AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996.
REGISTRATION NO. 333-04993
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ANGEION CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1579150
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3650 ANNAPOLIS LANE, SUITE 170
MINNEAPOLIS, 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
MINNEAPOLIS, 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. John M. Westcott, Jr., Esq.
Oppenheimer Wolff & Donnelly Hale and Dorr
3400 Plaza VII, 45 South Seventh Street 60 State Street
Minneapolis, MN 55402 Boston, MA 02109
(612) 344-9300 (617) 526-6000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please 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
reinvestment 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. |_|
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 Section 8(a), may
determine.
INFORMATION CONTAINED HEREIN IS SUBJECT 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 SUCH STATE.
SUBJECT TO COMPLETION DATED JUNE 4, 1996
ANGEION CORPORATION [LOGO]
5,000,000 SHARES
COMMON STOCK
THE 5,000,000 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "SHARES"),
OFFERED HEREBY ARE BEING ISSUED AND SOLD BY ANGEION CORPORATION ("ANGEION" OR
THE "COMPANY"). THE COMMON STOCK OF THE COMPANY IS TRADED ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "ANGN." ON MAY 31, 1996, THE LAST REPORTED SALE PRICE OF
THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $9.75.
SEE"RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated offering expenses of $250,000, which are
payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 750,000 additional shares of Common Stock on the same terms and
conditions as the securities offered hereby solely to cover
over-allotments, if any. If the option is exercised in full, the Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ and $ , respectively. See "Underwriting."
THE SHARES OF COMMON STOCK ARE OFFERED SEVERALLY BY THE UNDERWRITERS SUBJECT
TO PRIOR SALE, WHEN, AS AND IF DELIVERED TO AND ACCEPTED BY THEM, AND SUBJECT
TO CERTAIN OTHER CONDITIONS INCLUDING THE RIGHT OF THE UNDERWRITERS TO
WITHDRAW, CANCEL, MODIFY OR REJECT ANY ORDER IN WHOLE OR IN PART. IT IS
EXPECTED THAT DELIVERY OF THE SHARES OF THE COMMON STOCK WILL BE MADE AT THE
OFFICES OF RAYMOND JAMES & ASSOCIATES, INC., ST. PETERSBURG, FLORIDA ON OR
ABOUT , 1996.
RAYMOND JAMES & ASSOCIATES, INC.
NATWEST SECURITIES LIMITED
SALOMON BROTHERS INC
The date of this Prospectus is _____________, 1996.
Inside Front Cover:
1. Illustration: Internal view of heart of a patient showing the placement of
the ICD in the pectoral region of the body and the leads threaded into the
vein and into the ventricle of the heart. Two sketches surround
illustration depicting the Defibrillation test system and programmer in
use during implant and a follow-up visit at the physician's office using
the programmer/interrogator.
2. Two page spread; background - mechanical illustrations of RF, laser
catheter, Sentinel ICD cues and headers.
A. Center illustration of cross section of a heart depicting the
chambers and electrical pathways of the heart.
3. Photo of ICD system including ICD, computer programmer, Defibrillation
test system, smart wand and transvenous leads.
4. Photo of 3 models of Sentinel ICD.
5. Closeup photo of tip of radio frequency ablation catheter.
6. Closeup photo of tip of laser ablation catheter.
FOR UNITED KINGDOM PURCHASERS: THE COMMON STOCK MAY NOT BE OFFERED OR SOLD
IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE
THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS, WHETHER AS
PRINCIPAL OR AGENT (EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO
THE PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS
1995 OR THE FINANCIAL SERVICES ACT 1986), AND THIS PROSPECTUS MAY ONLY BE ISSUED
OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON IS OF A KIND
DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1995 OR IS A PERSON TO WHOM THE PROSPECTUS
MAY OTHERWISE LAWFULLY BE PASSED ON.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER- ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ NATIONAL MARKET
IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." UNLESS
OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
THE COMPANY
Angeion Corporation designs, develops and manufactures products that treat
irregular heartbeats (arrhythmias). The Company is developing the SENTINEL
series of implantable cardioverter defibrillators ("ICDs"), which it believes
are among the smallest and most technologically advanced ICDs currently in
clinical trials or market-approved. ICDs are designed to treat abnormally 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 sudden
cardiac death ("SCD"). ICDs are electronic devices that are implanted within the
body and are connected to the heart with defibrillator leads. These devices
monitor the patient's heartbeat and, in the event of VT or VF, deliver an
electrical shock to return the heartbeat to normal rhythm. Following receipt of
an Investigational Device Exemption ("IDE") from the U.S. Food and Drug
Administration ("FDA"), the Company commenced U.S. clinical trials of its first
SENTINEL model, the SENTINEL 2000, in March 1996. In April 1996, the Company
received CE Mark approval to market the SENTINEL 2000 in the European Union
("EU"). Based on its clinical trial progress to date, the Company plans to
submit its application for Pre-Market Approval ("PMA") for the SENTINEL 2000 and
the SENTINEL 2010 series to the FDA in the first half of calendar 1997.
The worldwide market for ICDs and defibrillator leads has grown from $160
million in 1990 to over $650 million in 1995, representing a compounded annual
growth rate in excess of 30%. It is estimated that in 1995 approximately 25,000
ICDs were implanted worldwide. The ICD market is expected to continue to grow at
an annual rate of approximately 20% to reach a worldwide market size of
approximately $1.3 billion by the end of the decade. The growth rate for this
market is attributable to a number of factors, including: (i) expansion of the
indications for use of an ICD; (ii) smaller devices allowing for less invasive
and less costly surgical procedures; (iii) less effective performance of drug
therapy compared with ICDs; (iv) an increasing survival rate for SCD episodes;
and (v) rapidly advancing ICD technology.
The Company believes the SENTINEL series of ICDs offers certain benefits over
competitors' ICDs currently in clinical trials or market-approved, including
reduced size and weight, increased longevity and greater flexibility in
treatment options. These benefits are derived from the Company's proprietary
product features and technologies, including: (i) its dual battery system; (ii)
a more efficient biphasic waveform that lowers defibrillation energy thresholds;
(iii) the HOT CAN electrode system, which uses the SENTINEL housing as an
electrode that can be programmed on and off; and (iv) an energy delivery system
that permits the ICD to increase shock effectiveness by directing the current
more uniformly throughout the heart.
The Company is also developing a radio frequency ("RF") catheter ablation system
that it believes offers a potential cure for certain forms of atrial arrhythmias
(rapid heartbeats originating in the upper chambers of the heart) and a laser
catheter ablation system that it believes offers a potential cure for certain
forms of VT. The Company has received an IDE from the FDA for both its RF and
laser catheter ablation systems. The Company plans to commence clinical trials
for its RF catheter ablation systems and to expand clinical trials for its laser
catheter ablation systems during the second half of calendar 1996.
Although the market for catheter ablation devices in the treatment of
arrhythmias is much less defined and in an earlier stage of development than the
ICD market, the worldwide ablation market has grown to approximately 110,000
procedures in 1995, primarily for the treatment of one form of atrial arrhythmia
known as supraventricular tachycardia ("SVT"). If cardiac ablation becomes an
accepted treatment for atrial fibrillation, atrial flutter or VT, the aggregate
market for cardiac ablation could further increase. The following factors are
driving the growth of this market: (i) catheter ablation offers a potential cure
for certain forms of arrhythmia rather than simply managing its symptoms; (ii)
catheter ablation is a cost-effective, minimally invasive procedure; and (iii)
advancements in electrophysiology mapping technology, known as "global mapping,"
are expected to allow more effective identification of the source of the
arrhythmia.
The Company believes its ablation products offer distinct advantages over
competitive products and techniques currently in clinical trials or
market-approved. The Company's RF catheter ablation system uses a proprietary
saline-cooled porous metal tip that prevents the formation of coagulum during
the ablation procedure and delivers the energy into the tissue more
efficiently. The Company's RF catheter ablation system is designed to treat SVT.
Future models of this catheter are being designed to treat other atrial
arrhythmias, such as atrial flutter and atrial fibrillation. Because the
ventricular wall (muscle) is too thick to be fully penetrated by RF energy, the
Company intends to address ventricular arrhythmias, such as VT, with the
application of laser energy.
The Company intends to market and sell its ICD and catheter ablation products on
a worldwide basis through three channels: (i) a direct Company sales force in
the United States; (ii) direct sales representatives and independent
distributors outside the United States; and (iii) its strategic alliance with
Pacesetter, Inc. ("Pacesetter"), one of the largest cardiovascular distribution
networks in the world and a subsidiary of St. Jude Medical, Inc. In preparation
for product launch of the SENTINEL 2000 in Europe, the Company has formed a
European subsidiary and established distributorships or direct sales
representation in a number of European countries. The Company's manufacturing
facility in Minneapolis, Minnesota and the facility of the Company's contract
manufacturer in Scotland have received ISO 9002 certification.
The Company's objective is to build a full line of electrophysiology products
for the treatment and cure of cardiac arrhythmias. The Company's strategy is to
focus on one area of cardiovascular disease, cardiac arrhythmias, and one common
practitioner, the electrophysiologist. In pursuit of its strategy, the Company
has developed innovative ICD and catheter ablation technologies; assembled a
management, research, engineering and medical team with significant medical
device industry experience; built what it believes to be a strong patent
portfolio; and entered into a strategic alliance with Pacesetter to provide
timely access to worldwide markets.
The Company was incorporated in Minnesota in May 1986. The Company's principal
executive offices are located at 3650 Annapolis Lane, Suite 170, Minneapolis,
Minnesota 55447-5434, and its telephone number at that location is (612)
550-9388.
ANGEION(R), SENTINEL(TM), SMALL CAP(TM), HOT CAN(TM), ENERGY STEERING(TM), SMART
WAND(TM), TUNED(TM), ANGEPASS(TM), ANGEPORE(TM), and ANGEFLEX(TM) are trademarks
of the Company. All other trademarks and trade names used herein are the
property of their respective owners.
THE OFFERING
Common Stock Offered ............... 5,000,000 shares
Common Stock to be Outstanding ..... 29,212,207 shares
after
the Offering (1) Use of Proceeds ... Expansion of clinical trials,
research and development, scale-up and
expansion of manufacturing and marketing
activities, potential acquisitions and
general corporate purposes, including
working capital.
Nasdaq National Market Symbol ...... ANGN
(1) Based on the number of shares of Common Stock outstanding on April 30,
1996. Does not include 3,425,066 shares issuable upon the exercise of
outstanding options and warrants and 1,125,000 shares issuable upon
conversion of the Series A Preferred Stock and a convertible debenture.
See "Description of Securities."
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, NINE MONTHS ENDED APRIL 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales $ 137,982 $ 0 $ 0 $ 0 $ 874,959
Manufacturing expenses (1) 147,755 0 0 0 2,278,242
Research and development 4,485,818 5,158,738 7,815,391 5,268,028 6,717,469
Sales and marketing (2) 0 0 0 12,767 387,634
General and administrative 1,353,502 1,460,424 1,849,376 1,495,868 2,444,543
Net loss (3) $(2,708,438) $(7,675,743) $(9,643,351) $(6,673,157) $(10,161,744)
Net loss per share (3)(4) $ (0.26) $ (0.72) $ (0.58) $ (0.41) $ (0.46)
Weighted average number of
shares outstanding (4) 10,296,812 10,657,311 16,550,915 16,291,900 21,953,593
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996
ACTUAL AS ADJUSTED (5)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 14,789,510 $ 60,486,385
Short-term investments 7,328,201 7,328,201
Working capital 22,953,009 68,649,884
Total assets 30,572,968 76,269,843
Long-term debt, less current
installments 1,500,000 1,500,000
Accumulated deficit (37,347,476) (37,347,476)
Shareholders' equity 26,445,804 72,142,679
</TABLE>
(1) The amounts reflected in manufacturing expenses for the year ended July
31, 1993 and the nine months ended April 30, 1996 reflect cost of goods
sold for those periods.
(2) Sales and marketing for the years ended July 31, 1993 through 1995 is
included in general and administrative.
(3) Net loss and net loss per share for the year ended July 31, 1993 reflect a
gain on sale of discontinued operations of $3,207,120, or $0.31 per share,
resulting from the sale of the Angeion Medical Products division ("AMP").
(4) Computed on the basis described for net loss per share in Note 2 of Notes
to Financial Statements.
(5) Adjusted to give effect to the sale of the Shares offered hereby at an
assumed per share offering price of $9.75 and application of the estimated
net proceeds therefrom. See "Use of Proceeds."
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISKS
DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
BEFORE PURCHASING THE SHARES OFFERED HEREBY.
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE,
ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE,"
"ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR
COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,
AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF FACTORS,
INCLUDING THOSE DESCRIBED BELOW.
CONTINUING OPERATING LOSSES; PROFITABILITY UNCERTAIN; FLUCTUATIONS IN
OPERATING RESULTS
The Company has incurred net operating losses from continuing operations in each
year since its inception in 1986. At April 30, 1996, the Company's accumulated
deficit was approximately $37.3 million. 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 AMP 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 and invests
in building its manufacturing and marketing capabilities. 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, if at all; successfully
develop, commercialize, manufacture and market its products; or achieve
profitability. In addition, the Company's results of operations may fluctuate
significantly from quarter to quarter depending upon a number of factors,
including the availability of third party reimbursement, the timing of
regulatory approvals, progress of product development and clinical trials, the
extent to which the Company's products gain market acceptance, marketing and
manufacturing costs and competition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
IMPACT OF 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. 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.
Any product developed by the Company that gains regulatory approval will have to
compete for market acceptance and market share. 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. The Company expects that
competition will also be based on device size and weight, longevity, ease of
programmability, ability to provide diagnostic capability, product reliability,
physician familiarity with the device, patent protection, sales and marketing
capability, third-party reimbursement policies, reputation and price. There can
be no assurance that FDA approval will be obtained for the Company's ICDs, that
competitors will not introduce new products with similar features or that the
market will accept the SENTINEL series. 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 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. A number of companies, certain of which have
significantly greater resources than the Company, have developed RF catheter
ablation devices to treat SVT. There can be no assurance that competitors of the
Company will not be able to develop and introduce cardiac ablation systems more
quickly than the Company or systems that may be more effective in treating SVT
and VT than the Company's cardiac ablation systems. In addition, there can be no
assurance that the Company's catheter ablation systems will receive FDA approval
or, if approved, that the market will accept such systems. 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."
IMPORTANCE OF INTELLECTUAL PROPERTY PROTECTION
Patents and trademarks are critical in the medical device industry. There can be
no assurance that patents and trademarks will be granted to the Company 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 adjudicated to be
valid if challenged or otherwise be of value. Even if the Company's patents and
trademarks are granted, others may be able to challenge the validity of such
patents and trademarks or introduce non-infringing products that are competitive
with the Company's products.
There can be no assurance that allegations of infringement of the proprietary
rights of third parties will not be made, or that if made such allegations would
not be sustained if litigated. There has been substantial litigation regarding
patent and other intellectual property rights in the medical device industry,
particularly in the ICD portion. 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
technology 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, if 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. 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, if at all, which could have a material
adverse effect on the Company.
The Company also relies on trade secrets and proprietary technology, 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 such breach, or that the Company's trade secrets will not otherwise become
known to or independently developed by competitors. See "Business --
Intellectual Property."
LACK OF PMA APPROVAL; LIMITED INITIAL REVENUES; COMPLIANCE WITH GOVERNMENT
REGULATIONS
The medical products the Company plans to market are subject to regulation in
the U.S. by the FDA. The process of complying with regulations with respect to
new products can be costly and time-consuming. The first stage of obtaining
formal FDA premarket approval is submission of an application for an IDE. 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 Company's ICD and catheter ablation products are also subject to a lengthy
and expensive PMA application approval process with the FDA. Such process
requires the Company to conduct lengthy human clinical trials with respect to
its products. The data collected in such clinical trials (both in and outside
the U.S.) are 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 its 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
ICDs 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 a PMA for its products in a timely
manner, if at all. Delays in obtaining marketing approvals and clearances in the
U.S. could have a material adverse effect on the Company. The Company is also
subject to certain FDA regulations governing manufacturing practices, packaging
and labelling, and failure to comply with these requirements could have a
material adverse effect on the Company.
Until the Company receives PMA approval, the Company will be subject to
FDA-imposed limitations on the number of ICD implants and catheter ablation
procedures that may be performed as well as the number and location of clinical
sites at which implants and procedures may be performed. As the Company
approaches these limitations, it would be required to apply to the
FDA for approval of additional implants and procedures, but there can be no
assurance that such approval will be received on a timely basis, if at all. The
Company would be unable to sell additional ICDs or conduct additional catheter
ablation procedures in the U.S. if it reaches the limits authorized by the FDA.
The timing of both the IDE and PMA review processes is unpredictable and
uncertain, and the failure to obtain the necessary approvals on a timely basis
would have a material adverse effect on the Company. See "Business -- Products."
The Company's products are also subject to regulation in foreign countries by
agencies comparable to the FDA. Although the Company has obtained a CE Mark for
the SENTINEL 2000 that allows the Company to commence marketing of the SENTINEL
2000 in countries that are members of the EU and the European Free Trade
Association, subject to limited regulations in certain countries, there can be
no assurance that the Company will be successful in obtaining CE Mark approval
for any other products, in a timely manner, if at all, which could have a
material adverse effect on the Company. See "Business -- Government Regulation."
OBLIGATIONS UNDER 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"). 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 such 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. See "-- Anti-Takeover Considerations."
Pursuant to the OEM Agreement, if the Company fails to fulfill all product
quantity, quality and specification requirements with respect to the Company's
ICD and laser catheter ablation products, Pacesetter may elect to manufacture
these products and pay the Company a royalty that is substantially less than the
transfer price payment the Company would have received had it manufactured the
products and sold them to Pacesetter. 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. There can be no assurance 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. See "Business --
Manufacturing; -- Sales and Marketing."
The License Agreement also grants Pacesetter a conditional right to sublicense
certain of the Company's ICD patents and patent applications in existence at the
time of the License Agreement (and certain continuation applications) to up to
three separate parties, provided that the Company receives the same
cross-licenses from the sublicensee as Pacesetter receives (or, if Pacesetter
also sublicenses 20 or more of its own patents or patent applications, that
Pacesetter uses its best efforts to secure such cross-licenses for the Company).
Pacesetter is under a pre-existing obligation, by virtue of a previous license
agreement with a major competitor, to license certain patent rights that
Pacesetter may acquire to such competitor, and the Company is aware that a
dispute has arisen between these parties with respect to the ability of
Pacesetter to receive royalties or negotiate cross-licenses with such competitor
in connection with the ICD patents and patent applications that are subject to
sublicensing under the License Agreement. Because the Company is not a party to
this dispute, the Company has no control over or knowledge of any potential
outcome of this dispute and is not necessarily bound by the outcome of this
dispute. Pacesetter has also recently initiated a lawsuit against CPI relating
to certain pacemaker and ICD patents. Although at this time the ICD patents and
patent applications of the Company that are subject to the License Agreement are
not at issue in this lawsuit, the Company has no control over whether Pacesetter
or CPI will involve such patents and patent applications in such lawsuit. There
can be no assurance that the Company will receive necessary cross-licenses from
third parties in exchange for the grant of sublicenses to the ICD patents and
patent applications that are subject to the License Agreement. See "Business --
Intellectual Property."
NEED FOR 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, the Company's ability to demonstrate to the medical
community the clinical efficacy of its products and its ability to manufacture
quality products in sufficient quantities. Failure of the Company's products to
gain market acceptance would have a material adverse effect on the Company.
Although the markets for the Company's products are expected to grow, there can
be no assurance that the Company will participate in such growth. See "Business
- -- Background and Markets; -- Competition."
DEPENDENCE ON SENIOR MANAGEMENT AND OTHER KEY PERSONNEL
The Company's success depends largely on its senior management and other key
personnel. Competition for personnel with significant experience in the medical
device industry is intense. Accordingly, the loss of the services of such
individuals or the inability to hire additional key individuals as required
could have a material adverse effect on the Company, including its current and
future product development efforts. The Company has purchased a $2.0 million
key-person life insurance policy on its Chairman, President and Chief Executive
Officer. See "Management."
UNCERTAINTY OF THIRD PARTY REIMBURSEMENT AND HEALTH CARE REFORM
The Company's ability to market its products successfully in the U.S. and
elsewhere 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 does not allow Medicare reimbursement for certain
kinds of products and related procedures that have not received PMA approval and
for which underlying questions of safety and effectiveness have not been
resolved, and certain private third-party payors have also begun denying such
reimbursement. Although the Company's ICDs and catheter ablation products are
currently being reimbursed by HCFA and third-party payors, there can be no
assurance that HCFA and the third-party payors will continue to reimburse such
products in the future. Even if some products are approved for reimbursement,
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.
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 such proposals may be adopted or what impact
they may have on the Company. See "Business -- Third Party Reimbursement."
DEPENDENCE ON THIRD PARTY VENDORS
The Company relies on third party vendors for certain of the components used in
the Company's products and for certain contract manufacturing services. A number
of significant components, such as capacitors, batteries, integrated circuits
and lead systems, are purchased from sole source suppliers. For certain
components and manufacturing services, there are relatively few sources of
supply, and establishing additional or replacement suppliers for such components
or services cannot be accomplished quickly. In addition, each supplier and each
component must be qualified with the FDA, and the time required for such
qualification may be lengthy. Although the Company tries to maintain sufficient
quantities of inventory of such components to minimize production delays or
interruptions, there can be no assurance that the Company will find suitable
alternatives at reasonable prices, if at all, or that any such alternatives will
remain available to the Company. The Company's inability to obtain acceptable
components in a timely manner or find and maintain suitable replacement
suppliers of components or manufacturing services would have a material adverse
effect on the Company, including its ability to manufacture its products. See
"Business -- Manufacturing."
LIMITED MANUFACTURING AND MARKETING EXPERIENCE
To date, the Company's products have been manufactured in limited quantities
for clinical testing purposes and have not been manufactured on a commercial
scale. As a result, there can be no assurance that the Company will not
encounter difficulties in scaling up its manufacturing capabilities, including
problems involving production yields, quality control, component supply and
shortages of qualified manufacturing personnel. Any such difficulties could also
result in the inability of the Company to satisfy Pacesetter's product
requirements, which could result in a royalty from Pacesetter that is
significantly lower than the transfer price payment the Company would have
otherwise received. Any significant manufacturing difficulties could have a
material adverse effect on the Company.
Management of the Company has limited experience in marketing the Company's ICD
and catheter ablation products, sales of which to date have consisted of limited
quantities for use in clinical trials. There can be no assurance that the
Company will be able to recruit and retain the necessary sales managers, direct
salespersons or distributors as needed or that the Company's efforts to scale up
its marketing capabilities will be successful. See "Business -- Sales and
Marketing."
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. Furthermore, 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."
NEED FOR ADDITIONAL FINANCING
The Company may need additional financing following completion of this offering
depending on a number of factors, including: progress with 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; costs of manufacturing
and marketing scale-up; and potential acquisitions. To the extent that
additional financing is needed, however, there can be no assurance that such
additional financing would be available on acceptable terms, if at all, and the
failure to obtain any such additional financing would have a material adverse
effect on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DILUTION
Purchasers of the shares of Common Stock offered hereby will experience an
immediate dilution in net tangible book value. See "Dilution."
IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, based on the number of outstanding shares of
Common Stock as of April 30, 1996, the Company will have approximately 29.2
million shares of Common Stock outstanding (30.0 million shares if the
Underwriters' over-allotment option is exercised in full), assuming no exercise
of outstanding options or warrants and no conversion of an outstanding
convertible debenture or shares of Series A Preferred Stock. Substantially all
of such shares are eligible for immediate resale following completion of this
offering as a result of having been registered for resale under the Securities
Act, pursuant to the provisions of Rule 144 or otherwise. On April 30, 1996, the
Company filed a registration statement registering the resale of 1,269,849
shares of Common Stock issued or issuable upon exercise of certain outstanding
warrants and 1,125,000 shares of Common Stock issuable upon conversion of a
convertible debenture and shares of Series A Preferred Stock held by Pacesetter.
The directors and officers of the Company and certain of their affiliates,
beneficially owning as of April 30, 1996, an aggregate of 2,515,886 shares of
Common Stock, have agreed not to sell or otherwise transfer shares of Common
Stock held by them or issuable to them upon exercise or conversion of options,
warrants or other securities (including 324,999 of the shares subject to the
registration statement filed on April 30, 1996) for the period beginning June 1,
1996 and ending 90 days after the effective date of the registration statement
of which this Prospectus is a part (the "Registration Statement"), inclusive
(the "Lock-up Period"). Nevertheless, sales of shares of Common Stock in the
public market during or following expiration of the Lock-up Period could
adversely affect the market price of the Common Stock. See "Underwriting."
POTENTIAL INSUFFICIENCY OF PRODUCT LIABILITY INSURANCE
The testing, manufacturing, marketing and sale of medical devices involves
risk of liability claims and product recalls. As a result, 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 commercially reasonable. Lack of sufficient
insurance could expose the Company to substantial damages in connection with
product liability claims or product recalls.
ANTI-TAKEOVER CONSIDERATIONS
The Company's Restated Articles of Incorporation (i) authorize the Company's
Board of Directors, without any action by the shareholders, to establish the
rights and preferences of up to 3,000,000 shares of undesignated preferred stock
(of which 1,225,000 shares remain undesignated as of the date of this
Prospectus) and (ii) provide that the affirmative vote of at least two-thirds of
the voting power of the shares entitled to vote is necessary in connection with
a merger, consolidation or transfer of substantially all of the Company's
assets. The Company also is subject to certain "anti-takeover" provisions of the
Minnesota Business Corporations Act. Moreover, the Purchase Agreement with
Pacesetter provides Pacesetter, for a certain period of time, with a right of
first refusal in connection with any sale of the Company or its assets. In
addition, in April 1996 the Company's Board of Directors adopted a Shareholder
Rights Plan designed to protect the Company and its shareholders from
unsolicited attempts or inequitable offers to acquire the Company. These
measures may, in certain circumstances, deter or discourage takeover attempts
and other changes in control of the Company not approved by the Board. As a
result, the Company's shareholders may lose opportunities to dispose of their
shares at the higher prices generally available in takeover attempts or that may
be available under a merger proposal. In addition, these measures may have the
effect of permitting the Company's current members of the Board to retain their
positions and place them in a better position to resist changes that
shareholders may wish to make if they are dissatisfied with the conduct of the
business of the Company. See "Description of Securities."
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. In addition, as long as
shares of Series A Preferred Stock are outstanding, in the event that dividends
are paid on the Common Stock, holders of such Series A Preferred Stock shall be
entitled to an equivalent dividend on the basis of the number of shares of
Common Stock into which the Series A Preferred Stock is then convertible. There
can be no assurance that the Company will ever pay cash dividends. See "Dividend
Policy."
VOLATILITY OF STOCK PRICE
The market prices for securities of medical device companies have historically
been highly volatile, including the market price of shares of the Company's
Common Stock. Future announcements by the Company or its competitors, including
announcements concerning strategic collaborations, results of clinical testing,
technological innovations or new commercial products, changes in government
regulations, regulatory actions, health care legislation, proprietary rights,
litigation and public concerns as to safety of the Company's or its competitors'
products, as well as period-to-period variances in financial results, could
cause the market price of the Common Stock to fluctuate substantially for
reasons that may be unrelated or disproportionate to the operations of the
Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares offered hereby,
after deducting underwriting discounts and commissions and estimated offering
expenses, and assuming a public offering price of $9.75 per share, are estimated
to be $45,696,875 ($52,588,906 if the Underwriters' over-allotment option is
exercised in full).
The Company anticipates that the net proceeds of this offering will be used to
fund expansion of clinical trials, research and development, scale-up and
expansion of the Company's manufacturing and marketing activities and for
general corporate purposes, including working capital. A portion of the net
proceeds may also be used to fund collaborative arrangements or acquisitions of
or investments in complementary businesses, products or technologies, although
no such transactions are currently pending.
The expected use of the net proceeds from this offering is subject to change
based upon factors such as progress of clinical trials, time and costs involved
in obtaining regulatory approvals, 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 and expansion. The Company may require additional capital after this
offering depending on a number of factors, and there can be no assurance that
any such additional capital will be available on acceptable terms, if at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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 government obligations.
DILUTION
The net tangible book value of the Common Stock of the Company as of April 30,
1996 (based on the unaudited financial statements included herein) was
$21,954,029 or $0.91 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 $9.75 per share, the adjusted net tangible book value
of the Common Stock of the Company as of April 30, 1996 would have been
$67,650,904 or $2.32 per share. The increase in net tangible book value of $1.41
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 $7.43 per share
from the $9.75 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.
The following table illustrates the resulting dilution in net tangible book
value per share with respect to the Common Stock offered hereby:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price per share $9.75
Net tangible book value per share at April 30, 1996 $0.91
Increase per share attributable to new investors 1.41
Pro forma net tangible book value per share after offering 2.32
Dilution in net tangible book value per share to new
investors $7.43
</TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at April 30,
1996, and as adjusted to reflect the net proceeds from the sale by the Company
of 5,000,000 shares of Common Stock pursuant to this offering (at an assumed
public offering price of $9.75 per share). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
financial statements and related notes contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
APRIL 30, 1996
ACTUAL AS ADJUSTED
<S> <C> <C>
Long-term debt $ 1,500,000 $ 1,500,000
Shareholders' equity:
Convertible preferred stock, series A, $0.01 par
value.
Authorized 1,475,000 shares; issued and outstanding
875,000 shares 3,166,425 3,166,425
Common stock, $0.01 par value.
Authorized 35,000,000 shares; issued and outstanding
24,212,207 shares, 29,212,207 shares as adjusted(1) 242,122 292,122
Additional paid-in capital 60,384,733 106,031,608
Accumulated deficit (37,347,476) (37,347,476)
Total shareholders' equity 26,445,804 72,142,679
Total capitalization $ 27,945,804 $ 73,642,679
</TABLE>
(1) Does not include 3,425,066 shares of Common Stock issuable upon the exercise
of options and warrants outstanding on April 30, 1996.
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. In addition, as long as
shares of the Company's Series A Preferred Stock are outstanding, in the event
that dividends are declared on the Common Stock of the Company, holders of the
Series A Preferred Stock shall be entitled to receive an equivalent dividend on
the basis of the number of shares of Common Stock into which such holder's
shares of Series A Preferred Stock are then convertible. There can be no
assurance that the Company will ever pay cash dividends.
MARKET PRICE FOR COMMON STOCK
The Common Stock is currently traded on the Nasdaq National Market under the
symbol "ANGN." Prior to October 19, 1995, the Common Stock was traded on the
Nasdaq SmallCap Market. The following table sets forth, for each of the calendar
periods indicated, the range of high and low closing bid quotations per share
until October 19, 1995, as reported by the Nasdaq SmallCap Market, and the range
of high and low closing sale prices of the Common Stock, as reported by the
Nasdaq National Market. These prices do not include adjustments for retail
mark-ups, mark-downs or commissions (and prior to October 19, 1995, represent
inter-dealer quotations and do not necessarily represent actual transactions).
<TABLE>
<CAPTION>
COMMON STOCK
HIGH LOW
<S> <C> <C>
1996:
Second calendar quarter (through May 31,
1996) $12.00 $9.56
First calendar quarter 11.12 7.62
1995:
Fourth calendar quarter 9.25 5.75
Third calendar quarter 8.38 4.88
Second calendar quarter 4.88 3.38
First calendar quarter 3.75 2.50
1994:
Fourth calendar quarter 3.12 2.38
Third calendar quarter 3.00 2.00
Second calendar quarter 3.00 1.62
First calendar quarter 3.62 2.25
1993:
Fourth calendar quarter 2.88 1.88
Third calendar quarter 3.12 2.00
Second calendar quarter 4.50 3.00
First calendar quarter 4.88 3.62
</TABLE>
For a recent sale price for the Common Stock, see the cover page to this
Prospectus. As of April 30, 1996, the Common Stock was held of record by 560
persons.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Prospectus. The statement of operations data for the years ended July 31,
1993, 1994 and 1995 and the balance sheet data at July 31, 1994 and 1995 are
derived from, and are qualified by reference to, the audited financial
statements included elsewhere in this Prospectus and should be read in
conjunction with those financial statements and notes thereto. The statement of
operations data set forth below for the years ended July 31, 1991 and 1992 and
the balance sheet data as of July 31, 1991, 1992 and 1993 are derived from the
audited financial statements of the Company not included herein. The selected
financial data as of and for the nine months ended April 30, 1995 and 1996 have
been derived from unaudited consolidated financial statements of the Company
which, in the opinion of management, include all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of such data.
The results of operations for the nine months ended April 30, 1996 are not
necessarily indicative of the results of operations to be expected for the
entire year ending July 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 3,030 $ 77,615 $ 137,982 $ 0 $ 0
Manufacturing expenses(1) 966 169,587 147,755 0 0
Research and development 1,175,986 2,996,845 4,485,818 5,158,738 7,815,391
Sales and marketing(2) 0 0 0 0 0
General and administrative 824,516 1,021,078 1,353,502 1,460,424 1,849,376
Net loss from continuing
operations (1,892,420) (4,054,919) (5,915,558) (7,675,743) (9,643,351)
Gain on sale of discontinued
operations(3) 0 0 3,207,120 0 0
Income (loss) from
discontinued operations 125,817 (106,536) 0 0 0
Net loss $(1,766,603) $(4,161,455) $(2,708,438) $(7,675,743) $(9,643,351)
Net loss per share from
continuing operations $ (0.22) $ (0.41) $ (0.57) $ (0.72) $ (0.58)
Net income (loss) per share
from discontinued
operations 0.01 (0.01) 0.31 0.00 0.00
Net loss per share(4) $ (0.21) $ (0.42) $ (0.26) $ (0.72) $ (0.58)
Weighted average number of
shares outstanding(4) 8,536,984 9,901,592 10,296,812 10,657,311 16,550,915
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
NINE MONTHS
ENDED APRIL 30,
1995 1996
$ 0 $ 874,959
0 2,278,242
5,268,028 6,717,469
12,767 387,634
1,495,868 2,444,543
(6,673,157) (10,161,744)
0 0
0 0
$ (6,673,157) $(10,161,744)
$ (0.41) $ (0.46)
0.00 0.00
$ (0.41) $ (0.46)
16,291,900 21,953,593
<TABLE>
<CAPTION>
JULY 31,
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,185,759 $ 927,620 $ 4,842,033 $ 2,127,358 $ 2,367,764
Short-term investments 0 0 0 0 0
Working capital (deficit) 4,097,908 2,989,426 4,692,607 (1,175,384) 1,669,554
Total assets 4,903,150 5,905,146 7,329,146 4,752,630 5,751,194
Long-term debt, less current
installments 117,604 76,045 1,513,516 1,504,187 1,501,091
Accumulated deficit (2,996,745) (7,158,200) (9,866,638) (17,542,381) (27,185,732)
Shareholders' equity
(deficit) 4,544,481 4,404,409 5,207,346 (596,320) 2,980,150
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
APRIL 30, 1996
ACTUAL AS ADJUSTED(5)
$ 14,789,510 $ 60,486,385
7,328,201 7,328,201
22,953,009 68,649,884
30,572,968 76,269,843
1,500,000 1,500,000
(37,347,476) (37,347,476)
26,445,804 72,142,679
(1) The amounts reflected in manufacturing expenses for the years ended July
31, 1991, 1992 and 1993 and the nine months ended April 30, 1996 reflect
cost of goods sold for those periods.
(2) Sales and marketing for the years ended July 31, 1991 through 1995 is
included in general and administrative.
(3) Gain on sale of discontinued operations is attributable to the sale of
AMP. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 4 of Notes to Financial Statements.
(4) Computed on the basis described for net loss per share in Note 2 of Notes
to Financial Statements.
(5) Adjusted to give effect to the sale of the Shares offered hereby at an
assumed per share offering price of $9.75 and application of the estimated
net proceeds therefrom. See "Use of Proceeds."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's continuing operations consist of the research and development
efforts of its two divisions, the implantable cardioverter defibrillator group
and the catheter ablation group. These divisions are developing medical devices
to treat various types of arrhythmias (irregular heartbeats). The operations
conducted by these divisions were previously conducted by AngeMed, Inc. and
AngeLase, Inc., 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. In September 1992, the Company completed the sale of AMP,
an accessory products business, to the B. Braun Cardiovascular Division of
Burron Medical Inc. The sale price consisted of $6.2 million in cash at closing,
plus a royalty of 10% and 5% of AMP product sales in fiscal 1993 and 1994,
respectively. See Note 4 of Notes to Financial Statements. Effective November 1,
1995, the Company also established a European subsidiary, Angeion Europe Ltd.
("Angeion Europe"), to facilitate clinical trials of its ICDs and expand its
European business activities.
The Company has incurred net operating losses from continuing operations in each
year since its inception in 1986. At April 30, 1996, the Company's accumulated
deficit was $37,347,476. Losses have resulted principally from costs incurred in
the research and development of the Company's products. The Company has had
limited revenue since the sale of AMP 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 and invests in building its
manufacturing and marketing capabilities. 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, if at all; successfully
develop, commercialize, manufacture and market its products; or achieve
profitability. In addition, the Company's results of operations may fluctuate
significantly from quarter to quarter depending upon a number of factors,
including the availability of third party reimbursement, the timing of
regulatory approvals, progress of product development and clinical trials, the
extent to which the Company's products gain market acceptance, marketing and
manufacturing costs and competition.
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 NINE MONTHS ENDED APRIL 30, 1996
Net sales increased from $0 in the nine months ended April 30, 1995 to $874,959
in the nine months ended April 30, 1996. The increase was due to the initiation
of sales of defibrillator products to Pacesetter and sales in connection with
European and U.S. clinical trials.
Manufacturing expenses increased from $0 in the nine months ended April 30, 1995
to $2,278,242 in the nine months ended April 30, 1996. The increase was due to
the cost of products sold during the period, as well as start-up costs
associated with the establishment of the Company's manufacturing capabilities.
Manufacturing costs were higher than net sales due to the low volume of net
sales relative to the significant costs incurred as the Company began its
manufacturing activities.
Research and development expenses increased from $5,268,028 in the nine months
ended April 30, 1995 to $6,717,469 in the nine months ended April 30, 1996. This
increase of $1,449,441 was due primarily to an acceleration of research and
development activity (including clinical trials) in connection with the
Company's ICD products. Research and development activity was focused on the
Company's ICD products, which accounted for $5,898,322 of the expenses for the
nine months ended April 30, 1996, while catheter ablation research and
development activities accounted for $819,147 of such expenses. The Company
expects that research and development expenses will continue to increase as the
Company expands human clinical trials, enhances current products and accelerates
the development of new products.
Sales and marketing expenses increased from $12,767 in the nine months ended
April 30, 1995 to $387,634, in the nine months ended April 30, 1996 due
primarily to the hiring of a sales and marketing Vice President and the
initiation of marketing activity.
General and administrative expenses increased from $1,495,868 in the nine months
ended April 30, 1995 to $2,444,543 in the nine months ended April 30, 1996. This
increase of $948,675 was due primarily to an increase in non-cash compensation
expenses resulting from the grant of stock and options and the start-up costs
associated with the establishment of the Company's European subsidiary.
The net loss for the nine months ended April 30, 1995 was $6,673,157, or $0.41
per share, compared to a net loss of $10,161,744, or $0.46 per share, for the
nine months ended April 30, 1996.
YEAR ENDED JULY 31, 1994 COMPARED TO YEAR ENDED JULY 31, 1995
The Company had no sales or manufacturing expenses in either fiscal 1994 or
fiscal 1995.
Research and development expenses increased from $5,158,738 in fiscal 1994 to
$7,815,391 in fiscal 1995. This increase of $2,656,653 was due primarily to an
acceleration of research and development activity on the Company's ICDs.
Research and development activity relating to the Company's ICDs accounted for
$6,772,442 of the expenses for fiscal 1995, while catheter ablation research and
development activities accounted for $1,042,949 of the expenses. During fiscal
1994, there was an additional 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 $1,460,424 in fiscal 1994
to $1,849,376 in fiscal 1995. This increase of $388,952 was due primarily to
an increase in payroll and legal expenses.
The net loss for fiscal 1994 was $7,675,743, or $0.72 per share, compared to
a net loss of $9,643,351, or $0.58 per share, for fiscal 1995.
YEAR ENDED JULY 31, 1993 COMPARED TO YEAR ENDED JULY 31, 1994
Net sales and cost of goods sold were $137,982 and $147,755, respectively, in
fiscal 1993. The Company had no sales or cost of goods sold in fiscal 1994. The
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 relating to the Company's ICDs. Research
and development activity relating to the Company's ICDs accounted for $3,981,905
of the expenses for fiscal 1994, while catheter ablation development activities
accounted for $1,176,833 of the expenses. During fiscal 1994, there was an
additional 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 $1,460,424 in fiscal 1994. This increase of $106,922 was due primarily to
an increase in payroll and financing expenses.
The gain on sale of discontinued operations of $3,207,120 in fiscal 1993 was
attributable to the sale of AMP. See Note 4 of Notes to Financial Statements.
The net loss for fiscal 1993 was $2,708,438, or $0.26 per share, compared to a
net loss of $7,675,743, or $0.72 per share for fiscal 1994, which included the
gain on sale of discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have related to, and are expected to continue to
relate to, the research and development activities of its ICD and catheter
ablation divisions, working capital and expenditure requirements of its
manufacturing operations, the acquisition of businesses, products and
technologies and expanded marketing expenditures. The Company has financed its
liquidity needs over the last three fiscal years through the sale of Common
Stock and other equity securities, issuance of long-term debt and notes payable
and the proceeds from the sale of AMP.
Net cash used in operating activities was $5,813,173 in the nine months ended
April 30, 1995 compared to $10,523,988 in the nine months ended April 30, 1996
and was $5,345,958, $5,151,520 and $8,566,889, in fiscal 1993, 1994 and 1995,
respectively. The cash used during these periods was primarily related to
research and development activities of the Company's ICD and catheter ablation
divisions (including clinical trials) and, during the nine months ended April
30, 1996, was also related to the build-up of inventory and the increase in
sales and marketing expenses. These increases were partially offset by increases
in accounts payable and accrued expenses, as the Company began its initial
manufacturing and marketing activities.
The Company continues to expand its patent and trademark portfolio through
internal proprietary development and the acquisition of developed technologies.
The Company's investment in patents and trademarks for the nine months ended
April 30, 1996 totaled $322,023. The Company invested $523,185, $311,167 and
$337,158 in patents and trademarks in fiscal 1993, 1994 and 1995, respectively.
The Company will continue to invest in proprietary technologies and procedures
as warranted. To date, no royalty payments have been made in connection with any
license agreements or other commitments.
The Company's expenditures for fixed assets were $2,543,497 for the nine months
ended April 30, 1996, and were $430,234, $244,254 and $989,351 in fiscal 1993,
1994 and 1995, respectively. Fixed asset expenditures related primarily to
computer equipment, office furniture, production equipment for the ICD division
and research and development equipment. As the Company expands its ICD
production and catheter ablation research capabilities, fixed asset expenditures
are expected to increase.
At April 30, 1996, cash and cash equivalents was $14,789,510 and short-term
investments were $7,328,201. In August 1995, the Company completed a public
offering of 3.4 million shares of Common Stock that resulted in net proceeds of
$20,327,045. In September 1994, the Company completed a public offering of 4.9
million shares of Common Stock and 4.9 million warrants that resulted in net
proceeds of $10,599,122. In March 1996, an additional $11,630,337 in net
proceeds was received from the exercise of these warrants. In fiscal 1993, the
Company completed the sale of AMP and consummated the strategic alliance with
Pacesetter. See Notes 4, 6 and 8 of Notes to Financial Statements.
The Company may need additional financing following completion of this offering
depending on a number of factors, including: progress with 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; costs of manufacturing
and marketing scale-up; and potential acquisitions of businesses, products and
technologies. To the extent that additional financing is needed, however, there
can be no assurance that such additional financing would be available on
acceptable terms, if at all, and the failure to obtain any such additional
financing would have a material adverse effect on the Company.
The Company has net operating loss carryforwards for financial reporting and
federal income tax purposes of approximately $35,000,000, which can be used to
offset taxable income in future years. Future equity offerings combined with
sales of the Company's equity during the preceding years 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. Since the Company anticipates continued losses
during the next few years, it is not anticipated that any limitation would have
a material adverse effect on the Company.
For 1997, the Company is required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, and SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 121 prescribes accounting and reporting
standards when circumstances indicate that the carrying amount of an asset may
not be recoverable. Initial application of SFAS No. 121 is not expected to
result in recognition of a cumulative effect of a change in accounting principle
by the Company. SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans. Since the Company intends to elect continued
recognition of certain stock-based compensation using the intrinsic value method
prescribed under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, no material effect on the Company's expense
recognition is expected. However, for transactions with non-employees SFAS No.
123 requires the fair value based method for expense recognition. Currently, the
Company is unable to estimate the impact that will result from this method of
computing expense.
BUSINESS
GENERAL
Angeion Corporation designs, develops and manufactures products that treat
irregular heartbeats (arrhythmias). The Company is developing the SENTINEL
series of implantable cardioverter defibrillators ("ICDs"), which it believes
are among the smallest and most technologically advanced ICDs in clinical trials
or market approved today. ICDs are designed to treat abnormally 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 sudden cardiac death
("SCD"). ICDs are electronic devices that are implanted within the body and are
connected to the heart with defibrillator leads. These devices monitor the
patient's heartbeat and, in the event of VT or VF, deliver an electrical shock
to return the heartbeat to normal rhythm. Following receipt of an
Investigational Device Exemption ("IDE") from the U.S. Food and Drug
Administration ("FDA"), the Company commenced U.S. clinical trials of its first
SENTINEL model, the SENTINEL 2000, in March 1996. In April 1996, the Company
received CE Mark approval to market the SENTINEL 2000 in the European Union
("EU"). Based on its clinical trial progress to date, the Company plans to
submit its application for Pre-Market Approval ("PMA") for the SENTINEL 2000 and
the SENTINEL 2010 series to the FDA in the first half of calendar 1997.
The Company is also developing a radio frequency ("RF") catheter ablation system
that it believes offers a potential cure for certain forms of atrial arrhythmias
(rapid heartbeats originating in the upper chambers of the heart) and a laser
catheter ablation system that it believes offers a potential cure for certain
forms of VT. The Company has received an IDE from the FDA for both its RF and
laser catheter ablation systems. The Company plans to commence clinical trials
for its RF catheter ablation systems and to expand clinical trials for its laser
catheter ablation systems during the second half of calendar 1996.
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 heart 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, 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 an 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 1.0 million people in the U.S. have
some form of VT and that more than 400,000 people in the U.S. die from SCD
episodes each year. It is estimated that approximately 60,000 to 70,000 people
survive SCD episodes each year, and approximately 100,000 to 120,000 people are
diagnosed each year with sustained chronic VT in the U.S. Individuals with
sustained chronic VT are considered to have a very high risk of experiencing an
SCD episode. Current treatments for SCD survivors and sustained chronic VT
patients consist primarily of medication, ICDs and open heart surgery.
IMPLANTABLE CARDIOVERTER DEFIBRILLATORS
One of the most effective treatments for individuals at risk of experiencing VT
or VF is an ICD. An ICD is an electronic device that is implanted in the patient
and is connected to the heart with defibrillator 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 that return the heartbeat to normal rhythm. Early ICD
devices were larger, requiring more invasive implantation and longer hospital
stays; delivered primarily high-energy shocks that were painful to the patient
and 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 ICDs which are currently on the market and which are characterized
by: (i) reduced size and weight allowing for pectoral implant capability; (ii) a
biphasic waveform (an electrical shock of alternating polarity); (iii) greater
longevity; (iv) transvenous lead systems (allows implantation of the lead
through a vein so that open chest surgery is not required); (v) electrogram
storage capability (storage of intercardiac EKG); (vi) tiered therapy
(electrical shocks of varying intensity depending on the type and severity of
the arrhythmia); (vii) use of the ICD housing as an electrode; and (viii)
programmability (allows the physician to customize therapy to the patient's
condition both before and, more importantly, after implant).
The worldwide market for ICDs and defibrillator leads has grown from $160
million in 1990 to over $650 million in 1995, representing a compounded annual
growth rate in excess of 30%. It is estimated that in 1995 approximately 25,000
ICDs were implanted worldwide. The ICD market is expected to continue to grow at
an annual rate of approximately 20% to reach a worldwide market size of
approximately $1.3 billion by the end of the decade. The growth rate for this
market is attributable to a number of factors, including: (i) expansion of the
indications for use of an ICD; (ii) smaller devices allowing for less invasive
and less costly surgical procedures; (iii) less effective performance of drug
therapy compared with ICDs; (iv) an increasing survival rate for SCD episodes;
and (v) rapidly advancing ICD technology.
These market estimates may be revised upward based upon the results of a recent
study known as the Multicenter Automatic Defibrillator Implantation Trial (the
"MADIT Study"). This five-year study evaluated the outcomes of high risk,
post-heart attack patients who were treated with drugs compared with those
post-heart attack patients implanted with an ICD. The MADIT study indicated that
patients implanted with an ICD had 54% fewer deaths than those who underwent
conventional drug therapies. The principal clinical investigator for the MADIT
Study estimates that an additional 80,000 people per year could benefit from an
ICD. This potential market size increase, however, may develop slowly until
referral patterns from cardiologists to electrophysiologists become more
established and may not be realized unless Medicare begins reimbursing for some
or all of the costs of a prophylactic implant of an ICD.
Recent developments in automated external defibrillators have the potential to
increase the number of first responders with the capability to treat victims of
SCD. Because SCD causes more than 400,000 deaths annually in the U.S., any
increase in the survival rate of such victims may increase the potential market
for ICDs. Although the market for the Company's ICD products is expected to
grow, there can be no assurance that the Company will participate in such
growth.
INTERVENTIONAL TECHNOLOGIES
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, reduces hospitalization and is much less expensive than
open chest surgery. In catheter ablation procedures, an 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 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 the tissue. When the ablated tissue is replaced with scar
tissue, the pathway generating the conflicting electrical impulse is eliminated
and the normal conduction of electrical activity is restored.
Although the market for catheter ablation devices in the treatment of
arrhythmias is much less defined and in an earlier stage of development than the
ICD market, the worldwide ablation market has grown to approximately 110,000
procedures in 1995, primarily for the treatment of one form of atrial arrhythmia
known as supraventricular tachycardia ("SVT"). If cardiac ablation becomes an
accepted treatment for atrial fibrillation, atrial flutter or VT, the aggregate
market for cardiac ablation could further increase.
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 SVT
is growing 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 using laser
catheter ablation. Although the ventricular wall is too thick to be fully
penetrated by RF energy, ventricular arrhythmias, such as VT, may potentially be
treatable with the application of laser energy. The market for VT laser catheter
ablation is supported by the same patient population for whom drug therapy is
not an acceptable treatment regimen. The following factors are driving the
growth of the overall catheter ablation market: (i) catheter ablation offers a
potential cure for certain forms of arrhythmia rather than simply managing its
symptoms; (ii) catheter ablation is a cost-effective, minimally invasive
procedure; and (iii) advancements in electrophysiology mapping technology, known
as "global mapping," are expected to allow more effective identification of the
source of the arrhythmia. Although the market for the Company's ablation
products is expected to grow, there can be no assurance that the Company will
participate in such growth.
STRATEGY
The Company's objective is to build a full line of electrophysiology products
for the treatment and cure of cardiac arrhythmias. The Company's strategy is
to focus on one area of cardiovascular disease, cardiac arrhythmias, and one
common practitioner, the electrophysiologist. The Company believes it
currently possesses the following fundamental strengths:
INNOVATIVE TECHNOLOGIES
The Company's research and development efforts have led to the introduction of
numerous technological innovations for ICDs, including reduced size and weight,
the use of dual batteries and proprietary design features to increase longevity
and certain features providing for greater flexibility in treatment options. The
Company has also made significant technological breakthroughs in its catheter
ablation products. The Company's RF catheter ablation system's porous metal tip,
which provides the ability to perfuse small amounts of water through the metal
electrode tip, minimizes blood coagulation during ablation, allowing the
delivery of larger amounts of power and energy to the cardiac tissue. The
Company believes its laser catheter ablation system is the first catheter
ablation system specifically designed for the treatment of VT. See "--
Products."
EXPERIENCED MANAGEMENT, RESEARCH, ENGINEERING AND MEDICAL PERSONNEL
The Company has assembled a management, research and scientific team with
considerable experience and expertise in the medical device industry. The
Company's personnel and medical advisors have substantial experience in
performing research, developing products, conducting clinical trials, obtaining
regulatory approvals, manufacturing and marketing ICDs and other medical
devices. In addition, the Company has developed relationships and works closely
with leading medical researchers worldwide. See "Management."
STRONG PATENT PORTFOLIO
The Company has assembled what it believes to be a strong patent portfolio
for both its ICD products and its catheter ablation products. As of May 15,
1996, the Company had 63 U.S. issued patents, 16 U.S. patents which have been
allowed but have not yet issued, 36 U.S. patent applications pending, 27
foreign patent applications pending, and additional U.S. patent applications
in preparation. See "-- Intellectual Property."
PACESETTER STRATEGIC ALLIANCE
In addition to establishing its own direct and indirect sales and marketing
channels, the Company has a strategic alliance with Pacesetter, which has one of
the largest cardiovascular distribution networks in the world. This alliance
offers the Company timely access to the worldwide market and provides greater
name recognition and resources. See "-- Sales and Marketing; -- Intellectual
Property."
PRODUCTS
The Company's competitive product strategy is to maintain a broad product
pipeline driven by innovative technologies. The medical device industry,
particularly the ICD portion, is characterized by significant investment in new
technologies. In addition to research in cardiac electrophysiology, the Company
intends to invest significant resources in concurrent new product development
programs. For all products, there can be no assurance that the Company will be
able to meet its development schedules.
IMPLANTABLE CARDIOVERTER DEFIBRILLATOR SYSTEM
The Company believes its ICDs offer certain benefits over competitors' ICDs
currently in clinical trials or market-approved, including reduced size and
weight, increased longevity and greater flexibility in treatment options. The
table below sets forth the Company's ICD products currently under development,
in clinical trials or market-approved:
<TABLE>
<CAPTION>
STATUS
MODEL SIZE/WT. LONGEVITY(1) CURRENT KEY FEATURE OBJECTIVES U.S. EUROPE
<S> <C> <C> <C> <C> <C>
2000 60cc/110gm 7 yrs. * Small size and weight IDE; CE Mark;
* Extended longevity Clinical trials Market-approved
* Optimized biphasic waveform
* Dual battery system
* HOT CAN electrode system
2010 Series
2010 60cc/110gm 7 yrs. * Electrogram storage Pre-clinical Clinical trials
2011 58cc/108gm * Extended programmability
2012 61cc/110gm * Coupled shock fibrillation
2020 Series TBA(2) TBA(2) TBA(2) In development
2030 Series TBD(3) TBD(3) TBD(3) Planning stage
2100 Series TBA(2) TBA(2) * Smaller size and weight In development
* Advanced waveform
* Pulse pretreatment
* Advanced anti-tachy pacing
* Dual chamber pacing
* Atrial therapy
</TABLE>
(1) Based on one shock per quarter and 25% pacing.
(2) To be announced in the future.
(3) To be determined and announced in the future.
SENTINEL 2000. The SENTINEL 2000 system consists of the SENTINEL model 2000 ICD,
the ANGEFLEX transvenous defibrillation lead system that connects the ICD to the
patient's heart, a specialized lap top computer programmer connected to a
programming wand (SMART WAND) and an external defibrillation test system.
The SENTINEL 2000 ICD is characterized by small size (60cc) and weight (110gm),
which allows for universal pectoral implantation. Pectoral implantation in
combination with transvenous leads eliminates the need for abdominal surgery and
thoracotomy (open chest surgery). Pectoral implantation reduces patient trauma,
recovery time and hospitalization costs and increases physician and patient
acceptance. Additionally, this product offers extended longevity through the use
of a dual battery system and other product design features. The SENTINEL 2000
also utilizes the Company's proprietary SMALL CAP TUNED biphasic waveform,
demonstrated in clinical trials to lower defibrillation thresholds. The SENTINEL
2000 features a programmable HOT CAN electrode system, which uses the SENTINEL
2000 housing as an electrode that can be programmed on and off, and programmable
shock configuration to add implant flexibility and further reduce defibrillation
thresholds.
In January 1995, the first fully functional model of the SENTINEL 2000 was
successfully implanted in human patients as part of a limited clinical trial in
Bonn, Germany. Follow-up evaluations of these initial patients have confirmed
that the SENTINEL 2000 is performing as anticipated. Additional implants have
taken place in the United Kingdom and Italy. In April 1996, the Company received
CE Mark approval for the SENTINEL 2000. The CE Mark is a worldwide standard
recognizing safety and quality assurance. This approval allows the Company to
begin marketing its SENTINEL 2000 model in all EU countries, subject to limited
regulations in certain countries. The Company is in the process of building
inventory for commercial introduction of the SENTINEL 2000 in the EU.
In March 1996, the Company initiated U.S. clinical trials of the SENTINEL 2000
following IDE approval. This IDE allows the Company to perform up to 60 implants
in up to 15 centers nationwide. The Company will apply to supplement its
SENTINEL 2000 IDE to include the SENTINEL 2010 series, discussed below, as part
of its current clinical studies. Based on its clinical trial progress to date,
the Company believes that it will submit its PMA application for the SENTINEL
2000 and the SENTINEL 2010 series to the FDA in the first half of calendar 1997.
See "-- Government Regulation."
SENTINEL 2010 SERIES. The SENTINEL 2010 series consists of the 2010, 2011 and
2012 models and contains all of the features of the SENTINEL 2000 plus 5.5
minutes of electrogram storage capability and enhanced programming flexibility
for the electrophysiologist. These models also have a coupled shock fibrillation
feature, which provides testing convenience for the electrophysiologist. The
difference between the three models in the 2010 series relates to lead connector
configuration. The model 2010, like the model 2000, provides a universal
four-port connector for an additional subcutaneous electrode. The model 2011 is
two cubic centimeters smaller than the model 2010 because of its two port low
profile connector. The model 2012 four-port connector is compatible with
competitors' lead systems for replacement applications without the use of
adapters. In May 1996, the SENTINEL 2010 ICD was introduced into human clinical
evaluation in Europe.
SENTINEL 2020 SERIES AND SENTINEL 2030 SERIES. The SENTINEL 2020 series and 2030
series are under development to provide enhanced patient therapy and are
expected to represent product line extensions of the SENTINEL 2000 and SENTINEL
2010 series. Both series of products are scheduled to begin human implants in
calendar 1997.
2100 SERIES. The Company's 2100 series ICDs will be a new generation of ICDs,
designed to offer significant therapeutic enhancements and flexibility over the
prior SENTINEL series ICDs. The Company expects that the 2100 series will have
all the features of the prior SENTINEL series ICDs, plus the following
additional features: (i) smaller size and weight; (ii) advanced lower
defibrillation energy waveform; (iii) pulse pretreatment therapy; (iv) advanced
anti-tachyarrhythmia pacing; (v) dual chamber pacing and sensing; and (vi)
atrial therapy.
LEAD SYSTEMS. The Company has developed a transvenous lead system, the ANGEFLEX
model 4020 series, which is available in four lengths. This lead system has been
approved for commercial sale in Europe and approved for use as part of the U.S.
clinical trials.
The Company is currently testing an alternate OEM transvenous lead system for
use with the SENTINEL series. This lead system is intended to provide single
pass lead defibrillation, pacing and sensing for physicians preferring this
configuration. The Company anticipates filing for IDE approval for this product
by early calendar 1997. Concurrently, the Company is developing its own single
pass transvenous lead system, the ANGEPASS series, that will include pacing,
sensing and defibrillation functions. This lead system is intended to
incorporate the technology of the ANGEFLEX series and will offer smaller size
and flexibility in a single pass configuration. Initial development and testing
of this lead system has commenced and pre-clinical trials are expected to begin
in the first half of calendar 1997.
CATHETER ABLATION SYSTEMS
The Company's objective in the area of ablative arrhythmia management is to
develop a broad product base to serve the needs of the electrophysiologist. The
Company's focus is directed both at atrial arrhythmias (SVT, atrial fibrillation
and atrial flutter) and ventricular arrhythmias (VT and VF). The Company is
developing four catheter-based systems for non-surgical percutaneous elimination
of various forms of cardiac arrhythmias: a cooled tip RF ablation catheter; a
cooled RF linear ablation catheter; a cooled laser ablation catheter; and a
visual ablation catheter. The Company is also developing catheter accessory
products that include a series of open lumen steerable guide/mapping catheters
that can be used in conjunction with both its RF and laser catheter ablation
systems.
COOLED TIP RF ABLATION CATHETER SYSTEM. The Company's cooled tip RF ablation
catheter system consists of the Company's proprietary single use, disposable
catheter coupled to a standard RF generator and infusion pump. Additional
support devices are supplied by the hospital. The Company believes that its RF
catheter offers many features not offered by RF catheters currently in clinical
trials or market-approved. The effectiveness of catheters that are currently in
clinical trials or market-approved is somewhat limited by blood coagulation on
overheated catheter electrodes, which requires removal, cleaning and reinsertion
of the catheter for continued use during the procedure. To address this problem,
the Company's RF catheter utilizes a proprietary porous metal electrode through
which saline is perfused during the ablation procedure. The saline irrigation
fluid both insulates the electrode from blood contact and cools the electrode
tip, thereby minimizing coagulum formation on the electrode while maximizing
lesion size.
The Company has completed preclinical studies with respect to the RF catheter
ablation system at Enders Pediatric Research Center in Boston. These studies
demonstrated the ability of the cooled tip RF catheter to produce larger lesions
in the atrium and ventricle without coagulum formation. In February 1996, the
Company received IDE approval to commence a feasibility study in human patients.
This IDE allows the Company to perform 20 procedures at four centers nationwide
for the treatment of SVT. The Company is currently investigating several
clinical sites and anticipates the commencement of clinical trials in the second
half of calendar 1996.
COOLED RF LINEAR ABLATION CATHETER SYSTEM. The Company's cooled RF linear
ablation catheter is an extension of its cooled tip RF catheter ablation system.
The RF linear ablation catheter, currently under development, is intended for
use in atrial flutter and atrial fibrillation, where linear lesions are
considered a more effective therapy. Competitors' catheters use a series of ring
electrodes that are sequentially activated with RF energy. The Company's RF
linear ablation catheter will use a cooled metal electrode with an adjustable
length feature. Using current RF generators, this catheter can form a linear
lesion with one application of energy, thereby reducing procedure time and
enhancing therapeutic effectiveness.
To date, the Company has constructed prototypes and demonstrated in engineering
studies the ability to make narrow linear lesions with the RF linear ablation
catheter. The Company intends to collaborate with a medical research institution
to complete development of this catheter. Based on its progress to date, the
Company anticipates filing an IDE for the treatment of atrial fibrillation with
the RF linear ablation catheter in the first half of calendar 1997.
COOLED LASER ABLATION CATHETER SYSTEM. The Company's cooled laser catheter
ablation system is targeted at the VT market. Laser energy produces full
transmural lesions of the size and depth most likely to achieve consistently
favorable results in the ventricle with minimal trauma. The Company's
proprietary technology uses a two-piece construction consisting of an inner
laser catheter for delivering energy to the tissue and an outer steerable
mapping catheter for identifying the appropriate arrhythmogenic tissue. The
inner catheter consists of a laser fiber housed in a plastic tube that also
contains irrigation channels, electrical wires and temperature instrumentation.
The catheter is coupled to a laser commonly used in urology and surgery. During
delivery of laser light, saline is perfused through the tip to prevent
coagulation of blood and vaporization of tissue. Temperature sensors in the
laser catheter are embedded in the tissue to safely deliver energy to cardiac
tissue.
The Company's laser technology was developed in conjunction with the experience
of Dr. Robert Svenson, a Medical Advisor to the Company, at the Carolinas
Medical Center. Dr. Svenson has treated 60 VT patients in open chest laser
ablation procedures over a six year period with favorable long term results.
Currently, the Company is conducting an IDE feasibility study to demonstrate the
ability of the laser catheter system to eliminate VT through a minimally
invasive percutaneous procedure. The Company's IDE for the feasibility study
provides for the treatment of 15 patients at two centers.
VISUAL ABLATION SYSTEM. The Company is developing a visually assisted laser
ablation system for certain cardiac therapies that may be anatomically guided.
This visually assisted laser ablation technology incorporates much of the
technology from the Company's current laser ablation system. The visual ablation
system technology integrates an imaging fiber bundle and an expandable balloon
into the Company's steerable mapping catheter. Once inside the heart, the
balloon is filled with saline to a diameter of several centimeters. The imaging
fiber is connected to an endoscopic viewing system to show the internal surfaces
of the heart. Once the appropriate anatomical structures are identified, a laser
fiber is positioned within the balloon to deliver energy to the interior surface
of the heart.
To date, the Company has performed several experiments to verify the ability of
this catheter to visualize the interior surfaces of the heart. After the Company
finalizes the design of this product, it will conduct the necessary studies to
file an IDE application with the FDA.
CATHETER ABLATION ACCESSORY PRODUCTS. The Company plans to provide a broad line
of cathether ablation accessory products for the electrophysiologist. These
accessories may include introducers, fixed mapping catheters, steerable
guide/mapping catheters and extension wires. The Company anticipates that some
of these products will be developed as an extension of its ablation technologies
while others will be purchased from other companies on an OEM ("Original
Equipment Manufacturer") basis or otherwise.
The Company has developed a series of open lumen, steerable guide/mapping
catheters that allow point 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 guide/mapping
catheter will allow a physician to position accurately the ablation catheter
within the ventricular chambers of the heart.
FUTURE PRODUCTS. One of the barriers to increased utilization of ablation
therapies is the time required to perform the mapping necessary to identify the
site of the arrhythmogenic tissue. To be as successful as procedures like
angioplasty, ablation procedure times must be reduced to minutes rather than
hours. Such a reduction in procedure time will be possible only with more
sophisticated techniques for measuring electrical patterns in the heart. Current
point mapping systems require the electrophysiologist to manipulate an electrode
catheter inside the heart and then develop a mental image from the electrical
signals. It is anticipated that procedure times will decrease and catheter
placement accuracy will increase if point mapping systems are replaced by
simultaneous mapping from many electrodes (global mapping), whose signals are
computer analyzed and displayed as a three dimensional graph. Such refined
global mapping technology has not yet been fully developed. The Company is
considering many alternatives in the global mapping area, including entering
into a strategic alliance with another company or research institution to
develop a global mapping system, or a direct investment in a technology or
business.
MANUFACTURING
The Company's manufacturing strategy is focused on the extensive use of proven
process vendors and the utilization of key component suppliers, with final
product assembly, testing, inspection and packaging at the Company's facilities.
The use of outside process vendors minimizes facility and equipment investment,
while providing access to resources that provide a high level of technical
ability with minimal production volume constraints. Key process vendors provide
laser welding, electronic assembly, sterilization, and other process
requirements. Component suppliers provide the Company with high quality
materials and the ability to increase production levels.
The Company currently manufactures its products at its U.S. facility in
Minneapolis, Minnesota, where it employs 55 persons dedicated to manufacturing.
The Minneapolis facility recently received ISO 9002 certification, which
certifies the quality management systems in all aspects of its business, with a
primary emphasis on manufacturing. In addition, the Company has contracted with
an ISO 9002 certified manufacturer in Scotland that will be responsible for
final assembly, testing, packaging, sterilization and labeling of its ICDs and
associated external products for the Company's European sales and clinical
trials. The Company's manufacturing facilities are required to meet and adhere
to all applicable requirements of U.S. and international regulatory agencies,
including current Good Manufacturing Practice regulations and Active Implantable
Medical Device Directive ("AIMDD") standards. These facilities are subject to
periodic inspection and surveillance audits by both U.S. and international
regulatory agencies.
The manufacturing process for the Company's products consists primarily of
assembly of purchased components, testing and inspection operations, packaging
and sterilization. Components are purchased according to the Company's
specifications. A number of significant components, such as capacitors,
batteries, integrated circuits and lead systems, are purchased from sole source
suppliers. For certain of these components, there are relatively few sources of
supply, and establishing additional or replacement suppliers for such components
cannot be accomplished quickly. In addition, each supplier and each component
must be qualified with the FDA, and the time required for such qualification may
be lengthy. Although the Company tries to maintain sufficient quantities of
inventory of such components to minimize production delays or interruptions,
there can be no assurance that the Company will find suitable alternatives at
reasonable prices, if at all, or that any such alternatives will remain
available to the Company. The Company's inability to obtain acceptable
components in a timely manner or find and maintain suitable replacement
suppliers would have a material adverse effect on the Company's ability to
manufacture its products.
Pursuant to the OEM Agreement with Pacesetter, if the Company fails to fulfill
all product quantity, quality and specification requirements with respect to the
Company's ICD and laser catheter ablation products, Pacesetter may elect to
manufacture these products and pay the Company a royalty that is substantially
less than the transfer price payment the Company would have received had it
manufactured the products and sold them to Pacesetter. 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 equals
the net margin, as determined in the OEM Agreement, on the products had the
Company manufactured the products and sold them to Pacesetter. To date,
Pacesetter has not elected to manufacture any of the Company's products.
SALES AND MARKETING
The Company intends to market and sell its ICD and catheter ablation products on
a worldwide basis through three channels: (i) a direct Company sales force in
the United States; (ii) direct sales representatives and independent
distributors outside the United States; and (iii) its strategic alliance with
Pacesetter. In preparation for product launch of the SENTINEL 2000 in Europe,
the Company has formed Angeion Europe and established distributorships or direct
sales representation in a number of European countries.
The Company will directly market and sell its products under its own label
through its own sales force and through independent distributors. Under the OEM
Agreement with Pacesetter, however, such independent 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. The Company has distributors in Italy, the United Kingdom, Belgium,
Austria and Holland, and direct sales representation in Germany. In December
1995, the Company established its United Kingdom subsidiary, Angeion Europe, to
facilitate its clinical trials of the SENTINEL series of ICDs and expand its
European sales and distribution activities.
The Company will also 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 the SENTINEL 2000, the SENTINEL 2010 series and all
other ICD products that are commercially marketed within two years of the first
commercial sales of the SENTINEL 2010 model ICD. Pacesetter has similar rights
with respect to laser catheter products that are commercially marketed within
two years of the first commercial sale of a laser catheter product. Pacesetter's
co-exclusive marketing period will continue for at least seven years from the
date of the OEM Agreement (February 1993), 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 marketing capability of Pacesetter will be of significant value in
establishing a worldwide market presence for the Company's products.
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 May 15, 1996, the
Company had 63 U.S. issued patents, 16 U.S. patents which have been allowed
but have not yet issued, relating to its research and development products,
36 U.S. patent applications pending, 27 foreign patent applications pending,
and additional U.S. patent applications in preparation.
The Company's patented features and technologies with respect to its ICDs
include: (i) its dual battery system; (ii) a more efficient biphasic waveform
that lowers defibrillation energy thresholds; (iii) the HOT CAN electrode
system, which uses the SENTINEL housing as an electrode that can be programmed
on and off; and (iv) an energy delivery system that permits the ICD to increase
shock effectiveness by directing the current more uniformly throughout the
heart. In addition, the Company's RF catheter utilizes a patented porous metal
electrode through which saline is perfused during the ablation procedure, and
the Company's laser catheter utilizes a patented two-piece construction
consisting of an inner laser catheter for delivering energy to the tissue and an
outer steerable mapping catheter for identifying the appropriate arrhythmogenic
tissue. 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.
The Company conducts 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 and the Company's policy
of respecting such rights and not knowingly or willfully infringing such rights,
there can be no assurance that allegations of such infringement will not be
made, or that if made such allegations would not be sustained if litigated.
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 will be adjudicated to be valid if challenged,
or otherwise 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.
The Company also relies on trade secrets and proprietary technology. 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.
Robert Svenson's efforts in connection with the development of 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 with Pacesetter, the Company and Pacesetter
have agreed to cross-license certain of their patents and patent applications.
Under this License Agreement, Pacesetter grants the Company certain
non-exclusive rights to certain patents and patent applications relating to
Pacesetter's ICD products as well as to manufacturing improvements made by
Pacesetter with respect to the Company's ICD products. With respect to the
Company's ICD products, the License Agreement divides the Company's patents and
patent applications into two categories: a first category for which the License
Agreement grants certain exclusive rights for a limited exclusive period, 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. The License Agreement
also gives Pacesetter the right to enforce the first category of ICD patents and
patent applications during the limited exclusive period. The License Agreement
provides that the Company always has the right to sublicense all of its patents
and patent applications to third parties to avoid or settle a pending patent
infringement lawsuit, provided that during the limited 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.
The License Agreement also grants Pacesetter a conditional right to sublicense
the first category of ICD patents and patent applications (and certain
continuation applications) to up to three separate parties, provided that the
Company receives the same cross-license from the sublicensee as Pacesetter
receives (or, if Pacesetter also sublicenses 20 or more of its own patents or
patent applications, that Pacesetter uses its best efforts to secure such
cross-license rights for the Company). The Company has been advised that
Pacesetter is under a pre-existing obligation, by virtue of a previous license
agreement with a major competitor, to license or offer to license certain patent
rights that Pacesetter may acquire to such competitor, and the Company is aware
that a dispute has arisen between these parties with respect to the ability of
Pacesetter to receive royalties or negotiate cross-licenses with such competitor
in connection with the first category of ICD patents and patent applications.
Because the Company is not a party to this dispute, the Company has no control
over or knowledge of any potential outcome of this dispute and is not
necessarily bound by the outcome of this dispute. Pacesetter has also recently
initiated a lawsuit against CPI relating to certain pacemaker and ICD patents.
Although at this time the first category of ICD patents and patent applications
are not at issue in this lawsuit, the Company has no control over whether
Pacesetter will seek to cause such patents and patent applications to become
involved in such lawsuit or any lawsuit.
Because the License Agreement only requires Pacesetter to secure (or, in certain
circumstances, to use its best efforts to secure) for the Company the same
cross-license rights that it receives from third parties in connection with
sublicenses under the License Agreement, there can be no assurance that the
Company will receive necessary cross-licenses from third parties in exchange for
the grant of sublicenses to the first category of ICD patents and patent
applications. These ICD patents and patent applications, however, represent less
than one-half of the Company's current ICD patent portfolio. As a result, even
if the Company does not receive necessary cross-licenses from third parties in
connection with sublicenses under the License Agreement, the Company believes
that the balance of its patent portfolio should be sufficient to enable the
Company to independently negotiate cross-licenses or otherwise settle
intellectual property disputes with competitors with respect to the Company's
products. Any reduction in the number of patents available to the Company in
connection with any such intellectual property disputes, however, could affect
the ability of the Company to ultimately settle any such disputes on reasonable
terms, if at all, which could have a material adverse effect on the Company.
RESEARCH AND DEVELOPMENT
Research and development expenditures for continuing operations were $4,485,818,
$5,158,738 and $7,815,391 in fiscal 1993, 1994 and 1995, respectively. Research
and development expenditures for the nine months ended April 30, 1996 were
$6,717,469. 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 66.8%, 77.2% and 86.7% of the Company's research and
development expenditures in fiscal 1993, 1994 and 1995, respectively, were
directly attributable to the SENTINEL ICD products. Approximately 87.8% of the
Company's research and development expenditures in the nine months ended April
30, 1996 were directly attributable to the Company's ICD products. The Company
expects that research and development expenses will continue to increase as the
Company expands human clinical trials and enhances current products while
accelerating the development of potential new products.
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 the Company. While antiarrhythmic
drugs and cardiac ablation therapies (like the Company's laser catheter ablation
system) compete in this 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"), 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. In August 1985, the FDA approved CPI's first commercial defibrillator to
be marketed in the U.S. Medtronic was the second company to receive FDA approval
(February 1993) and Ventritex was the third (April 1993).
The Company believes, based upon industry analyses and attendance by management
at industry meetings, that its SENTINEL series of ICDs are among the smallest
and most technologically advanced ICDs currently in clinical trials or
market-approved. 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 common features.
Any product developed by the Company that gains regulatory approval will have to
compete for market acceptance and market share. 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. The Company expects that
competition will also be based on device size and weight, longevity, ease of
programmability, ability to provide diagnostic capability, 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 for, rather than a treatment
of, SVT and 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 potentially offer 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 Corporation (a subsidiary of Johnson & Johnson), Boston Scientific
Corporation, Medtronic, EP Technologies, Inc., Cardiac Pathways Corporation,
Electro-Catheter Corp. and St. Jude Medical, Inc. (which purchased Daig
Corporation). These companies are primarily involved in the treatment of SVT
with RF energy-based catheters. Although RF catheters are not currently
considered effective treatments relating to the ventricle, certain companies
are experimenting with the use of RF energy, as well as other forms of
energy, in the ventricle.
THIRD PARTY REIMBURSEMENT
The Company's ability to commercialize its products successfully 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.
In November 1995 the FDA and HCFA entered into an interagency agreement
establishing a process pursuant to which the FDA will place all IDEs that it
approves into one of two categories, Category A or Category B. Category A
devices are considered experimental and for which the "absolute risk" of the
device type has not been established (i.e., initial questions of safety and
effectiveness have not been resolved for the device type) and will not be
eligible for Medicare reimbursement. Category B devices are considered
non-experimental or investigative devices where the incremental risk is the
primary risk in question (i.e., underlying questions of safety and effectiveness
of that device type have been resolved), or it is known that the device type can
be safe and effective because, for example, other manufacturers have obtained
FDA approval for that device type. A Category B device will be eligible for
Medicare reimbursement if it meets all other Medicare coverage requirements. The
SENTINEL 2000 ICD, and the RF and laser catheter ablation systems are Category B
devices and are currently being reimbursed by HCFA and third-party payors.
Even if the Company obtains PMAs for its products, some payors may deny coverage
until the procedures become generally accepted by the medical profession. There
can be no assurance that HCFA and third-party payors will continue to reimburse
any of the Company's products. 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. 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 prices of the
Company's products.
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.
These medical devices are also subject to ongoing controls and regulations under
the FDC Act, 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 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 Company has received IDE approval with
respect to its SENTINEL 2000 system and both the RF and laser catheter ablation
systems.
The second stage of formal FDA premarket approval is the PMA application. The
PMA, which is submitted after clinical evaluations are completed under an 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 a PMA for any products, which is necessary to market the
Company's products commercially in the U.S. in a timely manner, if at all.
Delays in obtaining marketing approvals and clearances in the U.S. could have a
material adverse effect on the Company.
The Company is required to maintain 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 AIMDD was fully
implemented in the EU, which is expected to make EU regulatory requirements 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 manufacturing capacity
abroad. The Company has received export approval under FDA regulations that
allows shipment of its products to the United Kingdom, and has also contracted
with a manufacturer in Scotland to manufacture its products for use in Europe.
See "-- Manufacturing."
Under the AIMDD, the Company is subject to "prior notice" of intent to conduct
clinical trials in the EU. This process, similar to the FDA IDE process,
requires regulatory documents and test information to be submitted to the
governmental agency of each country in which the Company intends to conduct
clinical trials. In order to commence commercial marketing of its products in
the EU, the Company is required to file for a CE Mark approval. In April 1996,
the Company received CE Mark approval for the SENTINEL 2000 from TUV Product
Service, an organization that certifies the safety of medical device products
and the quality assurance systems put in place by the manufacturer of the
medical device. There can be no assurance, however, that the Company will be
successful in obtaining CE Mark approval for any other products in a timely
manner, if at all, which could have a material adverse effect on the Company.
EMPLOYEES
As of April 30, 1996, the Company had 153 full-time employees, including 17
engaged in administration, 55 in manufacturing, 69 in research and development,
and 12 in regulatory and clinical. There are no unions representing the
Company's employees. The Company believes that its relations with its employees
are good.
FACILITIES
The Company leases approximately 52,000 square feet of office and manufacturing
space in Minneapolis, 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 system programs. Rent payments
under the lease are approximately $502,000 per year, including shared real
estate taxes and operating expenses. The primary 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
commercially reasonable price when needed.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company and their ages, as
of April 30, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
<S> <C> <C>
Whitney A. McFarlin 55 Chairman of the Board, President and Chief Executive Officer
David L. Christofferson 58 Vice President, Chief Financial Officer and Secretary
Robert S. Garin 53 Vice President of Human Resources
Jennifer M. Marrone 40 Vice President of Regulatory and Clinical Affairs
Gary L. Payment 52 Vice President of Operations
T.V. Rao 53 Vice President of Sales and Marketing
William J. Rissmann 46 Vice President of Engineering
Arnold A. Angeloni 53 Director
Dennis E. Evans 56 Director
Lyle D. Joyce, M.D., Ph.D. 49 Director
Joseph C. Kiser, M.D. 63 Director
Donald D. Maurer 59 Director
Glen Taylor 55 Director
</TABLE>
WHITNEY A. MCFARLIN has been President, Chief Executive Officer and Chairman of
the Board of the Company since September 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, 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 and Zero Corp.
DAVID L. CHRISTOFFERSON joined the Company as Vice President and Chief Financial
Officer in January 1991. Mr. Christofferson was elected as the Company's
Secretary in April 1993, and was elected to the Board of Directors of Angeion
Europe in December 1995. From April 1988 to December 1990, he was a Division
Manager for Excel Office Products, a company he founded in 1986, and which was
acquired in 1988 by General Office Products Company. From 1987 through 1989, he
was Chairman and Chief Financial Officer of Medical Wellness Technologies, Inc.,
a distributor of pain control devices. Prior to 1986, 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. In December 1995, Mr. Garin was elected to the Board of
Directors of Angeion Europe. 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.
JENNIFER M. MARRONE joined the Company in April 1995 as Vice President of
Regulatory and Clinical Affairs. From November 1993 to April 1995, Ms. Marrone
was Director of Regulatory, Clinical and Quality Assurance/Compliance at Empi,
Inc., a manufacturer of noninvasive biomedical devices. From 1979 to 1993, Ms.
Marrone served in a number of capacities 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 L. PAYMENT joined the Company in 1994 as Vice President of Operations. From
1985 to 1994, Mr. Payment held various positions at CPI, most recently as
Director of Manufacturing. Prior to joining CPI, Mr. Payment held several
positions at Medtronic, including Director of Operations, Manufacturing Program
Manager and Director of Quality Assurance.
T.V. RAO joined the Company in August 1995 as Vice President of Sales and
Marketing. In December 1995, Mr. Rao was elected Chairman of the Board of
Directors of Angeion Europe. From 1994 to 1995, Mr. Rao served as Vice President
of Sales and Marketing for Brunswick Biomedical Corporation, a medical device
company. From 1980 to 1994, Mr. Rao served in a number of capacities at
Medtronic, including Director of Product Management for the Tachyarrhythmia
Division, Director of International Marketing for pacing products, Product
Marketing Manager for tachyarrhythmia, and Manufacturing Engineering Manager for
the Energy Technology Division. From 1969 to 1980, Mr. Rao served in various
manufacturing engineering capacities at Onan Corporation.
WILLIAM J. RISSMANN joined the Company in November 1994 as Vice President of
Engineering. Most recently, Mr. Rissmann was Director of Research and
Development in the Advanced Tachy Products division at CPI. From 1990 to
1994, he held several positions at CPI, including Director of Quality Control
and Test Engineering and Manager of Product Planning and Administration. Mr.
Rissmann also has prior experience at St. Jude Medical and Medtronic.
ARNOLD A. ANGELONI has been President of Gateway Alliance, LLC, a financial
consulting firm for start-up ventures and business consolidations, since early
1996. From 1961 to 1995, Mr. Angeloni was employed by Deluxe Corporation, a
provider of check products and services to the financial payments industry, in
various administrative, marketing, and operations positions, most recently as
Senior Vice President and President of the Business Systems Division. Mr.
Angeloni has been a director of the Company since 1990.
DENNIS E. EVANS has been President and Chief Executive Officer of Hanrow
Financial Group Ltd., a merchant banking partnership, since February 1989. He
also serves on the Board of Directors of Minnesota Power & Light Co. and
Astrocom Corporation. Mr. Evans has been a director of the Company since
1990.
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. Dr. Joyce has been a director of
the Company since 1988.
JOSEPH C. KISER, M.D. is a cardiothoracic surgeon (retired) 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 practiced cardiothoracic surgery at Abbott Northwestern Hospital as well
as other Minneapolis/St. Paul hospitals for more than 20 years prior to his
retirement in January 1995. Dr. Kiser has been a director of the Company
since 1988.
DONALD D. MAURER was named a director of the Company in January 1996. Mr.
Maurer currently serves as Chairman of the Board and Chief Scientific Officer
of Empi, Inc., a public company. Mr. Maurer founded Empi in 1977, became
Chairman of the Board in 1978, and was named President and Chief Executive
Officer in 1979. Mr. Maurer is also the Chairman of the Board of Medical
Alley, a Minneapolis professional organization representing the interests of
the medical industry.
GLEN TAYLOR has been the Chief Executive Officer and Chairman of the Board of
Taylor Corporation since 1975. Taylor Corporation employs more than 8,000
individuals throughout 60 operating divisions in 15 states, Canada, Europe,
Mexico and Australia. Taylor Corporation's businesses include printing, banking,
direct mail marketing, office supplies and electrical manufacturing. Mr. Taylor
also is the owner of the Minnesota Timberwolves, a National Basketball
Association franchise. From 1980 to 1990, Mr. Taylor served as a Minnesota State
Senator. Mr. Taylor has been a director of the Company since 1992.
MEDICAL ADVISORS
In addition to the Company's Board of Directors and full-time employees, the
Company utilizes 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 care professionals. Listed below are the
Company's Medical Advisors:
<TABLE>
<CAPTION>
NAME SERVED SINCE CURRENT POSITIONS
<S> <C> <C>
Robert G. Hauser, M.D. 1994 * Special Adviser to the Chairman and Chief Executive
Officer of the Company.
* President of, and a Cardiologist with, The Minneapolis
Heart Institute (Minneapolis, MN ).
Lyle D. Joyce, M.D., Ph.D. 1988 * President, Minnesota Thoracic Group, P.A.
* Cardiothoracic surgeon with The Minneapolis Heart
Institute (Minneapolis, MN ).
Joseph C. Kiser, M.D. 1988 * Cardiothoracic surgeon (retired) with, and founder
of, The Minneapolis Heart Institute and The
Minneapolis Heart Institute Foundation.
Fabio Leonelli, M.D. 1992 * Assistant Professor of Medicine at the University of
Kentucky.
J. Philip Saul, M.D. 1995 * Associate Professor of Pediatrics and Health Sciences
and Technology at the Harvard Medical School.
* Staff Pediatric Electrophysiologist and Director of
the Cardiology Physiological Research Laboratories
in the Department of Cardiology at Children's
Hospital (Boston, MA).
Robert H. Svenson, M.D. 1991 * Director of Laser and
Applied Technologies Laboratory
at the Carolinas Medical Center (Charlotte, NC).
* Adjunct Professor of Medicine at the University of
North Carolina.
Mark A. Wood, M.D. 1993 * Assistant Professor of Internal Medicine at the
Medical College of Virginia.
* Co-Director of Cardiac Electrophysiology
Laboratories at the Medical College of Virginia and
the McGuire Veterans Administration Medical Center
(Richmond, VA ).
</TABLE>
STAR TEAM
As a supplement to its Medical Advisors, in May 1996 the Company established its
Strategic Tachyarrhythmia Advisory Resource Team (the "STAR Team"). The STAR
Team is made up of leading electrophysiologists, who are recognized as experts
in the use of biomedical devices for the management and treatment of cardiac
arrhythmias. The following is a brief summary of the STAR Team:
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. Dr. Benditt is a past
president of the North American Society of Pacing and Electrophysiology
("NASPE") and the American Heart Association -- Minnesota Affiliate, and a
Fellow of the American College of Cardiology. Dr. Benditt serves on the
editorial boards of many peer reviewed journals including the AMERICAN
JOURNAL OF CARDIOLOGY and the JOURNAL OF CARDIOVASCULAR ELECTROPHYSIOLOGY.
FRANCIS E. MARCHLINSKI, M.D. is a Professor of Medicine, College of
Pennsylvania, Hahnemann University. Dr. Marchlinski is a member of NASPE and
a Fellow of the American College of Cardiology. Dr. Marchlinski serves on the
editorial boards of many peer reviewed journals including the AMERICAN
JOURNAL OF CARDIOLOGY, PACING AND CLINICAL ELECTROPHYSIOLOGY and the JOURNAL
OF CARDIOVASCULAR ELECTROPHYSIOLOGY.
SANJEEV SAKSENA, M.D. is a Clinical Associate Professor of Medicine and
Pediatrics -- New Jersey Medical School, and a Director of Arrhythmia &
Pacemaker Services, Eastern Heart Institute in Passaic, New Jersey. Dr.
Saksena is the Scientific Chair and President-Elect for NASPE and a Fellow of
the American College of Cardiology. Dr. Saksena serves on the editorial
boards of many peer reviewed journals including the AMERICAN JOURNAL OF
CARDIOLOGY, PACING AND CLINICAL ELECTROPHYSIOLOGY, AMERICAN HEART JOURNAL and
the JOURNAL OF CARDIOVASCULAR ELECTROPHYSIOLOGY. Dr. Saksena is also the
Chairman of the Government Relations Committee of NASPE and a member of the
Antiarrhythimics vs. Implantable Defibrillators clinical trial planning and
steering committee of the National Institute of Health.
JOHN F. SWARTZ III, M.D. is the Director, Cardiac Electrophysiology, St. Francis
Medical Center in Tulsa, Oklahoma. Dr. Swartz represents the private practice
customers of the electrophysiology community for the Company. Dr. Swartz is a
member of the American College of Cardiology, and the American Heart
Association. Dr. Swartz is a reviewer for peer reviewed journals including
CIRCULATION, JOURNAL OF AMERICAN COLLEGE OF CARDIOLOGY and AMERICAN JOURNAL OF
CARDIOLOGY.
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, and is a Professor, Department of
Internal Medicine, at The Ohio State University. Dr. Tchou is a member of
NASPE and a Fellow of the American College of Cardiology. Dr. Tchou reviews
manuscripts for such journals as CIRCULATION, JOURNAL OF AMERICAN COLLEGE OF
CARDIOLOGY, PACING AND CARDIAC ELECTROPHYSIOLOGY and the JOURNAL OF
CARDIOVASCULAR ELECTROPHYSIOLOGY.
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 April 30, 1996, unless otherwise noted by,
(i) Pacesetter, (ii) each director and current executive officer, and (iii) all
executive officers and directors of the Company as a group. To its knowledge,
the Company has no beneficial owner of more than 5% of the outstanding Common
Stock. 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.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
PERCENT OF CLASS
NAME AMOUNT BEFORE OFFERING AFTER OFFERING
<S> <C> <C> <C>
Pacesetter, Inc. 1,125,000(2) 4.4% 3.7%
Whitney A. McFarlin 358,110(3) 1.5 1.2
David L. Christofferson 145,047(4) * *
Robert S. Garin 10,750(5) * *
Jennifer M. Marrone 10,000(6) * *
Gary L. Payment 28,530(7) * *
T.V. Rao 0 -- --
William J. Rissman 16,250(8) * *
Arnold A. Angeloni 71,902(9) * *
Dennis E. Evans 744,935(10) 3.1 2.5
Lyle D. Joyce, M.D., Ph.D 279,435(11) 1.2 *
Joseph C. Kiser, M.D 377,836(12) 1.6 1.3
Donald D. Maurer 0 -- --
Glen Taylor 473,091(13) 1.9 1.6
All current directors and executive
officers as a group (13 persons) 2,515,886(14) 10.0 8.3
</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. As of April 30, 1996, there were 24,212,207
shares of Common Stock outstanding.
(2) As set forth in a Schedule 13D filed with the Securities and Exchange
Commission on October 11, 1994, this amount consists of (i) 875,000 shares
of Common Stock which may be acquired within 60 days upon the conversion
of Series A 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.
(3) Includes 355,156 shares which may be acquired within 60 days upon the
exercise of options.
(4) Includes 144,747 shares which may be acquired within 60 days upon the
exercise of options.
(5) Includes 8,750 shares which may be acquired within 60 days upon the
exercise of options.
(6) Consists of 10,000 shares which may be acquired within 60 days upon the
exercise of options.
(7) Includes 25,000 shares which may be acquired within 60 days upon the
exercise of options.
(8) Consists of 16,250 shares which may be acquired within 60 days upon the
exercise of options.
(9) Includes 45,000 shares which may be acquired within 60 days upon the
exercise of options.
(10) Includes 610,000 shares beneficially owned by Hanrow Financial Group Ltd.
("Hanrow Financial"). Hanrow Financial is the general partner of Hanrow
Capital Fund and Hanrow Capital Fund III, which own 30,000 and 580,000
shares of Common Stock, respectively. Also includes 41,666 shares which
may be acquired within 60 days upon the exercise of warrants beneficially
owned by Hanrow Financial, 41,667 shares which may be acquired within 60
days upon the exercise of warrants owned by Hanrow Business Finance, Inc.,
an affiliate of Hanrow Financial, and 21,000 shares which may be acquired
within 60 days upon the exercise of options held by Mr. Evans. Mr. Evans
is the President and Chief Executive Officer of Hanrow Financial.
(11) Includes 91,000 shares held by the MTA Retirement Plan and Trust FBO Lyle
D. Joyce, 7,500 shares which may be acquired within 60 days upon the
exercise of warrants held by the MTA Retirement Plan and Trust FBO Lyle D.
Joyce, 13,333 shares which may be acquired within 60 days upon the
exercise of warrants and 39,000 shares which may be acquired within 60
days upon the exercise of options.
(12) Includes 43,567 shares held by the MTA Retirement Plan and Trust FBO
Joseph C. Kiser and 80,833 shares which may be acquired by Dr. Kiser
within 60 days upon the exercise of stock options and warrants.
(13) Includes 200,000 shares which may be acquired within 60 days upon the
exercise of warrants and 5,000 shares may be acquired within 60 days upon
the exercise of options.
(14) Includes an aggregate of 1,054,902 shares which may be acquired within 60
days upon the exercise of outstanding options and warrants beneficially
owned by current directors and executive officers.
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"), 300,000 shares of
Preferred Stock, Series B, par value $.01 per share (the "Series B Junior
Preferred"), and 1,225,000 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 April 30, 1996, there were 24,212,207 shares of Common Stock issued and
outstanding, options outstanding to purchase a total of 2,515,066 shares of
Common Stock, and a debenture convertible into 250,000 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 Preferred 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.
SERIES A PREFERRED
As of April 30, 1996, 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 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 an equivalent 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
As of April 30, 1996, the Company had outstanding warrants to purchase an
aggregate of 910,000 shares of its Common Stock. The weighted average exercise
price per share is $2.04. Such warrants are exercisable at present and for
periods of up to three 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.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company is governed by the provisions of Sections 302A.671 and 302A.673 of
the Minnesota Business Corporation Act. These anti-takeover provisions could
potentially 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 generally 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.
SHAREHOLDERS' RIGHTS PLAN
The Company has in effect a Shareholders' Rights Plan (the "Rights Plan"),
pursuant to which each share of Common Stock now outstanding has, and each share
offered hereby or issued prior to a Distribution Date will have, attached to it
one Preferred Stock Purchase Right (a "Right") that entitles the holder thereof
to purchase from the Company one one-thousandth of a share of Series B Junior
Preferred Stock of the Company at a purchase price of $70.00, subject to
adjustment. Separate certificates evidencing Rights will not be issued and the
Rights will not be exercisable until the occurrence of a Distribution Date, as
described below. All Rights expire on April 7, 2006, unless earlier exercised or
redeemed.
A Distribution Date will occur upon the earlier of ten business days after (i) a
public announcement that a person or group (an "Acquiring Person") has acquired
beneficial ownership of 15% or more of the Company's Common Stock, (ii) the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 15% or more of the Common Stock, or (iii) a
majority of the members of the Board who are unaffiliated with an Acquiring
Person or Adverse Person (as defined below) determines that any person or group
is an Adverse Person. Pursuant to the Rights Plan, the Board may make an Adverse
Person determination if it finds that a holder of at least 10% of the Company's
outstanding shares (i) acquired such shares either to cause the Company to
repurchase the shares or to enter into a transaction intended to provide such
person with short-term financial gain under circumstances that are not in the
best long-term interests of the Company's shareholders, or (ii) is causing or is
reasonably likely to cause a material adverse impact on the business or
prospects of the Company.
If a merger of the Company into an Acquiring Person occurs, any person acquires
beneficial ownership of 15% or more of the Company's Common Stock (except
pursuant to an offer for 100% of the shares approved by a majority of the
independent directors of the Company) or certain defined self-dealing events
between the Company and an Acquiring Person occur, each Right automatically
adjusts to permit the holder thereof to purchase that number of shares of Common
Stock which at the time of such transaction would have a market value of two
times the exercise price of the Right. However, Rights are not exercisable
following the occurrence of any of the events set forth above until the Rights
are no longer redeemable by the Company. Notwithstanding any of the foregoing,
all Rights that are, or (under certain circumstances) were, beneficially owned
by any Acquiring Person become null and void. The Company has the option, if the
Rights become exercisable, to exchange one share of Common Stock, or substitute
consideration consisting of cash, securities of the Company or other assets, for
each Right, except the void Rights.
At any time prior to the earlier to occur of (i) a person becoming an Acquiring
Person or (ii) the expiration of the Rights, the Company may redeem the Rights
in whole at a price of $.005 per Right (payable in cash or stock).
Any of the provisions of the Rights Plan may be amended, without the vote of
Rights holders, by the Board of Directors prior to the Distribution Date. After
the Distribution Date, certain limitations apply to the ability of the Board to
amend the Rights Plan.
The Rights Plan may have an anti-takeover effect in that any person or group
acquiring control of the Company without the consent of the Company's Board of
Directors could suffer substantial dilution through operation of the Rights
Plan.
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 1,269,849 shares issued or 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 the Series A
Preferred and a convertible debenture. The Company filed a Registration
Statement on Form S-3 on April 30, 1996 registering the resale of all of the
foregoing 2,394,849 shares, which Registration Statement is expected to be
declared effective prior to the commencement of this offering.
UNDERWRITING
The Underwriters named below, acting through their representatives, Raymond
James & Associates, Inc., NatWest Securities Limited and Salomon Brothers Inc
(the "Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase an aggregate of 5,000,000
shares of Common Stock from the Company at the Price to Public set forth on the
cover page of this Prospectus, less the underwriting discounts and commissions,
in the amounts set forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
<S> <C>
Raymond James & Associates, Inc ....................
NatWest Securities Limited .........................
Salomon Brothers Inc ...............................
Total ............................................. 5,000,000
</TABLE>
The nature of the Underwriters' obligations under the Underwriting Agreement is
such that all shares of the Common Stock offered hereby, excluding shares
covered by the over-allotment option granted to the Underwriters, must be
purchased if any are purchased. The Company has been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public initially at the Price to Public set forth on the cover page
of this Prospectus, and to certain dealers at such price less a concession not
in excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to other dealers. After the
public offering, the offering price and other selling terms may be changed by
the Representatives.
The Company has granted to the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to 750,000 additional shares
of the Common Stock solely to cover over-allotments, if any, at the same price
per share to be paid by the Underwriters for the other shares of Common Stock
offered hereby. If the Underwriters purchase any such additional shares pursuant
to the over-allotment option, each of the Underwriters will be committed to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments, if any, in connection with the offering made hereby.
The Company and each of its officers and directors and certain of their
affiliates have agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock of the Company, or securities convertible
into or exercisable for shares of Common Stock of the Company, without the prior
consent of Raymond James & Associates, Inc., during the period beginning June 1,
1996 and ending 90 days from the effective date of the Registration Statement,
inclusive. This restriction does not apply to shares of Common Stock issued by
the Company pursuant to the conversion or exercise of stock options, warrants,
convertible preferred stock or convertible debentures outstanding on the
effective date of the Registration Statement.
In connection with this offering, the Underwriters may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market
immediately prior to the commencement of sales in this offering, in accordance
with Rule 10b-6A under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). Passive market making consists of displaying bids on the Nasdaq
National Market limited by the bid prices of independent market makers and
purchases limited by such prices. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the Common Stock during a specified prior period
and must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including certain liabilities under the Securities Act.
Such indemnification is limited or unavailable in certain circumstances,
including where legally unavailable.
NatWest Securities Limited, a United Kingdom broker-dealer and a member of the
Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the shares of Common Stock offered hereby and subject to certain
exceptions, it will not offer or sell any shares of Common Stock within the
United States, its territories or possessions or to persons who are citizens
thereof or residents therein. The Underwriting Agreement does not limit the sale
of the shares of Common Stock offered hereby outside the U.S.
NatWest Securities Limited has also represented and agreed that (i) it has not
offered or sold and will not offer or sell any Common Stock to persons in the
United Kingdom prior to admission of the Common Stock to listing in accordance
with Part IV of the Financial Services Act 1986 (the "Act") except to persons
whose ordinary activities involve them in acquiring, managing, holding or
disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 or the Act; (ii) it has complied
and will comply with all applicable provisions of the Act with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on, in the United Kingdom any document received by it in
connection with the issue of the Common Stock, other than any document which
consists of or any part of listing particulars, supplementary listing
particulars or any other document or instrument required or permitted to be
published by listing rules under Part IV of the Act, to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise be lawfully issued or passed on.
The Company has agreed that, until August 1998, Raymond James & Associates, Inc.
shall have a right of first refusal to serve as lead manager or agent in
connection with any proposed offering of securities by the Company or by any
affiliates thereof, to serve 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 & Associates, Inc. agrees to
render its assistance for any such transaction, it shall be for fees and
expenses competitive with those that would likely be charged by comparable
investment banking firms. As of April 30, 1996, Raymond James & Associates, Inc.
owned of record 359,850 shares of Common Stock of the Company. On April 30,
1996, the Company filed a registration statement on Form S-3 registering for
resale all of such shares, which registration statement is expected to become
effective prior to the commencement of this offering.
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 Underwriters by Hale and Dorr, Boston, Massachusetts.
EXPERTS
The financial statements of Angeion Corporation as of July 31, 1994 and 1995,
and for each of the years in the three-year period ended July 31, 1995, included
and incorporated herein and in the registration statement by reference, have
been so included and incorporated herein by reference in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
included and incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The statements in the Prospectus under the captions "Risk Factors -- Importance
of Intellectual Property Protection" and "Business -- Intellectual Property" and
other references herein to intellectual property-related matters have been
reviewed and approved by Patterson & Keough, P.A., patent counsel to the
Company, as experts on such matters, and are included herein in reliance upon
that review and approval.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of 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 Offices of the
Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048; and Chicago Regional Office, Citicorp 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.
The Company has filed with the Commission a Registration Statement on Form S-3
under the Securities Act. This Prospectus does not contain all of the
information, exhibits and undertakings set forth in the Registration Statement,
certain portions of which are omitted as permitted by the rules and regulations
of the Commission. Copies of the Registration Statement and the exhibits are on
file with the Commission and may be obtained, upon payment of the fee prescribed
by the Commission, or may be examined, without charge, at the offices of the
Commission set forth above. For further information, reference is made to the
Registration Statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS 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, 1995; (b) Quarterly Reports on Form
10-Q for the quarters ended October 31, 1995, January 31, 1996 and April 30,
1996; (c) Current Report on Form 8-K, dated October 31, 1995; (d) Current Report
on Form 8-K, dated April 8, 1996, as amended on May 17, 1996; (e) all other
reports filed by the Company pursuant to Sections 13(a) or 15(d) of the Exchange
Act since July 31, 1995; (f) the description of the Company's Common Stock
contained in its Registration Statement on Form 8-A and any amendments or
reports filed for the purpose of updating such description; and (g) the
description of the Company's Series B Junior Preferred Stock and rights to
purchase Series B Junior Preferred Stock contained in its Registration Statement
on Form 8-A and any amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company with the Commission 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 of the Shares 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 incorporated or deemed to be
incorporated herein by reference 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 herein by reference modifies or supersedes such statement. Any such
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: Chief
Financial Officer; telephone number: (612) 550-9388.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report F-2
Balance Sheets as of July 31, 1994 and 1995 F-3
Statements of Operations for the Years Ended July 31, 1993, 1994 and 1995 F-4
Statements of Shareholders' Equity (Deficit) for the Years Ended July 31, 1993,
1994 and 1995 F-5
Statements of Cash Flows for the Years Ended July 31, 1993, 1994 and 1995 F-6
Notes to Financial Statements F-7
Unaudited Consolidated Balance Sheet as of April 30, 1996 F-12
Unaudited Consolidated Statements of Operations for the Nine Months Ended
April 30, 1995 and 1996 F-13
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended
April 30, 1995 and 1996 F-14
Notes to Unaudited Consolidated 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 1995, 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, 1995. 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 1995, and the results of its operations and its cash flows for each
of the years in the three-year period ended July 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 14, 1995
ANGEION CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
1994 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,127,358 $ 2,367,764
Other receivable 38,697 0
Royalty receivable 144,978 0
Inventories 230,211 398,788
Prepaid expenses and other current assets 128,135 172,955
Total current assets 2,669,379 2,939,507
Property and equipment, net 998,876 1,602,774
Patents and trademarks, net 905,875 1,055,229
Other assets 178,500 153,684
Total assets $ 4,752,630 $ 5,751,194
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 415,825 $ 836,301
Accrued payroll, vacation and related costs 337,758 238,599
Notes payable, net of discount of $167,000 2,833,000 0
Current installments of capital lease obligations 9,328 2,599
Other accrued expenses 248,852 192,454
Total current liabilities 3,844,763 1,269,953
Long-term debt 1,500,000 1,500,000
Capital lease obligations, less current installments 4,187 1,091
Total liabilities 5,348,950 2,771,044
Shareholders' equity (deficit):
Convertible preferred stock, series A, $0.01 par value.
Authorized 1,475,000 shares; issued and outstanding
875,000 shares in 1994 and 1995 3,166,425 3,166,425
Common stock, $0.01 par value.
Authorized 35,000,000 shares; issued and outstanding
11,152,935 shares in 1994 and 17,500,529 shares in 1995 111,529 175,005
Additional paid-in capital 13,668,107 26,824,452
Accumulated deficit (17,542,381) (27,185,732)
Total shareholders' equity (deficit) (596,320) 2,980,150
Commitments (notes 10 and 13)
Total liabilities and shareholders' equity (deficit) $ 4,752,630 $ 5,751,194
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1993 1994 1995
<S> <C> <C> <C>
Net sales $ 137,982 $ 0 $ 0
Cost of goods sold 147,755 0 0
Gross margin (9,773) 0 0
Operating expenses:
Research and development 4,485,818 5,158,738 7,815,391
General and administrative 1,353,502 1,460,424 1,849,376
Merger expense for in-process
research and development 0 1,450,499 0
Total operating expenses 5,839,320 8,069,661 9,664,767
Operating loss from continuing operations (5,849,093) (8,069,661) (9,664,767)
Other income (expense):
Royalty income 0 482,853 0
Interest income 115,852 72,250 292,578
Interest expense (76,019) (161,185) (271,162)
Other expense (106,298) 0 0
Other income (expense) (66,465) 393,918 21,416
Loss from continuing operations (5,915,558) (7,675,743) (9,643,351)
Gain on sale of discontinued operations 3,207,120 0 0
Net loss $(2,708,438) $(7,675,743) $(9,643,351)
Net loss per share from continuing operations $ (0.57) $ (0.72) $ (0.58)
Net income per share from
discontinued operations 0.31 0.00 0.00
Net loss per share $ (0.26) $ (0.72) $ (0.58)
Weighted average number of shares
outstanding 10,296,812 10,657,311 16,550,915
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
NUMBER NUMBER PAID-IN ACCUMULATED
OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1992 0 $ 0 10,230,434 $102,304 $11,460,305 $ (7,158,200) $4,404,409
Stock issued at $4.00 per
share, net of issuance costs 875,000 3,166,425 0 0 0 0 3,166,425
Stock options exercised 0 0 8,093 81 28,675 0 28,756
Director stock issued 0 0 68,698 687 215,288 0 215,975
Stock issued in settlement
of litigation 0 0 15,000 150 59,850 0 60,000
Compensation expense on
grant of options 0 0 0 0 40,219 0 40,219
Net loss 0 0 0 0 0 (2,708,438) (2,708,438)
Balance at July 31, 1993 875,000 3,166,425 10,322,225 103,222 11,804,337 (9,866,638) 5,207,346
Stock issued in connection
with merger of subsidiaries 0 0 663,610 6,636 1,443,863 0 1,450,499
Stock options exercised 0 0 115,530 1,155 4,222 0 5,377
Director stock issued 0 0 36,570 366 95,634 0 96,000
Stock issued for
consulting services 0 0 15,000 150 52,350 0 52,500
Compensation expense on
grant of options 0 0 0 0 67,301 0 67,301
Issuance of common
stock warrants 0 0 0 0 200,400 0 200,400
Net loss 0 0 0 0 0 (7,675,743) (7,675,743)
Balance at July 31, 1994 875,000 3,166,425 11,152,935 111,529 13,668,107 (17,542,381) (596,320)
Notes payable converted
into common stock 0 0 761,373 7,614 1,427,132 0 1,434,746
Stock and warrants issued
at $2.38 per share, net of
issuance costs 0 0 4,900,000 49,000 10,550,122 0 10,599,122
Stock options exercised 0 0 645,805 6,458 1,038,049 0 1,044,507
Director stock issued 0 0 40,416 404 95,596 0 96,000
Compensation expense on
grant of options 0 0 0 0 45,446 0 45,446
Net loss 0 0 0 0 0 (9,643,351) (9,643,351)
Balance at July 31, 1995 875,000 $3,166,425 17,500,529 $175,005 $26,824,452 $(27,185,732) $ 2,980,150
</TABLE>
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1993 1994 1995
<S> <C> <C> <C>
Operating activities:
Net loss $(2,708,438) $(7,675,743) $(9,643,351)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation expense 287,084 322,873 385,453
Amortization expense 129,109 178,152 212,620
Expense on grant of stock and stock options 316,194 215,801 141,446
Notes payable discount amortization 0 33,000 100,200
Merger expense for in-process research and
development 0 1,450,499 0
Gain on sale of discontinued operations (3,207,120) 0 0
Changes in operating assets and liabilities:
Other receivable (6,094) (2,603) 38,697
Trade accounts receivable 77,615 0 0
Royalty receivable (217,756) 72,778 144,978
Inventories (81,954) (90,452) (168,577)
Prepaid expenses and other current assets 53,633 (62,886) (66,020)
Accounts payable (105,845) 101,903 366,776
Accrued expenses 117,614 305,158 (79,111)
Net cash used in operating activities (5,345,958) (5,151,520) (8,566,889)
Investing activities:
Payments for purchases of property and equipment (430,234) (244,254) (989,351)
Increase in other assets (523,185) (311,767) (337,158)
Net cash used in investing activities (953,419) (556,021) (1,326,509)
Financing activities:
Proceeds from issuance of preferred stock, net 3,166,425 0 0
Proceeds from issuance of convertible
subordinated debentures 1,500,000 0 0
Proceeds from sale of discontinued operations 6,409,315 0 0
Proceeds from exercise of stock options 28,756 5,377 1,044,507
Proceeds from sale of warrants 0 200,400 0
Proceeds from issuance of common stock and
warrants, net 0 0 10,599,122
Proceeds from issuance of notes payable 0 2,800,000 0
Repayments of debt (890,706) (12,911) (1,509,825)
Net cash provided by financing activities 10,213,790 2,992,866 10,133,804
Net increase (decrease) in cash and cash equivalents 3,914,413 (2,714,675) 240,406
Cash and cash equivalents:
Beginning of year 927,620 4,842,033 2,127,358
End of year $ 4,842,033 $ 2,127,358 $ 2,367,764
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 22,310 $ 59,115 $ 240,031
</TABLE>
Supplemental disclosure of noncash investing and financing activities: 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.
During 1995, $1,434,746 of notes payable were converted into common stock.
The accompanying notes are an integral part of the financial statements.
ANGEION CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1993, 1994 AND 1995
1. DESCRIPTION OF BUSINESS
Angeion Corporation ("Angeion" or the "Company") designs, develops and
manufactures products that treat arrhythmias.
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 shorter of the lease term or useful life of the
asset. 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 for fiscal years 1993,
1994 and 1995 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
On 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 and June 21, 1994, Settlement and Release Agreements were
entered into by and among the Company and the Dissenters (the "Settlement
Agreements"). Pursuant to the terms of the Settlement Agreements, the Dissenters
agreed to terminate their claims against the Company and the directors. In
exchange, the Company agreed to issue an aggregate of 636,004 shares of Angeion
common stock to the Dissenters in exchange for their subsidiary common stock and
to issue options to purchase Angeion common stock to the Dissenters in exchange
for their subsidiary options.
The fair market value of the 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 shareholders' equity.
4. DISCONTINUED OPERATIONS
On September 22, 1992, the Company sold its Angeion Medical Products division
("AMP") effective as of July 31, 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 10% and 5% of AMP product sales in fiscal 1993 and 1994,
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.
As of July 31, 1995, there are no further royalties to be recognized.
5. PROPERTY AND EQUIPMENT
At July 31 property and equipment consisted of the following:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Production equipment $ 296,495 $ 630,953
Furniture and fixtures 117,465 177,365
Computer equipment 538,793 848,906
Research and development equipment 616,772 750,197
Leasehold improvements 187,071 338,526
1,756,596 2,745,947
Less accumulated depreciation and amortization (757,720) (1,143,173)
$ 998,876 $ 1,602,774
</TABLE>
6. ALLIANCE AND LONG TERM DEBT
On February 4, 1993, Angeion and Siemens Pacesetter, Inc. ("Pacesetter"), which
was subsequently acquired by St. Jude Medical, Inc. 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 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 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 ("Bridge Financing" or "Bridge Notes") 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. In connection with such loans, each lender received a warrant
to purchase, at an exercise price of $2.00 per share, 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 Notes. 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. During September 1994, $1,434,746 in
Bridge Notes, net of discount, were converted into common stock and $1,500,000
in Bridge Notes were repaid.
8. PUBLIC OFFERING
On September 19, 1994, the Company completed a public offering of 4.9 million
shares of newly issued common stock and 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. Net proceeds from the sale of the securities are
being used 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.
9. 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 common stock under the Plans.
Changes in options outstanding under the Plans are as follows:
<TABLE>
<CAPTION>
RANGE OF
SHARES OPTION PRICE
UNDER OPTION PER SHARE
<S> <C> <C>
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
Forfeited 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
Granted in fiscal 1995 703,968 1.970-7.000
Exercised in fiscal 1995 (522,174) 0.032-5.000
Forfeited in fiscal 1995 (128,581) 0.032-3.875
Balance at July 31, 1995 2,062,303 $0.032-9.062
</TABLE>
Options for the purchase of 994,649 shares were exercisable at July 31, 1995.
The Company has granted options, outside the Plans, to purchase 272,063 shares
at prices ranging from $2.50 to $3.63 per share. At July 31, 1995, 222,063 of
these options were exercisable.
Options have also been granted under the Non-Employee Director Plan to purchase
63,000 shares at prices ranging from $2.44 to $3.19 per share. Under this plan,
annual stock grants of common stock valued at $16,000 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.
In connection with a public offering (Note 8), warrants to purchase 2,450,000
shares of common stock were issued at an exercise price of $4.75 per share.
These warrants expire on March 12, 1996. In addition, the placement agent for
the public offering was issued a warrant to purchase 490,000 shares of common
stock at $2.85 per share. This warrant expires on September 12, 1999.
10. 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 $113,000, $116,000 and $138,000, for the years ended July 31,
1993, 1994 and 1995, respectively.
Future minimum lease payments under noncancelable operating leases (with initial
or remaining lease terms in excess of one year) are approximately $239,000,
$244,000 and $108,000 in 1996, 1997 and 1998, respectively.
11. INCOME TAXES
The Company has a tax net operating loss carryforward at July 31, 1995, of
approximately $25,000,000 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 (benefit) differs from the expected tax expense (benefit)
computed by applying the U.S. federal corporate income tax rate of 34.0% to the
net loss as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Federal statutory rate (34.0)% (34.0)% (34.0)%
State income taxes, net (6.0) (6.0) (6.0)
Expense on mergers of subsidiaries 0.0 6.4 0.0
Miscellaneous (1.7) 1.0 1.0
Change in valuation allowance 41.7 32.6 39.0
Effective income tax rate 0.0% 0.0% 0.0%
</TABLE>
Deferred taxes, calculated using an effective tax rate of 39.0% as of July 31
consist of the following:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Net operating loss carryforwards $ 6,511,000 $ 10,200,000
Other 25,000 65,000
Total net deferred tax assets 6,536,000 10,265,000
Less valuation allowance (6,536,000) (10,265,000)
Deferred income taxes $ 0 $ 0
</TABLE>
The net deferred assets at July 31, 1994 and 1995, are fully offset by a
valuation allowance. The valuation allowance is reviewed annually.
12. 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 contribution,
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.
13. 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
patent on this technology. 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 paid sales of laser ablation
devices. The Company has incurred no royalties through July 31, 1995, related to
the above commitment.
14. SUBSEQUENT EVENT
On August 2, 1995, the Company completed a public offering of 3.4 million shares
of newly issued common stock for proceeds of approximately $20,300,000, net of
expenses. During the nine months ended April 30, 1996 warrants that would have
expired on March 12, 1996 were exercised, along with certain stock options,
which provided to the Company net proceeds of approximately $12,800,000
(unaudited). 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, and general corporate purposes, including working
capital.
ANGEION CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30,
1996
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,789,510
Short-term investments 7,328,201
Receivables 401,913
Inventories 2,909,277
Prepaid expenses and other current assets 151,272
Total current assets 25,580,173
Property and equipment, net 3,667,445
Patents and trademarks, net 1,190,277
Other assets 135,073
Total assets $ 30,572,968
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,778,547
Accrued payroll, vacation and related costs 611,327
Current installments of capital lease obligations 984
Other accrued expenses 236,306
Total current liabilities 2,627,164
Long-term debt 1,500,000
Total liabilities 4,127,164
Shareholders' equity:
Convertible preferred stock, series A, $0.01 par value.
Authorized 1,475,000 shares; issued and outstanding
875,000 shares at April 30, 1996 3,166,425
Common stock, $0.01 par value.
Authorized 35,000,000 shares; issued and
outstanding 24,212,207 shares at April 30, 1996 242,122
Additional paid-in capital 60,384,733
Accumulated deficit (37,347,476)
Total shareholders' equity 26,445,804
Total liabilities and shareholders' equity $ 30,572,968
</TABLE>
See accompanying notes to consolidated financial statements.
ANGEION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30,
1995 1996
<S> <C> <C>
Net sales $ 0 $ 874,959
Operating expenses:
Manufacturing expenses 0 2,278,242
Research and development 5,268,028 6,717,469
Sales and marketing 12,767 387,634
General and administrative 1,495,868 2,444,543
Total operating expenses 6,776,663 11,827,888
Operating loss (6,776,663) (10,952,929)
Other income (expense):
Interest income 245,354 878,879
Interest expense (141,848) (87,694)
Other income (expense) 103,506 791,185
Net loss $(6,673,157) $(10,161,744)
Net loss per share $ (0.41) $ (0.46)
Weighted average number of shares outstanding 16,291,900 21,953,593
</TABLE>
See accompanying notes to consolidated financial statements.
ANGEION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED APRIL 30,
1995 1996
<S> <C> <C>
Operating activities:
Net loss $(6,673,157) $(10,161,744)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation expense 274,369 478,826
Amortization expense 159,016 205,586
Compensation expense on grant of stock and stock options 117,182 485,237
Notes payable discount amortization 83,500 --
Changes in operating assets and liabilities:
Receivables 183,675 (401,913)
Inventories 430 (2,510,489)
Prepaid expenses and other current assets 36,654 21,683
Accounts payable 135,001 942,246
Accrued expenses (129,843) 416,580
Net cash used in operating activities (5,813,173) (10,523,988)
Investing activities:
Purchase of short-term investments 0 (20,292,613)
Payments for purchases of property and equipment (803,289) (2,543,497)
Proceeds from maturities of short-term investments 0 12,964,412
Increase in other assets (281,234) (322,023)
Net cash used in investing activities (1,084,523) (10,193,721)
Financing activities:
Proceeds from issuance of common stock 10,599,122 20,327,045
Proceeds from exercise of stock options 381,192 1,184,779
Proceeds from exercise of warrants 0 11,630,337
Repayments of debt (1,508,999) (2,706)
Net cash provided by financing activities 9,471,315 33,139,455
Net increase in cash and cash equivalents 2,573,619 12,421,746
Cash and cash equivalents:
Beginning of period 2,127,358 2,367,764
End of period $ 4,700,977 $ 14,789,510
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 160,533 $ 60,843
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During the nine months ended April 30, 1995, notes payable of $1,434,746
were converted into common stock.
See accompanying notes to consolidated financial statements.
ANGEION CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996
1. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements include the accounts of
Angeion Corporation and its wholly-owned foreign subsidiary and 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 consolidated financial
statements should be read in conjunction with the financial statements and
related notes included herein.
Effective November 1, 1995, the Company established a European subsidiary,
Angeion Europe Ltd. ("Angeion Europe"), to facilitate clinical trials of its
ICDs and expand its European business activities. The functional currency and
denomination of all sales transactions of Angeion Europe are the U.S. dollar.
Accordingly, the financial statements of Angeion Europe, which are maintained in
the local currency, are remeasured into U.S. dollars in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." All exchange gains or losses from remeasurement of monetary assets
and liabilities that are not denominated in U.S. dollars are recognized
currently in income. For the nine-month periods ended April 30, 1995 and 1996,
the exchange gains recognized from remeasurement were $0 and $2,478,
respectively.
The information furnished reflects, in the opinion of the management of the
Company, all adjustments, consisting primarly of recurring accruals, considered
necessary for a fair presentation of the financial position and the results of
operations.
2. NET LOSS PER SHARE
Net loss per share is computed by dividing the net 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 1995 and 1996 periods presented due to their antidilutive effect.
3. SHORT-TERM INVESTMENTS
In accordance with the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
marketable debt securities have been classified as held-to-maturity and are
stated at amortized cost, which approximates estimated fair value. Securities
held by the Company consist of U.S.
government debt securities.
These securities are classified as held-to-maturity because of the Company's
positive intent and ability to hold its investments to maturity.
4. INVENTORIES
Inventories consisted of the following at April 30, 1996:
Raw materials $2,267,612
Work-in-process 543,759
Finished goods 97,906
$2,909,277
5. NON-CASH COMPENSATION
During the nine-month periods ended April 30, 1995 and 1996, the Company granted
in-the-money stock options and stock grants to employees, directors and
consultants in lieu of cash compensation, which amounted to $117,182 and
$485,237, respectively. For securities issued to employees, expense was
recognized for the stock and stock option grants based on the intrinsic value
method in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees." For stock issued to non-employees, expense was recognized based on
fair market value of securities granted.
6. CONTINGENCY
The Company has a pending employment legal proceeding that has arisen in the
ordinary course of business. It is the Company's opinion based on its review of
this matter with counsel that such proceeding will not have a material adverse
effect on the Company's financial position or results of operations.
7. 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 $10,599,122 net of
expenses. The exercise price of the warrants per whole share was $4.75 per share
and they would have expired on March 12, 1996. Net proceeds of the sale of the
securities are being used 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.
On August 2, 1995, the Company completed a public offering of 3.4 million shares
of newly issued Common Stock for proceeds of $20,327,045 net of expenses. During
the nine months ended April 30, 1996 warrants that would have expired on March
12, 1996 were exercised, along with certain stock options, which provided to the
Company net proceeds of approximately $12,800,000. The Company intends to apply
the net proceeds of the sale of securities for research and development and
leasehold improvements, and general corporate purposes, including working
capital.
Inside Back Cover
3 part illustration of the procedure using catheter ablation device.
Illustration of patient and the insertion of catheter in femoral artery of leg
and up and into the heart. Cross section of heart depicting location of ablation
catheter and site of abnormal cells. Closeup of abnormal heart tissue in the
electrical pathways and the application of energy to the abnormal electrical
pathways.
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'S PRODUCTS HAVE NOT BEEN APPROVED BY THE FDA AND THERE CAN BE NO
ASSURANCE THAT THE COMPANY WILL RECEIVE APPROVAL FROM THE FDA.
================================================================================
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 UNDERWRITERS. 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 13
Dilution 13
Capitalization 14
Dividend Policy 14
Market Price for Common Stock 15
Selected Financial Data 16
Management's Discussion and
Analysis of Financial Condition and
Results of Operations 17
Business 21
Management 35
Principal Shareholders and Beneficial
Ownership of Management 39
Description of Securities 41
Underwriting 44
Legal Matters 46
Experts 46
Available Information 46
Incorporation of Certain
Documents by Reference 47
Index to Financial Statements F-1
5,000,000 SHARES
ANGEION LOGO
COMMON STOCK
P R O S P E C T U S
RAYMOND JAMES & ASSOCIATES, INC.
NATWEST SECURITIES LIMITED
SALOMON BROTHERS INC
_______________________, 1996
================================================================================
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, the NASD fee and the Nasdaq
additional listing fee.
SEC registration fee $ 20,696
NASD fee 6,502
Nasdaq additional listing fee 17,500
Printing expenses 90,000
Fees and expenses of counsel for the Company 60,000
Fees and expenses of accountants for the Company 35,000
Blue Sky fees and expenses 12,000
Miscellaneous 8,302
Total $250,000
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. The Company's Restated Articles of
Incorporation also require the Company to provide indemnification to the fullest
extent of the Minnesota indemnification statute.
Article V of the Company's Bylaws provides that each director, officer, employee
or agent, past or 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 8 of the Underwriting 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
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement (filed herewith).
4.1 Articles of Merger, including Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3A contained in
its Registration Statement on Form 8-A registering the Common Stock
(File No. 0-17019)).
4.2 Amended Bylaws (previously filed).
4.3 Amended Form of Common Stock Certificate (previously filed).
4.4 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) (File No. 0-17019).
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly (previously filed).
23.1 Consent of KPMG Peat Marwick LLP (filed herewith).
23.2 Consent of Oppenheimer Wolff & Donnelly (see Exhibit 5.1).
23.3 Consent of Patterson & Keough, P.A. (filed herewith).
24.1 Power of Attorney (previously filed).
27.1 Financial Data Schedule (incorporated by reference to Exhibit 27.1 of
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended April 30, 1996) (File No. 0-17019).
</TABLE>
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 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to 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 Amendment to
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis and State of Minnesota,
on June 4, 1996.
ANGEION CORPORATION
By /S/ DAVID L. CHRISTOFFERSON
David L. Christofferson
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed by the following persons on June 4, 1996
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
* Chairman of the Board, President and Chief
Whitney A. McFarlin Executive Officer (principal executive officer)
/S/ DAVID L. CHRISTOFFERSON Vice President, Chief Financial Officer and Secretary
David L. Christofferson (principal financial and accounting officer)
* Director
Arnold A. Angeloni
Director
Dennis E. Evans
Director
Lyle D. Joyce, M.D., Ph.D.
* Director
Joseph C. Kiser, M.D.
* Director
Donald Maurer
* Director
Glen Taylor
*By: /S/ DAVID L. CHRISTOFFERSON
David L. Christofferson
ATTORNEY-IN-FACT
</TABLE>
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 Underwriting Agreement Filed herewith.
4.1 Articles of Merger, including Amended and Restated Incorporated by reference to Exhibit 3A contained in its
Articles of Incorporation Registration Statement on Form 8-A registering the Common
Stock (File No. 0-17019).
4.2 Amended Bylaws Previously filed.
4.3 Amended Form of Common Stock Certificate Previously filed.
4.4 Certificate of Designation of Preferred Stock, Incorporated by reference to Exhibit 4.1 contained in
Series A. the Current Report on Form 8-K filed February 9, 1993
(File No. 0-17019).
5.1 Opinion and Consent of Oppenheimer Previously filed.
Wolff & Donnelly
23.1 Consent of KPMG Peat Marwick LLP Filed herewith.
23.2 Consent of Oppenheimer Wolff & Donnelly (see Exhibit 5.1).
23.3 Consent of Patterson & Keough, P.A. Filed herewith.
24.1 Power of Attorney Previously filed.
27.1 Financial Data Schedule Incorporated by reference to Exhibit 27.1 of the Company's
Quarterly Report on Form 10-Q for the quarterly period
ended April 30, 1996 (File No. 0-17019).
</TABLE>
Draft 6/3/96
5,000,000 Shares
ANGEION CORPORATION
Common Stock
----------
UNDERWRITING AGREEMENT
St. Petersburg, Florida
[ ], 1996
RAYMOND JAMES & ASSOCIATES, INC.
NATWEST SECURITIES LIMITED
SALOMON BROTHERS INC
As Representatives of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Minnesota 33716
Dear Sirs:
Angeion Corporation, a Minnesota corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell an
aggregate of 5,000,000 shares (the "Firm Shares") of common stock, par value
$0.01 per share, of the Company, to the several Underwriters named in Schedule I
hereto (the "Underwriters"). In addition, the Company has agreed to sell to the
Underwriters, upon the terms and conditions set forth herein, up to an
additional 750,000 shares of common stock, par value $0.01 per share, of the
Company (the "Additional Shares") solely to cover over-allotments by the
Underwriters, if any. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares." The Company's common stock, par value
$0.01 per share, including the Shares, is hereinafter referred to as the "Common
Stock." Raymond James & Associates, Inc., Natwest Securities Limited and Salomon
Brothers Inc are acting as the representatives of the several Underwriters and
in such capacity are hereinafter referred to as the "Representatives."
The Company wishes to confirm as follows its agreement with you and the
other several Underwriters, on whose behalf you are acting, in connection with
the several purchases of the Shares from the Company.
Section 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 (File No
333-04993), including a prospectus subject to completion, relating to the
Shares. Such registration statement (including all financial schedules and
exhibits), as amended at the time when it became effective and as thereafter
amended by post-effective amendment, together with any registration statement
filed by the Company pursuant to Rule 462(b) under the Act, is referred to in
this Agreement as the "Registration Statement." The term "Prospectus" as used in
this Agreement means (i) the prospectus in the form included in the Registration
Statement, or (ii) if the prospectus included in the Registration Statement
omits information in reliance upon Rule 430A under the Act and such information
is included in a prospectus filed with the Commission pursuant to Rule 424(b)
under the Act or as part of a post-effective amendment to the Registration
Statement after the Registration Statement becomes effective, the prospectus as
so filed, or (iii) if the prospectus included in the Registration Statement
omits information in reliance upon Rule 430A under the Act and such information
is included in a term sheet (as described in Rule 434(c) under the Act) filed
with the Commission pursuant to Rule 424(b) under the Act, the prospectus
included in the Registration Statement and such term sheet, taken together. The
prospectus subject to completion in the form included in the Registration
Statement at the time of the initial filing of such Registration Statement with
the Commission and as such prospectus is amended from time to time until the
date upon which the Registration Statement was declared effective by the
Commission is referred to in this Agreement as the "Prepricing Prospectus."
Section 2. Agreements to Sell and Purchase. The Company hereby agrees
to sell the Firm Shares to the Underwriters and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company at a purchase
price of $_______ per Share (the "purchase price per Share"), the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares as adjusted pursuant to Section 10 hereof).
The Company also agrees to sell to the Underwriters, and upon the basis
of the representations, warranties and agreements of the Company herein
contained and subject to all the terms and conditions set forth herein, the
Underwriters shall have the right for 30 days from the date upon which the
Registration Statement is declared effective by the Commission to purchase from
the Company up to 750,000 Additional Shares at the purchase price per Share for
the Firm Shares. The Additional Shares shall, if purchased, be purchased solely
for the purpose of covering over-allotments made in connection with the offering
of the Firm Shares. If any Additional Shares are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments as you may determine to avoid
fractional shares) which bears the same proportion to the number of Additional
Shares to be sold as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule I hereto (or such number of Firm Shares as adjusted
pursuant to Section 10 hereof) bears to the total number of Firm Shares.
Section 3. Terms of Public Offering. The Company has been advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and initially
to offer the Shares upon the terms set forth in the Prospectus.
Section 4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of the Firm Shares and payment therefor shall be made at the
offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida, at 10:00 a.m., St. Petersburg, Florida time, four business
days after the date hereof (the "Closing Date"). The place of closing for the
Firm Shares and the Closing Date may be varied by agreement between you and the
Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida, at
10:00 a.m., St. Petersburg, Florida time, on such date or dates (the "Additional
Closing Date") (which may be the same as the Closing Date but shall in no event
be earlier than the Closing Date nor earlier than three nor later than ten
business days after the giving of the notice hereinafter referred to), as shall
be specified in a written notice from you on behalf of the Underwriters to the
Company, of the Underwriters' determination to purchase a number, specified in
such notice, of Additional Shares. Such notice may be given to the Company by
you at any time within 30 days after the date upon which the Registration
Statement is declared effective by the Commission. The place of closing for the
Additional Shares and the Additional Closing Date may be varied by agreement
between you and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 p.m., St. Petersburg, Florida time, on the
third full business day preceding the Closing Date or the Additional Closing
Date, as the case may be. Such certificates shall be made available to you in
St. Petersburg, Florida for inspection and packaging not later than 9:30 a.m.,
St. Petersburg, Florida time, on the business day immediately preceding the
Closing Date or the Additional Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date or the
Additional Closing Date, as the case may be, against payment of the purchase
price therefor by wire transfer or certified or official bank check or checks
payable in New York Clearing House (next day) funds.
Section 5. Agreements of the Company. The Company agrees with the
several Underwriters as follows:
(a) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing (i) when the Registration
Statement has become effective and when any post-effective amendment to
the Registration Statement or any registration statement filed pursuant
to Rule 462(b) under the Act is filed or becomes effective, (ii) if
Rule 430A under the Act is employed, when the Prospectus or term sheet
(as described in Rule 434(b) under the Act) has been timely filed
pursuant to Rule 424(b) under the Act, (iii) of any request by the
Commission for amendments or supplements to the Registration Statement,
any Prepricing Prospectus or the Prospectus or for additional
information, (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation (or threatened initiation) of any
proceeding for such purposes, and (v) within the period of time
referred to in Section 5(e) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net
worth or results of operations, or of any event that comes to the
attention of the Company that makes any statement made in the
Registration Statement or the Prospectus (as then amended or
supplemented) untrue in any material respect or that requires the
making of any additions thereto or changes therein in order to make the
statements therein not misleading in any material respect, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Act or any other law. If at any time
the Commission shall issue any stop 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
time.
(b) The Company will furnish to you, without charge, two
signed copies of the Registration Statement as originally filed with
the Commission and of each amendment thereto, including financial
statements and all exhibits thereto, and will also furnish to you,
without charge, such number of conformed copies of the Registration
Statement as originally filed and of each amendment thereto as you may
reasonably request.
(c) The Company will not file any amendment to the
Registration Statement, file any registration statement pursuant to
Rule 462(b) under the Act or make any amendment or supplement to the
Prospectus of which you shall not previously have been advised (with a
reasonable opportunity to review such amendment or supplement) or to
which you have reasonably objected after being so advised, or which is
not in compliance with the Act.
(d) The Company has delivered or will deliver to you, without
charge, in such quantities as you have requested or may hereafter
reasonably request, copies of each form of the Prepricing Prospectus.
The Company consents to the use, in accordance with the provisions of
the Act and with the securities or Blue Sky laws of the jurisdictions
in which the Shares are offered by the several Underwriters and by
dealers, prior to the date of the Prospectus, of each Prepricing
Prospectus so furnished by the Company.
(e) As soon after the execution and delivery of this Agreement
as is practicable and thereafter from time to time for such period as
in the reasonable opinion of counsel for the Underwriters a prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or a dealer, the Company will deliver to each Underwriter
and each dealer, without charge, as many copies of the Prospectus (and
of any amendment or supplement thereto) as they may reasonably request.
The Company consents to the use of the Prospectus (and of any amendment
or supplement thereto) in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale
of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or dealer. If during such period of time any event shall
occur that in the judgment of the Company or in the opinion of counsel
for the Underwriters is required to be set forth in the Prospectus (as
then amended or supplemented) or should be set forth therein in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with the Act or any other
law, the Company will forthwith prepare and file with the Commission an
appropriate supplement or amendment thereto, and will furnish to each
Underwriter and to each dealer who has previously requested
Prospectuses, without charge, a reasonable number of copies thereof.
(f) The Company will cooperate with you and counsel for the
Underwriters in connection with the registration or qualification of
the Shares for offering and sale by the several Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as
you may reasonably designate and will file such consents to service of
process or other documents as may be reasonably necessary in order to
effect such registration or qualification; 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 service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction
where it is not now so subject. In the event that the qualification of
the Shares in any jurisdiction is suspended, the Company shall so
advise you promptly in writing.
(g) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of
the Registration Statement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section
11(a) of the Act and Rule 158 under the Act, and will advise you in
writing when such statement has been so made available.
(h) During the period of five years hereafter, the Company
will furnish to you as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and
the Company will furnish to you (i) as soon as available, a copy of
each report or definitive proxy statement of the Company filed with the
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or mailed to stockholders, and (ii) from time to time
such other information concerning the Company as you may reasonably
request. Until the termination of the offering of the Shares, the
Company will timely file all documents, and any amendments to
previously filed documents, required to be filed by it pursuant to
Sections 13, 14 or 15(d) of the Exchange Act.
(i) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder substantially in accordance with
the description set forth in the Prospectus.
(j) If Rule 430A under the Act is employed, the Company will
timely file the Prospectus or term sheet (as described in Rule 434(b)
under the Act) pursuant to Rule 424(b) under the Act.
(k) The Company will not sell, contract to sell or otherwise
dispose of any Common Stock or rights to purchase Common Stock until
after the date 90 days from the effective date of the Registration
Statement, without the prior written consent of Raymond James &
Associates, Inc., except to the Underwriters pursuant to this
Agreement, and except that the Company may issue Common Stock upon the
exercise or conversion of warrants, stock options, preferred stock or
convertible debentures issued and outstanding at the time of
effectiveness of the Registration Statement and described in the
Registration Statement.
(l) The Company will not, directly or indirectly, take any
action that would constitute or any action designed, or which might
reasonably be expected to cause or result in or constitute, under the
Act or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(m) If at any time during the 25-day period after the first
date that any of the Shares are released by you for sale to the public,
any rumor, publication, or event relating to or affecting the Company
shall occur as a result of which in your opinion the market price of
the Common Stock (including the Shares) has been or is likely to be
materially affected (regardless of whether such rumor, publication, or
event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the
effect set forth above, forthwith consult with you concerning the
advisability and substance of, and, if appropriate, disseminate, a
press release or other public statement responding to or commenting on
such rumor, publication, or event.
(n) The Company shall not invest or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or the Subsidiary (as defined below) to
register as an investment company under the Investment Company Act of
1940, as amended.
(o) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of its incorporation or the rules of
the Nasdaq National Market or any national securities exchange on which
the Common Stock is listed, a registrar (which, if permitted by
applicable laws and rules, may be the same entity as the transfer
agent) for its Common Stock.
(p) The Company hereby agrees that this Agreement shall be
deemed, for all purposes, to have been made and entered into in
Pinellas County, Florida. The Company agrees that any dispute hereunder
shall be litigated solely in the Circuit Court of the State of Florida
in Pinellas County, Florida or in the United States District Court for
the Middle District of Florida, Tampa Division, and further agrees to
submit itself to the personal jurisdiction of such courts.
Section 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter on the date hereof, and shall be
deemed to represent and warrant to each Underwriter on the Closing Date and the
Additional Closing Date, that:
(a) The Registration Statement has been declared effective by
the Commission under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
Each Prepricing Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant to Rule 424(a) under the Act, complied when
so filed in all material respects with the provisions of the Act,
except that this representation and warranty does not apply to
statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by or on behalf of any Underwriter through you
expressly for use therein.
(b) The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus, and the Prepricing
Prospectus included as part of the Registration Statement declared
effective by the Commission complies as to form in all material
respects with the requirements of the Act. The Company has satisfied
all conditions to the use of Form S-3 with respect to the offering of
the Shares for sale to the public. The Registration Statement, in the
form in which it became effective and also in such form as it may be
when any post-effective amendment thereto shall become effective, any
registration statement filed pursuant to Rule 462(b) under the Act, and
the Prospectus, and any supplement or amendment thereto when filed with
the Commission under Rule 424(b) under the Act, complies and will
comply in all material respects with the provisions of the Act and does
not and will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or the
Prospectus (or any amendment or supplement thereto) made in reliance
upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by or on behalf of any Underwriter
through you expressly for use therein.
(c) The capitalization of the Company is as set forth in the
Prospectus as of the date set forth therein. All the outstanding shares
of Common Stock and other securities of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares to be issued and
sold to the Underwriters by the Company hereunder have been duly
authorized and, when issued and delivered to the Underwriters against
payment therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any preemptive or
similar rights; the securities of the Company conform to the
description thereof in the Registration Statement and the Prospectus
(or any amendment or supplement thereto); the form of certificate for
the Shares conforms to the corporate law of the State of Minnesota; and
the delivery of certificates for the Shares pursuant to the terms of
this Agreement and payment for the Shares will pass valid marketable
title to the Shares, free and clear of any voting trust arrangements,
liens, encumbrances, equities, claims or defects in title to the
several Underwriters purchasing the Shares in good faith and without
notice of any lien, claim or encumbrance.
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Minnesota with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as presently conducted and as
described in the Registration Statement and the Prospectus (and any
amendment or supplement thereto), and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
to so register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net worth or
results of operations of the Company.
(e) Angeion Europe Ltd., a U.K. corporation (the
"Subsidiary"), is a corporation duly organized, validly existing and in
good standing in its jurisdiction of incorporation, with full corporate
power and authority to own, lease and operate its properties and to
conduct its business as presently conducted and as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered and qualified to conduct
its business and is in good standing in such jurisdiction or place
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
to so register or qualify does not have a material adverse effect on
the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiary, taken as a
whole. All of the outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned by the Company directly, free and clear of
any lien, adverse claim, security interest, equity or other
encumbrance. Except for the subsidiary, the Company does not own a
material interest in or control, directly or indirectly, any other
corporation, partnership, joint venture, association, trust or other
business organization.
(f) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or the
Subsidiary, or to which the Company or the Subsidiary, or to which
their respective properties, is subject, that are required to be
described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) but are not described as required.
There is no action, suit, inquiry, proceeding, or investigation by or
before any court or governmental or other regulatory or administrative
agency or commission pending or, to the best knowledge of the Company,
threatened against or involving the Company or the Subsidiary
(including without limitation any such action, suit, inquiry,
proceeding or investigation relating to any product alleged to have
been manufactured or sold by the Company or the Subsidiary and alleged
to have been unreasonably hazardous, defective, or improperly designed
or manufactured), nor is there any basis for any such action, suit,
inquiry, proceeding, or investigation. There are no agreements,
contracts, indentures, leases or other instruments that are required to
be described in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or to be filed as an exhibit to the
Registration Statement that are not described or filed as required or
incorporated by reference as permitted by the Act. All such contracts
to which the Company or the Subsidiary is a party have been duly
authorized, executed and delivered by the Company or Subsidiary,
constitute valid and binding agreements of the Company or the
Subsidiary and are enforceable against the Company or the Subsidiary in
accordance with the terms thereof.
(g) Neither the Company nor the Subsidiary is in violation of
its articles of incorporation or bylaws or other charter documents, or
of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or the Subsidiary or of any decree
of any court or governmental agency or body having jurisdiction over
the Company or the Subsidiary, or in default in any material respect in
the performance of any obligation, agreement or condition contained in
any bond, debenture, note or any other evidence of indebtedness or in
any material agreement, indenture, lease or other instrument to which
the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any of their respective properties may be bound.
(h) The execution and delivery of this Agreement, and the
performance by the Company of its obligations under this Agreement,
have been duly and validly authorized by the Company, and this
Agreement has been duly executed and delivered by the Company and
constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(i) None of the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby
(i) is or may be void or voidable by any person or entity, (ii)
requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Shares under the Act and
compliance with the securities or Blue Sky laws of various
jurisdictions, all of which will be, or have been, effected in
accordance with this Agreement) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
articles of incorporation or bylaws or other charter documents, of the
Company or the Subsidiary, or (iii) conflicts or will conflict with or
constitutes a breach of, or a default under, any agreement, indenture,
lease or other instrument to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary or any of their
respective properties may be bound, or violates any statute, law,
regulation or filing or judgment, injunction, order or decree
applicable to the Company or the Subsidiary or any of their respective
properties, or results in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or the
Subsidiary pursuant to the terms of any agreement or instrument to
which the Company or the Subsidiary is a party or by which the Company
or the Subsidiary may be bound or to which the property or assets of
the Company or the Subsidiary is subject.
(j) Except as described in the Prospectus, the Company does
not have outstanding and at the Closing Date (and the Additional
Closing Date, if applicable) will not have outstanding any options to
purchase, or any warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue
or sell, any shares of Common Stock or any such warrants or convertible
securities or obligations. Except as has been complied with or waived,
no holder of securities of the Company or any other person has rights
to the registration of any securities of the Company because of the
filing of the Registration Statement.
(k) KPMG Peat Marwick LLP, the certified public accountants
who have certified the consolidated financial statements filed as part
of the Registration Statement and the Prospectus (or any amendment or
supplement thereto), are independent public accountants as required by
the Act.
(l) The consolidated financial statements, together with
related schedules and notes, forming part of the Registration Statement
and the Prospectus (and any amendment or supplement thereto), present
fairly both the historical and pro forma consolidated financial
position, results of operations and changes in financial position of
the Company on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved and all adjustments necessary
for a fair presentation of the results for such period have been made;
and the other financial and statistical information and data set forth
in the Registration Statement and Prospectus (and any amendment or
supplement thereto) is accurately presented and prepared on a basis
consistent with such financial statements and the books and records of
the Company.
(m) Subsequent to the respective dates as of which such
information is given in the Registration Statement and the Prospectus
(or any amendment or supplement thereto), neither the Company nor the
Subsidiary has incurred any liability or obligation, direct or
contingent, or entered into any transaction, whether or not in the
ordinary course of business, that is material to the Company and the
Subsidiary, taken as a whole, and there has not been any material
change in the capital stock, or material increase in the short-term
debt or long-term debt, of the Company or the Subsidiary, or any
material adverse change, or any development involving or which may
reasonably be expected to involve a potential future material adverse
change, in the condition (financial or other), business, net worth or
results of operations of the Company and the Subsidiary, taken as a
whole.
(n) The Company or the Subsidiary, as the case may be, has
good and marketable title to all property (real and personal) described
in the Prospectus as being owned by it, free and clear of all liens,
claims, security interests or other encumbrances except such as are
described in the Registration Statement and the Prospectus or such as
are not materially burdensome and do not interfere in any material
respect with the use of the property or the conduct of the business of
the Company and the Subsidiary, taken as a whole, and the property
(real and personal) held under lease by the Company or the Subsidiary,
as applicable, is held by them under valid, subsisting and enforceable
leases with only such exceptions as in the aggregate are not materially
burdensome and do not interfere in any material respect with the
conduct of the business of the Company and the Subsidiary, taken as a
whole.
(o) The Company has not distributed and will not distribute
prior to the Closing Date (or the Additional Closing Date, if any) any
offering material in connection with the offering and sale of the
Shares other than the Prepricing Prospectus and the Registration
Statement, the Prospectus or other materials permitted by the Act and
distributed with the prior written approval of the Underwriters.
(p) The Company has not taken, directly or indirectly, any
action which constituted or any action designed, or which might
reasonably be expected to cause or result in or constitute, under the
Act or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on the Nasdaq Stock Market in
accordance with Rule 10b-6A under the Exchange Act.
(q) Neither the Company nor the Subsidiary is an "investment
company," an "affiliated person" of, or "promoter" or "principal
underwriter" for an investment company within the meaning of the
Investment Company Act of 1940, as amended.
(r) The Company and the Subsidiary have all permits, licenses,
franchises, approvals, consents and authorizations of governmental or
regulatory authorities or private persons or entities (hereinafter
"permit" or "permits") as are necessary to own their respective
properties and to conduct their business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus, except where the failure to have obtained any such permit
has not had and will not have a material adverse effect upon the
condition (financial or other) or the business of the Company and the
Subsidiary, taken as a whole; the Company and the Subsidiary have
fulfilled and performed all of their material obligations with respect
to each such permit and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination of any
such permit or result in any other material impairment of the rights of
the holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus; and, except as
described in the Prospectus, such permits contain no restrictions that
are materially burdensome to the Company and the Subsidiary, taken as a
whole.
(s) The Company and the Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the business in which
they are engaged; and the Company has no reason to believe that the
Company and the Subsidiary will not be able to renew their existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
their business at a comparable cost.
(t) The Company and the Subsidiary have complied and will
comply, as applicable, in all material respects with wage and hour
determinations issued by the U.S. Department of Labor under the Service
Contract Act of 1965 and the Fair Labor Standards Act in paying its
employees' salaries, fringe benefits, and other compensation for the
performance of work or other duties in connection with contracts with
the U.S. government, and have complied and will comply in all material
respects with the requirements of the Americans with Disabilities Act
of 1990, the Family and Medical Leave Act of 1993, the Employee
Retirement Income Security Act, the Civil Rights Act of 1964 (Title
VII), as amended, the Age Discrimination in Employment Act and state
labor laws, and all comparable laws of foreign jurisdictions, as
applicable, except where the failure to comply with any such
requirements has not, and will not, have a material adverse effect
(financial or other) upon the condition of the Company and the
Subsidiary, taken as a whole. The Company and the Subsidiary have
complied and will comply in all material respects with the terms of all
certifications and representations made to the U.S. government in
connection with the submission of any bid or proposal or any contract.
The Company and the Subsidiary have complied and will comply in all
material respects with their obligations under their agreements and
contracts with the U.S. government and agencies thereof, if any.
(u) The Company and the Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations; (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
authorizations; 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.
(v) Neither the Company nor any Subsidiary has, directly or
indirectly, at any time during the past five years (i) made any
unlawful contribution to any candidate for political office, or failed
to disclose fully any contribution in violation of law, or (ii) made
any payment to any federal, state or foreign governmental official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or
any jurisdiction thereof or applicable foreign jurisdictions.
(w) The Company and the Subsidiary have obtained all required
permits, licenses, and other authorizations, if any, which are required
under federal, state, regional, county, local and foreign statutes,
codes, ordinances and other laws relating to pollution or protection of
the environment, including laws relating to emissions, discharges,
releases, spilling, injecting, leaching, or disposing into the
environment or threatened releases of pollutants, contaminants,
chemicals, or industrial, hazardous, or toxic materials or wastes into
the environment (including, without limitation, ambient air, surface
water, ground water, land surface, or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, discharge into the environment, transport, or
handling of pollutants, contaminants, chemicals, or industrial,
hazardous, or toxic materials or wastes, or any regulation, rule, code,
plan, order, decree, judgment, injunction, notice, or demand letter
issued, entered, promulgated, or approved thereunder ("Environmental
Laws"). The Company and the Subsidiary are in compliance with all terms
and conditions of all required permits, licenses, and authorizations,
and are also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables contained in the Environmental Laws. There is
no pending or, to the best knowledge of the Company, after due inquiry,
threatened civil or criminal litigation, notice of violation, warning
letter, or administrative preceding relating in any way to the
Environmental Laws (including, without limitation, notices, demand
letters, or claims under the Resource Conservation and Recovery Act of
1976, as amended ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), as
amended by the Superfund Amendments Reauthorization Act of 1987
("SARA"), the Toxic Substances Control Act of 1976, the Emergency
Planning and Community Right-to-Know Act of 1986, the Clean Water Act
of 1977, and the Clear Air Act of 1966, all as amended, and similar
foreign, state, local or other laws) involving the Company or the
Subsidiary. There have not been and there are not any past, present, or
foreseeable future events, conditions, circumstances, activities,
practices, incidents, actions, or plans which may interfere with or
prevent continued compliance, or which may give rise to any common law
or legal liability, or otherwise form the basis of any present or
future claim, action, demand, suit, proceeding, hearing, study, or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, arrangement for
disposal, transport, arrangement for transport, or handling, or the
emission, discharge, release, or threatened release into the
environment, of any pollutant, contaminant, chemical, or industrial,
hazardous, or toxic material or waste, including, without limitation,
any liability arising, or any claim, action, demand, suit, proceeding,
hearing, study, or investigation which may be brought, under RCRA,
CERCLA, SARA, or similar foreign, state, local or other laws.
(x) The Company and the Subsidiary own and have full right,
title and interest in and to, or have the right to use, each material
trade name, trademark, service mark, patent, copyright, license, and
other rights and all know-how (including trade secrets and other
unpatented and/or proprietary or confidential information, systems, or
procedures) under which the Company and the Subsidiary conduct all or
any portion of their business, which rights, titles, interests and
rights to use are adequate to conduct such business as conducted or as
proposed to be conducted or as described in the Registration Statement
and the Prospectus (or any amendment or supplement thereto); except as
otherwise disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement thereto), neither the Company nor the
Subsidiary has created any lien or encumbrance on, or granted any right
or license with respect to, any such trade name, trademark, service
mark, patent, copyright, license, or other rights or know-how
(including trade secrets and other unpatented and/or proprietary or
confidential information, systems, or procedures); neither the Company
nor the Subsidiary has infringed upon or otherwise violated the rights
of any third party with respect to any trade name, trademark, service
mark, patent, copyright, license, or other rights or know-how
(including trade secrets and other unpatented and/or proprietary or
confidential information, systems, or procedures); there is no claim
pending against the Company or the Subsidiary with respect to any trade
name, trademark, service mark, patent, copyright, license, or other
rights or know-how (including trade secrets and other unpatented and/or
proprietary or confidential information, systems, or procedures);
neither the Company nor the Subsidiary has received notice that any
trade name, trademark, service mark, patent, copyright, license, or
other rights or know-how (including trade secrets and other unpatented
and/or proprietary or confidential information, systems, or procedures)
which they use or have used in the conduct of their business infringes
upon or conflicts with the rights of any third party; the Company is
not aware of any infringement of any trade name, trademark, service
mark, patent, copyright, license, or other rights or know-how
(including trade secrets and other unpatented and/or proprietary or
confidential information, systems, or procedures) of the Company or the
Subsidiary which could have a material adverse effect on the business
of the Company and the Subsidiary, taken as a whole; and the Company is
not aware of any facts which, with the passage of time or otherwise,
would cause the Company or the Subsidiary to infringe upon or otherwise
violate the rights of any third party with respect to any trade name,
trademark, service mark, patent, copyright, license, or other rights or
know-how (including trade secrets and other unpatented and/or
proprietary or confidential information, systems, or procedures).
(y) The Company has filed with the U.S. Food and Drug
Administration (the "FDA"), and all applicable foreign, state and local
regulatory bodies for, and received approval of, all registrations,
applications, licenses, requests for exemptions, permits and other
regulatory authorizations material to the conduct of the business of
the Company and the Subsidiary as it is now conducted except for such
registrations, applications, licenses, requests for exemptions, permits
and other regulatory authorizations of which the failure to so obtain
would not have a material adverse effect upon the assets or properties,
business, results of operations, prospects or condition (financial or
otherwise) of the Company and the Subsidiary, taken as a whole; the
Company is in compliance in all material respects with all such
registrations, applications, licenses, requests for exemptions, permits
and other regulatory authorizations, and all applicable FDA, foreign,
state and local rules and regulations; and the Company has no reason to
believe that any party granting any such registration, application,
license, request for exemption, permit or other authorization is
considering limiting, suspending or revoking the same.
(z) The human clinical trials and animal studies and other
preclinical tests conducted by the Company or in which the Company has
participated that are described in the Registration Statement and
Prospectus or the results of which are referred to in the Registration
Statement or Prospectus, and such studies and tests conducted on behalf
of the Company, were and, if still pending, are being conducted in all
material respects in accordance with experimental protocols, procedures
and controls generally used by qualified experts in the preclinical or
clinical study of products comparable to those being developed by the
Company; the descriptions of the results of such studies, tests and
trials contained in the Registration Statement and Prospectus are
accurate and complete in all material respects, and the Company has no
knowledge of any other trials, studies or tests, the results of which
reasonably call into question the results described or referred to in
the Registration Statement and Prospectus; the Company has not received
any notices or correspondence from the FDA or any other governmental
agency requiring the termination, suspension or modification (other
than such modifications as are normal in the regulatory process) of any
animal studies, preclinical tests or clinical trials conducted by or on
behalf of the Company or in which the Company has participated that are
described in the Registration Statement or Prospectus or the results of
which are referred to in the Registration Statement or Prospectus.
(aa) All offers and sales of the Company's and the
Subsidiary's capital stock, warrants, options and debt or other
securities prior to the date hereof were made in compliance with the
Act and all other applicable state, federal and foreign laws or
regulations, or any actions under the Act or any state, federal or
foreign laws or regulations in respect of any such offers or sales are
effectively barred by effective waivers or statutes of limitation.
(ab) The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act. The Common Stock has been and continues to be
designated for inclusion on the Nasdaq National Market under the symbol
"ANGN" and the Company has complied and will continue to comply with
the maintenance and designation criteria applicable to Nasdaq National
Market issuers.
(ac) All federal, state, local and foreign tax returns
required to be filed by or on behalf of the Company and the Subsidiary
with respect to all periods ended prior to the date of this Agreement
have been filed (or are the subject of valid extension) with the
appropriate federal, state, local and foreign authorities and all such
tax returns, as filed, are accurate in all material respects. All
federal, state, local and foreign taxes (including estimated tax
payments) required to be shown on all such tax returns or claimed to be
due from or with respect to the business of the Company and the
Subsidiary have been paid or reflected as a liability on the
consolidated financial statements of the Company for appropriate
periods. All deficiencies asserted as a result of any federal, state,
local or foreign tax audits have been paid or finally settled and no
issue has been raised in any such audit which, by application of the
same or similar principals, reasonably could be expected to result in a
proposed deficiency for any other period not so audited. No state of
facts exist or has existed which would constitute grounds for the
assessment of any tax liability with respect to the periods that have
not been audited by appropriate federal, state, local or foreign
authorities. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any federal, state,
local or foreign tax return for any period.
(ad) Based upon representations of the executive officers and
directors of the Company, during the past five years none of the
executive officers or directors of the Company have been:
(i) Subject of a petition under the Federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which either of them was a general
partner at or within two years before the time of such filing,
or any corporation or business association of which either of
them was an executive officer at or within two years before
the time of such filing;
(ii) Convicted in a criminal proceeding or named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(iii) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(A) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with any such activity;
(B) engaging in any type of business
practice; or
(C) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
Federal or State securities law or Federal
commodities laws.
(iv) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any
Federal or State authority barring, suspending or otherwise
limiting for more than sixty (60) days either of their right
to engage in any activity described in paragraph (iii)(A)
above, or be associated with persons engaged in any such
activity;
(v) Found by any court of competent jurisdiction in a
civil action or by the Securities and Exchange Commission to
have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(vi) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any Federal commodities law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(ae) The Company confirms as of the date hereof that it and
the Subsidiary are in compliance with all provisions of Section 1 of
Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of doing
Business with Cuba, and the Company further agrees that if it or the
Subsidiary commences engaging in business with the government of Cuba
or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported
or incorporated by reference in the Prospectus, if any, concerning the
Company's business with Cuba or with any person or affiliate located in
Cuba changes in any material way, the Company will provide the
Department notice of such business or change, as appropriate, in a form
acceptable to the Department.
(af) Neither the employment by the Company or the Subsidiary
of their key personnel nor the activities of such individuals at the
Company or the Subsidiary conflicts with, constitutes a breach of, or
otherwise violates any employment, noncompetition, nondisclosure or
similar agreement or covenant by which such individuals may be bound.
(ag) There are no outstanding loans, advances, or guarantees
of indebtedness by the Company or the Subsidiary to or for the benefit
of any of their officers, directors, or controlling persons, or any of
the members of the families of any of them.
(ah) The Company has timely and properly filed with the
Commission all reports and other documents required to have been filed
with the Commission.
Section 7. Expenses. The Company hereby agrees with the several
Underwriters that the Company will pay or cause to be paid the costs and
expenses associated with the following: (i) the preparation, printing or
reproduction, and filing with the Commission of the Registration Statement
(including financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus, each registration statement filed pursuant to Rule
462(b) under the Act, and each amendment or supplement to any of them; (ii) the
printing (or reproduction) and delivery (including postage, air freight charges
and charges for counting and packaging) of such copies of the Registration
Statement, each Prepricing Prospectus, the Prospectus, each registration
statement filed pursuant to Rule 462(b) under the Act, and all amendments or
supplements to any of them, as may be reasonably requested for use in connection
with the offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the offering of the Shares; (iv) the printing
(or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Shares; (v)
the listing of the Shares on the Nasdaq National Market; (vi) the registration
or qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states as provided in Section 5(f) hereof (including the
reasonable fees and expenses of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. in connection with the
offering; (viii) the transportation and other expenses incurred by or on behalf
of representatives of the Company in connection with the presentations to
prospective purchasers of the Shares; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; (xi) the preparation, printing and
distributing bound volumes for the Representatives and their counsel; and (xi)
the performance by the Company of its other obligations under this Agreement.
Section 8. Indemnification and Contribution The Company agrees to
indemnify and hold harmless you and each other Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Prepricing Prospectus the Registration
Statement, the Prospectus, any amendment or supplement thereto, or in any
Registration Statement filed pursuant to Rule 462(b) under the Securities Act,
or arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of or based upon any untrue
statement or alleged untrue statement of any material fact contained in any
audio or visual materials used in connection with the marketing of the Shares,
including, without limitation, slides, videos, films and tape recordings, except
insofar as such losses, claims, damages, liabilities or expenses arise out of or
are based upon an untrue statement or omission or alleged untrue statement or
omission which has been made therein or omitted therefrom in reliance upon and
in conformity with the information relating to an Underwriter furnished in
writing to the Company by or on behalf of any Underwriter through you expressly
for use in connection therewith or arise out of materials prepared solely by the
Underwriters without the knowledge of the Company or any of its representatives
based upon material information obtained from sources other than, directly or
indirectly, the Company or its representatives. This indemnification shall be in
addition to any liability that the Company may otherwise have.
If any action or claim shall be brought against any Underwriter or any
person controlling any Underwriter in respect of which indemnity may be sought
against the Company, such Underwriter or such controlling person shall promptly
notify in writing the party(s) against whom indemnification is being sought (the
"indemnifying party" or "indemnifying parties"), and such indemnifying party(s)
shall assume the defense thereof, including the employment of counsel reasonably
acceptable to such Underwriter or such controlling person and payment of all
fees and expenses. Such Underwriter or any such controlling person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person unless (i) the
indemnifying party(s) has (have) agreed in writing to pay such fees and
expenses, (ii) the indemnifying party(s) has (have) failed to assume the defense
and employ counsel reasonably acceptable to the Underwriter or such controlling
person, or (iii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
indemnifying party(s), and such Underwriter or such controlling person shall
have been advised by its counsel that representation of such indemnified party
and any indemnifying party(s) by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party(s) shall not have
the right to assume the defense of such action on behalf of such Underwriter or
such controlling person). The indemnifying party(s) shall not be liable for any
settlement of any such action effected without its (their) written consent, but
if settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, the indemnifying party(s) agrees to indemnify and
hold harmless any Underwriter and any such controlling person from and against
any loss, claim, damage, liability or expense by reason of such settlement or
judgment, but in the case of a judgment only to the extent stated in the
immediately preceding paragraph.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with respect
to information relating to such Underwriter furnished in writing by or on behalf
of such Underwriter through you expressly for use in the Registration Statement,
the Prospectus or any Prepricing Prospectus, any amendment or supplement
thereto, or any Registration Statement filed pursuant to Rule 462(b) under the
Securities Act. If any action or claim shall be brought or asserted against the
Company, any of its directors, any such officers, or any such controlling person
based on the Registration Statement, the Prospectus or any Prepricing
Prospectus, any amendment or supplement thereto, or any Registration Statement
filed pursuant to Rule 462(b) under the Securities Act, and in respect of which
indemnity may be sought against any Underwriter pursuant to this paragraph, such
Underwriter shall have the rights and duties given to the Company by the
preceding paragraph (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officers, and any such controlling persons
shall have the rights and duties given to the Underwriters by the immediately
preceding paragraph. This indemnification shall be in addition to any liability
the Underwriters or any Underwriter may otherwise have.
If the indemnification provided for in this Section 8 is unavailable to
an indemnified party under the first or third paragraph hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in connection with
the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Shares (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus; provided that, in the event that the Underwriters
shall have purchased any Additional Shares hereunder, any determination of the
relative benefits received by the Company or the Underwriters from the offering
of the Shares shall include the net proceeds (before deducting expenses)
received by the Company, and the underwriting discounts and commissions received
by the Underwriters, from the sale of such Additional Shares, in each case
computed on the basis of the respective amounts set forth in the notes to the
table on the cover page of the Prospectus. The relative fault of the Company on
the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
In any event, the Company will not, without the prior written consent
of the Representatives, settle or compromise or consent to the entry of any
judgment in any proceeding or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not the
Representatives or any person who controls the Representatives 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 all Underwriters and such
controlling persons from all liability arising out of such claim, action, suit
or proceeding.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8 was determined by a pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the fourth paragraph of this Section 8.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in the fourth paragraph of
this Section 8 shall be deemed to include, subject to the limitations set forth
above, 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 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective numbers of Firm Shares set forth opposite their names in
Schedule I hereto (or such numbers of Firm Shares increased as set forth in
Section 10 hereof) and not joint.
In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus, any supplement or amendment thereto, or
any registration statement filed pursuant to Section 462(b) of the Act, each
party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any person
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 8.
Section 9. Conditions of Underwriter's Obligations. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) The Registration Statement shall have become effective not
later than 4:30 p.m., New York City time, on the date hereof, or at
such later date and time as shall be consented to in writing by you,
and all filings required by Rules 424(b) and 430A under the Act shall
have been timely made; and any request of the Commission for additional
information (to be included in the Registration Statement or otherwise)
shall have been disclosed to the Representatives and complied with to
their reasonable satisfaction.
(b) Subsequent to the effective date of the Registration
Statement there shall not have occurred any change, or any development
involving, or which might reasonably be expected to involve, a
potential future material adverse change, in the condition (financial
or other), business, properties, net worth or results of operations of
the Company and the Subsidiary, taken as a whole, not contemplated by
the Prospectus (or any supplement thereto), that in your reasonable
opinion, as Representatives of the several Underwriters, would
materially and adversely affect the market for the Shares.
(c) You shall have received on the Closing Date (and the
Additional Closing Date, if any) an opinion of Oppenheimer Wolff &
Donnelly, counsel for the Company, dated the Closing Date (and the
Additional Closing Date, if any), satisfactory to you and your counsel,
to the effect that:
(i) The Company is a corporation duly incorporated
under the laws of the State of Minnesota, and validly existing
in good standing, with full corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is
duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify does not have a material
adverse effect on the condition (financial or other),
business, properties, net worth or results of operation of the
Company and the Subsidiary, taken as a whole.
(ii) The Subsidiary is a corporation duly organized
and validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power
and authority to own, lease and operate its properties and to
conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its
business requires such registration or qualification, except
where the failure to so register or qualify does not have a
material adverse effect on the condition (financial or other),
business, properties, net worth or results of operation of the
Company and the Subsidiary, taken as a whole. All issued and
outstanding shares of capital stock of the Subsidiary have
been validly issued, fully paid and nonassessable and free and
clear of all liens, encumbrances, equities and claims.
(iii) The authorized capital stock and other
securities of the Company conform in all material respects as
to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Securities."
(iv) All shares of capital stock or other securities
of the Company outstanding prior to the issuance of the Shares
to be issued and sold by the Company hereunder have been duly
authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or, to the
knowledge of such counsel after reasonable inquiry, similar
rights that entitle or will entitle any person to acquire any
Shares upon the issuance thereof by the Company.
(v) To such counsel's knowledge, all offers and sales
of the Company's capital stock or other securities prior to
the date hereof were made in compliance with the registration
provisions of the Act and the registration provisions of all
other applicable state and federal laws or regulations or any
actions under the Act, or any state or federal laws or
regulations in respect of any such offers or sales are
effectively barred by effective waivers or statutes of
limitation.
(vi) The Shares to be issued and sold to the
Underwriters by the Company hereunder have been duly
authorized and, when issued and delivered to the Underwriters
against payment therefor in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and free
and clear of all liens, encumbrances, equities and claims and
of any preemptive or, to the knowledge of such counsel after
reasonable inquiry, similar rights that entitle or will
entitle any person to acquire any Shares upon the issuance
thereof by the Company.
(vii) The form of certificates for the Shares
conforms to the requirements of the applicable corporate laws
of the State of Minnesota.
(viii) The Registration Statement has become
effective under the Act and, to the knowledge of such counsel
after reasonable inquiry, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose are pending before or
threatened by the Commission.
(ix) The Company has all requisite corporate power
and authority to enter into this Agreement and to issue, sell
and deliver the Shares to be sold by it to the Underwriters as
provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and is a valid, legal
and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as enforceability
thereof may be limited by (i) the application of bankruptcy,
reorganization, insolvency and other laws affecting creditors'
rights generally, and (ii) equitable principals being applied
at the discretion of a court before which any proceeding may
be brought; and the Company has adequate authorization and has
taken all action necessary to authorize the indemnification
provisions contained in Section 8 herein, provided, however
that such counsel may specifically refrain from opining as to
the validity of the indemnification provisions hereof insofar
as they are or may be held to be violative of public policy
(under either state or federal law) against such types of
provisions in the context of the offer, offer for sale, or
sale of securities.
(x) Neither the Company nor the Subsidiary is in
violation of its respective articles of incorporation or
bylaws or other charter documents, and to the knowledge of
such counsel after reasonable inquiry, neither the Company nor
the Subsidiary is in default in the performance of any
material obligation, agreement or condition contained in any
bond, indenture, note or other evidence of indebtedness or in
any other agreement material to the Company and the
Subsidiary, taken as a whole.
(xi) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this
Agreement, compliance by the Company with all provisions
hereof nor consummation by the Company of the transactions
contemplated hereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default
under, articles of incorporation or bylaws or other charter
documents, of the Company or the Subsidiary, or any agreement,
indenture, lease or other instrument to which the Company or
the Subsidiary, is a party or by which the Company or the
Subsidiary, or any of their respective properties, is bound,
that is or was required to be filed by the Company with the
Commission, or is known to such counsel after reasonable
inquiry, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the
Company or the Subsidiary, nor will any such action result in
any violation of any existing law, regulation, ruling
(assuming compliance with all applicable state securities and
Blue Sky laws), judgment, injunction, order or decree known to
such counsel after reasonable inquiry, applicable to the
Company or the Subsidiary, or any of their respective
properties.
(xii) No consent, approval, authorization or other
order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency or official is required on the part of the
Company (except such as have been obtained under the Act or
such as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Shares)
for the valid issuance and sale of the Shares to the
Underwriters under this Agreement.
(xiii) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included or
incorporated by reference therein, as to which such counsel
need not express any opinion) comply as to form in all
material respects with the requirements of the Act, and the
conditions to the use of Form S-3 have been satisfied by the
Company.
(xiv) To the knowledge of such counsel after
reasonable inquiry, (A) other than as described or
contemplated in the Registration Statement or the Prospectus
(or any amendment or supplement thereto), there are no legal
or governmental proceedings pending or threatened against the
Company or the Subsidiary, or to which the Company or the
Subsidiary, or any of their respective properties, are
subject, that are required to be described in the Registration
Statement or Prospectus (or any amendment or supplement
thereto) that are not described as required therein, and (B)
there are no agreements, contracts, indentures, leases or
other instruments, that are required to be described in the
Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that are not described
or filed as required, as the case may be.
(xv) To the knowledge of such counsel after
reasonable inquiry, neither the Company nor the Subsidiary is
in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or
the Subsidiary or of any decree of any court or governmental
agency or body having jurisdiction over the Company or the
Subsidiary except where such violation does not and will not
have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of
operation of the Company and the Subsidiary, taken as a whole.
(xvi) To the knowledge of such counsel after
reasonable inquiry, the Company and the Subsidiary have such
permits, licenses, franchises, approvals, consents and
authorizations of governmental or regulatory authorities
("permits"), as are necessary to own their respective
properties and to conduct their business in the manner
described in the Prospectus, subject to such qualifications as
may be set forth in the Prospectus; the Company and the
Subsidiary have fulfilled and performed all of their
respective material obligations with respect to such permits
and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof
or result in any other material impairment of the rights of
the holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus; and,
except as described in the Prospectus, such permits contain no
restrictions that are materially burdensome to the Company and
the Subsidiary, taken as a whole.
(xvii) The property described in the Prospectus as
held under lease by the Company or the Subsidiary is held
under valid, subsisting and enforceable leases, with only such
exceptions as in the aggregate are not material and do not
interfere in any material respect with the conduct of the
business of the Company and the Subsidiary, taken as a whole.
(xviii) Such counsel has reviewed all agreements,
contracts, indentures, leases or other documents or
instruments referred to in the Registration Statement and the
Prospectus (other than routine contracts entered into by the
Company or the Subsidiary for the purchase of materials or the
sale of products, entered into in the normal course of
business) and such agreements, contracts, indentures, leases
or other documents or instruments are fairly summarized or
disclosed therein, and filed as exhibits thereto as required,
and such counsel does not know, after reasonable inquiry, of
any agreements, contracts, indentures, leases or other
documents or instruments required to be so summarized or
disclosed or filed which have not been so summarized or
disclosed or filed.
(xix) The statements under the captions "Risk Factors
-- Anti-Takeover Considerations," "-- Government Regulation,"
"-- Impact of Shares Eligible for Future Sale," "Business --
Government Regulation" and "Description of Securities" in the
Registration Statement and the Prospectus, insofar as such
statements constitute a summary of documents referred to
therein or matters of law, are accurate summaries and fairly
and correctly summarize and present in all material respects
the information called for with respect to such documents and
matters. Such counsel has no reason to believe that the
descriptions in the Prospectus of statutes, regulations or
legal or governmental proceedings are other than accurate or
fail to present fairly the information required to be shown.
(xx) Neither the Company nor the Subsidiary is, nor
will either of them become, as a result of the consummation of
the transactions contemplated hereby and the application of
the net proceeds therefrom as set forth in the Registration
Statement and the Prospectus under the caption "Use of
Proceeds," 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.
(xxi) To the knowledge of such counsel after
reasonable inquiry, neither the Company nor the Subsidiary has
received written notice from any third party alleging that
their employment of any individual or the activities of any
individual at the Company or the Subsidiary conflicts with,
constitutes a breach of, or otherwise violates any employment,
noncompetition, nondisclosure or similar agreement or covenant
by which such individual may be bound, and such counsel has no
reason to believe that the employment by the Company or the
Subsidiary of any individual or the activities of any
individual at the Company or the Subsidiary conflicts with,
constitutes a breach of, or otherwise violates any employment,
noncompetition, nondisclosure or similar agreement or covenant
by which such individual may be bound.
In rendering such opinion, counsel may rely upon an opinion or
opinions, each dated the Closing Date (and the Additional Closing Date,
if applicable), of other counsel as to the laws of a jurisdiction other
than the State of Minnesota, provided that (1) each such local counsel
is acceptable to you, (2) each such opinion so relied upon is addressed
to counsel and you, (3) such reliance is expressly authorized by each
opinion so relied upon and a copy of each such opinion is delivered to
you and is in form and substance satisfactory to you, and (4) counsel
shall state in their opinion that they believe that they and you are
justified in relying thereon. In rendering such opinion, local counsel
may rely, to the extent they deem such reliance proper, as to matters
of fact upon certificates of officers of the Company and of government
officials. Copies of all such certificates shall be furnished to you
and your counsel on the Closing Date (and the Additional Closing Date,
if applicable).
In rendering such opinion, in each case where such opinion is
qualified by "the knowledge of such counsel after reasonable inquiry,"
such counsel may rely as to matters of fact upon certificates of
executive and other officers and employees of the Company as you and
such counsel shall deem are appropriate and such other procedures as
you and such counsel shall mutually agree; provided, however, in each
such case, such counsel shall state that it has no knowledge contrary
to the information contained in such certificates or developed by such
procedures and knows of no reason why you should not reasonably rely
upon the information contained in such certificates or developed by
such procedures.
In addition to the opinion set forth above, such counsel shall
state that during the course of the preparation of the Registration
Statement and the Prospectus, and any amendments or supplements
thereto, nothing has come to the attention of such counsel which has
caused it to believe that the Registration Statement, as of the time it
became effective under the Act, the Prospectus or any amendment or
supplement thereto, on the date it was filed pursuant to Rule 424(b),
as of the respective dates when such documents were filed with the
Commission, and the Registration Statement and the Prospectus, or any
amendment or supplement thereto, as of the Closing Date (except for the
financial statements and other financial and statistical information
contained therein or omitted therefrom as to which no opinion need be
expressed), contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statement therein not misleading. With respect to such
statement, counsel shall state that although such counsel did not
undertake to determine independently the accuracy, completeness and
fairness of the statements contained in the Registration Statement or
in the Prospectus and takes no responsibility therefor (except to the
extent specifically set forth herein), such counsel did participate in
discussions and meetings with officers and other representatives of the
Company and discussions with the auditor for the Company in connection
with the preparation of the Registration Statement and the Prospectus,
and it is on the basis of the foregoing (relying as to certain factual
matters on the information provided to such counsel and not on an
independent investigation) that such counsel is making such statement.
(d) On each Closing Date there shall have been furnished to
you the opinion (addressed to the Underwriters) of Patterson & Keough,
P.A., patent counsel to the Company, dated such Closing Date (or the
Additional Closing Date, if any) and in form and substance satisfactory
to counsel for the Underwriters to the effect that such counsel is
familiar with that portion of the technology used by the Company and
the Subsidiary in its business concerning which such counsel has been
consulted and has read the Registration Statement and the Prospectus,
including in particular the portions of the Registration Statement and
the Prospectus referring to patents, trade secrets, trademarks, service
marks or other proprietary information or materials, including such
information or material licensed by the Company or the Subsidiary (the
"Technology Portion"), such counsel consents to being named as an
"Expert" in the Registration Statement, and:
(i) to the best of such counsel's knowledge, all
information submitted to the Patent and Trademark Office in
connection with the prosecution of patent applications on
behalf of the Company has been accurate, and neither this
firm, nor to the best of our knowledge, the Company or any
other person, have made any misrepresentation or concealed any
material information from the Patent and Trademark Office in
connection with the prosecution of such applications;
(ii) such counsel has no knowledge of any fact which
would preclude the Company from having clear title to the
Company's patents and patent applications referenced in the
Technology Portion. To the best of such counsel's knowledge,
and based upon a representation of the Company as to the
Company's intended strategy for pursuing cross-licensing,
neither the Company nor the Subsidiary lacks or will be unable
to obtain any rights or licenses to use any patent or know-how
necessary to conduct the business now conducted or proposed to
be conducted by the Company and the Subsidiary as described in
the Registration Statement and the Prospectus (and any
amendment or supplement thereto). To the best of such
counsel's knowledge, none of the patents owned by the Company
is unenforceable or invalid. To the best of such counsel's
knowledge, the Company has not received any notice of
infringement or of conflict with rights or claims of others
with respect to any patents, trademarks, service marks, trade
names, copyrights or know-how which could result in any
material adverse effect upon the Company and the Subsidiary,
taken as a whole. Such counsel is not aware of any patents of
others which are infringed by specific products or processes
referred to in the Prospectus in such manner as to materially
and adversely affect the Company and the Subsidiary, taken as
a whole;
(iii) to the best of such counsel's knowledge, there
are no legal, administrative or other governmental proceedings
pending relating to patent rights, trade secrets, trademarks,
service marks or other proprietary information or materials of
the Company or the Subsidiary, and to the best of such
counsel's knowledge no such proceedings are threatened or
contemplated by governmental authorities or others, other than
as described in the Prospectus;
(iv) the statements under the captions "Risk Factors
-- Intellectual Property Protection" and "Business --
Intellectual Property" in the Prospectus, insofar as such
statements constitute a summary of documents referred to
therein or matters of law, are accurate summaries and fairly
correctly present, in all material respects, the information
called for with respect to such documents and matters;
provided, however, that such counsel may rely on
representations of the Company with respect to the factual
matters contained in such statements, and provided that such
counsel shall state that nothing has come to the attention of
such counsel which leads them to believe that such
representations are not true and correct in all material
respects; and
(v) such counsel has no reason to believe that the
Registration Statement or the Prospectus (A) contains any
untrue statement of a material fact with respect to patents,
trade secrets, trademarks, service marks or other proprietary
information owned or used by the Company or the Subsidiary, or
(B) omits to state any material fact relating to patents,
trade secrets, trademarks, service marks or other proprietary
information owned or used by the Company or the Subsidiary
that would make the statements relating to such matters in the
Registration Statement or the Prospectus, in light of the
circumstances in which such statements were made, misleading.
(e) On each Closing Date there shall have been furnished to
you the opinion (addressed to the Underwriters) of ___________, special
patent counsel to the Company, dated such Closing Date (or the
Additional Closing Date, if any) and in form and substance satisfactory
to counsel for the Underwriters to the effect that such counsel is
familiar with the disputes between Pacesetter, Inc. and a major
competitor and Pacesetter, Inc. and Cardiac Pacemaker, Inc. described
in the Registration Statement and the Prospectus concerning which such
counsel has been consulted and has read the portions of the
Registration Statement and the Prospectus relating to such disputes,
such counsel consents to being named as an "Expert" in the Registration
Statement (if required by the Securities Act and the rules and
regulations thereunder), and:
(i) the statements in the ___ paragraph under the
caption "Risk Factors -- Pacesetter Relationship" and under
the ___ paragraph under the caption "Business -Intellectual
Property Protection," insofar as such statements relate to the
disputes between Pacesetter, Inc. and a major competitor and
Pacesetter, Inc. and Cardiac Pacemaker, Inc. and constitute a
summary of documents referred to therein or matters of law,
are accurate summaries and fairly correctly present, in all
material respects, the information called for with respect to
such documents and matters; provided, however, that such
counsel may rely on representations of the Company with
respect to the factual matters contained in such statements,
and provided that such counsel shall state that nothing has
come to the attention of such counsel which leads them to
believe that such representations are not true and correct in
all material respects.
(f) You shall have received on the Closing Date (and the
Additional Closing Date, if any) an opinion of Hale and Dorr, counsel
for the Underwriters, dated the Closing Date (and the Additional
Closing Date, if any), with respect to the issuance and sale of the
Firm Shares, the Registration Statement and other related matters as
you may reasonably request, and the Company and its counsel shall have
furnished to your counsel such documents as they may reasonably request
for the purpose of enabling them to pass upon such matters.
(g) You shall have received letters addressed to you and dated
the date hereof and the Closing Date (and the Additional Closing Date,
if any) from KPMG Peat Marwick LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(h) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company,
shall be contemplated by the Commission at or prior to the Closing
Date; (ii) there shall not have been any change in the capital stock or
other securities of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary
course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto); (iii) there shall not have been since the
respective dates as of which information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material
adverse change (present or potential future) in the condition
(financial or other), business properties, net worth or results of
operations of the Company and the Subsidiary, taken as a whole; (iv)
the Company and the Subsidiary shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary
course of business) that are material to the Company and the
Subsidiary, taken as a whole, other than those reflected in the
Registration Statement or the Prospectus (or any amendment or
supplement thereto); and (v) all of the representations and warranties
of the Company contained in this Agreement shall be true and correct in
all material respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date, and you shall
have received a certificate, dated the Closing Date and signed by the
chief executive officer and the chief financial officer of the Company
(or such other officers as are acceptable to you) to the effect set
forth in this Section 9(h) and in Section 9(i) hereof.
(i) The Company shall not have failed in any material respect
at or prior to the Closing Date to have performed or complied with any
of its agreements herein contained and required to be performed or
complied with by it hereunder at or prior to the Closing Date.
(j) The Company shall have furnished or caused to have been
furnished to you such further certificates and documents as you shall
have reasonably requested.
(k) At or prior to the Closing Date, you shall have received
the written commitment of each of the Company's directors, executive
officers and shareholders set forth on Schedule II hereto, not to
offer, sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for, or any
rights to purchase or acquire, Common Stock, during the period from
June 1, 1996 to the date 90 days following the effective date of the
Registration Statement, inclusive, without the prior written consent of
Raymond James & Associates, Inc., which commitments shall be in full
force and effect as of the Closing Date (and the Additional Closing
Date, if any).
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Additional
Closing Date of the conditions set forth in this Section 9, except that, if the
Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (j) shall be dated in
the Additional Closing Date and the opinions and letters referred to in
paragraphs (c) through (g) shall be revised to reflect the sale of Additional
Shares.
Section 10. Effective Date of Agreement. This Agreement shall become
effective upon the later of (a) the execution and delivery hereof by the parties
hereto, or (b) release of notification of the effectiveness of the Registration
Statement by the Commission.
If any one or more of the Underwriters shall fail or refuse to purchase
Firm Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Firm Shares, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm Shares
set forth opposite its name in Schedule I hereto bears to the aggregate number
of Firm Shares set forth opposite the names of all non-defaulting Underwriters
or in such other proportion as you may specify in the Agreement Among
Underwriters, to purchase the Firm Shares which such defaulting Underwriter or
Underwriters agreed, but failed or refused to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares and arrangements satisfactory
to you and the Company for the purchase of such Firm Shares are not made within
36 hours after such default, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company. In any such case that
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven (7) days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement.
Section 11. Termination of Agreement. This Agreement shall be subject
to termination in your absolute discretion, without liability on the part of any
Underwriter to the Company, by notice to the Company, if prior to the Closing
Date or the Additional Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, American Stock Exchange or The Nasdaq
Stock Market shall have been suspended or materially limited, (ii) trading of
any securities of the Company, including the Shares, on the New York Stock
Exchange, American Stock Exchange or The Nasdaq Stock Market shall have been
suspended or materially limited, whether as the result of a stop order by the
Commission or otherwise, (iii) a general moratorium on commercial banking
activities in New York or Florida shall have been declared by either federal or
state authorities, (iv) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions or other material event the effect
of which on the financial markets of the United States is such as to make it, in
your judgment, impracticable or inadvisable to market the Shares or to enforce
contracts for the sale of the Shares, or (v) the Company or the Subsidiary shall
have, in the sole judgment of the Representatives, sustained any loss or
interference, material to the Company and the Subsidiary, taken as a whole, with
their respective businesses or properties from fire, flood, hurricane, accident,
or other calamity, whether or not covered by insurance, or from any labor
disputes or any legal or governmental proceeding, or there shall have been any
material adverse change (including, without limitation, a material change in
management or control of the Company) in the condition (financial or otherwise),
business prospects, net worth, or results of operations of the Company and the
Subsidiary, taken as a whole, except in each case as described in, or
contemplated by, the Prospectus (excluding any amendment or supplement thereto).
Notice of such cancellation shall be promptly given to the Company and its
counsel by telegraph or telephone and shall be subsequently confirmed by letter.
Section 12. Information Furnished by the Underwriters. The statements
set forth under the caption "Underwriting" in any Prepricing Prospectus and in
the Prospectus, constitute all the information furnished by or on behalf of the
Underwriters through you or on your behalf as such information is referred to in
Sections 6(a), 6(b) and 8 hereof.
Section 13. Notices; Successors and Assigns. Except as otherwise
provided in Sections 5, 10 and 11 hereof, notice given pursuant to any of the
provisions of this Agreement shall be in writing and shall be delivered (i) if
to the Company, at the office of the Company at 3650 Annapolis Lane, Suite 170,
Minneapolis, Minnesota 55447, Attention: Whitney A. McFarlin, Chairman,
President and Chief Executive Officer (with a copy to Thomas C. Thomas, Esq.,
Oppenheimer, Wolff & Donnelly, 3400 Plaza VII, 43 South Seventh Street,
Minneapolis, Minnesota 55402); or (ii) if to you, as the Underwriters, to (A)
Raymond James & Associates, Inc. 880 Carillon Parkway, St. Petersburg, Florida
33716, Attention: John M. McDonald, Senior Vice President; (B) Natwest
Securities Limited, 175 Water Street, 20th Floor, New York, New York 10038,
Attention: Steve G. Meehan, Senior Director; and (C) Salomon Brothers Inc, Seven
World Trade Center, New York, New York 10048, Attention: Richard Shapiro (with a
copy to John M. Westcott, Jr., Esq., Hale and Dorr, 60 State Street, Boston,
Massachusetts 02109).
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 8 hereof, and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither of the
terms "successor" and "successors and assigns" as used in this Agreement shall
include a purchaser from you of any of the Shares in his status as such
purchaser.
Section 14. Applicable Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida
without reference to choice of law principles thereunder. This Agreement may be
signed in various counterparts which together shall constitute one and the same
instrument. This Agreement shall be effective when, but only when, at least one
counterpart hereof shall have been executed on behalf of each party hereto.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us.
Very truly yours,
ANGEION CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
CONFIRMED as of the date first above mentioned, on behalf of itself and the
other several Underwriters named in Schedule I hereto.
RAYMOND JAMES & ASSOCIATES, INC.
NATWEST SECURITIES LIMITED
SALOMON BROTHERS INC
By: RAYMOND JAMES & ASSOCIATES, INC.
By: _____________________________
Authorized Representative
SCHEDULE I
Number
of Firm
Name Shares
Raymond James & Associates, Inc..................
Natwest Securities Limited.......................
Salomon Brothers Inc.............................
TOTAL....................................... 5,000,000
SCHEDULE II
Name
Arnold A. Angeloni
David L. Christofferson
Dennis E. Evans
Robert S. Garin
Hanrow Business Finance, Inc.
Hanrow Financial Group Ltd.
Lyle D. Joyce
Joseph C. Kiser
Jennifer M. Marrone
Donald Maurer
Whitney A. McFarlin
Gary Payment
T.V. Rao
William J. Rissman
Glen Taylor
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Angeion Corporation:
We consent to the use of our report included and incorporated by reference
herein and to the reference to our firm under the heading "Experts" in the
Prospectus.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 4, 1996
June 4, 1996
CONSENT
The Board of Directors
Angeion Corporation
We consent to the reference to our firm under the heading "Experts" in the
Prospectus.
Sincerely,
/s/ Paul W. Stanga
Patterson & Keough, P.A.
