UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________to________
Commission file number 0-17019
ANGEION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1579150
(State of Incorporation) (IRS Employer Identification No.)
3650 Annapolis Lane, Suite 170 55447-5434
Plymouth, MN (Zip Code)
(Address of principal
executive offices)
(612) 550-9388
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__. NO ____.
Common Stock, par value $.01 per share: 30,223,583 shares
outstanding as of June 09, 1997
PART I. FINANCIAL INFORMATION
ITEM DESCRIPTION Page(s)
- ---- ----------- -------
1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets (unaudited) 1
- April 30, 1997 and July 31, 1996.
Consolidated Statements of Operations (unaudited) 2
- For the Three and Nine Months Ended
April 30, 1997 and 1996.
Consolidated Statements of Cash Flows (unaudited) 3
- For the Nine Months Ended April 30, 1997 and 1996.
Notes to Consolidated Financial Statements (unaudited). 4
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 5 - 7
PART II. OTHER INFORMATION
1. LEGAL PROCEEDINGS. 8
6. EXHIBITS AND REPORTS ON FORM 8-K. 8
Signature. 9
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Balance Sheets
April 30, 1997 and July 31, 1996
(unaudited)
April 30, July 31,
ASSETS 1997 1996
- ------ ------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 3,057,068 $ 35,183,919
Short-Term Marketable Securities 5,518,338 7,368,290
Accounts Receivable:
Trade, less allowance for doubtful accounts of
zero and $60,758 1,163,971 2,330,742
Other 235,746 164,009
Inventories 8,696,390 3,949,350
Prepaid Expenses and Other Current Assets 299,117 159,112
------------ ------------
TOTAL CURRENT ASSETS 18,970,630 49,155,422
Long-Term Marketable Securities 12,472,561 --
Property and Equipment, Net 6,672,074 4,819,820
Patents and Trademarks, Net 877,331 1,079,785
Other Assets 110,256 128,869
------------ ------------
TOTAL ASSETS $ 39,102,852 $ 55,183,896
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 1,554,747 2,970,237
Accrued Payroll, Vacation and Related Costs 1,053,484 607,700
Other Accrued Expenses 1,048,807 642,287
Deferred Income 731,250 --
------------ ------------
TOTAL CURRENT LIABILITIES 4,388,288 4,220,224
Long-Term Debt 1,500,000 1,500,000
------------ ------------
TOTAL LIABILITIES 5,888,288 5,720,224
------------ ------------
Shareholders' Equity:
Class A Convertible Preferred Stock, $.01 par value .
Authorized 1,475,000 shares; issued and outstanding
875,000 shares at April 30, 1997 and July 31, 1996 8,750 8,750
Common Stock, $.01 par value. Authorized
50,000,000 shares; issued and outstanding
28,850,957 shares at April 30, 1997,
and 28,641,707 shares at July 31, 1996 288,510 286,417
Additional Paid-In Capital 92,405,174 91,536,256
Cumulative Translation Adjustment (16,444) --
Accumulated Deficit (59,471,426) (42,367,751)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 33,214,564 49,463,672
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 39,102,852 $ 55,183,896
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Statements of Operations
Three and Nine Months Ended April 30, 1997 and 1996
(Unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 1,004,661 $ 452,600 $ 3,494,112 $ 874,959
Operating Expenses:
Manufacturing 1,871,200 1,053,444 5,247,015 2,278,242
Research & Development 4,629,296 2,808,202 12,211,486 6,717,469
Selling, General & Administrative 1,589,600 1,121,314 4,377,016 2,832,177
Total Operating Expenses 8,090,096 4,982,960 21,835,517 11,827,888
------------ ------------ ------------ ------------
OPERATING LOSS (7,085,435) (4,530,360) (18,341,405) (10,952,929)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest Income 332,336 279,905 1,325,577 878,879
Interest Expense (29,315) (29,088) (87,847) (87,694)
------------ ------------ ------------ ------------
Other Income 303,021 250,817 1,237,730 791,185
------------ ------------ ------------ ------------
NET LOSS $ (6,782,414) $ (4,279,543) $(17,103,675) $(10,161,744)
============ ============ ============ ============
NET LOSS PER SHARE $ (.24) $ (.18) $ (.60) $ (.46)
============ ============ ============ ============
Weighted Average Number of Shares
Outstanding 28,776,006 23,301,937 28,713,677 21,953,593
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Nine Months Ended April 30, 1997 and 1996
(Unaudited)
1997 1996
------------ ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $(17,103,675) $(10,161,744)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating Activities:
Depreciation and Amortization 1,299,821 684,412
Compensation Expense on Grant of Stock and Stock Options 436,750 485,237
Changes in Operating Assets and Liabilities:
Accounts Receivable 1,095,034 (401,913)
Inventories (4,747,040) (2,510,489)
Prepaid Expenses and Other Current Assets (140,005) 21,683
Accounts Payable (1,415,490) 942,246
Accrued Expenses 1,589,744 416,580
------------ ------------
Net Cash Used in Operating Activities (18,984,861) (10,523,988)
------------ ------------
INVESTING ACTIVITIES:
Purchase of Marketable Securities (31,522,609) (7,328,201)
Proceeds from Maturities of Marketable Securities 20,900,000 --
Payments for Purchases of Property and Equipment (2,931,008) (2,543,497)
Increase in Other Assets -- (322,023)
------------ ------------
Net Cash Used in Investing Activities (13,553,617) (10,193,721)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock and Warrants, Net -- 20,327,045
Proceeds from Exercise of Stock Options and Warrants 434,260 12,815,116
Repayments of Capital Lease Obligation and Note Payable -- (2,706)
------------ ------------
Net Cash Provided by Financing Activities 434,260 33,139,455
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (22,633) --
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (32,126,851) 12,421,746
Cash and Cash Equivalents:
Beginning of Period 35,183,919 2,367,764
------------ ------------
End of Period $ 3,057,068 $ 14,789,510
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period for Interest $ 87,847 $ 60,843
============ ============
See accompanying notes to financial statements.
</TABLE>
ANGEION CORPORATION
Form 10-Q
April 30, 1997
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements have been prepared by
the Company in accordance with generally accepted accounting principles,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements have been omitted or condensed pursuant to such rules and
regulations. The accompanying unaudited interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Company's July 31, 1996 Annual
Report to Shareholders.
The information furnished reflects, in the opinion of the management of Angeion
Corporation, all material adjustments, consisting only of normally recurring
adjustments, necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods presented.
2. FOREIGN CURRENCY TRANSLATION
The functional currency and denomination of all sales transactions of Angeion
Europe Ltd. are the U.S. dollar. Accordingly, the financial statements of
Angeion Europe Ltd., 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.
The financial statements of Angeion GmbH, whose functional currency is the
German Mark, are translated at current rates of exchange for net accounts and at
average exchange rates for the period for items of Income and Expense. The
resulting translation adjustments are recorded directly into a separate
component of shareholders equity.
3. 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 convertible preferred stock and common
stock warrants and options were excluded in the fiscal 1995 and 1996 periods
presented due to their anti-dilutive effect.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's 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 (abnormal heartbeats). Effective November 1, 1995, the
Company established a European subsidiary, Angeion Europe Ltd. ("Angeion
Europe"), to facilitate clinical studies of its implantable cardioverter
defibrillators ("ICDs") and expand its European business activities. For the
same reasons, a German subsidiary, Angeion GmbH, was established during the
quarter ended October 31, 1996. The results of the subsidiaries' operations are
included in the consolidated financial statements of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997, COMPARED TO THE THREE MONTHS ENDED APRIL 30,
1996
Net sales increased 122 percent to $1,004,661 in the three months ended April
30, 1997 from $452,600 in the same period of fiscal 1996. This increase was due
to increased sales in Europe as well as increased U.S. clinical activity.
Manufacturing expense increased 78 percent to $1,871,200 in the three months
ended April 30, 1997 from $1,053,444 in the same period of fiscal 1996. Included
in manufacturing expense is the standard cost of products sold and the start-up
costs associated with the establishment of the manufacturing operation, which
include unfavorable manufacturing variances and excess capacity.
Research and development expense increased 65 percent to $4,629,296 in the three
months ended April 30, 1997 from $2,808,202 in the same period of fiscal 1996.
The Company continues to focus the majority of its research and development
activities on its series of ICDs, which represent $4,159,588 of the current
quarterly expense, and its catheter ablation development activities, which
represent $469,708 of expense. The Company anticipates that research and
development expense will continue to increase, reflecting the Company's intent
to simultaneously move current products through development and human clinical
studies as rapidly as possible; introduce enhancements to current products; and
accelerate the development of a fifth generation ICD.
Selling, general and administrative expense increased 42 percent to $1,589,600
in the three months ended April 30, 1997 from $1,121,314 in the same period of
fiscal 1996. This increase relates primarily to the expansion of the two
wholly-owned subsidiaries in Germany and in the U.K. as well as payroll expense
related to the addition of staff in the United States. Selling expense is
expected to continue to increase as the Company accelerates development of a
U.S. direct sales force during the next six months.
Interest income increased 19 percent to $332,336 in the three months ended April
30, 1997 from $279,905 in the same period in fiscal 1996. This increase was due
to an increase in the average balance of cash, cash equivalents and marketable
securities in the quarter ended April 30, 1997 compared to the same period in
fiscal 1996.
NINE MONTHS ENDED APRIL 30, 1997, COMPARED TO THE NINE MONTHS ENDED APRIL 30,
1996
Net sales increased 299 percent to $3,494,112 in the nine months ended April 30,
1997 from $874,959 in the same period in fiscal 1996. This increase was due to
increased sales in Europe as well as increased U.S. clinical activity. This
increase was also due to increased OEM sales to Pacesetter, Inc. in the three
months ended October 31, 1996, although these OEM sales ceased following the
October 1996 announcement by St. Jude Medical, Inc. (St. Jude) of its intention
to acquire Ventritex, Inc., a company that manufactures and markets
defibrillator products similar to the Company's products. The St. Jude
acquisition of Ventritex, was completed on May 15, 1997. On May 19, 1997,
Angeion announced that a cross licensing agreement it signed with St. Jude on
April 2, 1997 became effective. This agreement replaces Angeion's earlier cross
licensing agreement of February 1993, and formally dissolves Angeion's OEM
relationship with St. Jude. See "Legal Proceedings" below. The Company has
accelerated the development of its own sales force and is in the process of
evaluating and establishing other distribution relationships. Nevertheless,
until such time as the Company is able to develop fully its own sales force and
establish other distribution relationships, net sales are expected to grow at a
slower rate than originally planned.
Manufacturing expense increased 130 percent to $5,247,015 in the nine months
ended April 30, 1997 from $2,278,242 in the same period in fiscal 1996. Included
in manufacturing expense is standard cost of products sold and the start-up
expense associated with the establishment of a manufacturing operation and
excess capacity.
Research and development expense increased 82 percent to $12,211,486 in the nine
months ended April 30, 1997 from $6,717,469 in the same period in fiscal 1996.
This increase resulted from increased expense in U.S. clinical studies as well
as ongoing development of ICD and catheter ablation technologies.
Selling, general and administrative expense increased 55 percent to $4,377,016
in the nine months ended April 30, 1997 from $2,832,177 in the same period in
fiscal 1996. The increase in selling expense was a result of the addition and
expansion of two wholly-owned international subsidiaries and development of the
U.S. marketing organization. General and administrative expenditures increased
primarily due to higher legal costs and expenses to support a growing employee
base.
Interest income increased 51 percent to $1,325,577 in the nine months ended
April 30, 1997 from $878,879 in the same period in fiscal 1996, due to higher
average invested cash, cash equivalents and marketable securities balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have related to, and are expected to continue to
relate to, expansion of clinical studies; research and development activities of
its ICD and catheter ablation divisions; scale-up and expansion of the Company's
manufacturing and marketing activities; general corporate purposes including
working capital; and the potential acquisition of businesses, products and
technologies. The Company has financed its liquidity needs during the last three
fiscal years through the sale of Common Stock and other equity securities, and
notes payable.
Net cash used in operating activities was $18,984,861 and $10,523,988 in the
nine-month periods ended April 30, 1997 and 1996, respectively. The cash used
during these periods was primarily related to the research and development
activities of the Company's ICD and catheter ablation divisions (including
clinical studies) and, during the nine-month period ended April 30, 1997, was
also related to the build-up of inventory and increased sales and marketing
expenses.
The Company's expenditures for fixed assets were $2,931,008 for the nine-month
period ended April 30, 1997 and $2,543,497 for the same period in 1996. 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
development capabilities, fixed asset expenditures are expected to continue to
increase.
At April 30, 1997, the Company had cash and cash equivalents of $3,057,068 and
marketable securities of $17,990,899. In July 1996, the Company completed a
public offering of Common Stock that resulted in net proceeds of $27,401,887.
Assuming the Company's operations progress as anticipated (of which there can be
no assurance), the Company believes that its existing balances of cash, cash
equivalents and marketable securities, along with cash generated from
operations, should provide sufficient capital for approximately the next 9 to 11
months. To the extent that the Company's operations do not progress as
anticipated, however, additional capital may be needed sooner. The timing of the
Company's capital needs and the amount of capital needed will depend on a number
of factors, including: progress with clinical studies; 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 scale-up and expansion of
manufacturing and marketing activities; potential acquisitions of businesses,
products, and technologies; the ability of the Company to build its own clinical
and distribution networks; and the Company's ability to secure alternative OEM
distribution channels. The Company has activities underway to obtain its
required capital, however there can be no assurance that any required additional
capital would be available on acceptable terms, if at all, and the failure to
obtain any additional capital would have a material adverse effect on the
Company.
CERTAIN IMPORTANT FACTORS
This Form 10-Q contains certain forward-looking statements. For this purpose,
any statements contained in this Form 10-Q 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 comparable terminology are intended 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 the following: the expectation that the Company will
continue to incur additional operating losses and net losses over the next few
years; the fluctuation in the Company's operating results; the impact of
competition in the ICD market; new product development cycles and the market
acceptance of the Company's products; the Company's ability to protect its
intellectual property rights and to resolve any intellectual property disputes
on reasonable terms; and the ability of the Company to continue to build its own
clinical and distribution networks.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has obtained a royalty-free cross license agreement with St. Jude
Medical, Inc. and its subsidiaries, Pacesetter, Ventritex and Telectronics. This
agreement replaces the OEM marketing and manufacturing agreements and license
agreement signed between the Company and Siemens/Pacesetter in 1993 (Pacesetter
was later acquired by St. Jude Medical, Inc.) and allows the Company to pursue
various distribution relationships with other companies in the medical industry.
Pacesetter's suit against the Company in the U.S. District Court, District of
Minnesota, concerning the 1993 License and OEM Agreements and Pacesetters claim
for overpayment has been recommended for dismissal for want of prosecution by
the Chief Magistrate Judge.
In 1996, the Company and Pacesetter, Inc. jointly sued Cardiac Pacemakers, Inc.,
in the United States District Court, District of Minnesota, for patent
infringement of Pacesetter's bradycardia patents and Company's tachycardia
patents. In connection with the Company's patents, the Company has assumed
control of that portion of the litigation against CPI. Trial is scheduled for
March, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Item No. Item Method of Filing
-------- ---- ----------------
10.1 Cross-License Agreement Filed herewith.
among St. Jude Medical, Inc.,
Pacesetter, Inc. and the
Company
27.1 Financial Data Schedule
(b) A current report on Form 8-K, dated April 3, 1997, was filed
during the three months ended April 30, 1997, pursuant to Item 5.
This filing was made in reference to an announcement of the
Company's cross licensing agreement with St. Jude Medical, Inc.
which became effective upon the completion of St. Jude's merger
with Ventritex, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANGEION CORPORATION
Dated: June 13, 1997 By /s/ David L. Christofferson
------------------------------
David L. Christofferson
Chief Financial Officer
Vice President of Finance
(principal financial and accounting officer)
CROSS-LICENSE AGREEMENT
This Cross-License Agreement is entered into by and among St. Jude
Medical, Inc., a Minnesota corporation having its principal place of business at
One Lillehei Plaza, St. Paul, Minnesota 55117 ("St. Jude"), and its wholly owned
subsidiary, Pacesetter, Inc., a Delaware corporation having its principal place
of business at 15900 Valley View Court, Sylmar, California 91392 ("Pacesetter")
(hereinafter sometimes collectively referred to with St. Jude as "St.
Jude/Pacesetter"), and Angeion Corporation, a Minnesota corporation having its
principal place of business at 3650 Annapolis Lane, Minneapolis, Minnesota 55447
("Angeion").
RECITALS
WHEREAS, Angeion and Pacesetter executed a set of agreements on
February 4, 1993, referred to as the "Corporate Partnering Transaction," which
included, INTER ALIA, an "OEM Marketing and Manufacturing Agreement," and a
"License Agreement"; and
WHEREAS, Angeion notified St. Jude/Pacesetter by letter dated November
20, 1996, of its termination/rescission of the "OEM Marketing and Manufacturing
Agreement" and the "License Agreement"; and
WHEREAS, Pacesetter filed a lawsuit against Angeion on November 26,
1996, in Federal District Court, District of Minnesota, Case No. 4-96-1161, for
a declaratory judgment as to the "OEM Marketing and Manufacturing Agreement" and
the "License Agreement"; and
WHEREAS, without admitting that grounds exist for the
termination/rescission of the "OEM Marketing and Manufacturing Agreement" and
the "License Agreement," and expressly reserving its rights to contend that any
sublicenses previously granted under the "License Agreement" are valid and
enforceable, and without prejudice to Pacesetter's position that the "OEM
Marketing and Manufacturing Agreement" and the "License Agreement" are valid and
enforceable, St. Jude/Pacesetter wish to enter into this Cross-License
Agreement; and
WHEREAS, without admitting that grounds exist for a determination that
the "OEM Marketing and Manufacturing Agreement" and/or the "License Agreement"
are valid and enforceable, and expressly reserving its rights to contend that
any sublicenses previously granted under the "License Agreement" are void and
unenforceable, and without prejudice to Angeion's position that grounds exist
for the termination/rescission of the "OEM Marketing and Manufacturing
Agreement" and the "License Agreement", Angeion wishes to enter into this
Cross-License Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
consideration herein expressed, the sufficiency of which is hereby acknowledged,
St. Jude/Pacesetter and Angeion agree as follows:
AGREEMENT
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following meanings:
1.1. "AFFILIATE", with respect to any Party, shall mean any other
entity which directly or indirectly controls or is controlled by, or is under
common control with, such Party, including without limitation, any subsidiary,
whose parent owns fifty percent (50%) or more of its voting securities or other
voting interests.
1.2. "ANGEION FIELD OF USE" shall mean Tachycardia Devices.
1.3. "CARDIAC STIMULATION DEVICE" shall mean permanently implantable
medical devices capable of delivering electrical stimulation to the heart for
the purpose of treating cardiac dysrhythmias and shall include, without
limitation, Related Peripherals and/or Components.
1.4 "EFFECTIVE DATE" shall mean the date upon which this Agreement
becomes effective as provided in Section 10.
1.5. "LICENSED PATENT", as to a Party, shall mean all patents owned,
acquired or licensed with the right to sublicense which are licensable or
sublicensable (without any right of a non-affiliated third party to receive a
continuing royalty or payment of any kind) by such Party (or its Affiliates) as
of the Effective Date or subsequent to the Effective Date, and which claim
priority, directly or indirectly, to applications filed prior to the Effective
Date.
1.6. "PARTY" shall mean either St. Jude/Pacesetter or Angeion, and
"Parties" shall mean St. Jude/Pacesetter and Angeion.
1.7. "RELATED PERIPHERALS AND/OR COMPONENTS" shall mean products or
services for use in or with, or for support of, Cardiac Stimulation Devices,
including component parts such as batteries, capacitors, electronic components,
software, packaging, headers and the like, and peripherals such as leads,
patches, programmers, computers, software and the like.
1.8. "ST. JUDE FIELD OF USE" shall mean Cardiac Stimulation Devices for
any patents identified as "Exclusive Angeion Defibrillator Patents" or
"Nonexclusive Angeion Defibrillator Patents" as defined in the "License
Agreement," and Tachycardia Devices for all other patents.
1.9. "SUBLICENSABLE PATENTS", as to a Party, shall mean all patents
owned, acquired, or licensed with the right to sublicense which are licensable
or sublicensable (but only in consideration of a royalty or continuing payment
to a non-affiliated third party) by such Party (or its Affiliates) as of the
Effective Date or subsequent to the Effective Date, and which claim priority,
directly or indirectly, to applications filed prior to the Effective Date.
1.10. "TACHYCARDIA DEVICES" shall mean Cardiac Stimulation Devices
which are capable of delivering an electrical stimulation of more than one (1)
joule to the heart.
2. PRIOR AGREEMENTS
2.1. "OEM MARKETING AND MANUFACTURING AGREEMENT". Without prejudice as
to the position of either Party as to any issue with respect to the "OEM
Marketing and Manufacturing Agreement," the Parties nevertheless acknowledge and
agree that the "OEM Marketing and Manufacturing Agreement" is terminated as of
November 20, 1996. Each Party acknowledges that the confidentiality provisions
of Section 18 of the "OEM Marketing and Manufacturing Agreement" shall remain in
effect as provided for upon termination.
2.2. "LICENSE AGREEMENT". Without prejudice as to the position of
either Party as to any issue with respect to the "License Agreement," or the
operation of the "License Agreement" concerning laser catheter products, the
Parties nevertheless acknowledge and agree that the "License Agreement" is
terminated and superseded by this Cross-License Agreement as of the Effective
Date in all respects concerning defibrillator products, except as to the effect,
if any, of the sublicense previously agreed to be granted by St. Jude/Pacesetter
to Intermedics, Inc., or the effect, if any, of any sublicenses determined
judicially or by arbitration to have been granted in accordance with the terms
of the "License Agreement," as to which sublicenses each Party reserves any and
all rights and claims. St. Jude/Pacesetter expressly relinquish any claim to any
further right to sublicense or enforce any patent owned by Angeion.
3. GRANT OF LICENSES
3.1. GRANT OF LICENSES. Subject to the terms and conditions of this
Cross- License Agreement, each Party and its Affiliates (the "Licensor") hereby
grant to the other Party and its Affiliates (the "Licensee") a fully paid up,
royalty-free, worldwide, nonexclusive, nontransferable, nonsublicensable license
under the Licensed Patents of Licensor and its Affiliates to make, have made,
use, sell, have sold, distribute, have distributed, service, have serviced,
repair and have repaired products and services in the Licensee's Field of Use,
except that the Licensee may not use the have made rights for any products made
for the Licensee by a third party which are then resold to the same third party.
The license granted will also extend to Related Peripherals and/or Components
purchased from third parties for use with products or services licensed
hereunder. Neither the Licensee nor its Affiliates shall have the right to
sublicense the rights to the Licensed Patents of the Licensor and its Affiliates
to any third party or to enforce the Licensed Patents of the Licensor and its
Affiliates.
3.2. SUBLICENSABLE PATENTS. If a Party or its Affiliate has acquired or
acquires during the term of this Cross-License Agreement by assignment or
license a Sublicensable Patent related to the other Party's Field of Use from a
third party under conditions that permit such Party or its Affiliate to grant a
license or sublicense (but only in consideration of a royalty or continuing
payment to a non-affiliated third party), then such Party hereby grants or will
grant to the other Party the right and option to obtain a nonexclusive license
or sublicense, as the case may be, on the most favorable terms and conditions
permissible to licensees or sublicensees under such Sublicensable Patent.
3.3 TERMINATION AND ACQUISITIONS. The licenses granted in Sections 3.1
and 3.2 are irrevocable and may not be terminated for any reason except for a
material breach of the representations and warranties set forth in Section 4.1
and 4.2, provided that the rights and licenses granted to the Licensee and its
Affiliates shall immediately terminate upon any acquisition by a third party
(the "Acquiring Company") of all or substantially all of the Tachycardia Devices
business of the Licensee and such Affiliates, unless: (i) the Acquiring Company
(including all Affiliates) does not at the time of the acquisition, or at any
time in the six (6) preceding calendar months, engage in development, design or
manufacture of Tachycardia Devices, or (ii) the Acquiring Company is already
licensed under substantially all of the Licensed Patents of the Licensor and its
Affiliates in the Licensee's Field of Use, in which case, if the Acquiring
Company is paying royalties to the Licensor under an existing license, royalty
obligations provided for in the Acquiring Company's pre-acquisition license
shall be required for all manufacture, use or sale licensed under either or both
of the pre-acquisition license or the license granted herein.
3.4 OEM RESTRICTION. The licenses granted in Sections 3.1 and 3.2 shall
not be used by the Licensee or its Affiliates to make or have made products for
Cardiac Pacemakers, Inc. or its Affiliates on an OEM basis.
4. REPRESENTATIONS AND WARRANTIES
4.1. WARRANTIES. Each Party, for itself and its Affiliates, represents,
warrants and covenants to the other parties that, as of the Effective Date of
this Agreement:
(i) The execution, delivery and performance of this Agreement
are within its corporate power, have been duly and validly authorized by all
necessary corporate action and do not contravene or constitute a default under
any provision of its articles of incorporation or by-laws;
(ii) The execution, delivery and performance of this
Agreement by it does not conflict with, contravene or constitute a default under
provision of applicable law or regulation or any agreement, license, judgment,
injunction, order, decree or other instrument binding upon it, or otherwise
relating to its Licensed Patents or the inventions described and claimed
therein;
(iii) It has the right and power to grant on behalf of itself
and its Affiliates the licenses, releases and immunities set forth herein;
(iv) The licenses set forth in Section 3 above will confer
upon the Party receiving the license immunity from suit for infringement of the
Licensed Patents and all rights, benefits and immunities of a non exclusive
licensee under the Licensed Patents to the full extent provided by Section 3;
(v) All licenses, consents, authorizations and approvals, if
any, required for its execution, delivery and performance of this Agreement have
been obtained and are in full force and effect and all conditions thereof have
been complied with;
(vi) No action by or in respect of, or filing with, any
government body, agency or official or any other person or entity is required in
connection with its execution, delivery and performance of this agreement; and
(vii) This Agreement constitutes a valid and binding
agreement, enforceable against it in accordance with its terms.
4.2. ADDITIONAL WARRANTY. St. Jude/Pacesetter further warrant and
covenant that as of the Effective Date neither of them has granted or agreed to
grant a sublicense expressly relating to any Angeion patents or patent
applications to any company other than Intermedics, Inc., that there is or was
no judicial or arbitral proceeding other than that brought by Medtronic, Inc.
relating to a claim by any third party to sublicense rights in any Angeion
patent or patent application arising from the "License Agreement," and that any
other sublicenses relating to such patents or patent applications, if any, will
arise only by operation of judicial decision or arbitration.
4.3. EXCLUSIONS. Nothing in this Agreement shall be construed as:
(i) A representation or warranty as to the validity or scope
of any Licensed Patent;
(ii) A representation or warranty that anything made, used or
sold under any license granted in this Agreement is or will be free from
infringement or misappropriation of patents, copyrights, trade secrets or other
proprietary rights other than the Licensed Patents;
(iii) An obligation to bring or prosecute any action, suit or
proceeding, against third parties for infringement of any Licensed Patents or to
defend any action, suit, or proceeding which challenges or concerns the validity
of any Licensed Patent;
(iv) An obligation to file, prosecute, or pay any fee or
cost, including, without limitation, maintenance fees, with respect to any
Licensed Patent; or
(v) A grant by implication, estoppel or otherwise any
licenses or rights under patents, copyrights, trade secrets or any other rights,
except as expressly set forth herein.
4.4. SURVIVAL. The representations and warranties contained in Section
4.1 and 4.2 shall survive the execution, delivery and performance of this
Agreement by the Parties hereto.
4.5. DISCLAIMER. SECTIONS 4.1 AND 4.2 SET FORTH ALL OF THE
REPRESENTATIONS AND WARRANTIES OF EACH PARTY TO THE OTHER PARTY. EXCEPT AS
EXPRESSLY SET FORTH IN SECTIONS 4.1 AND 4.2, EACH PARTY HEREBY DISCLAIMS ALL
OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED.
5. INDEMNIFICATION
Each Party shall indemnify, defend and hold harmless the other Party
and its successors, assigns, agents, officers, directors, and employees from and
against any judgements, claims, losses, costs, damages, expenses and settlements
(including, without limitation, reasonable legal fees and costs) arising out of
a breach (or a claim that, if true, would be a breach) of the representations
and warranties set forth in Sections 4.1 and 4.2. A Party shall not be obligated
to indemnify, hold harmless and defend unless (and only to the extent) the
indemnified Party (i) provides prompt notice of the commencement of the claim,
suit or proceeding for which indemnification is sought, (ii) provides
cooperation to such indemnifying party, and (iii) allows such indemnifying Party
to control the defense, provided that the indemnifying Party may not settle a
claim, suit or proceeding without approval of the indemnified Party, which
approval shall not be unreasonably withheld or delayed.
6. LIMITATION OF LIABILITY
TO THE EXTENT ALLOWED BY APPLICABLE LAW, IN NO EVENT SHALL EITHER PARTY
OR ITS AFFILIATES BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF
USE, INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND ARISING FROM THIS AGREEMENT OR THE SUBJECT
MATTER HEREOF, EVEN IF SUCH PARTY OR ITS AFFILIATES HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, HOWEVER CAUSED.
7. CONFIDENTIALITY
All negotiations between the Parties relating to this Agreement and the
terms and conditions of this Agreement shall be confidential. Notwithstanding
the foregoing, it is understood that (i) each Party may discuss with third
parties the term and substance of this Agreement as may be necessary for
purposes of carrying out the business of such Party, pursuant to appropriate
confidentiality provisions with such third parties; and (ii) each Party may
disclose publicly (in press releases, in responses to any inquiries, in
regulatory filings and otherwise), that each Party has received a license to
certain of the other Party's patents.
8. TERM
This Agreement shall commence on the Effective Date of this Agreement
and, unless sooner terminated, shall continue thereafter in full force and
effect until the date of expiration of the last to expire of the Licensed
Patents.
9. GENERAL PROVISIONS
9.1. NOTES. Any notice, request, demand, or other communication
required or permitted hereunder shall be in writing, shall reference this
Agreement and shall be deemed to be properly given: (i) when delivered
personally; (ii) when sent by facsimile, with written confirmation of receipt;
(iii) five (5) business days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (iv) two (2) business days
after deposit with a private industry express courier, with written confirmation
of receipt. All notices shall be sent to the address set forth below (or to such
other address as may be designated by a Party by giving written notice to the
other Party pursuant to this Section 9.1).
IF TO ST. JUDE/PACESETTER: IF TO ANGEION:
St. Jude Medical, Inc. Angeion Corporation
One Lillehei Plaza 3650 Annapolis Lane
St. Paul, Minnesota 55117 Minneapolis, Minnesota 55447
Attn: General Counsel Attn: President
Fax: 612-490-4333 Fax: 612-519-9519
With a copy to:
Pacesetter, Inc.
15900 Valley View Court
Sylmar, California 91392
Attn: General Counsel
Fax: 818-362-4795
9.2. ASSIGNMENT. This Agreement may not be assigned, in whole or in
part, whether voluntarily, by operation of law or otherwise, by any Party
without the prior written consent of the other Party except to a wholly-owned
subsidiary or, subject to the provisions of Section 3.3, in connection with a
merger, reorganization, consolidation or sale of all or substantially all of the
assets of the business of such assigning Party relating to Tachycardia Devices.
Subject to the preceding sentence, the rights and liabilities of the Parties
hereto will bind, and inure to the benefit of, their respective assignees and
successors and is binding on the Parties and their successors and assigns. Any
attempted assignment other than in accordance with this Section 9.2 shall be
null and void.
9.3. GOVERNING LAW, JURISDICTION AND VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to its conflicts of law provisions. Any dispute regarding this
Agreement shall be subject to the exclusive jurisdiction of the New York state
courts in and for New York county, New York (or, if there is federal
jurisdiction, the United States District Court for the Southern District of New
York) and the Parties agree to submit to the personal and exclusive jurisdiction
and venue of these courts.
9.4. CONSTRUCTION. This Agreement will be interpreted fairly in
accordance with its terms and without any construction in favor of or against
either Party.
9.5. ATTORNEYS' FEES. If any legal action, including, without
limitation, an action for arbitration or injunctive relief is brought between
the Parties relating to this Agreement or the breach hereof, the prevailing
Party in any final judgment or arbitration award, or the non-dismissing Party in
the event of a dismissal without prejudices, shall be entitled to the full
amount of all reasonable expenses, including all court costs, arbitration fees
and actual attorney fees paid or incurred in good faith.
9.6. WAIVER. The waiver by either Party of a breach of or a default
under any provision of this Agreement, shall not be effective unless in writing
and shall not be construed as a waiver of any subsequent breach of or default
under the same or any other provisions of this Agreement, nor shall any delay or
omission on the part of either Party to avail itself of any right or remedy that
it has or may have hereunder operate as a waiver of any right or remedy.
9.7. SEVERABILITY. If the application of any provision of this
Agreement to any particular facts or circumstances shall be held to be invalid
or unenforceable by an arbitration panel or a court of competent jurisdiction,
then (i) the validity and enforceability of such provision as applied to any
other particular facts or circumstances and the validity of other provisions of
this Agreement shall not in any way be affected or impaired thereby and (ii)
such provision shall be enforced to the maximum extent possible so as to effect
the intent of the Parties and reformed without further action by the parties to
the extent necessary to make such provision valid and enforceable.
9.8 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement
shall be deemed or construed as creating a joint venture, partnership, agency,
employment of fiduciary relationship between the Parties. Neither Party nor its
agents have any authority of any kind to bind the other Party in any respect
whatsoever, and the relationship of the Parties is, and at all time shall
continue to be, that of independent contractors.
9.9. CAPTIONS AND SECTION HEADINGS. The captions for sections and
paragraphs used in this Agreement are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement.
9.10. FURTHER ASSURANCES. Each Party agrees to take or cause to be
taken such further actions, and to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments, and to
obtain such consents, as may be reasonably required or requested in order to
effectuate fully the purposes, terms and conditions of this Agreement.
9.11. ENTIRE AGREEMENT. Except as otherwise provided for herein, this
Agreement constitutes the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior or contemporaneous
representations, discussions, proposals, negotiations, conditions, agreements
and communications, whether oral or written, between the Parties relating to the
subject matter of this Agreement and all past courses of dealing or industry
custom. No amendment or modification of any provision of this Agreement shall be
effective unless in writing and signed by a duly authorized signatory of the
Party against which enforcement of the amendment or modification is sought.
10. EFFECTIVE DATE
10.1. INITIAL EFFECTIVE DATE. This Agreement shall become effective on
and as of the earlier of (i) the first day following consummation of the merger
among St. Jude/Pacesetter and Ventritex, Inc.; or (ii) May 31, 1997, provided,
however, that this Agreement shall not become effective if prior to May 31,
1997, St. Jude/Pacesetter or Ventritex terminates the merger agreement among
Ventritex and St. Jude and St. Jude provides notice to Angeion of such
termination.
10.2. SUBSEQUENT EFFECTIVE DATE. If this Agreement does not become
effective pursuant to Section 10.1, this Agreement shall become effective if St.
Jude/Pacesetter (or its Affiliates) acquires control of Ventritex, Inc. or all
or substantially all of the Tachycardia Devices business of Ventritex, Inc. (or
its Affiliates) on or before May 31, 1998, and this Agreement shall become
effective on and as of the date on which St. Jude/Pacesetter consummates such
acquisition.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by duly authorized representatives of the Parties.
ST. JUDE/PACESETTER ANGEION
ST. JUDE MEDICAL, INC. ANGEION CORPORATION
By: By:
-------------------------------- -------------------------------
Signature Signature
Name: Kevin T. O'Malley Name: David L. Christofferson
------------------------------ -----------------------------
Print or type Print or type
Title: Vice President Title: Vice President & CFO
----------------------------- ----------------------------
Date: March 28, 1998 Date: April 2, 1997
----------------------------- ----------------------------
PACESETTER, INC.
By:
--------------------------------
Signature
Name: Stephen L. Wilson
------------------------------
Print or type
Title: Assistant Treasurer
-----------------------------
Date: March 28, 1998
-----------------------------
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