversely affect the business, properties, prospects, condition
(financial or otherwise) or results of operations of the Company.
(m) The Company has, and at the Closing Date will have, (i) all
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as contemplated in the
Prospectus (or if the Prospectus is not in existence, the most recent
Preliminary Prospectus), (ii) complied with all laws, regulations and orders
applicable to either it or its business, where the failure to so comply would
have a material adverse effect on the business, properties, prospects, condition
(financial or otherwise) or results of operations of the Company, and (iii)
performed all its obligations required to be performed, and is not, and at the
Closing Date will not be, to the Company's best knowledge, in default, under any
indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement, lease, contract or other agreement or
instrument (collectively, a "contract or other agreement") to which it is a
party or by which its property is bound or affected, except as otherwise set
forth in the Registration Statement and the Prospectus (or, if the Prospectus is
not in existence, in the most recent Preliminary Prospectus) and except where
such default would not have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company, and, to the Company's best knowledge, no other party
under any contract or other agreement to which it is a party is in default in
any respect thereunder. The Company is not in violation of any provision of its
organizational or governing documents.
(n) The Company has all corporate power and authority to enter
into this Agreement and the Escrow Agreement, and to carry out the provisions
and conditions hereof and thereof, and all consents, authorizations, approvals
and orders required in connection herewith and therewith have been obtained.
(o) Neither (i) the issuance, offering and sale of the Shares
pursuant hereto, nor (ii) the compliance by the Company with the other
provisions hereof require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained, such as may be required under state securities or Blue Sky laws or the
bylaws and rules of the National Association of Securities Dealers, Inc. (the
"NASD") and, if the Registration Statement is not effective under the Act as of
the time of execution hereof, such as may be required (and shall be obtained as
provided in either this Agreement) under the Act.
(p) Neither the execution of this Agreement or the Escrow
Agreement, nor the issuance, offering or sale of the Shares, nor the
consummation of any of the transactions contemplated herein or in the Escrow
Agreement, nor the compliance by the Company with the terms and provisions
hereof or thereof will conflict with, or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any contract or other agreement to which the Company by which the
Company may be bound or to which any of the property or assets of the Company is
subject; nor will such action result in any violation of the provisions of the
Company's organizational or governing documents, or any statute or any order,
rule or regulation applicable to the Company or of any court or of any federal,
state or other regulatory authority or other government body having jurisdiction
over the Company.
(q) There is no document or contract of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required. All such contracts to which the Company is a party have been duly
authorized, executed and delivered by the Company, constitute valid and binding
agreements of the Company, and are enforceable against the Company in accordance
with the terms thereof.
(r) No statement, representation or warranty made by the Company
in this Agreement or made in any certificate or document required by this
Agreement or the Escrow Agreement to be delivered to the Placement Agent, the
Investors or the Escrow Agent was or will be, when made, inaccurate, untrue or
incorrect in any material respect.
(s) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action intended, or
which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or which has constituted, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Common Stock.
(t) No holder of securities of the Company has rights to the
registration of any securities of the Company as a result of the filing of the
Registration Statement, other than rights which are not exercisable due to the
Placement Agent's determination to include only securities sold directly from
the Company.
(u) The Common Stock is currently listed on the Nasdaq Stock
Markets Small Cap Market (the "Nasdaq Small Cap Market").
(v) The Company is not involved in any material labor dispute nor
is any such dispute threatened.
(w) Neither the Company nor any of its employees or agents has
made any payment of funds of the Company received, or retained any funds in
violation of any law, rule or regulation of a character required to be disclosed
in the Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus).
(x) The Company is insured by insurers against such losses and
risks and in such amounts as are disclosed in the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus); and
the Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially adversely affect the Company or its
business, assets, prospects, condition (financial or otherwise) or results of
operations.
(y) The business, operations and properties of the Company have
been and are being conducted in compliance with all applicable laws, ordinances,
rules, regulations, licenses, permits, approvals, plans, authorizations or
requirements relating to occupational safety and health, or pollution, or
protection of health or the environment (including, without limitation, those
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic substances, materials or wastes
into ambient air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, and all applicable judicial or
administrative agency or regulatory decrees, awards, judgments and orders
relating thereto; and the Company has not received any notice from any
governmental instrumentality or any third party alleging any violation thereof
or liability thereunder (including, without limitation, liability for costs of
investigating or remediating sites containing hazardous substances and/or
damages to natural resources).
(z) The Company owns or possesses, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names necessary to carry on its business as presently conducted by it, and
the Company has not received any notice of any infringement of or conflict with
asserted rights of others with respect to any of the foregoing that in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
materially adversely affect the condition, financial or otherwise, earnings or
business of the Company.
(aa) Each officer, director and securityholder of the Company
listed on Exhibit B hereto has delivered to the Placement Agent an agreement in
the form of Attachment A hereto to the effect that he or she will not, for a
period of 90 days after the date hereof, without the prior written consent of
the Placement Agent, offer to sell, sell, contract to sell, grant any option to
purchase or otherwise dispose (or announce any offer, sale, grant of any option
to purchase or other disposition) of any shares of capital stock of the Company
or securities convertible into, or exchangeable or exercisable for, shares of
capital stock of the Company.
4. Agreements of the Company. The Company covenants and agrees with
the Placement Agent as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus would be required by law to be
delivered in connection with sales of the Shares by an underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Placement Agent within a reasonable period of time prior to the filing thereof
and the Placement Agent shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective, and will notify the Placement Agent
promptly, and will confirm such advice in writing, (1) when the Registration
Statement has become effective and when any post-effective amendment thereto
becomes effective, (2) of any request by the securities or other governmental
authority (including, without limitation, the Commission) of any jurisdiction
for amendments or supplements to the Registration Statement or the Prospectus or
for additional information, (3) of the issuance by any securities or other
governmental authority (including, without limitation, the Commission) of any
jurisdiction of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose or the threat
thereof, (4) of the happening of any event during the period mentioned in the
second sentence of Section 4(a) that in the judgment of the Company makes any
statement made in the Registration Statement or the Prospectus untrue or that
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they are made, not misleading and (5) of receipt by the
Company or any representative or attorney of the Company of any other
communication from the securities or other governmental authority (including,
without limitation, the Commission) of any jurisdiction relating to any of the
Registration Statement, any Preliminary Prospectus or the Prospectus. If at any
time any securities or other governmental authority (including, without
limitation, the Commission) of any jurisdiction shall issue any order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. If the Company has omitted any information from the
Registration Statement, pursuant to Rule 430A, it will use its best efforts to
comply with the provisions of and make all requisite filings with the Commission
pursuant to said Rule 430A and to notify the Placement Agent promptly of all
such filings.
(c) If, at any time when a Prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would, in the judgment of
counsel to the Company or counsel to the Placement Agent, include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or the Registration Statement, as then amended
or supplemented, would, in the judgment of counsel to the Company or counsel to
the Placement Agent, include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
or if for any other reason it is necessary, in the judgment of counsel to the
Company or counsel to the Placement Agent, at any time to amend or supplement
the Prospectus or the Registration Statement to comply with the Act or the Rules
and Regulations, the Company will promptly notify the Placement Agent and,
subject to Section 4(a) hereof, will promptly prepare and file with the
Commission, at the Company's expense, an amendment to the Registration Statement
or an amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance and will deliver to the Placement Agent,
without charge, such number of copies thereof as the Placement Agent may
reasonably request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the Placement Agent.
(d) The Company will furnish to the Placement Agent and its
counsel, without charge, (i) two signed copies of the registration statement
described in Section 3(a) hereof and each pre-effective amendment thereto,
including financial statements and schedules, and all exhibits thereto and (ii)
so long as a prospectus relating to the Shares is required to be delivered under
the Act, as many copies of each Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto as the Placement Agent may reasonably request.
(e) The Company will comply with all the undertakings contained
in the Registration Statement.
(f) Prior to the sale of the Shares to the Investors, the Company
will cooperate with the Placement Agent and its counsel in connection with the
registration or qualification of the Shares for offer and sale under the state
securities or Blue Sky laws of such jurisdictions as the Placement Agent may
request; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) During the period of five years commencing on the Effective
Date, the Company will furnish to the Placement Agent copies of such financial
statements and other periodic and special reports as the Company may from time
to time distribute generally to the holders of any class of its capital stock,
and will furnish to the Placement Agent a copy of each annual or other report it
shall be required to file with the Commission.
(h) The Company will make generally available to holders of its
securities, as soon as may be practicable, but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in which
the Effective Date falls, a consolidated earnings statement (which need not be
audited but shall be in reasonable detail) for a period of 12 months ended
commencing after the Effective Date, and satisfying the provisions of Section
11(a) of the Act (including Rule 158 of the Rules and Regulations).
(i) The Company will not at any time, directly or indirectly,
take any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization of the price of the Shares to
facilitate the sale or resale of any of the Shares.
(j) The Company will apply the net proceeds from the offering and
sale of the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
5. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay
all costs and expenses incident to the performance of the obligations of the
Company under this Agreement, including but not limited to costs and expenses of
or relating to (1) the preparation, printing and filing of the Registration
Statement (including each pre- and post-effective amendment thereto) and
exhibits thereto, each Preliminary Prospectus, the Prospectus and any amendment
or supplement to the Prospectus, including all fees, disbursements and other
charges of counsel to the Company, (2) the preparation and delivery of
certificates representing the Shares, (3) furnishing (including costs of
shipping and mailing) such copies of the Registration Statement (including all
pre- and post-effective amendments thereto), the Prospectus and any Preliminary
Prospectus, and all amendments and supplements to the Prospectus, as may be
requested for use in connection with the direct placement of the Shares, (4) the
listing of the Common Stock on the Nasdaq Small Cap Market, (5) any filings
required to be made by the Placement Agent with the NASD, and the fees,
disbursements and other charges of counsel for the Placement Agent in connection
therewith, (6) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions designated
pursuant to Section 4(f), including the reasonable fees, disbursements and other
charges of counsel to the Placement Agent in connection therewith and the
preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (7) fees, disbursements and other charges of counsel to the Company
and (8) the fees of the Escrow Agent. The Company shall reimburse the Placement
Agent, on a fully accountable basis, for all travel, legal and other
out-of-pocket expenses incurred in connection with the engagement hereunder, up
to a maximum of $ .
6. Conditions of the Obligations of the Placement Agent. The
obligations of the Placement Agent hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has become
effective shall be received by the Placement Agent not later than 5:00 p.m., New
York City time, on the date of this Agreement or at such later date and time as
shall be consented to in writing by the Placement Agent and all filings required
by Rule 424 of the Rules and Regulations and Rule 430A shall have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall be pending or threatened by any securities or other governmental
authority (including, without limitation, the Commission), (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by any securities or other
governmental authority (including, without limitation, the Commission), (iii)
any request for additional information on the part of the staff of any
securities or other governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of the staff of
the Commission or such authorities and (iv) after the date hereof no amendment
or supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Placement Agent and the
Placement Agent did not object thereto in good faith, and the Placement Agent
shall have received certificates, dated the Closing Date and signed by the
President and Chief Executive Officer or the Chairman of the Board of Directors
of the Company, and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and belief), to
the effect of clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, (i) there shall not have been
a material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in the
Registration Statement and the Prospectus, if in the judgment of the Placement
Agent any such development makes it impracticable or inadvisable to consummate
the sale and delivery of the Shares to Investors at the public offering price.
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers or directors in their capacities as such, before or by any Federal,
state or local court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would materially and adversely affect
the business, properties, business prospects, condition (financial or otherwise)
or results of operations of the Company.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date, as if made on such date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date shall have been duly performed, fulfilled or complied with.
(f) The Placement Agent shall have received an opinion, dated the
Closing Date, of Oppenheimer Wolff & Donnelly, counsel for the Company, to the
effect that:
(i) the Company has been duly organized and is validly existing
in good standing under the laws of Minnesota and is duly qualified to
transact business as a foreign corporation and is in good standing
under the laws of all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified does not
amount to a material liability or disability to the Company;
(ii) the Company has the requisite power to conduct its business
as described in the Registration Statement and the Prospectus, and the
Company has the corporate power to enter into this Agreement and to
carry out all the terms and provisions hereof to be carried out by it;
(iii) the Company has an authorized capitalization as set forth
in the Prospectus; all of the issued shares of capital stock of the
Company have been duly authorized and validly issued, and are fully
paid and nonassessable and, other than as set forth in the
Registration Statement, are free of preemptive or other similar
rights; the Shares have been duly authorized by all necessary action
of the Company and, when issued by the Company will be validly issued
and outstanding; the Shares have been duly authorized for listing,
subject to official notice of issuance, on the Nasdaq Small Cap
Market; except as disclosed in the Registration Statement, no holders
of outstanding shares of capital stock of the Company are entitled as
such to any preemptive or other rights to subscribe for any of the
Shares; and no holders of securities of the Company are entitled to
have such securities registered under the Registration Statement;
(iv) the statements set forth under the heading "Description of
Shares" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the securities of the Company, provide
a fair summary of such provisions;
(v) the execution and delivery of this Agreement and the Escrow
Agreement have been duly authorized by all necessary action of the
Company and each has been duly executed and delivered by the Company,
and is the valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights
and to general principles of equity and in the case of this Agreement,
except as rights to indemnity and contribution may be limited by
federal or state securities laws or the public policy underlying such
laws; the Escrow Agreement conforms to the descriptions thereof set
forth in the Prospectus;
(vi) no legal or governmental proceedings are pending to which
the Company or to which the property of the Company is subject that
are required to be described in the Registration Statement or the
Prospectus and are not described therein, and, to the best knowledge
of such counsel, no such proceedings have been threatened against the
Company or with respect to any of its respective assets; and no
contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement that is not described therein or filed
as required;
(vii) the Registration Statement is effective under the Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b);
and, to such counsel's knowledge after due inquiry, no stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto and no order directed at any
amendment or supplement thereto has been issued, and no proceedings
for that purpose have been instituted or threatened or are
contemplated by the Commission;
(viii) the Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined under the
Investment Company Act, and is not required to be registered under the
Investment Company Act;
(ix) the statements set forth in the Prospectus under the
captions "Risk Factors," "Business," "Description of Shares,"
"Management," "Principal Shareholders and Beneficial Ownership of
Management," and "Certain Transactions," insofar as such statements
constitute matters of law or legal conclusions, have been reviewed by
such counsel and are accurate in all material respects;
(x) The Registration Statement originally filed with respect to
the Shares and each amendment thereto and the Prospectus (in each
case, not including the financial statements and other financial and
statistical information contained therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the respective rules
and regulations of the Commission thereunder;
(xi) no default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company is a party or by which the Company is
bound or may be affected, where such default would have a material
adverse effect with regard to the assets, business or operations of
the Company; and
(xii) the issuance, offering and sale of the Shares to the
Investors by the Company pursuant to this Agreement and the compliance
by the Company with the other provisions of this Agreement do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state securities
or Blue Sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which the Company is a party or by which
the Company or any of its assets are bound, or the organizational or
governing documents of the Company or any of the Subsidiaries, or any
statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator known to such
counsel and applicable to the Company.
Such counsel shall also state that in the course of the preparation of
the Registration Statement and the Prospectus, such counsel has participated in
conferences with officers and representatives of the Company and with the
Accountants, at which conferences the contents of the Registration Statement and
the Prospectus were discussed and, on the basis of the foregoing, that they have
no reason to believe that the Registration Statement, as of its effective date
and as of the date of such opinion, contained or contains any untrue statement
of a material fact or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or the date of such opinion, included or
includes any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdictions in which such counsel are not admitted
to practice, to the extent satisfactory in form and scope to counsel for the
Placement Agent, upon the opinion of local counsel. The foregoing opinion shall
also state that the Placement Agent is justified in relying upon such opinions
of local counsel, and copies of such opinions shall be delivered to the
Placement Agent and their counsel.
References to the Registration Statement and the Prospectus in this
paragraph (f) shall include any amendment or supplement thereto at the date of
such opinion.
(g) Receipt of an opinion of patent counsel to the Company, in
form and substance reasonably satisfactory to the Placement Agent.
(h) Concurrently with the execution and delivery of this
Agreement, or, if the Company elects to rely on Rule 430A, on the date of the
Prospectus, the Accountants shall have furnished to the Placement Agent a
letter, dated the date of its delivery (the "Original Letter"), addressed to the
Placement Agent and in form and substance satisfactory to the Placement Agent,
confirming that (i) they are independent public accountants with respect to the
Company within the meaning of the Act and the Rules and Regulations; (ii) in
their opinion, the financial statements and any supplementary financial
information and schedules (and pro forma financial information) included in the
Registration Statement and examined by them comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations; (iii) on the basis of procedures, not constituting an
examination in accordance with generally accepted auditing standards, set forth
in detail in the Original Letter, including a reading of the unaudited financial
statements and other information referred to below, a reading of the latest
available interim financial statements of the Company, inspections of the minute
books of the Company since the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in the Original Letter to a date not more than five days prior to the
date of the Original Letter, nothing came to their attention that caused them to
believe that: (A) the unaudited financial statements and schedules of the
Company included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations, or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
the basis for the audited financial statements included in the Prospectus; (B)
any other unaudited income statement data and balance sheet items included in
the Prospectus do not agree with the corresponding items in the unaudited
financial statements from which such data and items were derived, and any such
unaudited data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited financial statements
included in the Prospectus; (C) the unaudited financial statements which were
not included in the Prospectus but from which were derived any unaudited
financial statements referred to in clause (A) and any unaudited income
statement data and balance sheet items included in the Prospectus and referred
to in clause (B) were to be determined on a basis substantially consistent with
the basis for the audited financial statements included in the Prospectus; (D)
the unaudited pro forma financial statements included in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements; (E) as of a specified date not more than five
days prior to the date of the Original Letter, there have been any changes in
the capital stock of the Company or any increase in the long-term debt of the
Company, or any decreases in net current assets or net assets or other items
specified by the Placement Agent, or any increases in any items specified by the
Placement Agent, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in the Original Letter; and (F) for the period from the
date of the latest financial statements included in the Prospectus to the
specified date referred to in Clause (E), there were any decreases in revenues
or the total or per share amounts of net income or other items specified by the
Placement Agent, or any increases in any items specified by the Placement Agent,
in each case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the Placement Agent,
except in each case for decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in the Original Letter; and
(iv) in addition to the examination referred to in their reports included in the
Prospectus and the procedures referred to in clause (iii) above, they have
carried out certain specified procedures, not constituting an examination in
accordance with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the Placement Agent,
which are derived from the general accounting, financial or other records of the
Company, as the case may be, which appear in the Prospectus or in Part II of, or
in exhibits or schedules to, the Registration Statement, and have compared such
amounts, percentages and financial information with such accounting, financial
and other records and have found them to be in agreement. At the Closing Date,
the Accountants shall have furnished to the Placement Agent a letter, dated the
date of its delivery, which shall confirm, on the basis of a review in
accordance with the procedures set forth in the Original Letter, that nothing
has come to their attention during the period from the date of the Original
letter referred to in the prior sentence to a date (specified in the letter) not
more than five days prior to the Closing Date which would require any change in
the Original Letter if it were required to be dated and delivered at the Closing
Date.
(i) At the Closing Date, there shall be furnished to the
Placement Agent a certificate, dated the date of its delivery, signed by each of
the Chief Executive Officer and the Chief Financial Officer of the Company, in
form and substance satisfactory to the Placement Agent to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus and (A) as of the date of
such certificate, (x) the Registration Statement does not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading and (y) the Prospectus does not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading and (B) since the Effective Date no
event has occurred as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein not
untrue or misleading in any material respect.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at
the time such certificate is delivered, true and correct in all
material respects.
(iii) Each of the covenants required herein to be performed by
the Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the delivery of such
certificate has been duly, timely and fully complied with.
(iv) No stop order suspending the effectiveness of the
Registration Statement or of any part thereof has been issued and no
proceedings for that purpose have been instituted or are contemplated
by the Securities and Exchange Commission.
(v) Subsequent to the date of the most recent financial
statements in the Prospectus, there has been no material adverse
change in the financial position or results of operations of the
Company, except as set forth in or contemplated by the Prospectus.
(j) The Shares shall be qualified for sale in such states as the
Placement Agent may reasonably request, each such qualification shall
be in effect and not subject to any stop order or other proceeding on
the Closing Date.
(k) The Company shall have furnished to the Placement Agent such
certificates, in addition to those specifically mentioned herein, as
the Placement Agent may have reasonably requested as to the accuracy
and completeness at the Closing Date of any statement in the
Registration Statement or the Prospectus, as to the accuracy at the
Closing Date of the representations and warranties of the Company as
to the performance by the Company of its obligations hereunder, or as
to the fulfillment of the conditions concurrent and precedent to the
obligations hereunder of the Placement Agent.
7. Indemnification.
(a) The Company shall indemnify and hold harmless the Placement
Agent, the directors, officers, employees and agents of the Placement Agent and
each person, if any, who controls the Placement Agent within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and against any and all losses, claims,
liabilities, expenses and damages, joint or several, (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which it, or any of them, may become subject under the Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on (i) any untrue statement or alleged untrue
statement made by the Company in Section 3 of this Agreement, (ii) any untrue
statement or alleged untrue statement of any material fact contained in (A) any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus and (B)
any application or other document, or any amendment or supplement thereto,
executed by the Company based upon written information furnished by or on behalf
of the Company filed in any jurisdiction in order to qualify the Shares under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange (each, an "Application") or (iii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any supplement to the Registration
Statement or the Prospectus or any Application a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Shares in the public offering to
any person and is based solely on an untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to the Placement Agent furnished in writing to the Company
by the Placement Agent expressly for inclusion in the Registration Statement,
any Preliminary Prospectus or the Prospectus; and provided further, that such
indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of any Placement Agent (or any person controlling such Placement Agent)
from whom the person asserting any such loss, claim, damage, liability or action
purchased Shares which are the subject thereof to the extent that any such loss,
claim, damage or liability (i) results from the fact that such Placement Agent
failed to send or give a copy of the Prospectus (as amended or supplemented) to
such person at or prior to the confirmation of the sale of such Shares to such
person in any case where such delivery is required by the Act and (ii) arises
out of or is based upon an untrue statement or omission of a material fact
contained in such Preliminary Prospectus that was corrected in the Prospectus
(or any amendment or supplement thereto), unless such failure to deliver the
Prospectus (as amended or supplemented) was the result of noncompliance by the
Company with Section 5(d). This indemnity agreement will be in addition to any
liability which the Company may otherwise have. The Company will not, without
the prior written consent of each Placement Agent, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Placement Agent or any person who controls such Placement
Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act is a party to each claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of each
Placement Agent and each such controlling person from all liability arising out
of such claim, action, suit or proceeding.
(b) The Placement Agent will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to the Placement
Agent, but only insofar as losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to the Placement Agent furnished in writing to the Company by the
Placement Agent expressly for use in the Registration Statement, any Preliminary
Prospectus or the Prospectus. This indemnity agreement will be in addition to
any liability that the Placement Agent might otherwise have. The Company
acknowledges that, for all purposes under this Agreement, the statements set
forth under the heading "Plan of Distribution" in any Preliminary Prospectus and
the Prospectus constitute the only information relating to the Placement Agent
furnished in writing to the Company by the Placement Agent expressly for
inclusion in the Registration Statement, any Preliminary Prospectus or the
Prospectus.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 7, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 7 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its election to assume
the defense, the indemnifying party will not be liable to the indemnified party
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. The Company will not,
without the prior written consent of the Placement Agent, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not the Placement Agent or any person who controls the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of the
Placement Agent and each such controlling person from all liability arising out
of such claim, action, suit or proceeding. An indemnifying party will not be
liable for any settlement of any action or claim effected without its written
consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Placement Agent,
the Company and the Placement Agent will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Placement Agent such as persons who control the Company within the meaning of
the Act or the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company, who also may be liable for contribution)
to which the Company and the Placement Agent may be subject in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
on the one hand and the Placement Agent on the other. The relative benefits
received by the Company on the one hand and the Placement Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting Company expenses) received by the Company as set
forth in the table on the cover page of the Prospectus bear to the fee received
by the Placement Agent hereunder. If, but only if, the allocation provided by
the foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Placement Agent on the
other, with respect to the statements or omissions which resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Placement
Agent, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Placement Agent agree that it would not be just and
equitable if contributions pursuant to this Section 7(d) were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability,
expense or damage, or action in respect thereof, referred to above in this
Section 7(d) shall be deemed to include, for purpose of this Section 7(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), the Placement Agent shall
not be required to contribute any amount in excess of the fee (exclusive of the
Placement Agent Warrants) received by it, and no person found guilty of
fraudulent mis- representation (within the meaning of Section 11(f) of the Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7(d), any person who
controls a party to this Agreement within the meaning of the Act or the Exchange
Act will have the same rights to contribution as that party, and each officer of
the Company who signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions hereof. Any
party entitled to contribution, promptly after receipt of notice of commencement
of any action against such party in respect of which a claim for contribution
may be made under this Section 7(d), will notify any such party or parties from
whom contribution may be sought, but the omission so to notify will not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have under this Section 7(d). No party will be liable
for contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
8. Termination.
(a) The obligations of the Placement Agent under this Agreement
may be terminated at any time prior to the Closing Date, by notice to the
Company from the Placement Agent, without liability on the part of the Placement
Agent to the Company if, prior to delivery and payment for the Shares, in the
sole judgment of the Placement Agent (i) trading in the Common Stock of the
Company shall have been suspended by the Commission or by the Nasdaq Small Cap
Market (ii) trading in securities generally on the New York Stock Exchange or
the Nasdaq Stock Market's National Market shall have been suspended or limited
or minimum or maximum prices shall have been generally established on any of
such exchanges, or additional material governmental restrictions, not in force
on the date of this Agreement, shall have been imposed upon trading in
securities generally by any of such exchanges or by order of the Commission or
any court or other governmental authority, (iii) a general banking moratorium
shall have been declared by Federal or New York State authorities, (iv) any
material adverse change in the financial or securities markets in the United
States or any outbreak or material escalation of hostilities or declaration by
the United States of a national emergency or war or other calamity or crisis
shall have occurred, the effect of any of which is such as to make it, in the
sole judgment of the Placement Agent, impracticable or inadvisable to market the
Shares on the terms and in the manner contemplated by the Prospectus.
(b) The obligations of the parties under this Agreement shall be
automatically terminated in the event that the Requisite Funds have not been
deposited by the Investors into the Escrow Account by the close of business on
the Closing Date.
9. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 3650 Annapolis
Lane, Plymouth, Minnesota 55447-5434, Attention: Mr. Whitney A. McFarlin or (b)
if to the Placement Agent, at the office of Raymond James & Associates, Inc.,
8850 Carrillon Parkway, St. Petersburg, Florida 33716, Attention: Mr. John M.
McDonald. Any such notice shall be effective only upon receipt. Any notice under
Section 7 may be made by facsimile or telephone, but if so made shall be
subsequently confirmed in writing.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers and the
Placement Agent set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of
its officers or directors, the Placement Agent or any controlling person
referred to in Section 7 hereof and (ii) delivery of and payment for the Shares.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 5 and 7 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
11. Right of First Refusal. Upon completion of the sale of Shares and
for a period of years thereafter, the Company shall grant to the Placement Agent
a right of first refusal (i) to serve as the lead manager or agent of any
offering of securities by the Company or by any affiliate, (ii) to serve as the
investment banker to the Company in connection with any merger, acquisition or
consolidation involving the Company or any affiliate, and (iii) to serve as the
investment banker to the Company in connection with any other transaction with
respect to which the Company proposes to engage an investment banker. Should the
Company desire investment banking assistance in connection with any of the
activities contemplated by (i), (ii) or (iii) above, it will so advise the
Placement Agent in writing, and the Placement Agent will have 10 days in which
to agree or decline to render such assistance, it being understood that if the
Placement Agent agrees to render such services, such services must be rendered
on terms and conditions which are competitive with those which would likely be
offered by comparable investment banking firms.
12. Successors. This Agreement shall inure to the benefit of and shall
be binding upon the Placement Agent, the Company and their respective successors
and legal representa- tives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnification and contribution contained in Sections 7(a) and (d) of this
Agreement shall also be for the benefit of the directors, officers, employees
and agents of the Placement Agent and any person or persons who control the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnification and contribution contained in Sections
7(b) and (d) of this Agreement shall also be for the benefit of the directors of
the Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act. No Investor shall be
deemed a successor because of such purchase.
13. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Placement Agent.
Very truly yours,
ANGEION CORPORATION
By:___________________________
Name:
Title:
Confirmed as of the date first above mentioned:
RAYMOND JAMES & ASSOCIATES, INC.
By:
Name:____________________
Title:
EXHIBIT A
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of _________, 1995, by and among Angeion
Corporation, a Minnesota corporation (the "Company"), Rayomnd James &
Associates, Inc. (the "Placement Agent") and Citibank, N.A., a national banking
institution incorporated under the laws of the United States of America (the
"Escrow Agent").
WHEREAS, the Company proposes to sell an aggregate of 2,500,000 shares
of its common stock, par value $.01 per share (the "Shares"), for an aggregate
of $ _________, all as described in the Company's registration statement on Form
S-3 (Registration No. 33- )(which, together with all amendments or supplements
thereto is referred to herein as the "Registration Statement");
WHEREAS, the Shares are being offered by the Company to investors whom
the Placement Agent has introduced to the Company, pursuant to registration
under the Securities Act of 1933, as amended, and pursuant to registration or
exemptions from registration under state securities laws;
WHEREAS, the offering of the Shares will terminate on _________, 1995
(the "Closing Date") and, if subscriptions for the total number of Shares being
offered pursuant to the Registration Statement have not been received by the
Company on or before the Closing Date, no Shares will be sold and all payments
made by subscribers will be refunded by the Escrow Agent with interest earned
thereon, if any; and
WHEREAS, with respect to all subscription payments received from
subscribers, the Company proposes to establish an escrow account with the Escrow
Agent at the office of its Escrow Administration, 120 Wall Street, 13th Floor,
New York, New York 10043.
NOW THEREFORE, it is agreed as follows:
1. Establishment of Escrow. The Escrow Agent hereby agrees to receive
and disburse the proceeds from the offering of the Shares and any interest
earned thereon in accordance herewith.
2. Deposit of Escrowed Property. The Placement Agent, on behalf of the
subscribers for the Shares, shall from time to time, but in no event later than
12:00 noon on the date following receipt by the Placement Agent, cause to be
wired to or deposited with, or, cause the subscribers for the Shares to wire or
deposit with, the Escrow Agent funds or checks of the subscribers delivered in
payment for Shares (the "Escrowed Property"). Such Escrowed Property shall be
wired to or deposited with the Escrow Agent not later than 12:00 noon on the
date following the date on which it is received by the Placement Agent. Any
checks delivered to the Escrow Agent pursuant to the terms hereof shall be made
payable to or endorsed to the order of the Escrow Agent. The Escrow Agent upon
receipt of such checks shall present such checks for payment to the drawee-bank
under such checks. Any checks not honored by the drawee-bank thereunder after
the first presentment for payment shall be returned to the Placement Agent, on
behalf of such subscriber, in the same manner notices are delivered pursuant to
Section 6. Upon receipt of funds or checks from the Placement Agent, the Escrow
Agent shall credit such funds and the amount of such checks to a
non-interest-bearing account (the "Escrow Account") held by the Escrow Agent. If
following the credit of the amount of any check to the Escrow Account such check
is dishonored, the Escrow Agent, if such dishonored check amount shall have been
invested pursuant to Section 3, shall liquidate to the extent of such dishonored
check amount such investments and debit the Escrow Account for the amount of
such dishonored check plus, if any, the amount of interest and other income
earned with respect to any investment of such dishonored check amount.
3. Investment of Escrowed Property. The Escrow Agent on the second
business day ("business day" defined for purposes of this Escrow Agreement as
any day which is not a Saturday, a Sunday or a day on which banks or trust
companies in the City and State of New York are authorized or obligated by law,
regulation or executive order to remain closed) succeeding (unless such deposit
is made in federal or other immediately available or "same day" funds, in which
case, on the business day next succeeding) the credit of any subscription
proceeds to the Escrow Account pursuant to Section 2 and until release of such
proceeds in accordance with the terms hereof, shall deposit such proceeds in a
Citibank Money Market Deposit Account, pursuant to Rule 15c2-4 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, in accordance with the terms set forth on Exhibit A hereto
(made a part of this Escrow Agreement as if herein set forth). The Escrow Agent
shall in no event be liable for any loss resulting from any change in interest
rates applicable to proceeds invested pursuant to this Section. Interest on
proceeds invested pursuant to this Section shall accrue from the date of
investment of such proceeds until the termination of such investment pursuant to
the terms hereof and shall be paid as set forth in Section 5.
4. List of Subscribers. The Placement Agent shall furnish or cause to
be furnished to the Escrow Agent, at the time of each deposit of funds or checks
pursuant to Section 2, a list, substantially in the form of Exhibit B hereto,
containing the name of, the address of, the number of Shares subscribed for by,
the subscription amount delivered to the Escrow Agent on behalf of, and the
social security or taxpayer identification number, if applicable, of each
subscriber whose funds are being deposited, and to which is attached a completed
W-9 form (or, in the case of any subscriber who is not a United States citizen
or resident, a W-8 form) for each listed subscriber. The Escrow Agent shall
notify the Placement Agent and the Company of any discrepancy between the
subscription amounts set forth on any list delivered pursuant to this Section 4
and the subscription amounts received by the Escrow Agent. The Escrow Agent is
authorized to revise such list to reflect the actual subscription amounts
received and the release of any subscription amounts pursuant to Section 5.
5. Withdrawal of Subscription Amounts. (a) If the Escrow Agent shall
receive a notice, substantially in the form of Exhibit C hereto (an "Offering
Termination Notice"), from the Company, the Escrow Agent shall (i) promptly
after receipt of such Offering Termination Notice and the clearance of all
checks received by the Escrow Agent as Escrowed Property, liquidate any
investments that shall have been made pursuant to Section 3 and send to each
subscriber listed on the list held by the Escrow Agent pursuant to Section 4
whose total subscription amount shall not have been released pursuant to
paragraph (b) or (c) of this Section 5, in the manner set forth in paragraph (d)
of this Section 5, a check to the order of such subscriber in the amount of the
remaining subscription amount held by the Escrow Agent as set forth on such list
held by the Escrow Agent, and (ii) promptly after the fourth business day of the
month immediately following the month in which the investments made pursuant to
Section 3 were terminated pursuant to this paragraph, send, in the manner set
forth in paragraph (d) of this Section 5, a check to the order of each such
subscriber in the amount of interest and other income earned and not yet paid
with respect to any investment of such subscriber's funds. The Escrow Agent
shall notify the Company and the Placement Agent of the distribution of such
funds to the subscribers.
(b) In the event that (i) the Shares have been subscribed for and
funds in respect thereof shall have been deposited with the Escrow Agent on or
before the Final Closing Date and (ii) no Offering Termination Notice shall have
been delivered to the Escrow Agent, the Company and the Placement Agent, shall
deliver to the Escrow Agent a joint notice, substantially in the form of Exhibit
D hereto (a "Closing Notice"), designating the date on which Shares are to be
sold and delivered to the subscribers thereof (the "Closing Date"), which date
shall not be earlier than the clearance of any checks received by the Escrow
Agent as Escrowed Property, the proceeds of which are to be distributed on such
Closing Date, and identifying the subscribers and the number of Shares to be
sold to each thereof on such Closing Date, not less than two (2) nor more than
seven (7) business days prior to such Closing Date. The Escrow Agent, after
receipt of such Closing Notice and the clearance of such checks:
(i) on or prior to the Closing Date identified in such
Closing Notice, shall liquidate any investments that shall have
been made pursuant to Section 3 to the extent of the subscription
amount to be distributed pursuant to the immediately succeeding
clause (ii);
(ii) on such Closing Date, pay to the Company and the
Placement Agent, in federal or other immediately available funds
and otherwise in the manner specified by the Company in such
Closing Notice, an amount equal to the aggregate of the
subscription amounts paid by the subscribers identified in such
Closing Notice for the Shares to be sold on such Closing Date as
set forth on the list held by the Escrow Agent pursuant to
Section 4; and
(iii) promptly after the fourth business day of the month
immediately following the month in which the investments made
pursuant to Section 3 were terminated pursuant to such Closing
Notice, shall send, in the manner set forth in paragraph (d) of
this Section 5, a check to the order of each subscriber
identified in such Closing Notice in the amount of interest and
other income earned and not yet paid with respect to any
investment of each such subscriber's funds distributed on such
Closing Date. At the time of such transfer, the Escrow Agent
shall identify in writing to the Company and the Placement Agent
the amount of the interest earned for the account of each
subscriber and the date such subscription was received.
(c) If at any time and from time to time prior to the release of
any subscriber's total subscription amount pursuant to paragraph (a) or (b) of
this Section 5 from escrow, the Company shall deliver to the Escrow Agent a
notice, substantially in the form of Exhibit E hereto (a "Subscription
Termination Notice"), to the effect that any or all of the subscriptions of such
subscriber have been rejected by the Company (a "Rejected Subscription"), the
Escrow Agent (i) promptly after receipt of such Subscription Termination Notice
and, if such subscriber delivered a check in payment of its Rejected
Subscription, after the clearance of such check, shall liquidate, to the extent
of the sum of such subscriber's Rejected Subscription amount as set forth in the
Subscription Termination Notice, any investments that shall have been made
pursuant to Section 3 and send to such subscriber, in the manner set forth in
paragraph (d) of this Section 5, a check to the order of such subscriber in the
amount of such Rejected Subscription amount, and (ii) promptly after the fourth
business day of the month immediately following the month in which the
investments made pursuant to Section 3 were terminated pursuant to this
paragraph, shall send to such subscriber, in the manner set forth in paragraph
(d) of this Section 5, a check to the order of such subscriber in the amount of
interest and other income earned and not yet paid with respect to any investment
of such subscriber's Rejected Subscription amount. At the time of such transfer,
the Escrow Agent shall identify in writing to the Company and the Placement
Agent the amount of the interest earned for the account of each subscriber and
the date such subscription was received.
(d) On a date following the transfer of any interest earned for
the account of each subscriber pursuant to Section 5(a), (b) or (c), but not
later than January 31, 1996, the Escrow Agent shall provide each subscriber with
tax form 1099 setting forth the amount of such interest.
(e) For the purposes of this Section 5, any check that the Escrow
Agent shall be required to send to any subscriber shall be sent to such
subscriber by first class mail, postage prepaid, at such subscriber's address
furnished to the Escrow Agent pursuant to Section 4.
6. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be (a) delivered by hand or (b)
sent by mail, registered or certified, with proper postage prepaid, and
addressed as follows:
if to the Company, to:
Angeion Corporation
3650 Annapolis Lane
Plymouth, Minnesota 55447-5434
Attention: Mr. Whitney A. McFarlin
with a copy to:
Oppenheimer Wolff & Donnelly
3400 Plaza VII Building
45 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Thomas C. Thomas, Esq.
if to the Placement Agent, to:
Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Attention: Mr. John M. McDonald
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2696
Attention: James R. Tanenbaum, Esq.
if to the Escrow Agent, to:
Citibank, N.A.
Corporate Trust
Escrow Administration
120 Wall Street, 13th Floor
New York, New York 10043
Attention: Mr. Bryan Gartenberg
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. All such
notices and communications, if mailed, shall be effective when deposited in the
mails, except that notices and communications to the Escrow Agent and notices of
changes of address shall not be effective until received.
7. Concerning the Escrow Agent. To induce the Escrow Agent to act
hereunder, it is further agreed by the Company and Placement Agent that:
(a) The Escrow Agent shall not be under any duty to give the
Escrowed Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed in this Escrow Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
(b) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
(c) The Escrow Agent shall not be liable, except for its own
negligence or willful misconduct, and, except with respect to claims based upon
such negligence or willful misconduct that are successfully asserted against the
Escrow Agent, the other parties hereto shall jointly and severally indemnify and
hold harmless the Escrow Agent (and any successor Escrow Agent) from and against
any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys' fees and disbursements, arising out of and in
connection with this Escrow Agreement. Without limiting the foregoing, the
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including without limitation any liability for any delays (not
resulting from gross negligence or willful misconduct) in the investment or
reinvestment of the Escrowed Property, or any loss of interest incident to any
such delays.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Escrow Agreement and shall not be
liable for any action taken or omitted in good faith and in accordance with such
advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Property deposited hereunder but is serving as escrow holder only. Any payments
of income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The parties hereto will
provide the Escrow Agent with appropriate W-9 forms for tax I.D., number
certification, or non-resident alien certifications.
This paragraph (f) and paragraph (c) of this Section 7 shall survive
notwithstanding any termination of this Escrow Agreement or the resignation of
the Escrow Agent.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectibility of any security or other document or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party
as to the wisdom of selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent (and any successor escrow agent) at any time
may be discharged from its duties and obligations hereunder by the delivery to
it of notice of termination signed by both the Company and the Placement Agent
or at any time may resign by giving written notice to such effect to the Company
and the Placement Agent. Upon any such termination or resignation, the Escrow
Agent shall deliver the Escrowed Property to any successor escrow agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction if no such successor escrow agent is agreed upon, whereupon the
Escrow Agent shall be discharged of and from any and all further obligations
arising in connection with this Escrow Agreement. The termination or resignation
of the Escrow Agent shall take effect on the earlier of (i) the appointment of a
successor (including a court of competent jurisdiction) or (ii) the day that is
30 days after the date of delivery: (A) to the Escrow Agent of the other
parties' notice of termination or (B) to the other parties hereto of the Escrow
Agent's written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Property safe until
receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or any enforceable order of
a court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
(k) In the event of any disagreement among or between the other
parties hereto and/or the subscribers of the Shares resulting in adverse claims
or demands being made in connection with the Escrowed Property, or in the event
that the Escrow Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the Escrowed Property
until the Escrow Agent shall have received (i) a final and non-appealable order
of a court of competent jurisdiction directing delivery of the Escrowed Property
or (ii) a written agreement executed by the other parties hereto and consented
to by the subscribers directing delivery of the Escrowed Property, in which
event the Escrow Agent shall disburse the Escrowed Property in accordance with
such order or agreement. Any court order referred to in (i) above shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said court order is final and
non-appealable. The Escrow Agent shall act on such court order and legal opinion
without further question.
(l) As consideration for its agreement to act as Escrow Agent as
herein described, the Company agrees to pay the Escrow Agent fees determined in
accordance with the terms set forth on Exhibit F hereto (made a part of this
Escrow Agreement as if herein set forth). In addition, the Company agrees to
reimburse the Escrow Agent for all reasonable expenses, disbursements and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of its
counsel).
(m) The other parties hereto irrevocably (i) submit to the
jurisdiction of any New York State or federal court sitting in New York City in
any action or proceeding arising out of or relating to this Escrow Agreement,
(ii) agree that all claims with respect to such action or proceeding shall be
heard and determined in such New York State or federal court and (iii) waive, to
the fullest extent possible, the defense of an inconvenient forum. The other
parties hereby consent to and grant any such court jurisdiction over the persons
of such parties and over the subject matter of any such dispute and agree that
delivery or mailing of process or other papers in connection with any such
action or proceeding in the manner provided hereinabove, or in such other manner
as may be permitted by law, shall be valid and sufficient service thereof.
(n) No printed or other matter in any language (including,
without limitation, the Registration Statement, notices, reports and promotional
material) which mentions the Escrow Agent's name or the rights, powers, or
duties of the Escrow Agent shall be issued by the other parties hereto or on
such parties' behalf unless the Escrow Agent shall first have given its specific
written consent thereto. The Escrow Agent hereby consents to the use of its name
and the reference to the escrow arrangement in the Registration Statement.
8. Miscellaneous.
(a) This Escrow Agreement shall be binding upon and inure solely
to the benefit of the parties hereto and their respective successors and
assigns, heirs, administrators and representatives, and the subscribers of the
Shares and shall not be enforceable by or inure to the benefit of any other
third party except as provided in paragraph (i) of Section 7 with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or obligations under this Escrow Agreement without the written
consent of the other parties.
(b) This Escrow Agreement shall be construed in accordance with
and governed by the internal law of the State of New York (without reference to
its rules as to conflicts of law).
(c) This Escrow Agreement may only be modified by a writing
signed by all of the parties hereto and consented to by the subscribers of the
Shares adversely affected by such modifications. No waiver hereunder shall be
effective unless in a writing signed by the party to be charged.
(d) This Escrow Agreement shall terminate upon the payment
pursuant to Section 5 of all amounts held in the Escrow Account.
(e) The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections are to Sections contained herein.
(f) This Escrow Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and the
same instrument; provided that, although executed in counterparts, the executed
signature pages of each such counterpart may be affixed to a single copy of this
Agreement which shall constitute an original.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
ANGEION CORPORTION
By: ______________________________
Name:
Title:
RAYMOND JAMES & ASSOCIATES, INC.
By: ______________________________
Name:
Title:
CITIBANK, N.A.
By: ______________________________
Name:
Title:
EXHIBIT A
Citibank Insured Money Market Deposit Accounts
Deposits/Withdrawals may be made to the Citibank Money Market Deposit
Account ("MMDA") established under the Escrow Agreement to which this Exhibit is
attached only through the Escrow Account. All transaction and balance reporting
of the MMDA will be included as part of the Escrow Account Statement. Activity
in the MMDA will be reflected as the equivalent of dollars on deposit in a
Citibank Money Market Deposit Account. Deposits/Withdrawals to the MMDA will be
made only as permitted by the Escrow Agreement to which this Exhibit is
attached. The MMDA has certain regulatory restrictions as well as some minimum
requirements:
1. By regulation, Citibank, N.A. is required to reserve the right to
require seven days' prior notice of any withdrawals of funds from an account;
provided, however, that, if Citibank, N.A. elects to exercise its right to
require seven days' prior notice, it shall exercise such right as to all such
accounts established.
2. A daily balance of $10,000 must be maintained on deposit in the
MMDA. If the MMDA should fall below $10,000 on any day, Citibank, N.A. will be
authorized to transfer the remaining balance to the Escrow Account.
3. Rates will be determined by Citibank, N.A. and can be determined by
calling your custody account officer.
4. Balances up to $100,000 (total on deposit at Citibank, N.A.) are
FDIC-insured.
<TABLE>
<CAPTION>
EXHIBIT B
SUMMARY OF CASH RECEIVED
NEW PARTICIPANT DEPOSIT
Date:_________
Deposit Date: List Number:_________
Investment Date: Page ___ of_________
Batch Number: Approved By:_________
JOB#:_________
For Bank use only
TITLE:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
_________________________________________________________________________________
AMOUNT OF TAX ID NO./ FOR BANK
NAME DEPOSIT Shares ADDRESS SOC.SEC. NO. USE ONLY
TAX CODE
EXEMPT(Y/N)
W-9(YR) NRA
W-8(YR)
1008(87)
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT(Y/N)
W-2(YR) NRS
W-8(YR)
1008(87)
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT(Y/N)
W-2(YR) NRS
W-8(YR)
1008(87)
Broker Misc. Misc. II Misc. III TAX CODE
EXEMPT(Y/N)
W-2(YR) NRS
W-8(YR)
1000(87)
Broker Misc. Misc. II Misc. III
</TABLE>
EXHIBIT C
[Form of Offering Termination Notice]
Citibank, N.A.
Corporate Trust
Escrow Administration
120 Wall Street, 13th Floor
New York, New York 10043
Attention: Mr. Bryan Gartenberg
Senior Trust Officer
Dear Mr. Gartenberg:
Pursuant to Section 5(a) of the Escrow Agreement dated as of , 1995
(the "Escrow Agreement") among Angeion Corporation, (the "Company"), Raymond
James & Associates, Inc. and you, the Company hereby notifies you of the
termination of the offering of the Shares (as that term is defined in the Escrow
Agreement) and directs you to make payments to subscribers as provided for in
Section 5(a) of the Escrow Agreement.
Very truly yours,
ANGEION CORPORATION
By: _______________________________
Name:
Title:
EXHIBIT D
[Form of Closing Notice]
_____________________ , 1995
Citibank, N.A.
Corporate Trust
Escrow Administration
120 Wall Street, 13th Floor
New York, New York 10043
Attention: Mr. Bryan Gartenberg
Senior Trust Officer
Ladies and Gentlemen:
Pursuant to Section 5(b) of the Escrow Agreement dated as of
___________ , 1995, (the "Escrow Agreement") among Angeion Corporation (the
"Company"), Raymond James & Associates, Inc. and you, the Company hereby
certifies that it has received subscriptions for the Shares (as that term is
defined in the Escrow Agreement) and the Company will sell and deliver Shares to
the subscribers thereof at a closing to be held on __________ , 1995 (the
"Closing Date"). The names of the subscribers concerned, the number of Shares
subscribed for by each of such subscribers and the related subscription amounts
are set forth on Schedule I annexed hereto.
Please accept these instructions as standing instructions for the
closing to be held on the Closing Date. The parties hereto certify that they do
not wish to have a call back regarding these instructions.
We hereby request that the aggregate subscription amount be paid to the
Placement Agent and us as follows:
1. To the Company, $_________;
2. To Raymond James & Associates, Inc., $_________; and
3. To the Escrow Agent, $_________.
These instructions may be executed in any number of counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
Very truly yours,
ANGEION CORPORATION
By: _____________________________
Name:
Title:
RAYMOND JAMES & ASSOCIATES, INC.
By: ______________________________
Name:
Title:
SCHEDULE I
Name of Subscriber Number of Shares Subscription Amount
EXHIBIT E
[Form of Subscription Termination Notice]
Citibank, N.A.
Corporate Trust
Escrow Administration
120 Wall Street, 13th Floor
New York, New York 10043
Attention: Mr. Bryan Gartenberg
Senior Trust Officer
Dear Mr. Gartenberg:
Pursuant to Section 5(c) of the Escrow Agreement dated as of
__________ , 1995 (the "Escrow Agreement") among Angeion Corporation (the
"Company"), Raymond James & Associates, Inc. and you, the Company hereby
notifies you that the following subscription(s) have been rejected:
Amount of Subscribed Dollar Amount of
Shares Rejected Rejected Subscription
Name of Subscriber
Very truly yours,
ANGEION CORPORATION
By: ____________________________
Name:
Title:
EXHIBIT F
A. A fee of $6,000 representing a minimum administration fee shall be
paid upon execution of the Escrow Agreement to which this Exhibit is attached.
B. A fee equal to:
12 Basis Points or the first $5,000,000 of any part thereof,
8 Basis Points on the next $5,000,000
3 Basis Points on the next $90,000,000
1-1/2 Basis Points on amount over $100,000,000 or Escrow Property
received by the Escrow Agent prior to the First Closing Date and succeeding
closing dates pursuant to the terms of the offering. The initial fee paid
at the time of execution will be deducted from the Escrow Administration
fee as calculated pursuant to the above schedule.
C. A fee for record-keeping equal to the following:
(1) $4.00 for each check issued by the Escrow Agent
(2) $9.00 for each participant (Hard Copy input of
subscriber information and
(3) $2.00 for each 1099 form issued
(4) $5.00 for each interest calculation
(5) $20.00 for each cancellation, correction or withdrawal of Escrowed
Property made by the Escrow Agent pursuant to Section 6(d) of the Escrow
Agreement to which this Exhibit is attached shall be paid when billed by
the Escrow Agent.
Capitalized terms not otherwise defined shall have the meanings subscribed
thereto in the Escrow Agreement to which this Exhibit is attached.
EXHIBIT B
ATTACHMENT A
Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Ladies and Gentlemen:
Reference is made to a Placement Agency Agreement (the "Placement Agency
Agreement"), which will be executed between Angeion Corporation, a Minnesota
corporation (the "Company"), and Raymond James & Associates, Inc. (the
"Placement Agent").
In consideration of the Placement Agency Agreement, the undersigned hereby
agrees not to, without the prior written consent of the Placement Agent, offer,
sell or otherwise dispose of any shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), or any securities convertible into or
exercisable or exchangeable for, or any rights to purchase or acquire, Common
Stock owned by the undersigned for a period of 90 days after the date of the
Placement Agency Agreement.
Dated: ______________________ , 1995
Very truly yours,
EXHIBIT 5.1
July 10, 1995
Angeion Corporation
3650 Annapolis Lane
Suite 170
Plymouth, MN 55447-5434
Re: Angeion Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Angeion Corporation, a Minnesota corporation (the
"Company"), pursuant to the Company's Registration Statement on Form S-3 to be
filed with the Securities and Exchange Commission on July 10, 1995 (the
"Registration Statement"), in connection with the Company's proposed offer and
sale of 2,500,000 shares (the "Shares") of the Company's common stock, par value
$.01 per share (the "Common Stock").
In connection with rendering this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements and other instruments, certificates of
officers, certificates of public officials and other documents as we have deemed
necessary or appropriate as a basis for the opinions expressed herein. In
connection with our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents tendered to us as originals, the
legal capacity of all natural persons and the conformity to original documents
of all documents submitted to us as certified or photostatic copies.
Based on the foregoing, and subject to the qualifications and limitations stated
herein, it is our opinion that:
1. The Company has the corporate authority to issue the Shares of the Company's
Common Stock in the manner and under the terms set forth in the Registration
Statement.
2. The Shares have been duly authorized by the Company. The Shares, when issued,
delivered and paid for by the Placement Agent in accordance with the
Placement Agency Agreement referred to in the Registration Statement, will be
validly issued, fully paid and nonassessable.
We express no opinion with respect to laws other than those of the State of
Minnesota and the federal law of the United States of America, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, to its use as part of the Registration Statement, and to
the use of our name under the caption "Legal Matters" in the Prospectus
constituting a part of the Registration Statement.
Very truly yours,
OPPENHEIMER WOLFF & DONNELLY
EXHIBIT 11.1
ANGEION CORPORATION
COMPUTATION OF NET INCOME (LOSS) PER SHARE (1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30, YEARS ENDED JULY 31,
1995 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Primary earnings per common share:
Average shares outstanding 16,291,900 10,519,777 10,657,311 10,296,812 9,901,592
Dilutive stock options and
warrants based on the treasury
stock method -- -- -- -- --
16,291,900 10,519,777 10,657,311 10,296,812 9,901,592
Loss from continuing operations $(6,673,157) $(5,768,779) $(7,675,743) $(5,915,558) $(4,054,919)
Income (loss) from discontinued
operations 0 0 0 3,207,120 (106,536)
Loss per share from continuing
operations (0.41) (0.55) (0.72) (0.57) (0.41)
Income (loss) per share from
discontinued operations 0 0 0 0.31 (0.01)
</TABLE>
(1) Fully diluted earnings (loss) per share computations are not included as the
per share results do not differ from primary earnings (loss) per share.
Convertible Preferred Stock and Convertible Debentures are not included in
the earnings (loss) per share computations because their effects, if any,
would be antidilutive.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Angeion Corporation:
We consent to the use of our reports included and incorporated herein by
reference and to the references to our firm under the headings "Selected
Financial Data" and "Experts" in the prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 7, 1995
