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 September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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.)
7601 Northland Drive, Brooklyn Park, MN 55428-1088
(Address of principal (Zip Code)
executive offices)
(612) 315-2000
(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: 38,625,497 shares
outstanding as of October 12, 1998
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM DESCRIPTION Page
- ---- ----------- ----
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets (unaudited) 1
- September 30, 1998 and December 31, 1997.
Consolidated Statements of Operations (unaudited) 2
- For the Three and Nine Months Ended
September 30, 1998 and 1997.
Consolidated Statements of Cash Flows (unaudited) 3
- For the Nine Months Ended September 30, 1998 and 1997.
Notes to Consolidated Financial Statements (unaudited). 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 5
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 10
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. 10
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11
Signatures. 12
<PAGE>
ANGEION CORPORATION
Consolidated Balance Sheets
September 30, 1998 and December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,474,725 $ 14,052,115
Accounts receivable:
Trade 2,087,863 241,136
Other 2,192,566 167,450
Inventories 8,933,696 6,889,144
Prepaid expenses and other current assets 873,834 291,475
------------- -------------
TOTAL CURRENT ASSETS 21,562,684 21,641,320
Property and equipment, net 7,361,959 6,523,820
Investment in joint venture, net 4,403,013 --
Other assets, net 2,558,940 718,411
------------- -------------
TOTAL ASSETS $ 35,886,596 $ 28,883,551
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,642,848 893,996
Current portion of long-term debt 576,875 --
Accrued payroll, vacation and related costs 1,212,589 1,015,119
Other accrued expenses 2,295,377 1,186,941
Deferred income 1,274,230 36,550
------------- -------------
TOTAL CURRENT LIABILITIES 7,001,919 3,132,606
Long-term debt 22,150,000 --
TOTAL LIABILITIES 29,151,919 3,132,606
------------- -------------
Shareholders' equity:
Common stock, $.01 par value. Authorized
75,000,000 shares; issued and outstanding
34,713,844 shares at September 30, 1998,
and 32,998,443 shares at December 31, 1997 347,138 329,984
Additional paid-in capital 116,263,016 109,682,282
Unamortized value of restricted stock (111,912) (50,716)
Cumulative translation adjustment (25,620) 6,903
Accumulated deficit (109,737,945) (84,217,508)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 6,734,677 25,750,945
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 35,886,596 $ 28,883,551
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 1
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 1,613,863 $ 1,213,908 $ 3,081,978 $ 2,914,559
Operating expenses:
Manufacturing 2,585,432 4,104,042 6,452,491 8,300,586
Research & development 5,391,486 4,627,213 15,943,033 14,142,447
Selling, general & administrative 1,924,077 2,764,664 5,573,220 6,156,411
------------ ------------ ------------ ------------
Total operating expenses 9,900,995 11,495,919 27,968,744 28,599,444
------------ ------------ ------------ ------------
OPERATING LOSS (8,287,132) (10,282,011) (24,886,766) (25,684,885)
------------ ------------ ------------ ------------
Other income (expense), net:
Equity in net loss of joint venture (432,622) -- (1,596,987) --
Gain on sale of patents and
technology 2,050,000 -- 2,050,000 --
Interest expense (603,996) (2,808) (1,549,554) (56,910)
Interest income 140,483 175,978 462,870 818,390
------------ ------------ ------------ ------------
Other income (expense) 1,153,865 173,170 (633,671) 761,480
------------ ------------ ------------ ------------
NET LOSS $ (7,133,267) $(10,108,841) $(25,520,437) $(24,923,405)
============ ============ ============ ============
NET LOSS PER SHARE (.21) (.33) (.76) (.84)
============ ============ ============ ============
Weighted average number of shares
outstanding 33,815,361 30,599,238 33,364,348 29,614,993
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(25,520,437) $(24,923,405)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,771,337 1,552,856
Compensation expense on grant of stock and stock options 1,222,004 406,368
Gain on sale of patents and technology (2,050,000) --
Loss on disposal of fixed assets 316,084 --
Equity in net loss of joint venture 1,596,987 --
Changes in operating assets and liabilities:
Accounts receivable (1,821,242) (305,759)
Inventory (2,044,552) 600,983
Prepaid expenses and other current assets (581,620) (75,356)
Accounts payable 748,619 881,833
Accrued expenses 1,304,511 837,664
Deferred income 1,237,680 (629,300)
------------ ------------
Net cash used in operating activities (23,820,629) (21,654,116)
------------ ------------
INVESTING ACTIVITIES:
Purchase of marketable securities -- (379,894)
Proceeds from maturities of marketable securities -- 23,500,000
Investments in joint venture (5,561,595) --
Payments for purchases of property and equipment (2,245,632) (2,451,832)
------------ ------------
Net cash provided by (used in) investing activities (7,807,227) 20,668,274
------------ ------------
FINANCING ACTIVITIES:
Net proceeds from issuance of debt 19,769,397 --
Proceeds from issuance of common stock 5,000,000 --
Proceeds from exercise of stock options and warrants 314,688 1,371,049
------------ ------------
Net cash provided by financing activities 25,084,085 1,371,049
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (33,619) 18,994
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,577,390) 404,201
Cash and cash equivalents:
Beginning of period 14,052,115 2,037,954
------------ ------------
End of period $ 7,474,725 $ 2,442,155
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 36,442 $ 56,910
------------ ------------
Non-cash investing and financing activity:
Transfer of property and equipment to joint venture $ 438,405 $ --
------------ ------------
Property acquired subject to capital leases $ 800,000 $ --
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
ANGEION CORPORATION
Form 10-Q
September 30, 1998
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared by the
Company in accordance with generally accepted accounting principles pursuant to
the published 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 consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes included in the Company's 1997 Annual Report to Shareholders. During
October 1997, the Company changed its year end from July 31 to December 31. The
transition period report as of and for the five months ended December 31, 1997,
was filed on Form 10-Q.
The information furnished reflects, in the opinion of the management of the
Company, all adjustments (of a normally recurring nature) necessary to present a
fair statement of the results for the period presented. The consolidated results
of operations for any interim period are not necessarily indicative of results
for the full year.
2. NET LOSS PER SHARE
For each period presented, basic and diluted loss per share amounts are
identical, as the effect of potential common shares is antidilutive.
3. EQUITY IN LOSS OF JOINT VENTURE
On January 1, 1998, the Company's 50 percent-owned joint venture, ELA*Angeion,
LLC ("ELA*Angeion"), began operations. A proportional amount of the income
(loss) from the joint venture are accounted for under the Equity Method and
appear as a component of Other Income (Loss) on the Company's Consolidated
Statements of Operations. Angeion's proportional share of sales, cost of sales
and any resultant gain or loss related to assets sold to the joint venture still
remaining on the books of the joint venture at the end of the applicable
reporting period have been eliminated.
4. REPORTING COMPREHENSIVE INCOME
In 1997, the Financial Accounting Standards Board (the "FASB") issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income". SFAS 130 does not change the reporting of net income (loss). However,
it requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a separate
financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 also requires that an enterprise display the
accumulated balance of other comprehensive income separately from retained
earnings and paid-in-capital in the equity section of a statement of financial
position. The Company adopted SFAS 130 on January 1, 1998, but does not have
significant comprehensive income components to report for the three and nine
month periods ended September 30,1998.
Page 4
<PAGE>
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 ("ICD") group and the
catheter ablation group. These divisions develop and manufacture medical devices
to treat various types of cardiac arrhythmias (irregular heartbeats). In
November 1995, the Company established a European subsidiary, Angeion Europe
Ltd. ("Angeion Europe"), to facilitate clinical studies of its ICDs and expand
its European business activities. For the same reasons, a German subsidiary,
Angeion GmbH, was established by the Company in October 1996. The results of the
subsidiaries' operations are included in the consolidated financial statements
of the Company. On January 1, 1998, the Company's 50 percent-owned joint
venture, ELA*Angeion, LLC ("ELA*Angeion"), began operations. A proportional
amount of the income (loss) of ELA*Angeion appears in the other income (expense)
section of the Company's Consolidated Statements of Operations.
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; funding of ELA*Angeion; and general
corporate purposes including working capital. The Company has financed its
liquidity needs through the sale of Common Stock, other equity securities and
the issuance of long-term debt and notes payable.
Net cash used in operating activities increased to $23,820,629 in the nine-month
period ended September 30, 1998, compared to $21,654,116 in the nine-month
period ended September 30, 1997. The cash used during these periods primarily
related to research and development activities of the Company's ICD and catheter
ablation divisions (including clinical studies), as well as increases in the
manufacturing capacity in the ICD division.
Investing activities utilized cash of $7,807,227 in the nine-month period ended
September 30, 1998 and provided cash of $20,668,274 in the nine-month period
ended September 30, 1997. In the nine-month period ended September 30, 1998, the
Company invested $6,000,000 in ELA*Angeion, of which $438,405 was a contribution
of physical assets. The cash provided from maturity of marketable securities in
the nine-month period ended September 30, 1997 were generated from U.S. Treasury
Bills, which were purchased as part of a U.S. Treasury Bill ladder established
in August 1996, with monthly maturities timed to meet the Company's liquidity
needs. The Company also utilized cash of $2,245,632 in the nine-month period
ended September 30, 1998 and $2,451,832 in the nine-month period ended September
30, 1997, to purchase property and equipment. During the nine-month period ended
September 30, 1998, purchases of property and equipment primarily related to
opening the Company's new offices in Brooklyn Park and purchases of equipment to
support research and development activities. During the nine-month period ended
September 30, 1997, purchases of property and equipment related primarily to
increasing manufacturing capacity and expanding the Company's research and
development capabilities.
On March 11, 1998, the Company borrowed $5,000,000 from RGC International
Investors, LDC ("Rose Glen") pursuant to a Convertible Senior Note (the "Interim
Financing"). In connection with the Interim Financing, the Company issued Rose
Glen warrants to purchase an aggregate of 970,000 shares of the Company's Common
Stock at an exercise price of $2.922. On April 15, 1998, the Company repaid the
Interim Financing together with accrued interest, in full. In consideration of
early payment, warrants for an aggregate of 242,500 shares of Common Stock were
canceled. The remaining warrant for 727,500 shares of Common Stock (the "Rose
Glen Warrant") is exercisable until March 11, 2003.
On April 14, 1998, the Company completed a private placement of $22,150,000
principal amount of 7 1/2 percent Senior Convertible Notes due 2003 (the
"Notes"), which resulted in net proceeds to the Company of approximately
$20,000,000. The Notes were issued pursuant to an Indenture between the Company
and U.S. Bank National Association, as trustee (the "Indenture"). Interest on
the Notes is payable semi-annually on April 15 and October 15 of each year,
commencing on October 15, 1998. The Notes are convertible into Common
Page 5
<PAGE>
Stock at any time after July 13, 1998, and prior to maturity, unless previously
redeemed, at a conversion price of $3.0516 per share (the "Conversion Price"),
subject to adjustment upon the occurrence of certain events. The Conversion
Price will be adjusted on December 18, 1998 to the lower of: (a) the previously
applicable Conversion Price, or (b) the average of the last reported sale price
of the Common Stock as reported by the Nasdaq National Market for the five
consecutive business days ending on the last full trading day prior to December
18, 1998; provided, however, that in no event will the Conversion Price be
reduced below $1.5258.
On or after April 14, 2001, the Notes will be redeemable at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days' prior
written notice at a redemption price equal to 100 percent of the principal
amount thereof, together with accrued and unpaid interest and liquidated
damages, if any, up to the redemption date. Upon the occurrence of a "change in
control" or the delisting of the Common Stock from the Nasdaq National Market
System, each holder of the Notes has the right to require the Company to
repurchase all or any part of such holder's Notes at a repurchase price equal to
101 percent of the principal amount thereof, together with accrued and unpaid
interest and liquidated damages, if any. Upon the occurrence of an "Event of
Default" under the Indenture, the Trustee or the holders of at least 25 percent
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately.
In September 1998, the Company entered into an agreement with Cordis Webster,
Inc., pursuant to which the Company assigned the rights to its cooled porous
electrode and cooled linear electrode patents and Cordis Webster will clinically
evaluate, manufacture and distribute Angeion's AngeCool radio frequency ablation
catheter. Under the terms of the agreement, Angeion will receive an up front
payment and the rights to royalties on the sale of products utilizing the
assigned technology.
In October 1997, the Company entered into an Amended and Restated Investment and
Master Strategic Relationship Agreement ("Investment Agreement") with
Synthelabo, a French pharmaceutical company, pursuant to which Synthelabo
purchased 2,251,408 shares of Common Stock of the Company and a four-year
warrant to purchase an additional 1,350,845 shares of Common Stock at an
exercise price of $6.6625 per share (the "Initial Warrant") for $15 million.
Under the Investment Agreement, the Company agreed to issue to Synthelabo
additional shares of Common Stock and an additional warrant in the event that
the average market price of the Company's Common Stock during the 15 day trading
days immediately prior to and including October 9, 1998 is lower than $5.125
(the "adjustment provision"). Pursuant to the adjustment provision, in October
1998, 3,846,153 additional shares were issued and the original warrant was
adjusted to 3,658,537 shares at an exercise price of $2.46 per share.
In addition, Synthelabo agreed to purchase up to an additional $15 million in
Common Stock (in installments of $5 million) upon the achievement by the Company
of certain milestones. In connection with each additional installment of Common
Stock purchased, Synthelabo will also receive additional warrants to purchase,
at the applicable investment price, shares of Common Stock equal to 60% of the
number of shares purchased. In August 1998, the Company achieved the first
milestone which was the grant of PMA approval for the Company's Sentinel series
ICD and Synthelabo purchased 1,362,398 shares of Common Stock and a three-year
warrant to purchase an additional 817,439 shares at an exercise price of $3.67
for $5 million.
At September 30, 1998, the Company had cash and cash equivalents of $7,474,725.
The Company believes that its existing balances of cash and cash equivalents
will not be sufficient to maintain its current level of growth beyond December
1998. As a result, the Company is seeking to raise additional capital to support
the necessary growth to sustain the Company. However, there can be no assurance
that capital will be available when needed or on acceptable terms. Failure to
obtain additional capital would have a material adverse effect on the Company.
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 manufacturing and marketing scale-up; funding needs of
ELA*Angeion; the ability of the Company to maximize its international sales
through the selling and marketing agreement with ELA Medical, S.A.; and the
ability of the Company to increase the number of U.S. implants through
ELA*Angeion, which has exclusive selling and marketing rights within the U.S.
Page 6
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
Total sales increased 33 percent to $1,613,863 for the three-month period ended
September 30, 1998, compared to $1,213,908 for the three-month period ended
September 30, 1997, due primarily to an increase in sales of ICDs. In the
three-month period ended September 30, 1998, revenue consisted of sales of ICDs
to ELA*Angeion (after elimination of Angeion's proportional share as discussed
in Note 3 above) and international sales. In the three-month period ended
September 30, 1997, sales were generated from U.S. clinical implants and sales
in Europe.
Manufacturing expense decreased 37 percent to $2,585,432 for the three-month
period ended September 30, 1998, compared to $4,104,042 for the three-month
period ended September 30,1997. The decrease was primarily due to a decrease in
obsolescence expense offset by an increase in the cost of products sold due to
higher sales.
Research and development expense increased 17 percent to $5,391,486 for the
three-month period ended September 30, 1998, compared to $4,627,213 for the
three-month period ended September 30, 1997. This increase was due to the costs
associated with the development of prototypes for the new models of ICDs
currently in product development. Research and development activity related to
the development of the ICDs accounted for $4,851,879 of the expense for the
three-month period ended September 30, 1998, while the catheter ablation
development activities accounted for $529,607 of the expense. Research and
development expenses will continue to increase for its ICDs, reflecting the
Company's intent to move these and other new products through development and
human clinical studies as rapidly as possible during Calendar 1998.
Selling, general and administrative expense decreased 30 percent to $1,924,077
for the three-month period ended September 30, 1998, compared to $2,764,664 for
the three-month period ended September 30, 1997. This decrease was primarily
related to a decline in legal costs and to a decrease in selling and marketing
expense due to the transition of this function to ELA*Angeion.
Interest expense increased to $603,996 for the three month-period ended
September 30, 1998, compared to $2,808 for the three-month period ended
September 30, 1997. The increase was due to the amortization of debt issuance
costs and the 7 1/2 percent interest accrued on the Notes issued in April 1998.
Interest income decreased 20 percent to $140,483 for the three-month period
ended September 30, 1998, compared to $175,978 for the three-month period ended
September 30, 1997. The decrease was due to the lower average invested cash
balances in the three-month period ended September 30, 1998, compared to the
three-month period ended September 30, 1997.
The net loss decreased to $7,133,267, or $.21 per share, in the three-month
period ended September 30, 1998, compared to $10,108,841, or $.33 per share, the
three-month period ended September 30, 1997. Decrease in net loss per share
attributable to a reduction of net loss combined with the increase in
outstanding shares of Common Stock.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1997
Total sales increased 6 percent to $3,081,978 for the nine-month period ended
September 30, 1998, compared to $2,914,559 for the nine-month period ended
September 30, 1997. In the nine-month period ended September 30, 1998, ICD
revenue consisted of sales to ELA*Angeion (after elimination of Angeion's
proportional share as discussed in Note 3 above) and international sales. In the
nine-month period ended September 30, 1997, ICD sales were generated from U.S.
clinical implants and sales in Europe.
Manufacturing expense decreased 22 percent to $6,452,491 for the nine-month
period ended September 30, 1998, compared to $8,300,586 for the nine-month
period ended September 30,1997. The decrease was primarily due to a decrease in
obsolescence expense offset by an increase in the expense associated with the
introduction of the new model 2020 ICD, which had its first implant in March
1998.
Page 7
<PAGE>
Research and development expense increased 13 percent to $15,943,033 for the
nine-month period ended September 30, 1998, compared to $14,142,447 for the
nine-month period ended September 30, 1997. This increase was due to the costs
associated with the development of prototypes for the new models of ICDs
currently in product development. Research and development activity related to
the development of the ICDs accounted for $14,297,580 of the expense for the
nine-month period ended September 30, 1998, while the catheter ablation
development activities accounted for $1,645,453 of the expense. Research and
development expense will continue to increase for its ICDs, reflecting the
Company's intent to move these and other new products through development and
human clinical studies as rapidly as possible during Calendar 1998.
Selling, general and administrative expense decreased 9 percent to $5,573,220
for the nine-month period ended September 30, 1998, compared to $6,156,411 for
the nine-month period ended September 30, 1997. This decrease was primarily due
to a decrease in selling and marketing expense related to the transition of this
function to ELA*Angeion. Selling, general and administrative expense was offset
by an increase in non-cash compensation associated with restricted stock grants
and expense incurred on the disposal of certain assets related to the Company's
move to its new facility.
Interest expense increased to $1,549,554 for the nine-month period ended
September 30, 1998, compared to $56,910 for the nine-month period ended
September 30, 1997. The increase was due to the amortization of debt issuance
costs and the 7 1/2 percent interest accrued on the Notes issued in April 1998.
Interest income decreased 43 percent to $462,870 for the nine-month period ended
September 30, 1998, compared to $818,390 for the nine-month period ended
September 30, 1997. The decrease was due to the lower average invested cash
balances in the nine-month period ended September 30, 1998, compared to the
nine-month period ended September 30, 1997.
The net loss increased to $25,520,437, or $.76 per share in the nine-month
period ended September 30, 1998, compared to $24,923,405 or $.84 per share the
nine-month period ended September 30, 1997. Decrease in net loss per share
attributable the increase in outstanding shares of Common Stock.
IMPACT OF YEAR 2000
All companies that use computers must address problems that could occur when the
year changes from 1999 to 2000. In the past, many computers and software used
two digits instead of four to identify the year when storing and processing
dates. This practice could cause a computer to use or calculate an incorrect
date as we approach the year 2000 approaches.
The Company has a Year 2000 Oversight team in place, and has commenced efforts
to address all potential Year 2000 issues. The team has divided the project into
several areas: products the Company manufactures, equipment used to produce and
test those products, business systems, facilities, and third parties. Each area
will be evaluated and brought into compliance in five phases:
1. Inventory - A complete list of all possible systems that may be affected by
the turn of the century.
2. Assessment - Review and document the impact and severity of the year 2000
issues for each system on the list.
3. Solutions - Identify the various methods for resolving each issue, select
the best solutions, and establish an implementation plan.
4. Implementation - Carry out the plan to resolve the issues.
5. Verification - Test solutions prior to year 2000 as required by the
implementation plan.
Page 8
<PAGE>
All of the Company's current and future products are designed, manufactured and
tested to perform correctly in next century. All equipment used to manufacture
and test these products is inventoried and will be assessed by the end of the
fourth quarter of 1998. All critical business systems, including the Company's
financial systems, have completed all five phases, and are compliant. Remaining
non-critical business systems will be assessed by the end of the fourth quarter
of 1998. The facilities have been assessed and only one system requires a minor
update to comply. Significant third party vendors have been identified, and the
Company expects to complete the assessment of their compliance by the end of
fourth quarter of 1998. The Company will require written documentation from
third party vendors as their year 2000 compliance. The Company's objective is to
complete all phases of the project in all areas by the end of the second quarter
of 1999.
Many of the Company's systems were purchased or implemented within the last few
years, and this will keep compliance costs relatively low. To date, the Company
has not yet incurred any costs in implementing the compliance plan, and
management estimates the total cost to complete the plan will be less than
$50,000. All costs related to the Year 2000 compliance are included in the
Information Systems budget and are based on management's best estimates. There
can be no guarantee that actual results will not differ from those estimated.
If the Company is not successful in its efforts to bring its systems in
compliance, the Company's ability to procure merchandise in a timely and
cost-effective manner may be impaired, daily business processes may be delayed
by manual procedures, or business processes may be interrupted if no alternative
methodology is available, which could have a material adverse effect on the
Company's operations.
Although, the Company believes that its Year 2000 compliance plan is adequate to
achieve full system operation on a timely basis, the Company is in the process
of developing a contingency plan to address the possibility of the Company's and
third parties' non-compliance. The Company anticipates completing its
contingency plan by the end of the second quarter of fiscal year 1999.
CERTAIN IMPORTANT FACTORS
This Form 10-Q contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. 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 to indicate
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties. Actual results may differ materially depending on a
variety of factors, including, but not limited to, the following: progress with
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 technological and market
developments; costs of manufacturing and marketing scale-up; funding needs of
ELA*Angeion; ability of the Company to obtain additional capital; and success of
the strategic alliance with Synthelabo. Additional information with respect to
the risks and uncertainties faced by the Company may be found in the Risk
Factors contained in the Company's Current Report of Form 8-K as filed with the
SEC on April 20, 1998, a copy of which is available from the Company upon
request.
Page 9
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS.
On September 16, 1998, Angeion Corporation was served with a patent infringement
suit filed in the District Court of Minnesota by Cardiac Pacemakers, Inc. (CPI),
a subsidiary of Guidant Corporation, alleging that the Sentinel ICD for which
Angeion received Premarket Approval (PMA) in August 1998 infringes three
patents. Angeion's policy is to respect the patent rights of others while
vigorously enforcing its own patent rights. As a normal precaution and prior to
receiving PMA approval for its Sentinel ICD, Angeion obtained a patent clearance
opinion from independent outside patent counsel. Angeion firmly believes it does
not infringe any of the patents asserted in the lawsuit. The Company has filed
an answer in the lawsuit denying infringement and raising several affirmative
defenses.
In 1996, the Company and Pacesetter, Inc. jointly sued Cardiac Pacemakers, Inc.,
a subsidiary of Guidant Corporation ("CPI"), in the United States District
Court, District of Minnesota, for patent infringement of Pacesetter's
bradycardia patents and the Company's tachycardia patents. In connection with
the Cross-License Agreement with St. Jude Medical, Inc. in May 1997 and pursuant
to a court order in July 1997, the Company is now the sole party to the
litigation involving the Company's tachycardia patents. The Company asserted
that the Mini I and Mini II ICDs CPI was making at that time infringed certain
of the Company's patent rights. Discovery was limited to the Mini I and Mini II
devices and has been substantially completed in the lawsuit.
On May 29, 1998, the Company was notified that the Magistrate Judge filed a
Report and Recommendation (the "Report") with the District Judge concerning
motions for summary judgment in the case. The Magistrate Judge heard competing
motions by both the Company and CPI on the issue of whether certain CPI
defibrillators infringed certain claims of four separate Company patents which
are at issue in the lawsuit. The Report recommended to the District Judge that
the Mini I and Mini II implantable defibrillators of CPI should be found to
infringe certain claims of three of the Company patents related to the smaller
capacitance, smaller size and Hot Can(R)-like features of these devices. The
Report of the Magistrate Judge does not constitute an order or judgment of the
District Court. CPI filed objections to the Report to which the Company
responded and the matter is now before the District Judge to make a formal
ruling in which he may accept, reject or modify all or part of the Report. The
Report did not address the issues of validity and enforceability of the patents
or the issues of damages or willful infringement, as these issues were not
before the Magistrate Judge as part of the motions for summary judgment. These
issues will be decided as part of a jury trial of the lawsuit which is to be
trial ready as of December, 1998, with the Company having the burden of proving
damages and willful infringement by a preponderance of the evidence and CPI
having the burden of proving that the patents are invalid or unenforceable by
clear and convincing evidence.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS.
In October 1998, pursuant to the adjustment provision in the Amended and
Restated Investment and Master Strategic Relationship Agreement ("Investment
Agreement") with Synthelabo, 3,846,153 additional shares were issued and the
original warrant was adjusted to 3,658,537 shares at an exercise price of $2.46
per share. The adjustment provision was made a condition to closing by
Synthelabo and only applies to the initial $15,000,000 investment.
In addition, under the Investment Agreement Synthelabo agreed to purchase up to
an additional $15 million in Common Stock (in installments of $5 million) upon
the achievement by the Company of certain milestones. In connection with each
additional installment of Common Stock purchased, Synthelabo will also receive
additional warrants to purchase, at the applicable investment price, shares of
Common Stock equal to 60% of the number of shares purchased. In August 1998, the
Company achieved the first milestones which was the grant of PMA approval for
the Company's Sentinel series ICD and Synthelabo purchased 1,362,398 shares of
Common Stock and a three-year warrant to purchase an additional 817,439 shares
at an exercise price of $3.67 for $5 million.
Page 10
<PAGE>
In issuing such shares of Common Stock and warrants, the Company relied upon
Section 4(2) of the Securities Act as a transaction by an issuer not involving
any public offering. In connection with such transactions, Synthelabo
represented its intention to acquire the securities for investment only and not
with a view to, or for sale in connection with, any distribution thereof, and
appropriate legends were affixed to the securities issued in such transactions.
Synthelabo had adequate access, through their due diligence effort, to
information about the Company.
ITEM 5. OTHER INFORMATION.
At September 30, 1998, the total long-term debt of the Company as shown in the
Company's consolidated financial statements, was $22,150,000. For the 1998
year-to-date period, the Company's ratio of net loss to fixed charges was (15.5)
versus (436.9) for the same 1997 period. The ratios were computed by dividing
fixed charges into the sum of earnings (after certain adjustments) and fixed
charges. Earnings include loss from operations plus equity in the net losses of
the Company's 50% owned joint venture. Fixed charges include interest on all
debt including amortization of debt issuance costs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Item No. Item Method of Filing
-------- ---- ----------------
10.1* Agreement between the Company and Cordis
Webster, Inc. regarding Angeion's cooled
porous electrode and cooled linear
electrode patents. Filed herewith.
12 Computation of ratio of earnings to fixed
charges. Filed herewith.
27 Financial Data Schedule.
(b) Reports on form 8-K.
A current report on Form 8-K, dated August 25, 1998, was filed during
the three months ended September 30, 1998, pursuant to Item 5. This filing
was made in reference to the Company's receipt of Pre-Market Approval from
the U.S. Food and Drug Administration for its Sentinel Series of
Implantable Cardioverter Defibrillators. No financial statements were
included in this filing.
---------------------------------------------------------------------------
* Confidential treatment has been requested with respect to designated
portions contained within this exhibit. Such portions have been omitted and
filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
Page 11
<PAGE>
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: October 15, 1998 By: /s/ James B. Hickey, Jr.
-----------------------------
James B. Hickey, Jr.
President and Chief Executive Officer
(principal executive and financial officer)
By: /s/ Peg O. Norris
-----------------------------
Peg O. Norris
Corporate Controller and Principal Accounting
Officer
(principal accounting officer)
Page 12
EXHIBIT 10.1
AGREEMENT
This Definitive Agreement dated as of the 18th day of September, 1998
(the "Effective Date") by and between CORDIS WEBSTER, INC., a California
corporation, with offices at 4750 Littlejohn Street, Baldwin Park, CA 91706
("Cordis Webster") and ANGEION CORPORATION, a Minnesota corporation, with
offices at 7601 Northland Drive, Brooklyn Park, MN 55428 ("Angeion").
Witnesseth:
Whereas, Cordis Webster is in the business of manufacturing and selling
medical devices, including cardiac ablation therapy devices; and,
Whereas, Angeion is in the business of developing implantable cardiac
defibrillators and electrophysiology catheters; and,
Whereas, Angeion is the owner of U.S. Patent Nos. 5,462,521, 5,643,197
and 5,800,428 and U.S. Patent Applications, Serial Nos. 08/496,947 and
09/073,651 and corresponding foreign patents and patent applications; and
Whereas, Angeion desires to assign to Cordis Webster all of its rights,
title and interest in and to the aforesaid patents, subject to the terms and
conditions hereinafter set forth, and Cordis Webster accepts such assignment;
and
Whereas, Cordis Webster desires Angeion to perform development work of
the Spot Catheter Product and the Linear Catheter Product (as each are
hereinafter defined); and
Whereas, Angeion is the sponsor and has previously conducted
pre-clinical and clinical studies on the Spot Catheter Product, and Cordis
Webster is interested in acquiring rights to all records, data, and analysis and
other information regarding the Spot Catheter Product studies, including but not
limited to, data for submission for regulatory approvals (including
communications to and from the US FDA and any corresponding foreign documents);
and
Whereas, Angeion desires to transfer to Cordis Webster the Spot
Catheter Technology and Linear Catheter Technology (as each are hereinafter
defined) and Cordis Webster accepts this technology transfer, subject to the
terms and conditions hereinafter set forth.
Now, therefore, in consideration of the premises and of the mutual
promises and covenants contained herein, the parties hereto agree as follows:
I. DEFINITIONS
A. "Field of Use" shall mean the radio frequency (RF) cardiac ablation
therapy field.
<PAGE>
B. "Spot Catheter Patents" shall mean U.S. Patent No. 5,462,521, "Fluid
Cooled and Perfused Tip For A Catheter" issued on October 31, 1995 and
U.S. Patent No. 5,643,197 (CIP), entitled "Fluid Cooled And Perfused
Tip For A Catheter" issued on July 1, 1997 and U.S. Patent Application
Serial No. 08/496,947 entitled "Fluid Cooled and Perfused Tip for a
Catheter" filed on June 30, 1995, and any application issuing from the
disclosure listed on Schedule 1, and all divisionals, continuations,
continuations-in-part, re-issues, re-examinations and corresponding
foreign patents thereof.
C. "Spot Catheter Product" shall mean any and all irrigated porous tip
RF ablation catheters covered by one or more claims of the Spot
Catheter Patents.
D. "Spot Catheter Technology" shall mean all information, data, and
know-how relating to the irrigated porous tip RF ablation catheter,
including without limitation, processes, techniques, methods,
protocols, products, apparatuses and other materials and compositions
which are reasonably related to irrigated porous tip RF ablation
catheters, but shall not include any information which, at the time of
disclosure, was published, known publicly, or otherwise in the public
domain; any information which, after disclosure, is published, becomes
known publicly, or otherwise becomes part of the public domain through
no fault of Cordis Webster; any information which, prior to the time of
disclosure, has been practiced by or is known to Cordis Webster as
evidenced by written documentation or other physical evidence or; any
information which, after disclosure, is made available to Cordis
Webster by a third party under no obligation of confidentiality.
E. "Linear Catheter Patents" shall mean U.S. Patent No. 5,800,428
entitled "Linear Catheter Ablation System" issued on September 1, 1998
and U.S. Patent Application Serial No. 09/073,651 entitled "Linear
Catheter Ablation System" filed on May 9, 1998, and any application
issuing from the disclosures listed on Schedule 2, and all divisionals,
continuations, continuations-in-part, re-issues, re-examinations and
corresponding foreign patents thereof.
F. "Linear Catheter Product" shall mean any and all irrigated linear
lesion RF ablation catheters covered by one or more claims of the
Linear Catheter Patents.
G. "Linear Catheter Technology" shall mean all information, data, and
know-how relating to the irrigated linear lesion RF ablation catheter
including without limitation, processes, techniques, methods,
protocols, products, apparatuses and other materials and compositions
which are reasonably related to irrigated linear lesion RF ablation
catheters, but shall not include any information which, at the time of
disclosure, was published, known publicly, or otherwise in the public
domain; any information which, after disclosure, is published, becomes
known publicly, or otherwise becomes part of the public domain through
no fault of Cordis Webster; any information which, prior to the time of
disclosure, has been practiced by or is known to Cordis Webster as
evidenced by written documentation or other physical evidence or; any
information
2
<PAGE>
which, after disclosure, is made available to Cordis Webster by a third
party under no obligation of confidentiality.
H. "Effective Date" shall mean the date above-written.
I. "Affiliated Company" shall mean any entity that directly or
indirectly controls, is controlled by or is under common control with
Cordis Webster, and for such purpose "control" shall mean the
possession, direct or indirect, of the power to direct or cause the
direction of the management and the policies of the entity, whether
through the ownership of voting securities, by contract or otherwise.
J. "Net Selling Price" shall mean the aggregate invoice price of a Spot
Catheter Product or Linear Catheter product to a third party that is
not Cordis Webster or an Affiliated Company, less discounts actually
allowed and taken, refunds, returns, allowances, the cost of
replacement or credit, sales commissions actually paid to third parties
that are not Affiliated Companies, separately invoiced postage,
separately invoiced insurance and other separately invoiced shipping
charges, and customs, duties and other governmental charges and import,
use and sales tax paid by Cordis Webster.
K. "Confidential Information" shall mean information provided by one
party or its Affiliated Companies to the other party or its Affiliated
Companies which if in written form is marked as being confidential and
if in oral form, is reduced to writing and a copy sent to the recipient
within thirty (30) days of disclosure. Such information may include,
without limitation, (a) matters of a technical nature such as trade
secret processes or devices, techniques, data, formulas, inventions
(whether or not patentable), specifications and characteristics of
products planned or being developed, and research subjects, methods and
results; (b) matters of a business nature such as information about
costs, margins, pricing policies, markets, sales, suppliers, customers,
product plans and marketing plans or strategies; and (c) other
information of a similar nature that is not generally known to the
public.
II. PURCHASE, SALE AND ASSIGNMENT; LICENSE.
A. Angeion hereby sells, assigns, conveys, transfers and delivers to
Cordis Webster, its successors and permitted assigns, and Cordis
Webster hereby purchases, acquires and accepts from Angeion the Spot
Catheter Patents and the Spot Catheter Technology and the Linear
Catheter Patents and the Linear Catheter Technology to be used only in
the Field of Use (except as expressly provided herein), subject to and
in accordance with the terms and conditions of this Agreement,
including the right to sue for infringement. Angeion further agrees to
provide to Cordis Webster the documentation necessary to transfer the
Spot Catheter Technology and Linear Catheter Technology and to sign the
necessary assignment documents for the patents for recordation in the
United States Patent and Trademark Office and foreign patent offices.
3
<PAGE>
B. [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
C. [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
D. From and after the Effective Date, Cordis Webster shall pay a
royalty amount equal to 5% of the Net Selling Price of Spot Catheter
Products and Linear Catheter Products sold anywhere in the world by
Cordis Webster or any Affiliated Companies in the Field of Use. For
Spot Catheter Products or Linear Catheter Products which are neither
manufactured nor sold in a country where there is patent coverage under
either the Spot Catheter Patents or the Linear Catheter Patents, Cordis
Webster or any Affiliated Companies shall pay a royalty of only 2% of
the Net Selling Price of such product. Royalty payments shall continue
until the first to occur of the following: [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***]
E. Cordis Webster hereby grants back to Angeion a royalty-free,
irrevocable, exclusive (subject to the rights expressly reserved by
Cordis Webster hereunder, including without limitation those described
in Article X) license to Spot Catheter Patents and Linear Catheter
Patents in all fields except the Field of Use.
F. [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
G. [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
H. Each calendar quarter following the Effective Date, Cordis Webster
shall provide Angeion with a quarterly royalty report setting forth the
total Net Selling Price of Spot Catheter Products and Linear Catheter
Products by Cordis Webster and its Affiliated Companies for that
quarter, as well as any royalties received from third parties for that
quarter pursuant to Subsection I. The quarterly report and any payments
due to Angeion shall be made and delivered to Angeion no later than
thirty (30) days following the end of the calendar quarter. All
royalties shall be calculated in U.S. Dollars and shall be due and
payable to Licensor in U.S. Dollars. In the event that the net Selling
Price of Spot Catheter Products and Linear Catheter Products are made
at prices calculated in a currency other than U.S. Dollars, Cordis
Webster shall calculate royalties due for such sales based on Johnson &
Johnson's existing currency translation practices, or such currency
translation practices as are customary in this industry if Johnson &
Johnson's existing currency translation practices are not acceptable to
the independent accounting firm selected by Angeion in subsection I.
4
<PAGE>
I. Cordis Webster and its Affiliated Companies shall keep accurate
records reflecting the Net Selling Price of all Spot Catheter Products
and Linear Catheter Products. Angeion shall have the right to audit the
quarterly reports and to inspect such records of Cordis Webster and its
Affiliated Companies using an independent public accounting firm of
national reputation selected and paid for by Angeion no more than twice
a year during normal business hours and upon reasonable notice. In the
event that any such audit reveals a discrepancy of more than five
percent (5%) from the royalties due to Angeion, Cordis Webster shall
bear the costs of such audit. Any such independent accounting firm
shall execute such confidentiality undertakings as Cordis Webster may
reasonably require.
J. In the event that any payments due to Angeion (including royalties
or invoices) are delinquent, such delinquent payments shall bear
interest at [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. To the
extent that any such audit shows an overpayment, such overpayment shall
be shown as a credit on the next quarterly royalty report, or shall be
promptly refunded at the option of Cordis Webster.
III. DEVELOPMENT PROGRAM.
A. Angeion shall complete at no additional charge development of the
Spot Catheter Product in accordance with the specification as set forth
in Exhibit A for clinical studies to support a Pre-Market Approval
("PMA") submission. Any changes to the specification for the Spot
Catheter Product reasonably requested by Cordis Webster after the
Effective Date shall be completed by Angeion and paid for by Cordis
Webster on a time and materials basis at the Development Rates as set
forth in Exhibit B.
B. Angeion shall develop Linear Catheter Product concept prototypes in
accordance with a project plan to be agreed upon by the parties. Cordis
Webster shall select a Linear Catheter Product from the concept
prototypes and the parties shall agree upon a project plan and
specifications for the selected concept prototype of the Linear
Catheter Product. Development of the selected concept prototypes of the
Linear Catheter Product shall include design, building and testing of
prototypes and clinical units for PMA submission, equipment
modifications and in vitro testing, when required.
C. Cordis Webster will fund Angeion for reasonable costs incurred
commencing January 1, 1998 to produce the concept prototypes and
develop the selected concept prototype for the Linear Catheter Product
(including not more than [***CONFIDENTIAL TREATMENT REQUESTED; PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***]incurred as of the Effective Date as set forth in the
invoice attached as Exhibit C) in accordance with a budget of up to
[***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED SEPARATELY
WITH
5
<PAGE>
THE SECURITIES AND EXCHANGE COMMISSION***] and a set of milestones to
be agreed by the parties as part of the project plan. Angeion shall use
its best efforts to complete development of the selected concept
prototype of the Linear Catheter Product in accordance with the budget
and milestones and shall not incur additional charges or costs above
the agreed upon budget without prior written approval of Cordis
Webster; however, the budget shall be based funding Angeion on a time
and materials basis at the Development Rates as set forth in Exhibit B.
Angeion does not guarantee or warrant that the development work related
to the selected concept prototype of the Linear Catheter Product can be
completed [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]. All sums
paid pursuant to subparagraph C of this section will be paid upon
receipt of a statement of services performed. Angeion shall keep
accurate records reflecting the development work related to the Linear
Catheter Product. Cordis Webster shall have the right to audit the
invoices and to inspect such records of Angeion no more than twice a
year during normal business hours and upon reasonable notice.
D. Notwithstanding the provisions of paragraph III.C above, it is
understood that during the term of this Agreement Cordis Webster may
elect to bring within the Cordis Webster organization certain or all of
the development and manufacturing activities relating to the Linear
Catheter Product as set forth in paragraph III.C and to terminate such
activities by Angeion. Prior to such transfer of activities, Cordis
Webster shall give Angeion sixty (60) days written notice of its
intentions. In such a case, Cordis Webster shall be liable only for
charges for all work done or non-cancelable costs committed by Angeion
prior to such transfer. Angeion shall exercise diligent efforts to
minimize any such non-cancelable costs.
E. Project reviews will be conducted on a quarterly basis or more
frequently upon request by Cordis Webster commencing the month the
agreement is signed. The review will include access by Cordis Webster,
if desired, to all design documentation including the Design History
File. Angeion will provide detailed monthly status reports including
expenses. Angeion will not exceed a monthly expense total as agreed by
the parties without prior written approval of Cordis Webster.
F. Angeion shall provide overall project leadership to develop and
manufacture the Spot Catheter Product and Linear Catheter Product.
Product priorities for the Spot Catheter Product, and product
priorities, features and specifications for the Linear Catheter Product
initially will be decided by Cordis Webster, after discussions with
Angeion. Any changes to the project plan or specifications for the
Linear Catheter Products shall be agreed upon by both parties in
writing.
IV. CLINICAL SUPPLIES AND TECHNOLOGY TRANSFER.
A. Angeion will manufacture 250 Spot Catheter Products for Cordis
Webster for use in clinical trials and will bill Cordis Webster for
these units at a cost of
6
<PAGE>
[***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION***].
B. Upon completion of the manufacture of the clinical supplies for the
Spot Catheter Product, or at the request of Cordis Webster, Angeion
shall provide technology transfer and technical support for a period of
one (1) year to transfer to Cordis Webster the production and
manufacturing of the Spot Catheter Products on a time and materials
basis at the Development Rates set forth in Exhibit B.
C. Angeion will manufacture, upon request by Cordis Webster, Linear
Catheter Products for Cordis Webster for use in clinical trials at an
agreed upon price per unit based upon the specifications for the Linear
Catheter Product and as of the milestone for the completion of the
project. Any changes to the specification for the Linear Catheter
Product reasonably requested by Cordis Webster after the milestone date
for completion of the specification shall be completed by Angeion and
paid for by Cordis Webster on a time and materials basis at the
Development Rates set forth in Exhibit B.
D. Upon completion of the manufacture of the clinical supplies of the
Linear Catheter Product, or at the request of Cordis Webster pursuant
to subparagraph E, Angeion shall provide technology transfer and
technical support for a period of up to one (1) year to transfer to
Cordis Webster the production and manufacturing of the Linear Catheter
Products on a time and materials basis at the Development Rates set
forth in Exhibit B.
E. [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***]
V. CLINICAL STUDIES AND REGULATORY FINDINGS.
A. If Cordis Webster determines in its sole discretion that it desires
to conduct clinical studies for the Spot Catheter Product and Linear
Catheter Product, Cordis Webster shall organize, sponsor and support
all future clinical trials.
B. Angeion has previously obtained Investigational Device Exemption
("IDE") approval for the Spot Catheter. The parties shall coordinate
the transition of the existing clinical IDE submission for the Spot
Catheter to Cordis Webster.
C. If and as required under the United States laws and FDA
regulations[***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***], at its
expense, shall exercise reasonable diligence to obtain and maintain all
registrations, licenses and permits required to comply with all laws
and regulations for sale and distribution of the Spot Catheter and
Linear Catheter.
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<PAGE>
D. [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***].
E. Angeion shall have access to clinical sites and clinical information
as may be reasonably required to facilitate Angeion's development
responsibilities.
F. Cordis Webster shall have the opportunity at its option to access
clinical and regulatory expertise of Angeion in connection with the
Spot Catheter Products and Linear Catheter Products at the Development
Rates as set forth in Exhibit B.
G. Angeion shall, to the best of its ability, ensure that the
identified clinical investigators for the [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***].
H. Angeion shall comply with all applicable provisions of the FDA
Quality System Regulation (QSR) and FDA Good Clinical Practices (GCP)
Regulation. Angeion shall notify Cordis Webster of any planned or
ongoing regulatory inspections of its facilities and operations.
VI. MARKETING.
All Spot Catheter Product and Linear Catheter Product in the Field of
Use shall be marketed under the name of Cordis Webster or such other
name or names as Cordis Webster may choose.
VII. TERM.
A. This Agreement shall remain in effect from the Effective Date
[***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION***].
B. Either party may terminate this Agreement in the event such other
party shall have materially breached or defaulted in the performance of
any of its obligations hereunder, and such default shall have continued
for thirty (30) days after written notice thereof was provided to the
breaching party by the non-breaching party. Any termination shall
become effective at the end of the thirty (30) day period unless the
breaching party has cured any such breach or default prior to the
expiration of the thirty (30) day period.
C. Termination of this Agreement shall not release any party hereto
from any liability which, at the time of termination, has already
accrued to the other party or which is attributable to a period prior
to such termination, nor preclude either party from pursuing any rights
and remedies it may have hereunder at law or in equity which accrued or
are based upon any event occurring prior to such termination.
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<PAGE>
VIII. NON-COMPETE.
During the Term and for a period of [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***], Angeion shall not manufacture, sell or develop
for third parties catheters for use in the Field of Use.
IX. CONFIDENTIALITY.
A. Unless otherwise expressly provided for in this Agreement, both
parties shall treat the Confidential Information received from the
other party as proprietary or confidential and shall not disclose any
such Confidential Information to any third party during the Term and
for a period of five (5) years thereafter, except for information
which:
(i) at the time of disclosure, was published, known
publicly or otherwise in the public domain;
(ii) after disclosure, is published, becomes known
publicly or otherwise becomes part of the public
domain through no fault of the receiving party;
(iii) prior to the time of disclosure, is known to the
receiving party as evidenced by its written records
and is not then subject to an obligation of
confidentiality to any third party; and
(iv) after disclosure, is made available to the receiving
party in good faith by a third party under no
obligation of confidentiality and without restriction
on its further disclosure by the receiving party.
B. Notwithstanding the above, either party may disclose Confidential
Information of the other and this Agreement to their legal
representatives and employees to the extent such disclosure is
reasonably necessary to achieve the purposes of this Agreement; or in
connection with the filing and support of patent applications; or as
required by law or to comply with applicable governmental regulations
or court order, including the FDA and its foreign counterparts;
provided that if a party is required to make such disclosure of another
party's Confidential Information, other than pursuant to a
confidentiality agreement, it will give reasonable advance notice to
the other party of such disclosure and, save to the extent
inappropriate in the case of patent applications, will use its
reasonable best efforts to secure confidential treatment of such
information in consultation with the other party prior to its
disclosure and disclose only the minimum necessary to comply with such
requirements.
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<PAGE>
X. LICENSE OPTIONS.
A. Angeion hereby grants to Cordis Webster and its Affiliated Companies
an option to practice the inventions of the Spot Catheter Patents and
practice the Spot Catheter Technology and practice the inventions of
the Linear Catheter Patents and practice the Linear Catheter Technology
limited to the additional field of [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***].
B. Upon exercise of the Option to obtain these rights in the TMR Field,
Cordis Webster or its Affiliated Companies shall:
(i) [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***]
(ii) [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***].
C. Angeion grants to Cordis Webster and its Affiliated Companies an
option to practice the inventions of the Spot Catheter Patents and
practice the Spot Catheter Technology and practice the inventions of
the Linear Catheter Patents and practice the Linear Catheter Technology
in all fields outside the Field of Use and [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] ("OTHER PRODUCTS FIELD").
D. Upon exercise of the Option to obtain the Other Products Field,
Cordis Webster or its Affiliates Companies shall:
(i) [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***]
(ii) [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION***].
E. Royalty payments made in accordance with this Section shall continue
until the first to occur of the following: [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***].
10
<PAGE>
XI. RIGHT OF FIRST NEGOTIATION.
Subject to any contractual obligations between Angeion and ELA Medical,
Angeion agrees to grant Cordis Webster a right of first negotiation to
obtain all rights in any new concepts or inventions in the Field of Use
developed by Angeion to the extent not already covered under this
Agreement.
XII. INTELLECTUAL PROPERTY DEVELOPED UNDER THIS AGREEMENT.
A. All patentable and unpatentable inventions and other intellectual
property conceived or reduced to practice solely by employees or
consultants of Angeion as a result of the development work conducted
under this Agreement in the Field of Use ("Angeion Inventions") shall
be the property of Cordis Webster.
B. All patentable and unpatentable inventions and other intellectual
property conceived or reduced to practice jointly by employees or
consultants of Cordis Webster and Angeion as a result of the
development work conducted under this Agreement in the Field of Use
("Joint Inventions") shall be the property of Cordis Webster.
C. Angeion agrees to assign to Cordis Webster all rights in any such
Angeion Inventions or Joint Inventions. Upon the request of Cordis
Webster and at Cordis Webster's expense, Angeion will assist Cordis
Webster, or its designee, in making application for Letters Patent in
any country in the world. Angeion further agrees to have executed all
papers and do all things which may be necessary or advisable to
prosecute such applications and to transfer to and vest in Cordis
Webster all the right, title and interest in and to such invention,
discoveries or ideas and all applications for patents and Letters
Patent issued hereon.
D. Cordis Webster shall be responsible for [THE COST OF FILING AND
MAINTAINING ALL OF THE SPOT CATHETER PATENTS AND LINEAR CATHETER
PATENTS DURING THE TERM, PROVIDED CORDIS WEBSTER SHALL NOT BE OBLIGATED
TO SPEND MORE THAN A MAXIMUM COST OF [***CONFIDENTIAL TREATMENT
REQUESTED; PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION***] FOR A SINGLE U.S. PATENT APPLICATION AND A
TOTAL OF [***CONFIDENTIAL TREATMENT REQUESTED; PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION***] FOR FILING
CORRESPONDING FOREIGN PATENT APPLICATIONS CORRESPONDING TO A SINGLE
U.S. PATENT APPLICATION.]
E. In the event Cordis Webster elects not to file or maintain a patent
application in a given country, Angeion shall be free to file or
maintain such patent applications in that country.
11
<PAGE>
XIII. WARRANTIES AND REPRESENTATIONS.
A. Cordis Webster and Angeion, each represent and warrant to the other
that:
(i) it has the power to execute, deliver and perform the
terms and conditions of this Agreement and has taken
all necessary action to authorize the execution,
delivery and performance thereof;
(ii) the execution, delivery or performance of this
Agreement will not constitute a violation of, be in
conflict with, or result in, a breach of any
agreement or contract to which it is a party or to
which it is bound;
(iii) this Agreement constitutes the legal, valid and
binding agreement enforceable in accordance with its
terms, except as enforcement of remedies may be
limited by general principles of bankruptcy,
insolvency, or other similar laws affecting
creditors' rights generally; and
(iv) it will comply with all applicable laws, regulations,
ordinances, statutes, decrees or proclamations of all
governmental authorities having jurisdiction over
this Agreement.
B. In addition, Angeion warrants to Cordis Webster that it:
(i) is the owner of all right, title and interest in and
to the Spot Catheter Patents and Spot Catheter
Technology other than the interest in third party
income with respect to the Spot Catheter Patents as
evidenced by the Assignment Agreement attached hereto
as Exhibit D;
(ii) is the owner of all right, title and interest in and
to the Linear Catheter Patents and Linear Catheter
Technology;
(iii) has not licensed the Spot Catheter Patents, Spot
Catheter Technology, Linear Catheter Patents or
Linear Catheter Technology to any third party.
XIV. INFRINGEMENT.
Cordis Webster shall have the right, but not the obligation, to bring
suit against a third party for infringement of the Spot Catheter and
Linear Catheter Patents, however, if Cordis Webster has not brought any
such suit after three (3) months' notice having been given to Angeion,
Angeion may bring such suit and may join Cordis Webster in such suit if
necessary. The party initiating such suit shall be responsible for all
costs of such suit and shall receive all recovery in such suit.
12
<PAGE>
XV. INDEMNIFICATION.
A. Angeion shall indemnify, defend and hold harmless Cordis Webster and
its directors, officers and employees ("Cordis Webster Indemnitees")
from and against any and all liabilities, damages, losses, costs or
expenses, including reasonable attorneys' fees, resulting from any
claim, suit or proceeding brought by a third party for infringement of
third party patents by Spot Catheter Products or Linear Catheter
Products manufactured by Angeion.
B. Cordis Webster shall indemnify, defend and hold harmless Angeion and
its directors, officers and employees ("Angeion Indemnitees") from and
against any and all liabilities, damages, losses, costs or expenses,
including reasonable attorneys' fees, resulting from any claim, suit or
proceeding brought by a third party for physical injury arising out of
or in connection with the use of Spot Catheter Products and the Linear
Catheter Products; except for Spot Catheter Products and Linear
Catheter Products manufactured by Angeion to the extent such injury is
caused by the negligence or willful misconduct of Angeion.
C. Beginning at the time that the Spot Catheter Product or Linear
Catheter Product is being commercially distributed or sold (other than
for the purpose of obtaining regulatory approvals), Cordis Webster or
its Affiliated Companies shall, at its sole cost and expense, procure
and maintain commercial general liability insurance in amounts not less
than $2,000,000 per incident and $2,000,000 annual aggregate. Such
commercial general liability insurance shall provide (i) liability
coverage and (ii) contractual liability coverage for indemnification
under subsection A hereof. If Cordis Webster and its Affiliated
Companies may elect to self-insure all or part of the limits described
above (including deductibles or retentions which are in excess of
$250,000 annual aggregate) on the same basis that it insures other
similar risks. The minimum amount of insurance coverage required under
this subsection B shall not be construed to create a limit of Cordis
Webster's liability with respect to indemnification under subsection A
hereof. Cordis Webster shall provide written evidence of such insurance
upon request by Angeion and shall provide Angeion with written notice
at least fifteen (15) days prior to the cancellation, non-renewal or
material change in such insurance.
XVI. MISCELLANEOUS.
A. Press Releases. Neither party will generate any press releases or
otherwise disclose publicly the existence or terms of this Agreement
other than the initial press release to be issued upon the execution of
this Agreement which is attached hereto as Exhibit E, without the prior
written consent of the other party, except as may be otherwise required
by law or as necessary for Angeion to satisfy the contractual
obligations between Angeion and ELA Medical. Cordis Webster
acknowledges that Angeion believes that this Agreement is likely to be
deemed a material agreement for Angeion, thereby requiring Angeion to
make an SEC filing of this Agreement. In the
13
<PAGE>
event of such a required filing, Angeion agrees to request confidential
treatment of sensitive portions of this Agreement and to work with
Cordis Webster in that regard.
B. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
C. Assignment. Neither party may assign this Agreement without the
prior written consent of the other, which consent shall not be
unreasonably withheld; provided, however, Cordis Webster may assign
this Agreement to an Affiliated Company but nothing herein shall
prevent Angeion from assigning to a third party without the consent of
Cordis Webster any royalty payments or other rights to be received by
Angeion under the provisions of Article II (D), (E), and (G), IV (E)
and X (B), (D) and (E).
D. Independent Contractor. The relationship of Cordis Webster and
Angeion is that of an independent contractor and nothing contained in
this Agreement shall be construed to give either party the power to
direct and control the activities of the other or create or assume any
obligation on behalf of the other for any purpose whatsoever.
E. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto concerning the subject matter hereof and any
representation, promise or condition in connection therewith, not
incorporated herein, shall not be binding upon either party. Before
signing this Agreement the parties have had numerous conversations,
including preliminary discussions, formal negotiations and informal
conversations at meals and social occasions, and have generated
correspondence and other writings, in which the parties discussed the
transaction which is the subject of this Agreement and their
aspirations for success. In such conversations and writings,
individuals representing the parties may have expressed their judgments
and beliefs concerning the intentions, capabilities, and practices of
the parties, and may have forecasted future events. The parties
recognize that such conversations and writings often involve an effort
by both sides to be positive and optimistic about the prospects for the
transaction. However, it is also recognized, that all business
transactions contain an element of risk, as does the transaction
contemplated by this Agreement, and that it is normal business practice
to limit the legal obligations of contracting parties to only those
promises and representations which are essential to their transaction
so as to provide certainty as to their respective future rights and
remedies. Accordingly, this Agreement is intended to define the full
extent of the legally enforceable undertakings of the parties hereto,
and no promise or representation, written or oral, which is not set
forth explicitly in this Agreement is intended by either party to be
legally binding. Both parties acknowledge that in deciding to enter
into this Agreement and to consummate the transaction contemplated
hereby neither has relied upon any statements or representations,
written or oral, other than those explicitly set forth therein.
F. Amendment. No changes, amendments or alterations shall be effective
unless in writing and signed by all parties.
14
<PAGE>
G. Waiver. No waiver of any default in the performance of any of the
duties or obligations arising out of this Agreement shall be valid
unless in writing and signed by the waiving party.
H. Severability. If any provision of this Agreement shall be held to be
unenforceable in whole or in part, then the invalidity of such
provision shall not be held to invalidate any other provision herein,
and all other provisions shall remain in full force and effect.
I. Dispute Resolution.
a. Any dispute, claim, or controversy arising from or
related in any way to this Agreement or the
interpretation, application, breach, termination or
validity thereof, including any claim of inducement
of this Agreement by fraud or otherwise, will be
submitted for resolution to arbitration pursuant to
the commercial arbitration rules then pertaining of
the Center For Public Resources ("CPR"), except where
those rules conflict with these provisions, in which
case these provisions control. The arbitration will
be held in California.
b. The panel shall consist of three arbitrators chosen
from the CPR Panels of Distinguished Neutrals, each
of whom is a lawyer specializing in business
litigation with at least 15 years experience with a
law firm of over 25 lawyers or was a judge of a court
of general jurisdiction. In the event the aggregate
damages sought by the claimant are stated to be less
than $5 million, and the aggregate damages sought by
the counterclaimant are stated to be less than $5
million, and neither side seeks equitable relief,
then a single arbitrator shall be chosen, having the
same qualifications and experience specified above.
c. The parties agree to cooperate (1) to obtain
election of the arbitrator(s) within 30 days of
initiation of the arbitration; (2) to meet with the
arbitrator(s) within 30 days of selection; and (3)
to agree at that meeting or before upon procedures
for discovery and as to the conduct of the hearing
which will result in the hearing being concluded
within no more than 9 months after selection of the
arbitrator(s) and in the award being rendered within
60 days of the conclusion of the hearings, or of any
post-hearing briefing, which briefing will be
completed by both sides within 20 days after the
conclusion of the hearings. In the event no such
agreement is reached, the CPR will select
arbitrator(s), allowing appropriate strikes for
reasons of conflict or other cause and three
preemptory challenges for each side. The
arbitrator(s) shall set a date for the hearing,
commit to the rendering of the award within 60 days
of the conclusion of the evidence at the hearing, or
of any post-hearing briefing (which briefing will be
completed by both sides in no more than 20 days after
the conclusion of the hearings), and provide for
15
<PAGE>
discovery according to these time limits, giving
recognition to the understanding of the parties
hereto that they contemplate reasonable discovery,
including document demands and depositions, but that
such discovery be limited so that the time limits
specified herein may be met without undue difficulty.
In no event will the arbitrator(s) allow either side
to obtain more than a total of 40 hours of deposition
testimony from all witnesses including both fact and
expert witnesses. In the event multiple hearing days
are required, they will be scheduled consecutively to
the greatest extent possible.
d. The arbitrator(s) shall render their award following
the substantive law of California. The arbitrator(s)
shall render an opinion setting forth findings of
fact and conclusions of law with the reasons therefor
stated. A transcript of the evidence adduced at the
hearing shall be made and shall, upon request, be
made available to either party.
e. To the extent possible, the arbitration hearings and
award will be maintained in confidence.
f. The United States District Court for the District of
California may enter judgment upon any award. In the
event the panel's award exceeds $5 million in
monetary damages or includes or consists of equitable
relief, then the court shall vacate, modify or
correct any award where the arbitrators' findings of
fact are clearly erroneous, and/or where the
arbitrators' conclusions of law are erroneous; in
other words, it will undertake the same review as if
it were a federal appellate court reviewing a
district court's findings of fact and conclusions of
law rendered after a bench trial. An award for less
than $5 million in damages and not including
equitable relief may be vacated, modified or
corrected only upon the grounds specified in the
Federal Arbitration Act. The parties consent to the
jurisdiction of the above-specified Court for the
enforcement of these provisions, the entry of
judgment on any award and the vacatur, modification
and correction of any award as above specified. In
the event such Court lacks jurisdiction, then any
court having jurisdiction of this matter may enter
judgment upon any award and provide the same relief,
and undertake the same review, as specified herein.
g. Each party has the right before or during the
arbitration to seek and obtain from the appropriate
court provisional remedies such as attachment,
preliminary injunction, replevin, etc. to avoid
irreparable harm, maintain the status quo or preserve
the subject matter of the arbitration.
h. EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY
ISSUE BY JURY.
16
<PAGE>
i. EACH PARTY HERETO WAIVES ANY CLAIM TO PUNITIVE OR
EXEMPLARY DAMAGES FROM THE OTHER.
j. EACH PARTY HERETO WAIVES ANY CLAIM OF CONSEQUENTIAL
DAMAGES FROM THE OTHER UNLESS (1) THE FORESEEABILITY
OF SUCH DAMAGES AT THE TIME OF THE CONTRACT AND (2)
THE AMOUNT OF SUCH DAMAGES ARE PROVEN BY CLEAR AND
CONVINCING EVIDENCE.
J. Mediation.
a. Any dispute, controversy or claim arising out of or
related to this Agreement, or the interpretation,
application, breach, termination or validity thereof,
including any claim of inducement by fraud or
otherwise, which claim would, but for this provision,
be submitted to arbitration shall, before submission
to arbitration, first be mediated through non-binding
mediation in accordance with the Model Procedures for
the Mediation of Business Disputes promulgated by the
CPR then in effect except where those rules conflict
with these provisions, in which case these provisions
control. The mediation shall be conducted in
California and shall be attended by a senior
executive with authority to resolve the dispute from
each of the operating companies that are parties.
b. The mediator shall be an attorney specializing in
business litigation who has at least 15 years of
experience as a lawyer with a law firm of over 25
lawyers or was a judge of a court of general
jurisdiction and who shall be appointed from the list
of neutrals maintained by CPR.
c. The parties shall promptly confer in an effort to
select a mediator by mutual agreement. In the absence
of such an agreement, the mediator shall be selected
from a list generated by CPR with each party having
the right to exercise challenges for cause and two
peremptory challenges within 72 hours of receiving
the CPR list.
d. The mediator shall confer with the parties to design
procedures to conclude the mediation within no more
than 45 days after initiation. Under no circumstances
shall the commencement of arbitration under paragraph
I of this Section above be delayed more than 45 days
by the mediation process specified herein.
e. Each party agrees to toll all applicable statutes of
limitation during the mediation process and not to
use the period of pendency of the mediation to
disadvantage the other party procedurally or
otherwise. No statements made by either side during
the mediation may be used by the other during any
subsequent arbitration.
17
<PAGE>
f. Each party has the right to pursue provisional relief
from any court, such as attachment, preliminary
injunction, replevin, etc., to avoid irreparable
harm, maintain the status quo, or preserve the
subject matter of the arbitration, even though
mediation has not been commenced or completed.
K. Notices. Any required notices hereunder shall be given in writing by
certified mail or overnight express deliver at the address of each
party below, or to such other address as either party may indicate on
its behalf by written notice:
If to Cordis Webster: Cordis Webster, Inc.
4750 Littlejohn Street
Baldwin Park, CA 91706
Attention: President
If to Angeion: Angeion Corporation
7601 Northland Drive
Brooklyn Park, MN 55428
Attention: President
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have caused this Agreement to be executed affixing their
signatures below.
CORDIS WEBSTER, INC.
By /s/ Thomas S. Ells
-----------------------------------
Title V.P. Business Development
--------------------------------
ANGEION CORPORATION
By /s/James B. Hickey
-----------------------------------
Title President and CEO
--------------------------------
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Nine months ended September 30,
1998 1997
---- ----
Net loss $(25,520,437) $(24,923,405)
Interest expense 847,398 56,910
Amortization of debt costs 702,156 --
Income tax -- --
------------ ------------
Loss before fixed charges (23,970,883) (24,866,495)
Fixed charges 1,549,554 56,910
Ratio of net loss before fixed charges to
fixed charges (15.5) (436.9)
Deficiency of earnings to cover fixed
charges $(25,520,437) $(24,923,405)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,474,725
<SECURITIES> 0
<RECEIVABLES> 4,280,429
<ALLOWANCES> 0
<INVENTORY> 8,933,696
<CURRENT-ASSETS> 21,562,684
<PP&E> 12,132,850
<DEPRECIATION> 4,770,891
<TOTAL-ASSETS> 5,886,595
<CURRENT-LIABILITIES> 7,001,919
<BONDS> 0
0
0
<COMMON> 347,138
<OTHER-SE> 6,387,539
<TOTAL-LIABILITY-AND-EQUITY> 35,886,596
<SALES> 3,081,978
<TOTAL-REVENUES> 3,081,978
<CGS> 6,452,491
<TOTAL-COSTS> 6,452,491
<OTHER-EXPENSES> 21,516,253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,549,554
<INCOME-PRETAX> (25,520,437)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,520,437)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,520,437)
<EPS-PRIMARY> (.76)
<EPS-DILUTED> (.76)
</TABLE>
