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 March 31, 1999
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: 40,052,880 shares
outstanding as of May 13, 1999*
- -----------------------------
* The Registrant's Board of Directors has approved a one-for-ten reverse stock
split effective as of the close of business on May 17, 1999. The shares
outstanding on May 13, 1999 do not reflect the reverse stock split.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM DESCRIPTION Page
- ---- ----------- ----
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets (unaudited) 1
- March 31, 1999 and December 31, 1998. 1
Consolidated Statements of Operations (unaudited) 2
- For the Three Months Ended March 31, 1999 and 1998. 2
Consolidated Statements of Cash Flows (unaudited) 3
- For the Three Months Ended March 31, 1999 and 1998. 3
Notes to Consolidated Financial Statements (unaudited). 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 6
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 10
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11
SIGNATURES. 13
EXHIBIT INDEX. 14
<PAGE>
ANGEION CORPORATION
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 11,085,362 $ 1,827,637
Accounts receivable, net:
Trade 2,072,108 1,587,669
Other 32,791 102,426
Inventories 5,382,566 6,377,359
Prepaid expenses and other current assets 935,778 623,573
------------- -------------
TOTAL CURRENT ASSETS 19,508,605 10,518,664
Property and equipment, net 6,414,549 6,880,822
Investment in joint venture, net 2,176,163 3,221,003
Other assets, net 2,051,668 2,272,918
------------- -------------
TOTAL ASSETS $ 30,150,985 $ 22,893,407
============= =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
- -------------------------------------
Current liabilities:
Accounts payable 1,822,986 2,459,294
Notes payable and current portion of long-term debt 6,432,595 500,461
Accrued payroll, vacation and related costs 965,327 983,060
Other accrued expenses 2,400,557 1,882,268
Deferred income 1,118,763 1,198,021
------------- -------------
TOTAL CURRENT LIABILITIES 12,740,228 7,023,104
Long-term debt 20,199,000 22,150,000
TOTAL LIABILITIES 32,939,228 29,173,104
------------- -------------
Shareholders' deficit:
Common stock, $.01 par value. Authorized
7,500,000 shares; issued and outstanding
4,005,972 shares at March 31, 1999,
and 3,879,656 shares at December 31, 1998 40,060 38,797
Additional paid-in capital 128,732,472 116,879,840
Unamortized value of restricted stock (60,862) (118,066)
Cumulative translation adjustment (27,724) (24,650)
Accumulated deficit (131,472,189) (123,055,618)
------------- -------------
TOTAL SHAREHOLDERS' DEFICIT (2,788,243) (6,279,697)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 30,150,985 $ 22,893,407
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 1
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Operations
For the Three Months Ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 1,801,999 $ 354,997
Operating expenses:
Manufacturing 2,303,018 1,844,621
Research & development 3,522,997 5,347,456
Selling, general & administrative 1,982,683 2,614,159
Restructuring 719,649 --
------------ ------------
Total operating expenses 8,528,347 9,806,236
------------ ------------
OPERATING LOSS (6,726,348) (9,451,239)
------------ ------------
Other income (expense), net:
Equity in net loss of joint venture (1,044,841) (317,876)
Interest expense (692,099) (19,931)
Interest income 46,717 114,148
------------ ------------
Other income (expense) (1,690,223) (223,659)
------------ ------------
NET LOSS $ (8,416,571) $ (9,674,898)
============ ============
NET LOSS PER SHARE $ (2.12) $ (2.92)
============ ============
Weighted average number of shares outstanding 3,961,729 3,309,132
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (8,416,571) $ (9,674,898)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 783,660 798,338
Compensation expense on grant of stock and stock options 143,593 448,969
Loss on disposal of fixed assets -- 401,008
Equity in net loss of joint venture 1,044,841 317,876
Changes in operating assets and liabilities:
Accounts receivable (414,804) (451,669)
Inventory 994,792 (586,958)
Prepaid expenses and other current assets (312,205) (876,157)
Accounts payable (636,308) 379,268
Accrued expenses 500,556 820,561
Deferred income (79,257) 383,098
------------ ------------
Net cash used in operating activities (6,391,703) (8,040,564)
------------ ------------
INVESTING ACTIVITIES:
Investments in joint venture -- (2,000,000)
Payments for purchases of property and equipment (52,198) (501,911)
------------ ------------
Net cash used in investing activities (52,198) (2,501,911)
------------ ------------
FINANCING ACTIVITIES:
Net proceeds from issuance of debt 5,790,072 4,211,890
Net proceeds from issuance of warrants 9,982,495 --
Repayment of debt (67,866) --
------------ ------------
Net cash provided by financing activities 15,704,701 4,211,890
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (3,075) (1,598)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,257,725 (6,332,183)
Cash and cash equivalents:
Beginning of period 1,827,637 14,052,115
------------ ------------
End of period $ 11,085,362 $ 7,719,932
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 78,191 $ 19,321
Non-cash investing and financing activity:
Conversion of debt to equity $ 1,950,995 $ --
Property acquired subject to capital leases -- 797,389
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
ANGEION CORPORATION
Form 10-Q
March 31, 1999
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 Annual Report on Form 10-K for the year ended
December 31, 1998.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation.
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, ELA*Angeion, LLC ("ELA*Angeion"), a joint venture owned
equally by the Company and ELA Medical, Inc. ("ELA"), began operations. A
proportional amount of the loss from the joint venture is accounted for under
the Equity Method and appears 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 remaining on the books of the joint venture at the end of the
applicable reporting period have been eliminated. On May 11, 1999 the Company
withdrew from ELA*Angeion. See "Subsequent Events."
4. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current year
presentation.
5. REPORTING COMPREHENSIVE INCOME
Components of comprehensive income consist only of immaterial foreign currency
translation adjustments. The Company's net loss and comprehensive loss are
substantially equivalent and are not presented separately.
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<PAGE>
6. SHAREHOLDERS' DEFICIT
On March 5, 1999, the Company received U.S. Food and Drug Administration ("FDA")
Pre-market Approval ("PMA") for its Lyra 2020 ICD series and AngePass(TM) lead
series, which allows the Company to market these products in the U.S. As a
result of the PMA, the Company received the final two $5,000,000 equity
investments from its strategic partner, Synthelabo, pursuant to the Investment
and Master Strategic and Relationship Agreement the Company entered into with
Synthelabo in October 1997. In exchange for the $10,000,000 equity investment,
the Company issued Synthelabo warrants to purchase 909,017 and 540,541 shares of
the Company's common stock at prices of $0.10 and $11.10 per share,
respectively.
7. RESTRUCTURING
In January 1999, the Company announced a restructuring plan (the "January
Restructuring") to help reduce its cash flow burn rate. As a result of the
January Restructuring, the Company reduced approximately 20% of its total
employee base, including 40% of the Company's senior management team. The
Company took a restructuring charge in the first quarter of 1999 of
approximately $720,000 for expenses relating to severance costs and other
employee benefits associated with the reduction in work force. As of March 31,
1999, $102,166 of accrued expenses were included on the Company's balance sheet
related to the January Restructuring.
8. SUBSEQUENT EVENTS
In April 1999, the Company announced a second restructuring plan (the "April
Restructuring") to refocus its business and reduce operating expenses. After a
thorough analysis by its Board of Directors and management, the Company decided
to limit its participation in the implantable cardioverter defibrillator ("ICD")
marketplace in order to re-deploy its resources toward opportunities that may
result in greater shareholder value. The Company will continue to explore
strategic alternatives for the Company, including the potential license or sale
of certain of its assets. As a result of the April Restructuring, the Company
will reduce its workforce by approximately 75 percent of its total employee
base, thereafter retaining a modest staff necessary to support its ongoing
operations and clinical, regulatory and engineering staff necessary to provide
customer support for the Company's Lyra(TM) series of ICDs and existing
implants. In addition, the Company will continue to provide agreed-upon amounts
of product to ELA under the terms of its amended supply agreements discussed
below. The amount of the charge relating to the April Restructuring has not yet
been determined. The related workforce reduction is expected to reduce payroll
expenses by approximately $1,800,000 per quarter, beginning in the third quarter
of 1999.
The Company also announced in April 1999 that it has settled all ongoing
litigation with Cardiac Pacemakers, Inc. ("CPI") and its parent company, Guidant
Corporation ("Guidant"), for $35,000,000. As a result of the settlement, the
Company granted to CPI a nonexclusive license under all of the Company's patents
that cover cardiac stimulation devices. CPI made a one-time payment of
$35,000,000 to settle claims for past damages and for the license. CPI and
Guidant agreed not to sue the Company for future infringement with respect to
the Company's Lyra and Model 2030 series of ICD product lines. The Company
agreed to pay a pass-through royalty for those products to the Estate of Dr.
Michel Mirowski, which owns certain patents licensed to CPI. After the payment
of legal fees and other expenses associated with the lawsuits, the Company
retained approximately $30,000,000 of net cash from the CPI settlement.
On May 7, 1999, the Company's Board of Directors approved a one-for-ten reverse
stock split of the Company's Common Stock for shareholders of record at the
close of business on May 17, 1999. The reverse stock split is being implemented
as part of the Company's previously announced restructuring plan. Financial
information contained in this report has been retroactively adjusted to reflect
the impact of the reverse stock split.
On May 11, 1999, the Company entered into a Withdrawal Agreement (the
"Withdrawal Agreement") with ELA pursuant to which the Company withdrew from its
membership in ELA*Angeion. Under the terms of the Withdrawal Agreement ELA will
have sole responsibility for the operations of ELA*Angeion and will assume
certain warranty coverage, technical service and regulatory compliance services
for which the Company is currently responsible under applicable law, the supply
agreement between the Company and ELA*Angeion, and contracts with third parties
for model 2000 and 2010 series ICD products and associated leads and programmers
supplied to such third parties and implanted in human beings in the United
States (including associated programmers for such ICD models). The Company will
retain potential product liability obligations from patients and has agreed to
maintain at its own expense through May 10, 2004, product liability insurance
with limits of liability at least as high as those currently in place, subject
to availability on commercially reasonable terms. The Company is currently
evaluating the accounting implications of its withdrawal from ELA*Angeion.
In connection with the consummation of the transactions contemplated by the
Withdrawal Agreement, the Company entered into the following related
transactions: (i) the Company amended and
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<PAGE>
terminated its supply agreement with ELA*Angeion and entered into a new
manufacturing and supply agreement with ELA under which the Company has agreed
to supply a limited number of ICD products to ELA*Angeion according to the terms
of its supply agreement and provide any future ICD products directly to ELA;
(ii) the Company amended its manufacturing and supply agreement with ELA Medical
S.A. to limit certain of the Company's obligations to supply ICD products
thereunder and to provide for the assumption by ELA Medical S.A., an affiliate
of ELA ("ELA Medical S.A.") of warranty coverage, technical service and
regulatory compliance services for which the Company is currently responsible
under applicable law, the supply agreement between the Company and ELA Medical
S.A., and contracts with third parties for model 2000 and 2010 series ICD
products and associated leads and programmers supplied to such third parties and
implanted in human beings in Europe and Japan (including associated programmers
for such ICD models); (iii) the Company amended its Investment Agreement with
Synthelabo, the parent company of ELA, to allow for the actions contemplated by
the Withdrawal Agreement to occur; and (iv) the Company, ELA and ELA Medical
S.A. entered into a Settlement Agreement and Mutual Release releasing each party
thereto and all of its affiliates from any and all claims made by such other
party in connection with, arising from or related to ELA*Angeion and certain of
the contractual obligations arising from or contemplated by the terms of the
joint venture relationship.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company's operations consist primarily of the manufacturing and marketing
efforts related to its current implantable cardioverter defibrillator ("ICD")
product line and the catheter ablation research and development activity
pursuant to an agreement with Cordis Webster Inc.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998
Total sales increased to $1,801,999 for the three-month period ended March 31,
1999, compared to $354,997 for the three-month period ended March 31, 1998, due
primarily to an increase in sales of ICDs. In the three-month period ended March
31, 1999, revenue consisted of sales of ICDs to ELA*Angeion, LLC ("ELA*Angeion)
the Company's previously 50 percent-owned joint venture (after elimination of
Angeion's proportional share of such sales) and international sales to ELA
Medical, Inc. ("ELA") and through the Company's two subsidiaries, Angeion Europe
Limited and Angeion GmbH. In the three-month period ended March 31, 1998, sales
were limited as a result of a temporary suspension of ICD clinical implants
during the latter part of 1997 and the first part of 1998 due to technical
issues. The Company received approval from the United States Food and Drug
Administration ("FDA") in January 1998 to resume clinical studies.
Manufacturing expense increased 25 percent to $2,303,018 for the three-month
period ended March 31, 1999, compared to $1,844,621 for the three-month period
ended March 31,1998. The increase was primarily due to increased sales and
production for the period ended March 31, 1999, which were partially offset by
efforts to reduce spending by the Company in order to decrease its cash flow
burn rate.
Research and development expense decreased 34 percent to $3,522,997 for the
three-month period ended March 31, 1999, compared to $5,347,456 for the
three-month period ended March 31, 1998. This decrease was primarily due to
efforts to reduce spending efforts by the Company in order to decrease its cash
flow burn rate. Research and development activity related to the development of
the ICDs accounted for $3,356,661 of the expense for the three-month period
ended March 31, 1999, while the catheter ablation development activities
accounted for $166,336 of the expense.
Selling, general and administrative expense decreased 24 percent to $1,982,683
for the three-month period ended March 31, 1999, compared to $2,614,159 for the
three-month period ended March 31, 1998. This decrease was primarily related to
lower selling and marketing expenses, reduced non-cash compensation charges and
lower debt amortization expenses for the three-month period ended March 31,
1999.
Interest expense increased to $692,099 for the three month-period ended March
31, 1999, compared to $19,931 for the three-month period ended March 31, 1998.
The increase was due to interest expense related
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to the 7 1/2 Senior Convertible Notes issued in April 1998 and the two term
loans totaling $6,000,000 that were received in January 1999.
Interest income decreased 59 percent to $46,717 for the three-month period ended
March 31, 1999, compared to $114,148 for the three-month period ended March 31,
1998. The decrease was due to the lower average invested cash balances in the
three-month period ended March 31, 1999, compared to the three-month period
ended March 31, 1998.
Restructuring expenses for the three-month period ended March 31, 1999 totaled
approximately $720,000. These expenses related to employee severance and other
employee benefits as a result of the reduction in force announced in January
1999.
The net loss decreased to $8,416,571, or $2.12 per share, in the three-month
period ended March 31, 1999, compared to $9,674,898, or $2.92 per share, in the
three-month period ended March 31, 1998. Decrease in net loss per share is
attributable to a reduction of net loss offset by an increase in outstanding
shares of common stock.
LIQUIDITY AND CAPITAL RESOURCES
In January 1999, the Company entered into financing agreements with Norwest
Business Credit (the "Bank") in which the Bank made two term loans (the "Loans")
to the Company in the amounts of $4,000,000 and $2,000,000. The loans were
guaranteed by individual investors (the "Investors"), including a director of
the Company. The Loans were secured by a security interest in all of the
Company's intellectual property that the Company was free to pledge for such
purpose. The loans were repaid in May 1999.
On March 5, 1999, the Company received FDA Pre-market Approval ("PMA") for its
Lyra 2020 ICD series and AngePass(TM) lead series, which allows the Company to
market these products in the U.S. As a result of the PMA, the Company received
the final two $5,000,000 equity investments from its strategic partner,
Synthelabo, pursuant to the Investment and Master Strategic and Relationship
Agreement (the "Investment Agreement") the Company entered into with Synthelabo
in October 1997. In exchange for the $10,000,000 equity investment, the Company
issued Synthelabo warrants to purchase 909,017 and 540,541 shares of the
Company's common stock at prices of $0.10 and $11.10 per share, respectively.
Net cash used in operating activities decreased to $6,391,703 in the three-month
period ended March 31, 1999, compared to $8,040,564 in the three-month period
ended March 31, 1998. The decrease was primarily due to reduced spending efforts
by the Company offset partially by cash used as a result of the January
Restructuring.
Investing activities used cash of $52,198 and $2,501,911 for the three-month
periods ended March 31, 1999 and 1998, respectively. In the three-month period
ended March 31, 1998, the Company invested $2,000,000 in ELA*Angeion and used
cash of $501,911 for purchases of property and equipment primarily related to
research and development equipment, as well as the opening of the Company's new
offices. During the three-month period ended March 31, 1999, the Company's
investing activities consisted of purchases of property and equipment.
At March 31, 1999, the Company had cash and cash equivalents of $11,085,362.
In April 1999, the Company received a net payment of approximately $30,000,000
from Cardiac Pacemakers, Inc. ("CPI") in connection wih the settlement of its
ongoing litigation. See "Legal Proceedings."
As of March 31, 1999, the Company's net tangible assets were below the threshold
for continued listing on the Nasdaq Stock Market. In addition, the Company's
common stock has traded below the price
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per share threshold required for continued listing on the Nasdaq Stock Market.
As previously reported, Angeion received notification in early April that the
Nasdaq staff had determined that the Company should be removed from the Nasdaq
listing. Angeion has appealed the Nasdaq staff's determination to the Nasdaq
Listing Qualifications Panel and a hearing on the appeal has been scheduled for
May 21, 1999. The Nasdaq staff has also raised questions about the amount of
time that has passed since the last regular meeting of the Company's
shareholders and the fact that the Company received a "going concern"
qualification in its last auditor's opinion. These issues will also be addressed
at the hearing. Angeion will remain listed pending a decision on the appeal.
SUBSEQUENT EVENTS
In April 1999, the Company announced a second restructuring plan (the "April
Restructuring") to refocus its business and reduce operating expenses. After a
thorough analysis by its Board of Directors and management, the Company decided
to limit its participation in the ICD marketplace in order to re-deploy its
resources toward opportunities that may result in greater shareholder value. The
Company will continue to explore strategic alternatives for the Company,
including the potential license or sale of certain of its assets. As a result of
the April Restructuring, the Company will reduce its workforce by approximately
75 percent of its total employee base, while retaining a modest staff necessary
to support its ongoing operations and clinical, regulatory and engineering staff
necessary to provide customer support for the Company's Lyra(TM) series of ICDs
and existing implants. In addition, the Company will continue to provide
agreed-upon amounts of product to ELA under the terms of its amended supply
agreements discussed below. The amount of the charge relating to the April
Restructuring has not yet been determined. The related workforce reduction is
expected to reduce payroll expenses by approximately $1,800,000 per quarter,
beginning in the third quarter of 1999.
The Company also announced in April 1999 that it has settled all ongoing
litigation with CPI and its parent company, Guidant Corporation ("Guidant"), for
$35,000,000. As a result of the settlement, the Company granted to CPI a
nonexclusive license under all of the Company's patents that cover cardiac
stimulation devices. CPI made a one-time payment of $35,000,000 to settle claims
for past damages and for the license. CPI and Guidant agreed not to sue the
Company for future infringement with respect to the Company's Lyra and Model
2030 series of ICD product lines. The Company agreed to pay a pass-through
royalty for those products to the Estate of Dr. Michel Mirowski, which owns
certain patents licensed to CPI. After the payment of legal fees and other
expenses associated with the lawsuits, the Company retained approximately
$30,000,000 of net cash from the CPI settlement.
On May 7, 1999, the Company's Board of Directors approved a one-for-ten reverse
stock split of the Company's common stock for shareholders of record at the
close of business on May 17, 1999. The reverse stock split is being implemented
as part of the Company's previously announced restructuring plan. Financial
information contained in this report has been retroactively adjusted to reflect
the impact of the reverse stock split.
On May 11, 1999, the Company entered into a Withdrawal Agreement (the
"Withdrawal Agreement") with ELA pursuant to which the Company withdrew from its
membership in ELA*Angeion. Under the terms of the Withdrawal Agreement ELA will
have sole responsibility for the operations of ELA*Angeion and will assume
certain warranty coverage, technical service and regulatory compliance services
for which the Company is currently responsible under applicable law, the supply
agreement between the Company and ELA*Angeion, and contracts with third parties
for model 2000 and 2010 series ICD products and associated leads and programmers
supplied to such third parties and implanted in human beings in the United
States (including associated programmers for such ICD models). The Company will
retain potential product liability obligations from patients and has agreed to
maintain at its own expense through May 10, 2004, product liability insurance
with limits of liability at least as high as those currently in place, subject
to availability on commercially reasonable terms. The Company is currently
evaluating the accounting implications of its withdrawal from ELA*Angeion.
In connection with the consummation of the transactions contemplated by the
Withdrawal Agreement, the Company entered into the following related
transactions: (i) the Company amended and terminated its supply agreement with
ELA*Angeion and entered into a new manufacturing and supply agreement with
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ELA under which the Company has agreed to supply a limited number of ICD
products to ELA*Angeion according to the terms of its supply agreement and
provide any future ICD products directly to ELA; (ii) the Company amended its
manufacturing and supply agreement with ELA Medical S.A., an affiliate of ELA,
to limit certain of the Company's obligations to supply ICD products thereunder
and to provide for the assumption by ELA Medical S.A. of warranty coverage,
technical service and regulatory compliance services for which the Company is
currently responsible under applicable law, the supply agreement between the
Company and ELA Medical S.A., and contracts with third parties for model 2000
and 2010 series ICD products and associated leads and programmers supplied to
such third parties and implanted in human beings in Europe and Japan (including
associated programmers for such ICD models); (iii) the Company amended the
Investment Agreement with Synthelabo to allow for the actions contemplated by
the Withdrawal Agreement to occur; and (iv) the Company, ELA and ELA Medical
S.A. entered into a Settlement Agreement and Mutual Release releasing each party
thereto and all of its affiliates from any and all claims made by such other
party in connection with, arising from or related to ELA*Angeion and certain of
the contractual obligations arising from or contemplated by the terms of the
joint venture relationship.
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 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
the following areas: products; manufacturing and test equipment; business
systems; facilities; and third parties. Each area is scheduled to be evaluated
and brought into compliance in the following five phases:
1. Inventory - A complete list of 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 the year 2000 as required by the
implementation plan.
All of the Company's current products are designed, manufactured and tested to
perform correctly in the next century. All equipment used to manufacture and
test these products is inventoried and is expected to be assessed by the end of
the second quarter of 1999. The Company believes all critical business systems
are Year 2000 compliant. Year 2000 compliance evaluation and remediation, if
required, for the remaining non-critical business systems are scheduled to be
completed by the end of the second quarter of 1999. The Company's facilities
have been assessed and are substantially compliant with Year 2000 requirements.
Significant third party vendors have been identified, and the Company expects to
complete the assessment of their Year 2000 compliance by the end of the second
quarter 1999. The Company will require written documentation from third party
vendors indicating that they are Year 2000 compliant. 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 are Year 2000 compliant, keeping remediation costs relatively low. As
of March 31, 1999, the Company has incurred Year 2000 related expenses of less
than $100,000. The total expenditures to comply with the Year 2000 issues are
expected to be no more than $200,000, however, the actual may be materially
greater than expected.
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, any of which could have a material adverse effect on
the Company's operations.
Page 9
<PAGE>
Although, the Company believes that its Year 2000 compliance plan is adequate to
achieve system compliance 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 1999.
MARKET RISK
There have been no material changes in reported market risks faced by the
Registrant since December 31, 1998, as discussed in the Company's Annual Report
for the year ended December 31, 1998 filed on Form 10-K.
NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
The statement requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The Company plans to adopt this standard in 2000. The
Company is currently evaluating SFAS No. 133, but does not expect that it will
have a material effect on its financial statements.
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: cost
associated with the January Restructuring and the April Restructuring; the
ability and success of the Company in identifying and exploiting business
opportunities that may result in greater shareholder value; payroll expense
savings from the April Restructuring; the ability of the Company to conduct its
operation with a reduced workforce; the outcome of the Company's delisting
hearing with the Nasdaq Listing Qualifications Panel, the level of support
required for the Company's ongoing operations and clinical, regulatory and
engineering staff necessary to provide customer support for the Company's Lyra
series of ICD's and existing implants; the amounts of product requested by ELA
Medical, Inc.; and the cost and success of the Company's Year 2000 compliance
program.
PART II
ITEM 1. LEGAL PROCEEDINGS.
In 1996, the Company and Pacesetter, Inc. jointly sued CPI, a subsidiary of
Guidant 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.
On September 16, 1998, Angeion Corporation was served with a patent infringement
suit filed in the District Court of Minnesota by CPI, alleging that the Sentinel
ICD, for which Angeion received U.S. Food and Drug Administration Pre-market
Approval in August 1998, infringes certain patents of CPI. The Company filed an
answer in the lawsuit denying infringement and raising several affirmative
defenses.
On April 8, 1999, the Company announced it had reached a settlement with CPI
over the patent
Page 10
<PAGE>
infringement lawsuit. As a result of this agreement, Angeion will grant to CPI a
non-exclusive license under all of Angeion's patents that cover cardiac
stimulation devices. CPI will make a one-time payment of $35,000,000 to settle
claims for past damages and the license. CPI and Guidant have agreed not to sue
the Company for future infringement with respect to Angeion's Lyra and Model
2030 ICD series product lines. Angeion has agreed to pay a cross-through royalty
for those products to the Estate of Dr. Michael Mirowski, which owns certain
patents licensed to CPI.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS.
On May 7, 1999, the Company's Board of Directors approved a one-for-ten reverse
stock split of the Company's common stock for shareholders of record at the
close of business on May 17, 1999. The reverse stock split is being implemented
as part of the Company's previously announced restructuring plan.
In March 1999, pursuant to the Investment Agreement with Synthelabo, in exchange
for $10,000,000 the Company issued to Synthelabo warrants to purchase 909,017
and 540,541 shares of the Company's common stock at prices of $0.10 and $11.10
per share, respectively. These warrants expire on March 12, 2009 and March 12,
2002, respectively.
In issuing such 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 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Item No. Item
-------- ----
3.1 Articles of Merger, including Amended and Restated
Articles of Incorporation (incorporated by reference
to Exhibit 3A contained in the Company's
Registration Statement on Form 8-A (File No.
0-17019)).
3.2 Amendment to the Company's Amended and Restated
Articles of Incorporation (incorporated by reference
to Exhibit 4.3 contained in the Company's
Registration Statement on Form S-3 (File No.
333-36005)).
3.3 Amendment to the Company's Amended and Restated
Articles of Incorporation (incorporated by reference
to Exhibit 4.4 to the Company's Registration
Statement on Form S-3 (File No. 333-50557)).
3.4 Amended Bylaws (incorporated by reference to Exhibit
4.2 contained in the Company's Registration
Statement on Form S-3 (File No. 333-04993)).
4.1 Warrant dated as of March 12, 1999 in the name of
Synthelabo to purchase 9,090,171 shares of Common
Stock.
4.2 Warrant dated as of March 12, 1999 in the name of
Synthelabo to purchase 5,405,405 shares of Common
Stock.
Page 11
<PAGE>
10.1 Letter Amendment dated as of March 12, 1999 to the
Amended and Restated Investment and Master Strategic
Relationship Agreement dated as of October 9, 1997
between the Company and Synthelabo.
12 Computation of ratio of earnings to fixed charges.
27 Financial Data Schedule.
Page 12
<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: May 17, 1999 By: /s/ James B. Hickey, Jr.
-----------------------------
James B. Hickey, Jr.
President and Chief Executive Officer
(principal executive officer and acting
principal financial officer)
Page 13
<PAGE>
EXHIBIT INDEX
Exhibit Description of Document Method of Filing
- ------- ----------------------- ----------------
3.1 Articles of Merger, including Amended and Incorporated by
Restated Articles of Incorporation (incorporated reference
by reference to Exhibit 3A contained in the
Company's Registration Statement on Form 8-A
(File No. 0-17019)).
3.2 Amendment to the Company's Amended and Restated Incorporated by
Articles of Incorporation (incorporated by reference
reference to Exhibit 4.3 contained in the
Company's Registration Statement on Form S-3
(File No. 333-36005)).
3.3 Amendment to the Company's Amended and Restated Incorporated by
Articles of Incorporation (incorporated by reference
reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-3 (File No.
333-50557)).
3.4 Amended Bylaws (incorporated by reference to Incorporated by
Exhibit 4.2 contained in the Company's reference
Registration Statement on Form S-3 (File No.
333-04993)).
4.1 Warrant dated as of March 12, 1999 in the name Filed herewith
of Synthelabo to purchase 9,090,171 shares of
Common Stock.
4.2 Warrant dated as of March 12, 1999 in the name Filed herewith
of Synthelabo to purchase 5,405,405 shares of
Common Stock.
10.1 Letter Amendment dated as of March 12, 1999 to Filed herewith
the Amended and Restated Investment and Master
Strategic Relationship Agreement dated as of
October 9, 1997 between the Company and
Synthelabo.
12 Computation of ratio of earnings to fixed Filed herewith
charges.
27 Financial Data Schedule. Filed herewith
Page 14
EXHIBIT 4.1
THIS SECURITY IS SUBJECT TO THE PROVISIONS OF THE INVESTMENT AND MASTER
STRATEGIC RELATIONSHIP AGREEMENT DATED AS OF OCTOBER 9, 1997 BETWEEN THE ISSUER
AND SYNTHELABO AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATE
SECRETARY OF THE ISSUER. THIS SECURITY WAS SOLD IN A PRIVATE PLACEMENT, WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AND MAY BE OFFERED OR SOLD ONLY
IF REGISTERED UNDER THE SECURITIES ACT OF 1933 OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
March 12, 1999
ANGEION CORPORATION
COMMON STOCK PURCHASE WARRANT
9,090,171 Shares
Capitalized terms used and not otherwise defined in this Common Stock
Purchase Warrant (this "Warrant") shall have the respective meanings assigned to
them in the Investment and Master Strategic Relationship Agreement dated as of
the 9th day of October, 1997, between Angeion Corporation, a Minnesota
corporation having its executive offices and principal place of business at 7601
Northland Drive, Suite 170, Brooklyn Park, Minnesota 55428 (the "Company"), and
Synthelabo, a French societe anonyme (the "Holder"), as the same may be
supplemented, modified, amended, renewed or restated from time to time (the
"Purchase Agreement").
The Company does hereby certify and agree that, for value received, the
Holder, its successors and assigns, hereby is entitled to purchase from the
Company 9,090,171 duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock, par value $0.01 per share ("Common Stock"), of the
Company (the "Exercise Quantity") upon the terms and subject to the provisions
of this Warrant.
Section 1. Price and Exercise of Warrant.
1.1 Term of Warrant. This Warrant shall be exercisable for the period
commencing on the date hereof and ending at 4:30 p.m., New York City time, on
the tenth anniversary of the date hereof (the "Expiration Date").
1.2 Exercise Price. The price per share at which the shares of Common
Stock issuable upon exercise of this Warrant (the "Warrant Shares") shall be
$0.01 per share (the "Warrant Price").
1.3 Exercise of Warrant. (a) This Warrant may be exercised, in whole or in
part, upon surrender to the Company at its offices at 7601 Northland Drive,
Suite 170, Brooklyn Park, Minnesota 55428 of the certificate or certificates
evidencing this Warrant to
<PAGE>
be exercised, together with the form of election to exercise attached hereto as
Exhibit A duly completed and executed, and upon payment to the Company of the
Warrant Price for the number of Warrant Shares in respect of which this Warrant
is then being exercised. Payment of the aggregate Warrant Price may be made in
cash, by certified or bank check or by wire transfer.
(b) Subject to Section 2 hereof, upon such surrender of this
Warrant, and the duly completed and executed form of election to exercise, and
payment of the Warrant Price as aforesaid, the Company shall cause to be issued
and delivered with all reasonable dispatch (and in any event within five
business days thereafter) to the Holder or such other person as the Holder may
designate in writing a certificate or certificates for the number of full shares
of Common Stock so purchased upon the exercise of this Warrant. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
shares of Common Stock as of the date of the surrender of this Warrant, and the
duly completed and executed form of election to exercise, and payment of the
Warrant Price, as aforesaid; provided, however, that if, at the date of
surrender of this Warrant and payment of the Warrant Price, the transfer books
for the shares of Common Stock purchasable upon the exercise of this Warrant
shall be closed, the certificates for the shares of Common Stock shall be
issuable as of the date on which such books shall next be opened (whether before
or after the Expiration Date), and, until such date, the Company shall be under
no duty to cause to be delivered any certificate for such shares of Common Stock
or for shares of such other class of stock. If this Warrant is exercised in
part, a new Warrant certificate of the same tenor and for the number of Warrant
Shares not exercised shall be executed by the Company.
(c) The Company will take such actions as shall be reasonably
requested by the Holder with respect to any filing which Holder shall be
required to make upon any exercise of the Warrant under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
1.4 Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of this Warrant. If any
fraction of a share of Common Stock would be issuable upon the exercise of this
Warrant (or any portion thereof), the Company shall purchase such fraction for
an amount in cash equal to the same fraction of the last reported sale price of
the Common Stock on the NASDAQ National Market System or any other national
securities exchange on which the Common Stock is then listed.
Section 2. Exchange and Transfer of Warrant.
(a) This Warrant may be exchanged for two or more Warrants entitling
the Holder thereof to purchase the same aggregate Exercise Quantity at the
Warrant Price per share and otherwise having the same terms and provisions as
this Warrant. The Holder may request such an exchange by surrender of this
Warrant to the Company, together with a written exchange request specifying the
desired number of Warrants and allocation of the
-2-
<PAGE>
Exercise Quantity purchasable under the existing Warrant. Within two business
days after the Company's receipt of this Warrant and such an exchange request,
the Company will issue and deliver such new Warrants to the Holder in the
amounts and with the allocations requested.
(b) Subject to the restrictions set forth in Section 4.2(d) of the
Purchase Agreement, this Warrant from time to time may be transferred, in whole
or in part, by the Holder or any duly authorized representative of the Holder. A
transfer may be registered with the Company by submission to it of this Warrant,
together with the annexed Assignment Form attached hereto as Exhibit B duly
completed and executed. Within two business days after the satisfaction by the
Holder of the conditions to such transfer set forth in such Section 4.2(d) and
the Company's receipt of this Warrant and the Assignment Form so completed and
executed, the Company will issue and deliver to the transferee a new Warrant
representing the portion of the Exercise Quantity transferred at the same
Warrant Price per share and otherwise having the same terms and provisions as
this Warrant, which the Company will register in the new holder's name. In the
event of a partial transfer of this Warrant, the Company shall concurrently
issue and deliver to the transferring holder a new Warrant that entitles the
transferring holder to purchase the balance of the Exercise Quantity not so
transferred and that otherwise is upon the same terms and conditions as this
Warrant. Upon the due delivery of this Warrant for transfer, the transferee
holder shall be deemed for all purposes to have become the holder of the new
Warrant issued respecting the Exercise Quantity transferred, effective
immediately prior to the close of business on the date of such delivery,
irrespective of the date of actual delivery of the new Warrant representing the
Exercise Quantity transferred.
(c) In the event of the loss, theft or destruction of this Warrant,
the Company shall execute and deliver an identical new Warrant to the Holder in
substitution therefor upon the Company's receipt of (i) evidence reasonably
satisfactory to the Company of such event and (ii) if requested by the Company,
an indemnity agreement reasonably satisfactory in form and substance to the
Company. In the event of the mutilation of or other damage to this Warrant, the
Company shall execute and deliver an identical new Warrant to the Holder in
substitution therefor upon the Company's receipt of the mutilated or damaged
Warrant.
(d) The Company shall pay all costs and expenses incurred in
connection with the exercise, exchange, transfer or replacement of this Warrant,
including, without limitation, the costs of preparation, execution and delivery
of a new Warrant and of stock certificates representing all Warrant Shares;
provided, however, that the Holder shall pay all stamp and other transfer taxes
payable in connection with the transfer or replacement of this Warrant.
Section 3. Certain Covenants.
(a) The Company shall at all times reserve for issuance and keep
available out of its authorized and unissued shares of Common Stock, solely for
the purpose
-3-
<PAGE>
of providing for the exercise of this Warrant, such number of shares of Common
Stock as shall from time to time be sufficient therefor.
(b) The Company will not, by amendment of its articles of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant. Without limiting the foregoing, the Company (i) will not increase the
par value of any shares of capital stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise, and (ii) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of capital stock
upon the exercise of this Warrant.
Section 4. Adjustment of Warrant Price and Number of Warrant Shares.
The Warrant Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events, as
hereinafter provided.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii) subdivide
its outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares by reclassification of its
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation), the
Warrant Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder, upon
exercise of this Warrant after such date, shall be entitled to receive the
aggregate number and kind of shares of Common Stock which, if this Warrant had
been exercised immediately prior to such record date, it would have owned upon
such exercise and been entitled to receive upon such dividend, distribution,
subdivision, combination or reclassification.
(b) In case the Company shall hereafter distribute to all holders of
its Common Stock shares of stock other than Common Stock, evidences of its
indebtedness or assets (excluding cash dividends or distributions out of
retained earnings and dividends or distributions referred to in paragraph (a)
above), or any rights, warrants or options to subscribe for or purchase shares
of Common Stock (or securities convertible into, exercisable for or exchangeable
for shares of Common Stock ), then in each such case the Warrant Price in effect
thereafter shall be determined by multiplying the Warrant Price in effect
immediately prior to the date of such issuance by a fraction, the numerator of
which shall be the total number of outstanding shares of Common Stock multiplied
by the Fair Market Value Price (as defined in below), less the then fair market
value (as determined in good faith by the Company's board of directors) of said
shares of stock, assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
outstanding shares of Common Stock multiplied by the Fair
-4-
<PAGE>
Market Value Price. Such adjustments shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(c) Whenever the Warrant Price payable upon exercise of this Warrant
is adjusted pursuant to paragraphs (a) and (b) above, the number of Warrant
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Warrant Shares initially issuable upon
exercise of this Warrant by the Warrant Price in effect as of the date of this
Warrant and dividing the product so obtained by the Warrant Price, as adjusted.
(d) No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($0.05)
in such price; provided, however, that any adjustments not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 4 shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
(e) Anything in this Section 4 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes in
the Warrant Price, in addition to those required by this Section 4, as it in its
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights or warrants to
purchase Common Stock or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions in cash out
of retained earnings) referred to hereinabove in this Section 4, hereafter made
by the Company to the holders of its Common Stock shall not be taxable to them.
(f) Whenever the Warrant Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Warrant Price
and adjusted number of shares issuable upon exercise of this Warrant to be
mailed to the Holder. The certificate setting forth the computation shall be
signed by the Chief Financial Officer of the Company.
(g) In the event that at any time, as a result of any adjustment
made pursuant to paragraph (a) above, the holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in paragraphs (a) to (d) inclusive, above.
-5-
<PAGE>
Section 5. Rights and Obligations of the Warrant Holder.
This Warrant shall not entitle the Holder to any rights of a stockholder
in the Company.
Section 6. Restrictive Stock Legend.
This Warrant and the Warrant Shares have not been registered under any
securities laws. Accordingly, until such time as the securities represented
thereby are no longer subject to the restrictions set forth in Section 4.2 of
the Purchase Agreement and there is delivered to the Company an opinion of
counsel reasonably acceptable to the Company to the effect that such legend is
no longer required, any stock certificates issued pursuant to the exercise of
this Warrant shall bear the following legend:
THIS SECURITY IS SUBJECT TO THE PROVISIONS OF THE INVESTMENT AND
MASTER STRATEGIC RELATIONSHIP AGREEMENT DATED AS OF OCTOBER 9, 1997
BETWEEN THE ISSUER AND SYNTHELABO AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE
AT THE OFFICE OF THE CORPORATE SECRETARY OF THE ISSUER. THIS SECURITY
WAS SOLD IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR IF AN EXEMPTION FROM REGISTRATION
IS AVAILABLE.
Section 7. Notices.
Any notice or other communication required or permitted to be given here
shall be in writing and shall be effective (a) upon hand delivery or delivery by
telex (with correct answerback received), telecopy or facsimile at the address
or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the third business
day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communication shall be:
If to the Company:
Angeion Corporation
7601 Northland Drive, Suite 170
Brooklyn Park, MN 55428
Telephone: (612) 315-2000
Telecopier: (612) 315-2059
-6-
<PAGE>
Attention: Chief Financial Officer
With a copy to:
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Telephone: (415) 268-7000
Telecopier: (415) 268-7522
Attention: Gavin B. Grover, Esq.
If to the Holder:
Synthelabo
22 Avenue Galilee
92350 Le Plessis Robinson
France
Telephone: (33)(1)45.37.56.67
Telecopier: (33)(1)45.37.58.04
Attention: General Counsel
With copies to:
ELA Medical
Centre d'Affaires la Boursidiere
92357 Le Plessis Robinson
France
Telephone: (33)(1)46.01.33.01
Telecopier: (33)(1)46.01.33.15
Attention: President
and
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036-7703
Telephone: (212) 626-4400
Telecopier: (212) 626-4120
Attention: James C. Colihan, Esq.
Each party hereto may from time to time change its address for notices under
this Section 7 by giving at least 10 days' notice of such changes address to the
other party hereto.
Section 8. Amendments and Waivers.
-7-
<PAGE>
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Section 9. Applicable Law.
This Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without regard to the principles
of conflict of laws.
Section 10. Definitions.
As used in this Warrant, the following terms shall be defined as follows:
"Fair Market Value Price" shall mean the average Quoted Price for the five
business days prior to the closing of the applicable sale.
"Quoted Price" of the Common Stock shall mean: the last sale price regular
way or, in the case no such sale takes place on such day, the average of the
closing bid and asked prices regular way, in wither case on the NASDAQ National
Market System as reported by NASDAQ, or, if the Common Stock is not authorized
for quotation on the NASDAQ National Market System, on the New York Stock
Exchange Composite Tape (the "Composite Tape"), or, if the Common Stock is not
listed or admitted to trading on such exchange, on the national securities
exchange in or nearest the City of New York on which the Common Stock is listed
or admitted to trading, or if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last sale price regular way or,
in case no such sale takes place on such day, the average of the highest
reported bid and lowest reported asked prices as furnished by the National
Association of Securities Dealers Inc. through NASDAQ or a similar organization
if NASDAQ is no longer reporting such information, or if on any such trading day
the Common Stock is not quoted by any such organization, the fair value of a
share of Common Stock on such day, as determined in good faith by the board of
directors of the Company.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed on the day and year first above written.
ANGEION CORPORATION
By: /s/ James B. Hickey, Jr.
------------------------------------
Title: President and Chief Executive
Officer
-9-
EXHIBIT 4.2
THIS SECURITY IS SUBJECT TO THE PROVISIONS OF THE INVESTMENT AND MASTER
STRATEGIC RELATIONSHIP AGREEMENT DATED AS OF OCTOBER 9, 1997 BETWEEN THE ISSUER
AND SYNTHELABO AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATE
SECRETARY OF THE ISSUER. THIS SECURITY WAS SOLD IN A PRIVATE PLACEMENT, WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AND MAY BE OFFERED OR SOLD ONLY
IF REGISTERED UNDER THE SECURITIES ACT OF 1933 OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
March 12, 1999
ANGEION CORPORATION
COMMON STOCK PURCHASE WARRANT
5,405,405 Shares
Capitalized terms used and not otherwise defined in this Common Stock
Purchase Warrant (this "Warrant") shall have the respective meanings assigned to
them in the Investment and Master Strategic Relationship Agreement dated as of
the 9th day of October, 1997, between Angeion Corporation, a Minnesota
corporation having its executive offices and principal place of business at 7601
Northland Drive, Suite 170, Brooklyn Park, Minnesota 55428 (the "Company"), and
Synthelabo, a French societe anonyme (the "Holder"), as the same may be
supplemented, modified, amended, renewed or restated from time to time (the
"Purchase Agreement").
The Company does hereby certify and agree that, for value received, the
Holder, its successors and assigns, hereby is entitled to purchase from the
Company 5,405,405 duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock, par value $0.01 per share ("Common Stock"), of the
Company (the "Exercise Quantity") upon the terms and subject to the provisions
of this Warrant.
Section 1. Price and Exercise of Warrant.
1.1 Term of Warrant. This Warrant shall be exercisable for the period
commencing on the date hereof and ending at 4:30 p.m., New York City time, on
the third anniversary of the date hereof (the "Expiration Date").
1.2 Exercise Price. The price per share at which the shares of Common
Stock issuable upon exercise of this Warrant (the "Warrant Shares") shall be
$1.11 per share (the "Warrant Price").
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1.3 Exercise of Warrant. (a) This Warrant may be exercised, in whole or in
part, upon surrender to the Company at its offices at 7601 Northland Drive,
Suite 170, Brooklyn Park, Minnesota 55428 of the certificate or certificates
evidencing this Warrant to be exercised, together with the form of election to
exercise attached hereto as Exhibit A duly completed and executed, and upon
payment to the Company of the Warrant Price for the number of Warrant Shares in
respect of which this Warrant is then being exercised. Payment of the aggregate
Warrant Price may be made in cash, by certified or bank check or by wire
transfer.
(b) Subject to Section 2 hereof, upon such surrender of this
Warrant, and the duly completed and executed form of election to exercise, and
payment of the Warrant Price as aforesaid, the Company shall cause to be issued
and delivered with all reasonable dispatch (and in any event within five
business days thereafter) to the Holder or such other person as the Holder may
designate in writing a certificate or certificates for the number of full shares
of Common Stock so purchased upon the exercise of this Warrant. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
shares of Common Stock as of the date of the surrender of this Warrant, and the
duly completed and executed form of election to exercise, and payment of the
Warrant Price, as aforesaid; provided, however, that if, at the date of
surrender of this Warrant and payment of the Warrant Price, the transfer books
for the shares of Common Stock purchasable upon the exercise of this Warrant
shall be closed, the certificates for the shares of Common Stock shall be
issuable as of the date on which such books shall next be opened (whether before
or after the Expiration Date), and, until such date, the Company shall be under
no duty to cause to be delivered any certificate for such shares of Common Stock
or for shares of such other class of stock. If this Warrant is exercised in
part, a new Warrant certificate of the same tenor and for the number of Warrant
Shares not exercised shall be executed by the Company.
(c) The Company will take such actions as shall be reasonably
requested by the Holder with respect to any filing which Holder shall be
required to make upon any exercise of the Warrant under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
1.4 Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of this Warrant. If any
fraction of a share of Common Stock would be issuable upon the exercise of this
Warrant (or any portion thereof), the Company shall purchase such fraction for
an amount in cash equal to the same fraction of the last reported sale price of
the Common Stock on the NASDAQ National Market System or any other national
securities exchange on which the Common Stock is then listed.
Section 2. Exchange and Transfer of Warrant.
(a) This Warrant may be exchanged for two or more Warrants entitling
the Holder thereof to purchase the same aggregate Exercise Quantity at the
Warrant Price per share and otherwise having the same terms and provisions as
this Warrant. The Holder may request such an exchange by surrender of this
Warrant to the Company, together with a
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written exchange request specifying the desired number of Warrants and
allocation of the Exercise Quantity purchasable under the existing Warrant.
Within two business days after the Company's receipt of this Warrant and such an
exchange request, the Company will issue and deliver such new Warrants to the
Holder in the amounts and with the allocations requested.
(b) Subject to the restrictions set forth in Section 4.2(d) of the
Purchase Agreement, this Warrant from time to time may be transferred, in whole
or in part, by the Holder or any duly authorized representative of the Holder. A
transfer may be registered with the Company by submission to it of this Warrant,
together with the annexed Assignment Form attached hereto as Exhibit B duly
completed and executed. Within two business days after the satisfaction by the
Holder of the conditions to such transfer set forth in such Section 4.2(d) and
the Company's receipt of this Warrant and the Assignment Form so completed and
executed, the Company will issue and deliver to the transferee a new Warrant
representing the portion of the Exercise Quantity transferred at the same
Warrant Price per share and otherwise having the same terms and provisions as
this Warrant, which the Company will register in the new holder's name. In the
event of a partial transfer of this Warrant, the Company shall concurrently
issue and deliver to the transferring holder a new Warrant that entitles the
transferring holder to purchase the balance of the Exercise Quantity not so
transferred and that otherwise is upon the same terms and conditions as this
Warrant. Upon the due delivery of this Warrant for transfer, the transferee
holder shall be deemed for all purposes to have become the holder of the new
Warrant issued respecting the Exercise Quantity transferred, effective
immediately prior to the close of business on the date of such delivery,
irrespective of the date of actual delivery of the new Warrant representing the
Exercise Quantity transferred.
(c) In the event of the loss, theft or destruction of this Warrant,
the Company shall execute and deliver an identical new Warrant to the Holder in
substitution therefor upon the Company's receipt of (i) evidence reasonably
satisfactory to the Company of such event and (ii) if requested by the Company,
an indemnity agreement reasonably satisfactory in form and substance to the
Company. In the event of the mutilation of or other damage to this Warrant, the
Company shall execute and deliver an identical new Warrant to the Holder in
substitution therefor upon the Company's receipt of the mutilated or damaged
Warrant.
(d) The Company shall pay all costs and expenses incurred in
connection with the exercise, exchange, transfer or replacement of this Warrant,
including, without limitation, the costs of preparation, execution and delivery
of a new Warrant and of stock certificates representing all Warrant Shares;
provided, however, that the Holder shall pay all stamp and other transfer taxes
payable in connection with the transfer or replacement of this Warrant.
Section 3. Certain Covenants.
(a) The Company shall at all times reserve for issuance and keep
available out of its authorized and unissued shares of Common Stock, solely for
the purpose of
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providing for the exercise of this Warrant, such number of shares of Common
Stock as shall from time to time be sufficient therefor.
(b) The Company will not, by amendment of its articles of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant. Without limiting the foregoing, the Company (i) will not increase the
par value of any shares of capital stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise, and (ii) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of capital stock
upon the exercise of this Warrant.
Section 4. Adjustment of Warrant Price and Number of Warrant Shares.
The Warrant Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events, as
hereinafter provided.
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (ii) subdivide
its outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares by reclassification of its
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation), the
Warrant Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder, upon
exercise of this Warrant after such date, shall be entitled to receive the
aggregate number and kind of shares of Common Stock which, if this Warrant had
been exercised immediately prior to such record date, it would have owned upon
such exercise and been entitled to receive upon such dividend, distribution,
subdivision, combination or reclassification.
(b) In case the Company shall hereafter distribute to all holders of
its Common Stock shares of stock other than Common Stock, evidences of its
indebtedness or assets (excluding cash dividends or distributions out of
retained earnings and dividends or distributions referred to in paragraph (a)
above), or any rights, warrants or options to subscribe for or purchase shares
of Common Stock (or securities convertible into, exercisable for or exchangeable
for shares of Common Stock ) (excluding those referred to in paragraph (c)
below), then in each such case the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to the
date of such issuance by a fraction, the numerator of which shall be the total
number of outstanding shares of Common Stock multiplied by the Fair Market Value
Price (as defined in below), less the then fair market value (as determined in
good faith by the Company's board of directors) of said shares of stock, assets
or evidences of indebtedness so distributed or of such rights or warrants, and
the denominator of which shall be the total number of outstanding shares of
Common Stock multiplied by the Fair Market Value Price. Such adjustments shall
be made
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whenever any such distribution is made and shall become effective immediately
after the record date for the determination of shareholders entitled to receive
such distribution.
(c) In case the Company shall hereafter issue shares of its Common
Stock or securities (including options, warrants or rights) convertible into,
exchangeable for or exercisable for shares of Common Stock, such shares of
Common Stock or securities convertible into, exchangeable for or exercisable for
shares of Common Stock being herein called "Company Securities") at a price per
share that is less than the Reference Price (as defined below) at any time
during the Anti-Dilution Period (as defined below), the Warrant Price shall be
adjusted immediately thereafter so that it shall equal the price determined by
multiplying the Warrant Price in effect immediately prior thereto by a fraction,
(x) the numerator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to the issuance of such additional Company
Securities pursuant to such offering plus the number of shares of Common Stock
which the aggregate consideration received for the issuance of such additional
shares would purchase at such Reference Price, and (y) the denominator of which
shall be the number of shares of Common Stock outstanding immediately after the
issuance of such additional shares pursuant to such offering. Such adjustment
shall be made successively whenever such an issuance is made.
(d) In case the Company shall hereafter issue any Company Securities
(excluding securities issued in transactions described in paragraph (c) above)
at an effective price per share less than the Fair Market Value Price, the
Warrant Price shall be adjusted immediately thereafter so that it shall equal
the price determined by multiplying the Warrant Price in effect immediately
prior thereto by a fraction, (x) the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional Company Securities pursuant to such offering plus the number
of shares of Common Stock which the aggregate consideration received for the
issuance of such additional shares would purchase at the Fair Market Value
Price, and (y) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares
pursuant to such offering. Such adjustment shall be made successively whenever
such an issuance is made.
(e) Whenever the Warrant Price payable upon exercise of this Warrant
is adjusted pursuant to paragraphs (a), (b), (c) and (d) above, the number of
Warrant Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Warrant Shares initially issuable upon
exercise of this Warrant by the Warrant Price in effect as of the date of this
Warrant and dividing the product so obtained by the Warrant Price, as adjusted.
(f) Anything herein to the contrary notwithstanding:
(i) (A) The Company shall not be required to make any adjustment
contemplated under paragraph (c) in the case of: (A) the issuance of
shares of Common Stock upon the sale or exercise in whole or part of the
warrants to purchase shares of Common Stock issued pursuant to the
Purchase Agreement; (B) the issuance of shares of Common Stock or any
other securities which may now or
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hereafter be granted or exercised under any of the Company's compensatory
benefit plans (regardless of whether such shares of Common Stock or other
securities are issued to employees, directors, consultants or others of
the Company or the joint venture established pursuant to the Limited
Liability Company Operating Agreement of ELA * Angeion Medical Systems LLC
(the "U.S. Joint Venture Agreement")) (the "Plans") and such other
employee benefit arrangements, contracts or plans as are recommended by
the management of the Company and approved by its board of directors
(adjusted appropriately for stock splits, stock combinations or stock
dividends); (C) the issuance or sale of shares of Common Stock or
convertible securities upon the exercise of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or convertible securities outstanding on the date of the Purchase
Agreement, except as set forth in Schedule 2.4(f)(i)(A)(C) of the Purchase
Agreement; (D) the issuance or sale of shares of Common Stock upon
conversion or exchange of any convertible securities or exercise of any
options, warrants or other purchase rights, if a prior antidilution
adjustment was made or required to be made hereunder upon the issuance,
sale (or grant with respect to options) of such convertible securities,
options, warrants or other purchase rights; (E) the issuance of shares of
Common Stock in connection with a bona fide merger, acquisition (including
without limitation, acquisition of a third party's assets, products,
technology or other rights) or other similar transaction involving the
Company or a subsidiary of the Company if the board of directors of the
Company has obtained a fairness opinion with respect to the issuance of
such Common Stock from a nationally or regionally recognized investment
banking firm indicating the financial terms of such merger, acquisition or
other similar transaction are fair to the Company when taken as a whole;
or (F) the issuance of any Company Securities in any transaction which is
part of the formation of a strategic relationship or joint venture between
the Company and a third party if the board of directors of the Company has
obtained a fairness opinion with respect to the issuance of such Company
Securities from a nationally or regionally recognized investment banking
firm indicating that the financial terms of such strategic relationship,
joint venture or other similar relationship or venture are fair to the
Company when taken as a whole.
(B) The Company shall not be required to make any adjustment
contemplated under paragraph (d) in the case of: (A) the issuance of
shares of Common Stock upon the sale or exercise in whole or part of
the warrants to purchase shares of Common Stock issued pursuant to
the Purchase Agreement; (B) the issuance of shares of Common Stock
or any other securities which may now or hereafter be granted or
exercised under any of the Plans and such other employee benefit
arrangements, contracts or plans as are recommended by the
management of the Company and approved by its board of directors
(adjusted appropriately for stock splits, stock combinations or
stock dividends); (C) the issuance or sale of shares of Common Stock
or convertible securities upon the exercise of any rights or
warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or convertible securities outstanding on
the date of the
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Purchase Agreement, except as set forth in Schedule 2.4(f)(i)(A)(C)
of the Purchase Agreement; (D) the issuance or sale of shares of
Common Stock upon conversion or exchange of any convertible
securities or exercise of any options, warrants or other purchase
rights, if a prior antidilution adjustment was made or required to
be made hereunder upon the issuance, sale (or grant with respect to
options) of such convertible securities, options, warrants or other
purchase rights; (E) the issuance of shares of Common Stock in
connection with a bona fide merger, acquisition (including without
limitation, acquisition of a third party's assets, products,
technology or other rights) or other similar transaction involving
the Company or a subsidiary of the Company if the board of directors
of the Company has obtained a fairness opinion with respect to the
issuance of such Common Stock from a nationally or regionally
recognized investment banking firm indicating the financial terms of
such merger, acquisition or other similar transaction are fair to
the Company when taken as a whole; (F) the issuance of any Company
Securities in any transaction which is part of the formation of a
strategic relationship or joint venture between the Company and a
third party if the board of directors of the Company has obtained a
fairness opinion with respect to the issuance of such Company
Securities from a nationally recognized investment banking firm
indicating that the financial terms of such strategic relationship,
joint venture or other similar relationship or venture are fair to
the Company when taken as a whole; or (G) the issuance of shares of
Common Stock in connection with a bona fide private placement
transaction not involving purchasers or placement agents affiliated
with the Company if (1) the discount to market is not greater than
15% and (2) the Company has obtained a fairness opinion with respect
to the issuance thereof from a nationally or regionally recognized
investment banking firm that the financial terms of such transaction
are fair to the Company when taken as a whole.
(ii) The Company shall not be required to make any adjustment contemplated
under paragraph (c) or (d) with respect to any Future Financing (as
defined below) if the Investor exercises its right to increase or maintain
its stock ownership with respect to such Future Financing pursuant to the
Purchase Agreement.
(iii) The provisions of paragraphs (c) and (d) above shall terminate and
have no further force and effect upon the Investor's Rights Termination
Date as such term is defined in the U.S. Joint Venture Agreement.
(g) The number of shares of Common Stock outstanding at any given
time for purposes of the calculations under paragraphs (c) and (d) shall be
subject to the following rules:
(i) In case of (1) the sale by the Company for cash (or as a component of
a unit being sold for cash) of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or any
securities convertible into or
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exchangeable for Common Stock without the payment of any further
consideration other than cash, if any (such securities convertible,
exercisable or exchangeable into Common Stock being herein called
"Convertible Securities"), or (2) the issuance by the Company, without the
receipt by the Company of any consideration therefor, or any rights or
warrants to subscribe for or purchase, or any options for the purchase of,
Common Stock or Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such Convertible
Securities, are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the minimum aggregate consideration payable to
the Company upon the exercise of such rights, warrants or options, plus
the consideration, if any, received by the Company for the issuance or
sale of such rights, warrants or options, plus, in the case of such
Convertible Securities, the minimum aggregate amount of additional
consideration, other than such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less
than the Reference Price or Fair Market Value Price, as applicable, on the
date of the issuance or sale of such rights, warrants or options, then the
total maximum number of shares of Common Stock issuable upon the exercise
of such rights, warrants or options or upon the conversion or exchange of
such Convertible Securities (as of the date of the issuance or sale of
such rights, warrants or options) shall be deemed to be outstanding shares
of Common Stock and shall be deemed to have been sold for cash in an
amount equal to (1) any cash paid for such warrants, options or
Convertible Securities plus (2) the price per share payable upon the
exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities issuable upon the exercise of such
rights, warrants or options.
(ii) In case the Company shall modify the rights of conversion, exchange
or exercise of any of the securities referred to in (i) above or any other
securities of the Company convertible, exchangeable or exercisable for
shares of Common Stock, for any reason other than an event that would
require adjustment to prevent dilution, so that the consideration per
share received by the Company after such modification is less than the
Reference Price or Fair Market Value Price, as applicable, the number of
shares to be issued and outstanding shall be recalculated according to (i)
and the number of antidilution shares issued pursuant to paragraph (c) or
(d), as the case may be, shall be recalculated and any additional
resulting antidilution shares shall thereupon be issued.
(iii) In the case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company theretofor shall be
deemed to be the gross
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sales price therefor without deducting therefrom any expense paid or
incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith.
(h) No adjustment in the Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least five cents ($0.05)
in such price; provided, however, that any adjustments not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 4 shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
(i) Anything in this Section 4 to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes in
the Warrant Price, in addition to those required by this Section 4, as it in its
discretion shall determine to be advisable in order that any dividend or
distribution in shares of Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights or warrants to
purchase Common Stock or distribution of shares of stock other than Common
Stock, evidences of indebtedness or assets (other than distributions in cash out
of retained earnings) referred to hereinabove in this Section 4, hereafter made
by the Company to the holders of its Common Stock shall not be taxable to them.
(j) Whenever the Warrant Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Warrant Price
and adjusted number of shares issuable upon exercise of this Warrant to be
mailed to the Holder. The certificate setting forth the computation shall be
signed by the Chief Financial Officer of the Company.
(k) In the event that at any time, as a result of any adjustment
made pursuant to paragraph (a) above, the holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in paragraphs (a) to (h) inclusive, above.
Section 5. Rights and Obligations of the Warrant Holder.
This Warrant shall not entitle the Holder to any rights of a stockholder
in the Company.
Section 6. Restrictive Stock Legend.
This Warrant and the Warrant Shares have not been registered under any
1securities laws. Accordingly, until such time as the securities represented
thereby are no longer subject to the restrictions set forth in Section 4.2 of
the Purchase Agreement and there is delivered to the Company an opinion of
counsel reasonably acceptable to the Company to the effect that such legend is
no longer required, any stock certificates issued pursuant to the exercise of
this Warrant shall bear the following legend:
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THIS SECURITY IS SUBJECT TO THE PROVISIONS OF THE INVESTMENT AND
MASTER STRATEGIC RELATIONSHIP AGREEMENT DATED AS OF OCTOBER 9, 1997
BETWEEN THE ISSUER AND SYNTHELABO AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT IN ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE
AT THE OFFICE OF THE CORPORATE SECRETARY OF THE ISSUER. THIS SECURITY
WAS SOLD IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR IF AN EXEMPTION FROM REGISTRATION
IS AVAILABLE.
Section 7. Notices.
Any notice or other communication required or permitted to be given here
shall be in writing and shall be effective (a) upon hand delivery or delivery by
telex (with correct answerback received), telecopy or facsimile at the address
or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the third business
day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communication shall be:
If to the Company:
Angeion Corporation
7601 Northland Drive, Suite 170
Brooklyn Park, MN 55428
Telephone: (612) 315-2000
Telecopier: (612) 315-2059
Attention: Chief Financial Officer
With a copy to:
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Telephone: (415) 268-7000
Telecopier: (415) 268-7522
Attention: Gavin B. Grover, Esq.
If to the Holder:
Synthelabo
22 Avenue Galilee
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92350 Le Plessis Robinson
France
Telephone: (33)(1)45.37.56.67
Telecopier: (33)(1)45.37.58.04
Attention: General Counsel
With copies to:
ELA Medical
Centre d'Affaires la Boursidiere
92357 Le Plessis Robinson
France
Telephone: (33)(1)46.01.33.01
Telecopier: (33)(1)46.01.33.15
Attention: President
and
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036-7703
Telephone: (212) 626-4400
Telecopier: (212) 626-4120
Attention: James C. Colihan, Esq.
Each party hereto may from time to time change its address for notices under
this Section 7 by giving at least 10 days' notice of such changes address to the
other party hereto.
Section 8. Amendments and Waivers.
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Section 9. Applicable Law.
This Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York without regard to the principles
of conflict of laws.
Section 10. Definitions.
As used in this Warrant, the following terms shall be defined as follows:
"Anti-Dilution Period" shall mean the period commencing on the date hereof
and terminating on the first anniversary of the Initial Closing Date (as defined
in the Purchase Agreement).
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"Fair Market Value Price" shall mean the average Quoted Price for the five
business days prior to the closing of the applicable sale.
"Future Financing" shall mean any future offering of any shares of any
class of Company Securities with voting rights generally to elect directors of
the Company.
"Quoted Price" of the Common Stock shall mean: the last sale price regular
way or, in the case no such sale takes place on such day, the average of the
closing bid and asked prices regular way, in wither case on the NASDAQ National
Market System as reported by NASDAQ, or, if the Common Stock is not authorized
for quotation on the NASDAQ National Market System, on the New York Stock
Exchange Composite Tape (the "Composite Tape"), or, if the Common Stock is not
listed or admitted to trading on such exchange, on the national securities
exchange in or nearest the City of New York on which the Common Stock is listed
or admitted to trading, or if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last sale price regular way or,
in case no such sale takes place on such day, the average of the highest
reported bid and lowest reported asked prices as furnished by the National
Association of Securities Dealers Inc. through NASDAQ or a similar organization
if NASDAQ is no longer reporting such information, or if on any such trading day
the Common Stock is not quoted by any such organization, the fair value of a
share of Common Stock on such day, as determined in good faith by the board of
directors of the Company.
"Reference Price" shall mean one hundred and fifteen percent (115%) of the
average Quoted Price for all trading days within the fifteen (15) trading days
ending two days prior to the earlier of (i) the public announcement by the
Company of the granting of approval by the Federal Food and Drug Administration
(the "FDA") regarding the use of the Company's implantable cardioverter
defibrillator models 2020 and 4040 or (ii) the actual date of grant by the FDA
of such approvals.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed on the day and year first above written.
ANGEION CORPORATION
By: /s/ James B. Hickey, Jr.
------------------------------------
Title: President and Chief Executive
Officer
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EXHIBIT 10.1
March 12, 1999
Synthelabo
22 Avenue Galilee
92350 Le Plessis Robinson
FRANCE
ATTN: Jean-Pierre Charlet
Dear Sirs:
This letter is intended to memorialize our mutual agreement regarding the
securities to be issued by Angeion Corporation (the "Company") to Synthelabo
pursuant to Sections 2.2(b) and 2.2(c) of that certain Amended and Restated
Investment and Master Strategic Relationship Agreement, dated as of October 9,
1997, by and between Angeion Corporation and Syhthelabo (the "Investment
Agreement"). All terms not defined herein shall have the same meanings as set
forth in the Investment Agreement. In consideration of the agreements contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
1. In consideration of receipt by the Company from Synthelabo of an
aggregate amount in cash equal to the sum of the Third Investment Purchase Price
and the Fourth Investment Purchase Price, the Company shall issue to Synthelabo
(a) a warrant in the form attached as Exhibit A hereto and (b) a warrant in the
form attached as Exhibit B hereto (the "Warrants"). The Company and Synthelabo
acknowledge and agree that delivery of the Warrants by the Company to Synthelabo
is in place of, and satisfies (i) any obligation of the Company to deliver, and
(ii) any obligation of Synthelabo to purchase, the Third Investment Shares, the
Third Investment Warrants, the Fourth Investment Shares and the Fourth
Investment Warrants.
2. This letter agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York.
<PAGE>
Synthelabo
March 12, 1999
Page Two
Please acknowledge Synthelabo's agreement with the foregoing by executing
this letter on the signature line provided below.
Sincerely yours,
ANGEION CORPORATION
By: /s/ James B. Hickey, Jr.
------------------------------------
James B. Hickey, Jr.
President and
Chief Executive Officer
ACKNOWLEDGED AND AGREED TO:
SYNTHELABO
By: /s/ Jean Pierre Charlet
-------------------------------------------
Name: Jean Pierre Charlet
-----------------------------------------
Title: Vice President General Counsel
----------------------------------------
By: /s/ Philippe Goupit
-------------------------------------------
Name: Philippe Goupit
-----------------------------------------
Title: Business Development Project Director
----------------------------------------
EXHIBIT 12
Three months ended March 31,
1999 1998
------------ ------------
Net loss $ (8,416,571) $ (9,674,898)
Interest expense 482,056 19,931
Amortization of debt costs 210,043 263,720
Income tax -- --
------------ ------------
Loss before fixed charges (7,724,472) (9,391,247)
Fixed charges 692,099 283,651
Ratio of net loss before fixed charges to
fixed charges (11.2) (33.1)
Deficiency of earnings to cover fixed
charges $ (8,416,571) $ (9,674,898)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,085,362
<SECURITIES> 0
<RECEIVABLES> 2,399,674
<ALLOWANCES> 294,775
<INVENTORY> 5,382,566
<CURRENT-ASSETS> 19,508,605
<PP&E> 11,715,345
<DEPRECIATION> 5,300,796
<TOTAL-ASSETS> 30,150,985
<CURRENT-LIABILITIES> 12,740,228
<BONDS> 0
0
0
<COMMON> 40,060
<OTHER-SE> (2,828,303)
<TOTAL-LIABILITY-AND-EQUITY> 30,150,985
<SALES> 1,801,999
<TOTAL-REVENUES> 1,801,999
<CGS> 2,303,018
<TOTAL-COSTS> 2,303,018
<OTHER-EXPENSES> 6,225,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 692,099
<INCOME-PRETAX> (8,416,571)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,416,571)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,416,571)
<EPS-PRIMARY> (2.12)
<EPS-DILUTED> (2.12)
</TABLE>
