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 June 30, 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
(Address of principal 55428-1088
executive offices) (Zip Code)
(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: 4,009,659 shares
outstanding as of August 12, 1999
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM DESCRIPTION Page
ITEM 1. FINANCIAL STATEMENTS.
<S> <C>
Consolidated Balance Sheets (unaudited) 1
- June 30, 1999 and December 31, 1998.
Consolidated Statements of Operations (unaudited) 2
- For the Three and Six Months Ended June 30, 1999 and
1998.
Consolidated Statements of Cash Flows (unaudited) 3
- For the Six Months Ended June 30, 1999 and 1998.
Notes to Consolidated Financial Statements (unaudited). 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 5
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. 12
ITEM 5. OTHER INFORMATION. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 13
SIGNATURES. 14
EXHIBIT INDEX. 15
</TABLE>
<PAGE>
ANGEION CORPORATION
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,017,309 $ 1,827,637
Accounts receivable, net:
Trade 924,777 1,587,669
Other 19,237 102,426
Inventories 2,657,437 6,377,359
Prepaid expenses and other current assets 746,621 623,573
------------- -------------
TOTAL CURRENT ASSETS 33,365,381 10,518,664
Property and equipment, net 5,402,861 6,880,822
Investment in joint venture, net 1,526,340 3,221,003
Other assets, net 1,730,127 2,272,918
------------- -------------
TOTAL ASSETS $ 42,024,709 $ 22,893,407
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 659,134 2,959,755
Accrued payroll, vacation and related costs 385,739 983,060
Other accrued expenses 626,279 1,882,268
Deferred income -- 1,198,021
------------- -------------
TOTAL CURRENT LIABILITIES 1,671,152 7,023,104
Long-term debt 20,198,000 22,150,000
------------- -------------
TOTAL LIABILITIES 21,869,152 29,173,104
Shareholders' equity (deficit):
Common stock, $.01 par value. Authorized
7,500,000 shares; issued and outstanding
4,009,659 shares at June 30, 1999,
and 3,879,656 shares at December 31, 1998 40,097 38,797
Additional paid-in capital 128,693,010 116,879,840
Unamortized value of restricted stock -- (118,066)
Cumulative translation adjustment (8,757) (24,650)
Accumulated deficit (108,568,793) (123,055,618)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 20,155,557 (6,279,697)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 42,024,709 $ 22,893,407
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 1
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 2,194,286 $ 1,113,117 $ 3,996,285 $ 1,468,115
Operating expenses:
Manufacturing 2,625,546 2,022,438 4,928,564 3,867,059
Research & development 1,924,964 5,204,092 5,447,961 10,551,548
Selling, general & administrative 1,016,599 1,309,702 2,999,282 3,660,142
Restructuring 3,784,330 -- 4,503,979 --
------------ ------------ ------------ ------------
Total operating expenses 9,351,439 8,536,232 17,879,786 18,078,749
------------ ------------ ------------ ------------
OPERATING LOSS (7,157,153) (7,423,115) (13,883,501) (16,610,634)
------------ ------------ ------------ ------------
Other income (expense), net:
Equity in net loss of joint venture (649,823) (846,490) (1,694,664) (1,164,366)
Gain on sale of non-capital assets 989 -- 989 --
Royalties (36,299) -- (36,299) --
Net proceeds from settlement of
lawsuit and sale of license
rights 31,107,084 -- 31,107,084 --
Interest expense (625,828) (661,907) (1,317,927) (945,558)
Interest income 378,486 208,240 425,203 322,388
------------ ------------ ------------ ------------
Other income (expense) 30,174,609 (1,300,157) 28,484,386 (1,787,536)
------------ ------------ ------------ ------------
Net income (loss) before taxes $ 23,017,456 $ (8,723,272) $ 14,600,885 $(18,398,170)
------------ ------------ ------------ ------------
Provision for income taxes 114,060 -- 114,060 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 22,903,396 $ (8,723,272) $ 14,486,825 $(18,398,170)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE:
Basic $ 5.72 $ (2.63) $ 3.64 $ (5.55)
Assuming dilution $ 3.73 $ (2.63) $ 2.39 $ (5.55)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic 4,005,287 3,317,841 3,983,512 3,313,510
Assuming dilution 6,238,069 3,317,841 6,216,294 3,313,510
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2
<PAGE>
ANGEION CORPORATION
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 14,486,825 $(18,398,170)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 1,500,840 1,641,660
Compensation expense on grant of stock and stock options 265,528 1,267,252
Loss on disposal of fixed assets 499,439 299,523
Equity in net loss of joint venture 1,694,664 1,164,366
Changes in operating assets and liabilities:
Accounts receivable 746,080 (406,457)
Inventory 3,719,922 (1,074,883)
Prepaid expenses and other current assets (123,049) (542,257)
Accounts payable (1,800,395) 881,385
Accrued expenses (1,853,310) 175,188
Deferred income (1,198,020) 643,573
------------ ------------
Net cash provided by (used in) operating activities 17,938,524 (14,348,820)
------------ ------------
INVESTING ACTIVITIES:
Investments in joint venture -- (3,561,595)
Payments for purchases of property and equipment (52,215) (1,682,403)
------------ ------------
Net cash used in investing activities (52,215) (5,243,998)
------------ ------------
FINANCING ACTIVITIES:
Net proceeds from issuance of debt and warrants 5,790,073 19,304,771
Net proceeds from issuance of common stock and warrants 9,997,623 27,492
Repayment of debt (6,500,226) --
------------ ------------
Net cash provided by financing activities 9,287,470 19,332,263
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS 15,893 (117)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,189,672 (260,672)
Cash and cash equivalents:
Beginning of period 1,827,637 14,052,115
------------ ------------
End of period $ 29,017,309 $ 13,791,443
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 985,390 $ 33,807
Non-cash investing and financing activity:
Conversion of debt to equity $ 1,951,994 $ --
Transfer of property and equipment to joint venture -- 438,405
Property acquired subject to capital leases -- 797,389
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
ANGEION CORPORATION
Form 10-Q
June 30, 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 INCOME (LOSS) PER SHARE
Basic income per share is calculated by dividing net income (loss) by the
weighted-average common shares outstanding during the period. Income (loss) per
share assuming dilution reflects the potential dilution to basic income per
share that could occur upon conversion or exercise of securities, options, or
other such items, to common shares using the if-converted and treasury stock
methods based upon the weighted-average fair value of the Company's common
shares during the period.
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"), a wholly owned subsidiary
of Sanofi-Synthelabo, a French pharmaceutical company, 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. During previous reporting
periods, the Company'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 12, 1999, the Company announced it had reached an
agreement under which the Company will withdraw from its joint venture with ELA.
As a result of this agreement, the Company's remaining investment in the joint
venture will be recovered and its proportional share of sales and cost of sales
and any resultant gain or loss related to assets sold to the joint venture, and
still held by the joint venture, have been entirely recognized during the period
ended June 30, 1999.
4. REPORTING COMPREHENSIVE INCOME
Components of comprehensive income consist only of immaterial foreign currency
translation adjustments. The Company's net income (loss) and comprehensive
income (loss) are substantially equivalent and are not presented separately.
5. SHAREHOLDERS' EQUITY (DEFICIT)
On March 5, 1999, the Company received U.S. Food and Drug Administration ("FDA")
Pre-market Approval ("PMA") for its Lyra(TM) 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
Page 4
<PAGE>
investments from its strategic partner, Sanofi-Synthelabo (formerly Synthelabo),
pursuant to the Investment and Master Strategic Relationship Agreement (the
"Investment Agreement"), the Company entered into with Sanofi-Synthelabo in
October 1997. In exchange for the $10,000,000 equity investment, the Company
issued Sanofi-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
(before giving effect to the reverse stock split discussed below).
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 was implemented as
part of the Company's previously announced restructuring plan discussed below.
Financial information contained in this report has been retroactively adjusted
to reflect the impact of the reverse stock split.
6. 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 percent of its total
employee base, including 40 percent 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 related to severance costs and other
employee benefits associated with the reduction in work force. As of June 30,
1999, $50,000 of accrued expenses were included on the Company's balance sheet
related to the January Restructuring.
In April 1999, the Company announced a second restructuring plan (the "April
Restructuring") to refocus its business and reduce operating expenses. As a
result of the April Restructuring, the Company reduced its workforce by
approximately 75 percent of its total employee base, while retaining the staff
necessary to support its ongoing operations and clinical, regulatory and
engineering staff needed to provide customer support for the Company's Lyra
series of ICDs and existing implants. In addition, the Company is continuing to
provide agreed-upon amounts of product to ELA under the terms of its amended
supply agreements. For the three-month period ended June 30, 1999, a
restructuring charge of approximately $3,784,000 was recorded. The restructuring
includes reduction in administrative and operational personnel from the
workforce and divesting of non-strategic business assets. Additional
restructuring charges may be incurred as a result of the shareholder approval of
the asset purchase agreement. (See footnote #7)
The restructuring charge includes approximately $618,000 and $1,598,000 in cash
charges in the first and second quarters, respectively, primarily related to
severance and employee benefit cost. The balance of the restructuring charges
relate primarily to non-cash charges for the write down of plant assets and
inventory.
7. SUBSEQUENT EVENTS
On August 3, 1999, the Company announced that it had entered into an agreement
to transfer certain assets and grant a non-exclusive, royalty free, one-way
license of substantially all of its patents, patent applications and related
intellectual property rights for cardiac stimulation devices to ELA. As part of
the agreement, Angeion will transfer ownership of its flat capacitor technology
and its AngePass 4040, 4080 and 4090 Series lead systems, including related
regulatory approvals and obligations to ELA. In exchange, Angeion will receive
from Sanofi-Synthelabo all 745,996 shares of the Company's Common Stock owned by
it and warrants to purchase approximately 1.9 million shares. Closing of the
transactions contemplated by the agreement is subject to the approval of the
Company's shareholders and bondholders. The Company plans to hold a meeting of
shareholders later this year to vote on the agreement.
Upon closing of the transactions contemplated by the agreement, the Company will
be relieved of all further obligations to supply implantable cardiac
defibrillator products to ELA outside of the United States. Also upon closing,
the Company will be relieved of its obligation to enter into a patent and
related intellectual property cross license with ELA.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Page 5
<PAGE>
The Company's operations consist primarily of the manufacturing efforts related
to its current implantable cardioverter defibrillator ("ICD") product line.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1998
Total sales increased to $2,194,286 for the three-month period ended June 30,
1999, compared to $1,113,117 for the three-month period ended June 30, 1998, due
primarily to an increase in sales of ICDs. In the three-month period ended June
30, 1999, revenue consisted primarily of sales of ICDs to ELA*Angeion, the
Company's previously 50 percent-owned joint venture, and international sales to
ELA. During previous reporting periods, including the three-month period ended
June 30, 1998, the Company'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. As a result of this withdrawal agreement, the Company's
proportional share of sales and cost of sales and any resultant gain or loss
related to assets sold to the joint venture, and still held by the joint
venture, have been entirely recognized during the period ended June 30, 1999.
Manufacturing expense increased 30 percent to $2,625,546 for the three-month
period ended June 30, 1999, compared to $2,022,438 for the three-month period
ended June 30,1998. The increase was primarily due to increased production and
sales volume partially offset by efforts to reduce spending in order to decrease
its cash flow burn rate for the three-month period ended June 30, 1999, compared
to the three-month period ended June 30, 1998.
Research and development expense decreased 63 percent to $1,924,964 for the
three-month period ended June 30, 1999, compared to $5,204,092 for the
three-month period ended June 30, 1998. This decrease was primarily due to
reduced payroll and expense spending related to the January and April
Restructurings that allowed the Company to decrease its cash flow burn rate.
Research and development activity related to the development of the ICDs
accounted for $1,686,527 of the expense for the three-month period ended June
30, 1999, while the catheter ablation activities accounted for $238,437 of the
expense.
Selling, general and administrative expense decreased to $1,016,599 for the
three-month period ended June 30, 1999, compared to $1,309,702 for the
three-month period ended June 30, 1998. This decrease was primarily due to lower
selling and marketing expenses as a result of reduced headcount from the January
and April Restructurings for the three-month period ended June 30, 1999,
compared to the three-month period ended June 30, 1998.
Interest expense decreased to $625,828 for the three-month period ended June 30,
1999, compared to $661,907 for the three-month period ended June 30, 1998.
Interest expense primarily related to the 7 1/2% Senior Convertible Notes (the
"Notes") issued in April 1998, debt amortization and the two term loans totaling
$6,000,000 that were entered into in January 1999. The decrease in interest
expense can be attributed to lower debt amortization expenses partially offset
by higher interest related to the Notes for the three-month period ended June
30, 1999, compared to the three-month period ended June 30, 1998.
Interest income increased 82 percent to $378,486 for the three-month period
ended June 30, 1999, compared to $208,240 for the three-month period ended June
30, 1998. The increase was due to the higher average invested cash balances in
the three-month period ended June 30, 1999, compared to the three-month period
ended June 30, 1998.
Restructuring expenses for the three-month period ended June 30, 1999 totaled
approximately $3,784,330. These expenses related to employee salaries, employee
severance, other employee benefits and inventory write-offs as a result of the
Company's restructuring efforts announced in April 1999. The workforce reduction
is expected to reduce payroll expenses by approximately $1,800,000 per quarter,
beginning in the third quarter.
The Company recorded a net profit of $22,903,396, or $5.72 per share, in the
three-month
Page 6
<PAGE>
period ended June 30, 1999, compared to a net loss of $8,723,272, or $2.63 per
share, in the three-month period ended June 30, 1998. The net profit per share
is primarily a result of a settlement with Cardiac Pacemakers, Inc. announced in
April 1999.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
Total sales increased to $3,996,285 for the six-month period ended June 30,
1999, compared to $1,468,115 for the six-month period ended June 30, 1998, due
primarily to an increase in sales of ICDs. In the six-month periods ended June
30, 1999 and 1998, revenue consisted primarily of sales of ICDs to ELA*Angeion
and international sales to ELA. Sales to ELA*Angeion for the six-month period
ended June 30, 1998 included a sales elimination entry to reflect Angeion's
proportional share of product still held by ELA*Angeion as of June 30, 1998. As
a result of the withdrawal agreement with ELA, Angeion recognized previously
deferred income during the six-month period ended June 30, 1999. Sales for the
six-month period ended June 30, 1998 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 FDA
in January 1998 to resume clinical studies.
Manufacturing expense increased 27 percent to $4,928,564 for the six-month
period ended June 30, 1999, compared to $3,867,059 for the six-month period
ended June 30, 1998. The increase was primarily due to increased sales and
production volume for the period ended June 30, 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 48 percent to $5,447,961 for the
six-month period ended June 30, 1999, compared to $10,551,548 for the six-month
period ended June 30, 1998. This decrease was primarily due to efforts to reduce
spending 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
$5,043,188 of the expense for the six-month period ended June 30, 1999, while
the catheter ablation activities accounted for $404,773 of the expense.
Selling, general and administrative expense decreased 18 percent to $2,999,282
for the six-month period ended June 30, 1999, compared to $3,660,142 for the
six-month period ended June 30, 1998. This decrease was primarily due to lower
selling and marketing expenses for the six-month period ended June 30, 1999,
compared to the six-month period ended June 30, 1998.
Interest expense increased to $1,317,927 for the six-month period ended June 30,
1999, compared to $945,558 for the six-month period ended June 30, 1998. The
increase was due to interest expense related to the 7 1/2% Senior Convertible
Notes issued in April 1998 (the "Bonds") and the two term loans totaling
$6,000,000 that were received in January 1999.
Interest income increased 32 percent to $425,203 for the six-month period ended
June 30, 1999, compared to $322,388 for the six-month period ended June 30,
1998. The increase was due to the higher average invested cash balances in the
six-month period ended June 30, 1999 as a result of the legal settlement with
Cardiac Pacemakers, Inc. that was announced in April 1999.
Restructuring charges for the six-month period ended June 30, 1999 totaled
$4,503,979. These expenses related primarily to employee severance, other
employee benefits, inventory write-offs and capital asset reserves as a result
of the Company's previously announced restructuring efforts announced in January
and April 1999.
The Company recorded a net profit of $14,486,825, or $3.64 per share, in the
six-month period ended June 30, 1999, compared to a net loss of $18,398,170, or
$5.55 per share, in the six-month period ended June 30, 1998. The net profit per
share is primarily a result of the legal settlement with CPI. that was announced
in April 1999, along with efforts to reduce spending by the Company.
LIQUIDITY AND CAPITAL RESOURCES
Page 7
<PAGE>
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 PMA approval for its Lyra(TM) 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,
Sanofi-Synthelabo, pursuant to the Investment Agreement the Company entered into
with Sanofi-Synthelabo in October 1997. In exchange for the $10,000,000 equity
investment, the Company issued Sanofi-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 (before giving effect to the Company's one-for-ten
reverse stock split effected on May 17, 1999).
The Company announced in April 1999 that it had 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
$31,100,000 of net cash from the CPI settlement.
Net cash provided by operating activities in the six-month period ended June 30,
1999 were $17,938,524, compared to net cash used in operating activities of
$14,348,820 in the six-month period ended June 30, 1998. The change was
primarily due to the legal settlement with CPI, continued efforts to reduce
spending by the Company partially offset by cash used as a result of the January
and April Restructurings.
Investing activities used cash of $52,215 and $5,243,998 for the six-month
periods ended June 30, 1999 and 1998, respectively. In the six-month period
ended June 30, 1998, the Company invested $3,561,595 in ELA*Angeion and used
cash of $1,682,403 for purchases of property and equipment primarily related to
research and development equipment and the opening of the Company's new offices.
During the six-month period ended June 30, 1999, the Company's investing
activities consisted of purchases of property and equipment.
At June 30, 1999, the Company had cash and cash equivalents of $29,017,309.
RESTRUCTURING
In January 1999, the Company announced a restructuring plan to help reduce its
cash flow burn rate. As a result of the January Restructuring, the Company
reduced approximately 20 percent of its total employee base, including 40
percent 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 related to severance costs and other employee benefits associated with
the reduction in work force. As of June 30, 1999, $50,000 of accrued expenses
were included on the Company's balance sheet related to the January
Restructuring.
In April 1999, the Company announced a second restructuring plan 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. As part of the April
Restructuring, the Company continued to explore strategic alternatives for the
Company, including the potential license or sale of certain of its assets. The
Board of Directors also began contacting numerous investment bankers and other
industry sources on a non-exclusive basis, to explore business expansion
opportunities. The Company is initially targeting affordable,
Page 8
<PAGE>
profitable medical device companies with management infrastructure and proven
technology to serve as a platform for growth and increasing shareholder value.
The objective is to seek an acquisition that will fit the above profile, and
complement or maximize the use of the Company's assets. As part of this ongoing
process and the Board and management are working to identify potential
acquisition targets.
As a result of the April Restructuring, the Company reduced its workforce by
approximately 75 percent of its total employee base, while retaining the staff
necessary to support its ongoing operations and clinical, regulatory and
engineering staff needed to provide customer support for the Company's Lyra
series of ICDs and existing implants. In addition, the Company is continuing to
provide agreed-upon amounts of product to ELA under the terms of its amended
supply agreements. In anticipation of obtaining the approvals required to close
the Sanofi-Synthelabo asset agreement and in order to continue to conserve its
available cash, the Company anticipates further reductions in staff as
obligations are met and responsibilities are transferred to ELA. If the Company
does not receive the anticipated approvals at the shareholder meeting, the
Company may need to refill selected positions to assume management of certain
responsibilities related to the Company's ongoing involvement in the ICD
business. For the three-month period ended June 30, 1999, a restructuring charge
of approximately $3,784,000 was recorded. The restructuring includes reduction
in administrative and operational personnel from the workforce and divesting of
non-strategic business assets. Additional restructuring charges may be incurred
as a result of the shareholder approval of the asset purchase agreement.
The restructuring charge includes approximately $618,000 and $1,598,000 in cash
charges in the first and second quarters, respectively, primarily related to
severance and employee benefit cost. The balance of the restructuring charges
relate primarily to non-cash charges for the write down of plant assets and
inventory.
Subsequent to the April restructuring announcement, the Company has been in
contact with the holders of the Bonds to communicate its current financial
condition and explore numerous alternatives with such holders. In July 1999,
approximately 25 percent of the Bondholders contacted the trustee under the
indenture for the Bonds to ask that the trustee determine whether or not Angeion
is in violation of the terms of the indenture, which could result in the Company
being obligated to pay back the approximately $20,000,000 in principal
outstanding amount of the Bonds plus 1 percent. This group of Bondholders are
questioning whether the Company's settlement with CPI was in violation of the
terms of the indebture. The Company believes it has complied with all of the
terms of the indenture, disagrees with the assertion of these Bondholders, and
will be meeting with the trustee in August 1999 to respond to such assertions.
SUBSEQUENT EVENTS
On May 21, 1999, the Company participated in a hearing with the Nasdaq Listing
Qualifications Panel. The hearing was the outcome of the Company's appeal of the
previously announced determination by Nasdaq's staff, that due to the Company's
non-compliance with certain Nasdaq requirements, the Company should be removed
from Nasdaq listing. In a July 1999 letter to the Company, the Panel determined
to continue the listing of the Company's securities on the Nasdaq National
Market, subject to the Company maintaining a minimum of $20,000,000 in net
tangible assets as evidenced by the Form 10-Q filing for the quarter ended June
30, 1999, after taking into account all pro forma adjustments required for any
significant events or transactions occurring on or before the filing date of
this Form 10-Q. The Company must also be able to demonstrate compliance with all
requirements for continued listing on the Nasdaq National Market. In the event
the Company is unable to comply with any of the terms of this exception, its
securities may be transferred to the Nasdaq Small Cap Market or be delisted from
the Nasdaq Stock Market. The Company's June 30, 1999 balance sheet, with the
appropriate pro forma adjustments, reflects net tangible assets, as defined by
NASDAQ, of $20,155,557. While the Company feels it has met the terms of the
Nasdaq staff's letter, the Nasdaq Panel reserves the right to reconsider the
terms of its decision should there be a material change in the Company's
financial or operational character. In addition, any document filed by the
Company will be subject to review by the Panel, which may at its discretion,
request additional information before approving the Company's compliance.
Page 9
<PAGE>
On August 3, 1999, the Company announced that it had entered into an agreement
to transfer certain assets and grant a non-exclusive, royalty-free, one-way
license of substantially all of its patents, patent applications and related
intellectual property rights for cardiac stimulation devices to ELA. As part of
the agreement, the Company will transfer its flat capacitor technology and its
AngePass(TM) 4040, 4080 and 4090 Series lead systems, including related
regulatory approvals and obligations to ELA Medical. In exchange, Angeion will
receive from Sanofi-Synthelabo all 745,996 shares of the Company's Common Stock
owned by it and warrants to purchase approximately 1.9 million shares. Closing
of the transactions contemplated by the agreement is subject to the approval of
Angeion shareholders and Bondholders. The Company plans to hold a meeting of
Shareholders later this year to vote on the agreement.
Upon closing of the transactions contemplated by the agreement, the Company will
be relieved of all further obligations to supply ICD products to ELA outside of
the United States. Also upon closing, Angeion will be relieved of its obligation
to enter into a patent and related intellectual property cross license with ELA.
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 has been evaluated and is
being 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 has been updated, if necessary, to Year
2000 compliance. The Company believes all critical business systems are Year
2000 compliant. Although Year 2000 compliance evaluation and remediation, if
required, for the remaining non-critical business systems, facilities and third
party vendors were initially scheduled to be completed by the end of the second
quarter of 1999, certain non-critical items remain open and are expected to be
closed by the end of the third quarter of 1999. The Company has, and will
continue to, 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 third 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. 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.
Although, the Company believes that its Year 2000 compliance plan is adequate to
achieve system
Page 10
<PAGE>
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 third 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. In 1999, the FASB issued SFAS No. 137, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE
OF FASB NO. 133, AN AMENDMENT OF FASB STATEMENT NO. 133 which defers the
effective date of SFAS No. 133 by one year. SFAS No. 133 is now effective for
all fiscal quarters of all fiscal years beginning after June 15, 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
The discussion above contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. 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: approval of Sanofi-Synthelabo agreement by the Company's shareholders
and Bondholders; satisfaction of certain other conditions to the closing of the
transactions contemplated by the Sanofi-Synthelabo agreement; successful
resolution of discussions with the Bondholders and the trustee for the Bonds;
the costs to support the Company's ongoing operations and to provide customer
support for the Company's products; the demand for and cost of supplying the
Company's products; the costs associated with refocusing the Company's business;
the ability of the Company to conduct its business with a reduced workforce; the
ability of the Company to identify and successfully pursue other business
opportunities; and continued listing on Nasdaq National Market. Additional
information with respect to the risks and uncertainties faced by the Company may
be found in, and the prior discussion is qualified in its entirety by, the Risk
Factors contained in the Company's Annual Report of Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission ("SEC")
and the Company's other periodic filings with the SEC, copies of which are
available upon request.
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.
Page 11
<PAGE>
On September 16, 1998, the Company 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 infringement lawsuit. As a result of this agreement, the Company
will grant to CPI a non-exclusive 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 the license. CPI and Guidant
have agreed not to sue the Company for future infringement with respect to
Angeion's Lyra 2020 and Model 2030 ICD Series product lines. The Company 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.
In March 1999, pursuant to the Investment Agreement with Sanofi-Synthelabo, in
exchange for $10,000,000 the Company issued to Sanofi-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 (before giving effect to the reverse stock
split discussed below).
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, Sanofi-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. Sanofi-Synthelabo had
adequate access, through their due diligence effort, to information about the
Company.
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.
ITEM 5. OTHER INFORMATION.
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.
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 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
Page 12
<PAGE>
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.
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)).
10.1 Asset Purchase Agreement dated as of
August 2, 1999 between the Company and
Sanofi-Synthelabo.
12 Computation of ratio of earnings to fixed
charges.
27 Financial Data Schedule.
Page 13
<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: August 16, 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 14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Document Method of Filing
<S> <C> <C>
3.1 Articles of Merger, including Amended and Incorporated by
Restated Articles of Incorporation reference
(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 Incorporated by
Restated Articles of Incorporation reference
(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 Incorporated by
Restated Articles of Incorporation reference
(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 Incorporated by
to Exhibit 4.2 contained in the Company's reference
Registration Statement on Form S-3 (File
No. 333-04993)).
10.1 Asset Purchase Agreement dated as of Filed herewith
August 2, 1999 between the Company and
Sanofi-Synthelabo.
12 Computation of ratio of earnings to fixed Filed herewith
charges.
27 Financial Data Schedule. Filed herewith
</TABLE>
Page 15
[EXECUTION COPY]
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND AMONG
ANGEION CORPORATION
SANOFI-SYNTHELABO
AND
ELA MEDICAL
DATED
AUGUST 2, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I PURCHASE AND SALE OF ASSETS......................1
1.1 PURCHASE AND SALE OF ASSETS......................1
1.2 ASSUMED LIABILITIES..............................2
ARTICLE II PURCHASE PRICE; CLOSING..........................3
2.1 PURCHASE PRICE...................................3
2.2 TIME AND PLACE...................................3
2.3 DELIVERIES.......................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.........5
3.1 ORGANIZATION AND GOOD STANDING...................5
3.2 AUTHORITY; BINDING EFFECT; PERFORMANCE...........5
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS............6
3.4 ABSENCE OF UNDISCLOSED LIABILITIES...............6
3.5 NO CLAIMS OR LITIGATION..........................6
3.6 TITLE TO ASSETS AND RELATED MATTERS..............7
3.7 INTELLECTUAL PROPERTY............................7
3.8 CONTRACTS........................................8
3.9 PERMITS..........................................8
3.10 COMPLIANCE WITH APPLICABLE LAW...................8
3.11 BROKERS AND FINDERS..............................8
3.12 ABSENCE OF OTHER AGREEMENT FOR SALE OF ASSETS....8
3.13 PROXY STATEMENT..................................9
3.14 DISCLOSURE.......................................9
3.15 RELIANCE.........................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER........................................9
4.1 ORGANIZATION AND GOOD STANDING...................9
4.2 AUTHORITY; BINDING EFFECT; PERFORMANCE...........9
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS...........10
4.4 BROKERS AND FINDERS.............................10
ARTICLE V COVENANTS.......................................10
5.1 CONDUCT PENDING CLOSING.........................10
5.2 PROXY STATEMENT.................................11
5.3 ACCESS TO INFORMATION...........................13
5.4 NOTICE AND CURE.................................13
5.5 BEST EFFORTS....................................13
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF PARENT AND
PURCHASER.......................................14
6.1 REPRESENTATIONS AND WARRANTIES TRUE.............14
i
<PAGE>
6.2 PERFORMANCE.....................................14
6.3 APPROVALS, PERMITS, CONSENTS....................14
6.4 SHAREHOLDER AND SENIOR NOTE HOLDER APPROVAL.....14
6.5 DELIVERY OF CLOSING DOCUMENTS...................14
6.6 ABSENCE OF CERTAIN EVENTS.......................14
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF SELLER.........15
7.1 REPRESENTATIONS AND WARRANTIES TRUE.............15
7.2 PERFORMANCE.....................................15
7.3 APPROVALS, PERMITS, CONSENTS....................15
7.4 SHAREHOLDER AND SENIOR NOTE HOLDER APPROVAL.....15
7.5 DELIVERY OF CLOSING DOCUMENTS...................15
7.6 ABSENCE OF CERTAIN EVENTS.......................15
ARTICLE VIII TERMINATION.....................................16
8.1 TERMINATION.....................................16
8.2 EFFECT OF TERMINATION...........................16
ARTICLE IX POST-CLOSING COVENANTS..........................17
9.1 ACCESS AFTER CLOSING............................17
9.2 FURTHER ASSURANCES..............................17
9.3 SUPPLY AGREEMENTS...............................17
ARTICLE X INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES......................................17
10.1 INDEMNITY OBLIGATIONS OF SELLER.................17
10.2 INDEMNITY OBLIGATIONS OF PARENT AND PURCHASER...18
10.3 INDEMNIFICATION PROCEDURES......................19
10.4 DURATION........................................19
ARTICLE XI MISCELLANEOUS PROVISIONS........................20
11.1 EXPORT CONTROLS.................................20
11.2 FEES AND EXPENSES...............................20
11.3 SEVERABILITY....................................20
11.4 ENTIRE AGREEMENT; AMENDMENTS....................20
11.5 NOTICES.........................................21
11.6 SUCCESSORS AND ASSIGNMENT.......................22
11.7 NO THIRD PARTY BENEFICIARIES....................22
11.8 NO WAIVER.......................................22
11.9 PUBLICITY.......................................22
11.10 COUNTERPARTS....................................23
11.11 HEADINGS........................................23
11.12 ENGLISH LANGUAGE CONTROLS; ENTIRE AGREEMENT.....23
11.13 GOVERNING LAW...................................23
11.14 RELATIONSHIP OF THE PARTIES.....................23
11.15 SOVEREIGN IMMUNITY; EXCLUSIONS..................23
11.16 CONSULTATION AND ARBITRATION....................24
ii
<PAGE>
EXHIBITS
Exhibit A Warranty Bill of Sale and Assignment
Exhibit B Patent Assignment
Exhibit C Termination Agreement
Exhibit D License Agreement
Exhibit E FIRTPA Certificate
Exhibit F Settlement Agreement and Mutual Release
Exhibit G Assumption Agreement
Exhibit H Cross-License Agreement
iii
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of this 2nd day of August,
1999, is entered into by and among Angeion Corporation, a corporation organized
and existing under the laws of the State of Minnesota ("Seller"),
Sanofi-Synthelabo, a societe anonyme organized and existing under the laws of
the Republic of France ("Parent"), and ELA Medical, a societe anonyme organized
and existing under the laws of the Republic of France and a subsidiary of Parent
("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller has expertise in, and is engaged in the business of,
the design, development, manufacture, distribution and sale of certain cardiac
stimulation devices (the "Cardiac Stimulation Device Business");
WHEREAS, Seller is currently considering certain strategic
alternatives, including, but not limited to, refocusing its operations so that
it would no longer be engaged in the Cardiac Stimulation Device Business; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, on the terms and conditions set forth herein,
subject to the approval of the shareholders of Seller and the approval of the
Senior Note Holders (as hereinafter defined), all of Seller's right, title and
interest in and to certain defibrillator leads used in implantable cardioverter
defibrillators and all of Seller's right, title and interest in and to the
research and development of a flatpack, photoflash capacitor being developed for
use in an implantable medical device, as more fully described below.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and intending to be legally bound hereby, the parties hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and subject to the
conditions herein set forth, Seller hereby agrees to sell, convey, transfer,
assign, grant and deliver to Purchaser at the Closing (as hereinafter defined),
and Purchaser hereby agrees to purchase from Seller at the Closing, all of
Seller's right, title and interest in and to all technology, intellectual
property, patents, patent applications, including continuations, and know-how,
including licenses, development agreements and supply agreements from third
parties, to the extent assignable, owned or used by Seller with respect to
Seller's model Series 4040, 4080 and 4090 Leads (the "Leads") and the research
and development of a flatpack, photoflash capacitor being developed for use in
an implantable medical device (the "Flat Capacitor") (collectively, the
"Assets"), free and clear of all Encumbrances (as hereinafter defined), other
than those Encumbrances arising under the Assumed Contracts (as hereinafter
defined), including, without limitation,
(i) all technical specifications for the Leads and Flat
Capacitor;
<PAGE>
(ii) all trade secrets, inventions, patent disclosures,
protocols, know-how, formulae, processes, procedures,
records of inventions, test information, drawings,
diagrams, designs, operating manuals and other
proprietary information for the Leads and Flat
Capacitor;
(iii) all patents and patent applications for the Leads and
Flat Capacitor, including Patent No. 5649974 and Patent
No. 5454839, subject only to existing non-exclusive
licenses in favor of St. Jude Medical Inc., Guidant CPI
and Medtronic, Inc. (to the extent that Medtronic's
license is held to be valid) (collectively, the
"Assigned Patents");
(iv) all documentation and all copyrights in such
documentation for the Leads and Flat Capacitor;
(v) all permits, licenses, franchises, approvals and
authorizations issued by governmental or regulatory
authorities or bodies for the Leads and Flat Capacitor,
to the extent assignable by Seller;
(vi) all testing and validation results for the Leads and
Flat Capacitor, and all test fixtures that relate
specifically to the Leads and Flat Capacitor and are not
generally used with respect to other assets of Seller
used in the Cardiac Stimulation Device Business.
Purchaser acknowledges that Cardiac Control Systems,
Inc. presently owns certain manufacturing equipment and
fixtures which may be useful in production of the Leads,
and that any such equipment and fixtures owned by
Cardiac Control Systems, Inc. are not included in the
definition of Leads for purposes of this Agreement;
(vii) all samples on hand of the Leads and Flat Capacitor; and
(viii) all of Seller's right, title and interest in and to the
supply and development agreements listed in Schedule 1.1
hereto (the "Assumed Contracts").
For the avoidance of doubt, the parties acknowledge and agree that the Assets do
not include (i) non-proprietary software, (ii) any rights to any work of Seller
in respect of middle cardiac vein leads (model Series 4300), single pass dual
chamber leads (model Series 4060), single pass RV/SVC leads (model Series 4050)
or atrial defibrillation leads (model Series 4200), (iii) finished inventory or
work-in-progress or (iv) the physical tools and other assets listed in the
Disclosure Schedule.
1.2 ASSUMED LIABILITIES. Purchaser shall assume, pay, perform in
accordance with their terms, or otherwise satisfy, as of the Closing Date (as
hereinafter defined):
(i) the liabilities and obligations of Seller in respect of
the Assumed Contracts, and
(ii) all liabilities, obligations or undertakings of any
nature whatsoever, whether accrued, absolute, fixed or
contingent, known or unknown, arising out of or relating
to the Assets, including, without limitation, (a) any
action brought or claim made by third parties, which
relate to the periods following the Closing Date, and
(b) any and all claims which relate to Leads or Flat
Capacitors manufactured and sold by Purchaser
-2-
<PAGE>
after the Closing Date.
The liabilities assumed by Purchaser pursuant to this Section 1.2
are sometimes referred to as the "Assumed Liabilities". Except as expressly
provided in this Section 1.2, Purchaser shall not assume any liabilities or
obligations of (or claimed through) Seller, whether relating to the Assets or
otherwise, it being expressly acknowledged and agreed by the parties that all
such liabilities and obligations, and any claims or disputes relating thereto,
whether existing as of the Closing Date or arising thereafter, fixed or
contingent, known or unknown, asserted or unasserted, are and shall remain the
liabilities and obligations of Seller for all purposes (the "Excluded
Liabilities").
ARTICLE II
PURCHASE PRICE; CLOSING
2.1 PURCHASE PRICE. (a) Subject to the terms and conditions of this
Agreement, the purchase price payable for the purchase of the Assets (the
"Purchase Price") shall be an amount equal to the fair market value of the
Securities (as hereinafter defined). The Purchase Price shall be payable as
follows: on the Closing Date, as consideration for the purchase of the Assets,
Parent shall deliver to Seller, and Seller shall accept from Parent, all of the
shares of common stock, par value $.01 per share, of Seller ("Seller Common
Stock") owned by Parent, directly or indirectly, and all of the warrants to
purchase shares of Seller Common Stock owned by Parent, directly or indirectly,
in each case as of the Closing Date and as set forth on Schedule 2.1(a) hereto
(collectively, the "Securities").
(b) The parties shall mutually determine the allocation of the
value of the Purchase Price among the Assets.
2.2 TIME AND PLACE. The closing for the sale and purchase of the
Assets (the "Closing") shall take place at 10:00 a.m. at the offices of Faegre &
Benson LLP, 2200 Norwest Center, Minneapolis, Minnesota 55402 on such date, or
at such other location, as the parties shall mutually agree in writing (the
"Closing Date").
2.3 DELIVERIES.
(a) Deliveries by Seller. Seller shall deliver to Purchaser at
the Closing the following:
(i) a Warranty Bill of Sale and Assignment in form
attached hereto as Exhibit A, together with such other bills of
sale, assignments and other instruments of transfer, in form
reasonably satisfactory to Purchaser and its counsel, as Purchaser
and its counsel shall deem reasonably necessary or appropriate to
vest and confirm in Purchaser good and marketable title to the
Assets;
(ii) a Patent Assignment in the form attached hereto as
Exhibit B;
(iii) an executed counterpart of a Termination of
Implantable Cardioverter Defibrillator Product Manufacturing and
Supply Agreement (the "Termination Agreement"), pursuant to which
Seller and Purchaser agree to terminate certain supply
-3-
<PAGE>
arrangements between such parties with respect to the Cardiac
Stimulation Device Business, in the form attached hereto as Exhibit
C;
(iv) an executed counterpart of a License Agreement (the
"License Agreement") with respect to the Licensed Patents (as that
term is defined in the License Agreement) in the form attached
hereto as Exhibit D;
(v) a copy, certified as of the Closing Date by the
Secretary of Seller, of (A) the resolutions of the Board of
Directors of Seller authorizing the execution, delivery and
performance of this Agreement by Seller and (B) the resolutions or
other actions of the shareholders of Seller approving the sale by
Seller of the Assets to Purchaser and the other actions contemplated
hereunder, as required under the Minnesota Business Corporation Act
("MBCA") and Seller's Articles of Incorporation and By-Laws, as
amended;
(vi) a certificate of Seller ("FIRPTA Certificate") in
the form attached hereto as Exhibit E certifying that Seller is not
a "foreign person" within the meaning of Section 1445 of the
Internal Revenue Code of 1986, as amended;
(vii) all third party consents to the sale of the Assets
hereunder as set forth in Schedule 2.3(a)(vii) hereto;
(viii) transfer of all items of tangible personal
property included among the Assets and all documents, computer files
and other mediums which contain or evidence the Intellectual
Property Rights (as hereinafter defined);
(ix) a certificate, dated the Closing Date and executed
by a proper officer of Seller, to the effect that (A) each of the
representations and warranties of Seller made herein is true and
correct in all material respects on the Closing Date as though such
representations and warranties were made on such date and (B) Seller
has performed and complied in all material respects with all
covenants, conditions and obligations under this Agreement which are
required to be performed or complied with by Seller on or prior to
the Closing Date;
(x) evidence satisfactory to Purchaser and its counsel
as to the release of all Encumbrances created with respect to the
Assets;
(xi) a written opinion of counsel for Seller, dated the
Closing Date and addressed to Parent and Purchaser, in a form to be
mutually agreed to by the parties;
(xii) an executed counterpart of a Settlement Agreement
and Mutual Release in the form attached hereto as Exhibit F (the
"Settlement Agreement and Mutual Release");
(xiii) an executed counterpart of an Assumption
Agreement (the "Assumption Agreement") in the form attached hereto
as Exhibit G; and
(xiv) an acknowledgment of receipt of the items to be
delivered by Parent and Purchaser at the Closing.
-4-
<PAGE>
(b) Deliveries by Parent and Purchaser. Parent or Purchaser,
as applicable, shall deliver to Seller at the Closing the following:
(i) an executed counterpart of the Assumption Agreement;
(ii) an executed counterpart of the Termination
Agreement;
(iii) an executed counterpart of the License Agreement;
(iv) the Securities, duly endorsed in blank or with
stock powers duly endorsed in blank attached thereto;
(v) a certificate, dated as of the Closing Date and
executed by a proper officer of Purchaser, to the effect that (A)
each of the representations and warranties of Purchaser made herein
is true and correct in all material respects on the Closing Date as
though such representations and warranties were made on such date
and (B) Purchaser has performed and complied in all material
respects with all covenants and obligations under this Agreement
which are to be performed or complied with by Purchaser on or prior
to the Closing Date;
(vi) a written opinion of counsel for Parent and
Purchaser, dated the Closing Date and addressed to Seller, in a form
to be mutually agreed to by the parties;
(vii) an executed counterpart of the Settlement
Agreement and Mutual Release; and
(viii) an acknowledgment of receipt of the items to be
delivered by Seller at the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the representations and warranties set forth in
this Article III, each of which is true and correct as of the date hereof and
will be true and correct as of the Closing Date, except as set forth in the
Disclosure Schedule to be delivered by Seller to Purchaser on the date hereof
(the "Disclosure Schedule") (which Disclosure Schedule sets forth the exceptions
to the representations and warranties contained in this Article III):
3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has all requisite corporate power and authority to own, lease and
operate the properties and assets it now owns, leases or operates and to carry
on its business as presently conducted. Seller is qualified to do business and
is in good standing in each jurisdiction where the ownership, leasing or
operations of the Assets or the conduct of its business requires such
qualification, except where such failure to be so qualified and in good standing
would not have a material adverse effect on the business or financial condition
of Seller as presently conducted.
3.2 AUTHORITY; BINDING EFFECT; PERFORMANCE. Seller has all requisite
corporate power
-5-
<PAGE>
and authority to execute and deliver and, subject to the approval of its
shareholders and the approval of the Senior Note Holders, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Seller, and the
consummation of the transactions contemplated hereby, have been duly authorized
by the Board of Directors of Seller. With the exception of shareholder approval
and the approval of the Senior Note Holders, which approvals shall be obtained
by the Closing Date, no other corporate action on the part of Seller is
necessary to authorize the execution, delivery or performance of this Agreement
by Seller or the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered on behalf of Seller and
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except that the enforceability of
this Agreement is subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors' rights and
limitations on the availability of the remedy of specific performance and other
equitable relief.
3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution, delivery
and performance of this Agreement by Seller, and the consummation of the
transactions contemplated hereby, will not (i) violate or conflict with any
provision of the Articles of Incorporation or By-Laws of Seller; (ii) except
with respect to the Indenture dated as of April 14, 1998 (the "Indenture")
between Seller and U.S. Bank, national association, with respect to the 7 1/2%
Senior Convertible Notes due 2003 of Seller, violate or conflict with, result in
the breach of, constitute an event of default (or an event which, with the lapse
of time or the giving of notice or both, would constitute an event of default)
under, or result in the creation in any party of any right to accelerate,
modify, cancel or terminate, any contract or other instrument to which Seller is
a party, or by which Seller or any of the Assets is bound, or result in the
creation of any Encumbrance or other right of any third party upon any of the
Assets; (iii) violate or conflict with any law, rule, regulation, ordinance,
code, judgment, order, writ, injunction or decree of any court or any
governmental body or agency thereof of any jurisdiction to which Seller or any
of the Assets may be subject; or (iv) require any registration, declaration or
filing with, or permit, license, exemption, order, franchise, approval, consent
or other authorization of, or the giving of notice to, any governmental or
regulatory body, agency or authority.
3.4 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the
Disclosure Schedule, there are no material liabilities or obligations relating
to the Assets, whether known or unknown, fixed or contingent.
3.5 NO CLAIMS OR LITIGATION. There are no suits, actions, claims,
proceedings (including, without limitation, arbitral and administrative
proceedings) or investigations pending or, to the knowledge of Seller,
threatened against Seller (or any of its directors, officers, employees,
stockholders or agents) relating to or affecting, directly or indirectly, the
Assets. There are no such suits, actions, claims, proceedings or investigations
pending or, to the knowledge of Seller, threatened against Seller or challenging
the validity or propriety of this Agreement or the transactions contemplated
hereby. There is no judgment, order, injunction, decree or award issued by any
court, arbitrator, governmental body or agency thereof of competent jurisdiction
to which Seller is a party or by which any of the Assets, including the
Intellectual Property Rights, are bound, which is unsatisfied or which requires
continuing compliance therewith by Seller, other than an arbitration concerning
a potential non-exclusive license to the Assigned Patents by Medtronic to which
Seller was not a party and disputes the outcome thereof or being bound thereby.
-6-
<PAGE>
3.6 TITLE TO ASSETS AND RELATED MATTERS. (a) Seller has good and
marketable title to the Assets, free and clear of any and all mortgages,
pledges, security interests, liens, charges, equities, claims, conditional sales
contracts, licenses, restrictions, reservations, options, rights and other
encumbrances of any nature whatsoever (collectively, "Encumbrances"), other than
those Encumbrances arising under the Assumed Contracts. On the Closing Date,
Seller shall convey to Purchaser, and Purchaser shall acquire from Seller, good
and marketable title to the Assets, free and clear of any Encumbrances, other
than those Encumbrances arising under the Assumed Contracts. There is no
agreement, arrangement or understanding with any person to which Seller is a
party, or any judgment, order, writ, injunction or decree of any court or
governmental body or agency thereof of any jurisdiction that is binding on
Seller, that would prevent the use by Purchaser of the Assets from and after the
Closing Date.
(b) The Assets include all of the Intellectual Property Rights
(as hereinafter defined). Seller has not assigned or conveyed any Intellectual
Property to any third party, other than as set forth in the Disclosure Schedule.
3.7 INTELLECTUAL PROPERTY. The Disclosure Schedule sets forth a
complete and correct list of all worldwide patents, patent applications,
copyrights, whether or not registered, trademarks and service marks, trademark
and service mark registrations (and applications therefor), trade names,
business names, brand names and logos, devices, insignias, formats, titles and
subtitles and all registrations issued and all applications pending with respect
to the foregoing, all technical specifications, know-how, trade secrets,
inventions, patent disclosures, protocols, formulae, processes, procedures,
records of inventions, test information, testing and validation results, test
fixtures (other than generic test fixtures), drawings, diagrams, designs,
operating manuals and other proprietary information currently owned or used by
Seller in connection with the Leads and the Flat Capacitor, excluding
non-proprietary software (collectively, the "Intellectual Property Rights"), all
of which are valid and subsisting and are included in the Assets. Except as set
forth on the Disclosure Schedule, Seller is the sole, rightful and exclusive
owner of, and has good and marketable title to, all of the Intellectual Property
Rights and the goodwill associated therewith, free and clear of all
Encumbrances. All patents, applications and registrations described in the
Disclosure Schedule are valid and in full force and effect, and no filings or
other action is required for at least 10 days after the Closing Date to maintain
the patents, registrations or applications described in the Disclosure Schedule
in full force and effect. Except as set forth on the Disclosure Schedule, there
are no licenses, agreements or commitments outstanding or effective granting any
other person any right to make, use, sell, import, operate under, license or
sublicense, or otherwise concerning, the Intellectual Property Rights. The
Intellectual Property Rights do not infringe, or otherwise conflict with, any
proprietary or other rights of any other person. Seller has no knowledge that
any of the Intellectual Property Rights infringe upon or conflict with the
rights of any other person and has not received any notice or claim of such
infringement or conflict, including from the U.S. Patent and Trademark Office.
To the knowledge of Seller, there is no infringement or violation by any other
person of Seller's rights in any of the Intellectual Property Rights. The
consummation of the transactions contemplated hereby will not result in any
modification of or create any right of termination, cancellation or abandonment
with respect to the Intellectual Property Rights. Seller has paid in full (or
otherwise to the satisfaction of the invoicing party) all invoiced fees and
expenses of domestic and foreign counsel for work done and disbursements
incurred on behalf of Seller relating to the Intellectual Property Rights
through and including the Closing Date.
-7-
<PAGE>
3.8 CONTRACTS. Except for the Assumed Contracts, there are no
written or oral contracts, arrangements and understandings relating to the
Assets, except those license agreements currently in effect which grant to any
person any rights with respect to any of the Intellectual Property Rights as set
forth in the Disclosure Schedule and standard employment, patent assignment,
work for hire, confidentiality agreements and consulting agreements between
Seller and employees or consultants of Seller, pursuant to which such employees
and consultants have assigned to Seller any rights that they have with respect
to the Intellectual Property Rights. Seller has previously delivered or made
available to Purchaser complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each Assumed Contract. Except
as set forth in the Disclosure Schedule, (i) each Assumed Contract is in full
force and effect; (ii) neither Seller nor (to the knowledge of Seller) any other
party is in default under any such contract, and no event has occurred which
constitutes, or with the lapse of time or the giving of notice or both would
constitute, a default by Seller or (to the knowledge of Seller) a default by any
other party under such contract; (iii) to the knowledge of Seller, there are no
disputes or disagreements between Seller and any other party with respect to any
such contract; (iv) Seller is not currently renegotiating any of such contracts,
nor is Seller paying liquidated damages in lieu of performing any of such
contracts; and (v) there are no amounts due and payable by Seller under any of
the Assumed Contracts and no amounts will be owing under any of the Assumed
Contracts in the future except with respect to products delivered or services
rendered after the Closing Date or as otherwise disclosed on the Disclosure
Schedule.
3.9 PERMITS. The Disclosure Schedule sets forth a complete and
correct list of all permits, licenses, franchises, approvals and authorizations
issued by governmental or regulatory authorities for the Leads and Flat
Capacitor. Except with respect to the 4090 Series leads, Seller is in compliance
with all such permits, licenses, franchises, approvals and authorizations,
except where the failure to be so in compliance would not have a material
adverse effect on the Assets or the use thereo, and has not received
notification by any governmental or regulatory authority of any violation by
Seller of any such permits, licenses, franchises, approvals and authorizations.
3.10 COMPLIANCE WITH APPLICABLE LAW. Seller is not in violation of
any applicable foreign or domestic laws, rules, regulations, ordinances, codes,
judgments, orders, injunctions, writs or decrees of any Federal, state, local or
foreign court or governmental body or agency thereof to which it may be subject
which are applicable to or which could materially adversely affect any of the
Assets. No claims have been filed against Seller, and Seller has not received
any notice alleging, any such violation, nor, to the knowledge of Seller, is
there any inquiry, investigation or proceedings relating thereto.
3.11 BROKERS AND FINDERS. Except for Raymond James & Associates, no
broker, finder or investment banker has been retained by Seller or is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement. Seller agrees to pay Raymond James
& Associates, and indemnify and hold each of Parent and Purchaser harmless in
respect of, all fees, commissions or other amounts payable to Raymond James &
Associates.
3.12 ABSENCE OF OTHER AGREEMENT FOR SALE OF ASSETS. There are no
agreements, arrangements or understandings to which Seller is a party or by
which any of the Assets are bound providing for or involving the purchase, sale
or other disposition of the Assets, whether through a sale of assets or
otherwise, other than this Agreement.
-8-
<PAGE>
3.13 PROXY STATEMENT. The Proxy Statement (as hereinafter defined)
will comply in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended, except that no representation or
warranty is being made by Seller with respect to any information supplied to
Seller by Purchaser or any of its affiliates specifically for inclusion in the
Proxy Statement. The Proxy Statement will not, at the time the Proxy Statement
is filed with the Securities and Exchange Commission (the "SEC") or first sent
to shareholders of Seller or at the time of the Special Meeting (as hereinafter
defined) contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the meeting of
Seller's shareholders held for approval of the transactions contemplated by this
Agreement which has become false or misleading.
3.14 DISCLOSURE. No representation and warranty of Seller contained
in this Agreement (including, without limitation, the Disclosure Schedule
hereto), nor any other statement, schedule, certificate or other document
delivered or to be delivered by Seller to Purchaser pursuant hereto or in
connection with the transactions contemplated by this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances in which they were made, not
misleading. All information required to be disclosed by Seller under this
Agreement and all other material information concerning the Assets have been
disclosed by Seller in this Agreement, the Disclosure Schedule hereto or any
other statement, schedule, certificate or other document delivered to Purchaser
by Seller under this Agreement.
3.15 RELIANCE. The foregoing representations and warranties are made
by Seller with the knowledge and expectation that Purchaser is placing complete
reliance thereon in entering into, and performing its obligations under, this
Agreement, and the same shall not be affected in any respect whatsoever by any
investigation heretofore conducted by or on behalf of either of them whether in
contemplation of this Agreement or otherwise.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, make the
representations and warranties set forth in this Article IV, each of which is
true and correct as of the date hereof and will be true and correct as of the
Closing Date:
4.1 ORGANIZATION AND GOOD STANDING. Each of Parent and Purchaser is
a societe anonyme duly organized, validly existing and in good standing under
the laws of the Republic of France and has all requisite corporate power and
authority to own, lease and operate the properties and assets it now owns,
leases or operates and to carry on its business as presently conducted.
4.2 AUTHORITY; BINDING EFFECT; PERFORMANCE. Each of Parent and
Purchaser has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by Parent and Purchaser has been duly authorized
by all necessary corporate action on the part of Parent and Purchaser. This
Agreement has been duly executed and delivered on behalf of Parent and Purchaser
and constitutes
-9-
<PAGE>
the legal, valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms, except that the enforceability of
this Agreement is subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors' rights and
limitations on the availability of the remedy of specific performance and other
equitable relief.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and
delivery of this Agreement by Parent and Purchaser, and the consummation of the
transactions contemplated hereby, will not (i) violate or conflict with any
provision of the organizational documents of either Parent or Purchaser; (ii)
violate or conflict with, result in the breach of or constitute a default (or an
event which, with the lapse of time or the giving of notice or both, will
constitute a default) under, any contract or other instrument to which either
Parent or Purchaser is a party or by which either Parent or Purchaser or any of
their assets are bound, except for any such violation, conflict, breach, event
of default, acceleration, modification, cancellation or termination which,
individually or in the aggregate, would not have a material adverse effect on
the business, financial condition or results of operations of either Parent or
Purchaser; (iii) violate or conflict with any law, rule, regulation, judgment,
order, writ, injunction or decree of any court or any governmental body or
agency thereof of any jurisdiction to which either Parent or Purchaser is
subject; or (iv) require any filing with, or license, permit, order, franchise,
approval, consent or other authorization of, any governmental body or agency
thereof.
4.4 BROKERS AND FINDERS. No broker, finder or investment banker has
been retained by Purchaser or is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS
5.1 CONDUCT PENDING CLOSING. Seller hereby makes the following
covenants and agreements with Purchaser:
(a) AFFIRMATIVE COVENANTS. Between the date hereof and the
Closing Date, unless otherwise consented to in writing by Purchaser, Seller
shall:
(i) use its best efforts to preserve the Assets;
(ii) remain in material compliance with all permits,
laws, rules and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar governmental
authorities applicable to the Assets and the Licensed Patents;
(iii) promptly advise Purchaser in writing of the
commencement or, if known to Seller, threat of any suit, proceeding
or investigation which could have a material adverse effect on the
Assets and the Licensed Patents, whether or not covered by
insurance;
(iv) promptly advise Purchaser in writing of the
existence or occurrence of (i) any condition or event which could
have a material adverse effect on the Assets and the Licensed
Patents and (ii) any event, condition or state of facts which will
or is
-10-
<PAGE>
reasonably likely to result in the failure to satisfy any of the
conditions specified in Article VI hereof; and
(v) maintain the policies of insurance on the Assets in
effect as of the date hereof in full force and effect without
reduction in coverage.
(b) NEGATIVE COVENANTS. Between the date hereof and the
Closing Date, unless otherwise consented to in writing by Purchaser, Seller
shall not:
(i) make any change in the Articles of Incorporation or
By-Laws, or other constituent documents, of Seller;
(ii) enter into any contract or commitment, or series of
related contracts or commitments, in respect of the Assets, except
with the prior written consent of Purchaser;
(iii) subject to Section 5.1(b)(vii) hereof, create or
permit to become effective any Encumbrances on the Assets and the
Licensed Patents;
(iv) sell, assign, lease or otherwise transfer or
dispose of any of the Assets, abandon any of the Licensed Patents,
grant any exclusive license with respect to or, subject to Section
5.1(b)(vii) hereof, sell, assign, or otherwise transfer or dispose
of any of the Licensed Patents;
(v) commit a material breach of or amend any agreement,
permit, license or other right of Seller in respect of the Assets;
(vi) enter into any other transaction in respect of the
Assets outside the ordinary course of business or prohibited
hereunder; or
(vii) enter into any agreement or commitment to do any
of the foregoing, provided, however, that Seller shall not be
prohibited from (1) entering into an agreement or agreements for the
sale of all or substantially all of the Licensed Patents, so long as
the purchaser acknowledges that such sale will be subject to the
rights of Purchaser and its affiliates under the License Agreement
or the Cross-License Agreement referred to in Section 8.2 hereof, as
the case may be, (2) entering into a security agreement in which all
or substantially all of the Licensed Patents are used as collateral,
so long as the lender acknowledges that such security interest will
be subject to the rights of Purchaser and its affiliates under the
License Agreement or the Cross-License Agreement referred to in
Section 8.2 hereof, as the case may be or (3) entering into a
non-exclusive license with respect to any of the Licensed Patents.
5.2 PROXY STATEMENT.
(a) Subject to Section 5.2(b) hereof, Seller, acting through its
Board of Directors, shall:
-11-
<PAGE>
(i) duly call, give notice of, convene and hold a
special meeting of its shareholders (the "Special Meeting") as soon
as practicable following the date hereof for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy
relating to this Agreement no later than August 20, 1999 and obtain
and furnish the information required to be included by the SEC in
the Proxy Statement and, after consultation with Purchaser, use its
best efforts to respond promptly to any comments made by the SEC
with respect to the preliminary proxy and cause a definitive proxy
(as amended or supplemented, the "Proxy Statement") to be mailed to
its shareholders;
(iii) include in the Proxy Statement the written opinion
of Seller's financial advisor that the consideration to be received
by Seller hereby is fair from a financial point of view; and
(iv) use its reasonable best efforts to obtain the
approval of this Agreement and the transactions contemplated hereby
by (A) the holders of the requisite number of issued and outstanding
shares of capital stock of Seller, and (B) the holders (the "Senior
Note Holders") of a majority of the issued and outstanding 7 1/2%
Senior Convertible Notes of Seller due April 14, 2004 (the "Senior
Notes").
(b) The Board of Directors of Seller shall recommend approval
and adoption of this Agreement and the transactions contemplated hereby by
Seller's shareholders and the Senior Note Holders. The Board of Directors of
Seller shall not be permitted to withdraw, amend or modify in a manner adverse
to Purchaser such recommendation (or announce publicly its intention to do so),
except that prior to the Special Meeting, the Board of Directors of Seller shall
be permitted to withdraw, amend or modify its recommendation (or announce
publicly its intention to do so) but only if the Board of Directors of Seller
shall have determined in its good faith judgment, based upon the advice of
outside counsel, that it is obligated by its fiduciary obligations under
applicable law to withdraw, amend or modify such recommendation. If the Special
Meeting is being held, the recommendation of the Board of Directors of Seller
shall be included in the Proxy Statement. Nothing contained in this Section
5.2(b) shall prohibit Seller from making any disclosure to Seller's shareholders
or the Senior Note Holders if, in the good faith judgment of the Board of
Directors of Seller, upon the advice of counsel, failure to make such disclosure
would be inconsistent with applicable laws.
(c) Each of Parent and Purchaser agrees that it will provide
Seller with the information concerning it required to be included in the Proxy
Statement and will vote, or cause to be voted, all of the shares of Seller
Common Stock then owned by it, directly or indirectly, or over which it has the
power to vote, in favor of approval of this Agreement and the transactions
contemplated hereby. Parent and Purchaser shall have the right to review in
advance all characterizations and information related to them, this Agreement
and the transactions contemplated hereby which appear in the Proxy Statement.
(d) Each of Parent, Purchaser and Seller agrees promptly to
correct any information provided by it for use in the Proxy Statement as and to
the extent it shall have become false or misleading in any material respect and
to supplement the information provided by it
-12-
<PAGE>
specifically for use in the Proxy Statement to include any information that
shall have become necessary, in order to make statements contained therein, in
light of the circumstances in which they were made, not misleading, and Seller
further agrees to take all steps necessary to cause the Proxy Statement, as so
corrected or supplemented, to be filed with the SEC and to be disseminated to
its shareholders and the Senior Note Holders, in each case as and to the extent
required by applicable federal securities laws.
5.3 ACCESS TO INFORMATION. From the date hereof until the Closing
Date, Seller and its representatives shall cooperate fully in all reasonable
respects with Purchaser in its investigation of the Assets. Without limiting the
foregoing, such persons shall allow the employees, attorneys, accountants and
other representatives of Purchaser to meet with the management of Seller and its
representatives at reasonable times, to have free and full access at reasonable
times to the premises, properties, books and records (including the right to
make extracts therefrom or copies thereof) of Seller in respect of the Assets,
and shall furnish to Purchaser or its authorized representatives such additional
information pertaining to the Assets as, in the reasonable discretion of
Purchaser, are required for Purchaser to conduct such investigation.
5.4 NOTICE AND CURE. Seller will notify Purchaser of, and will use
all commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practicable after it becomes known to
Seller, that causes or will cause any covenant or agreement of Seller under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of Seller contained in this Agreement. Seller shall
also notify Purchaser in writing of, and will use all commercially reasonable
efforts to cure, before the Closing, any violation or breach, as soon as
practicable after it becomes known to Seller, of any representation, warranty,
covenant or agreement made by Seller in this Agreement. No notice given pursuant
to this Section 5.4 shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
5.5 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties agrees that it shall use its commercially
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, but not limited to, (i) obtaining all
consents from governmental authorities and other third parties required for the
consummation of the transactions contemplated hereby, (ii) timely making all
necessary filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), if any, and (iii) having vacated, dismissed or
withdrawn any order, stay, decree, judgment or injunction of any governmental
authority which temporarily, preliminarily or permanently prohibits or prevents
the transactions contemplated by this Agreement; provided, however, that Parent,
Purchaser and Seller hereby agree that commercially reasonable best efforts
shall not include making any payment to, or otherwise satisfying any claims of,
the Senior Note Holders in order to obtain their approval of the consummation of
the transactions contemplated by this Agreement. Upon the terms and subject to
the conditions hereof, each of the parties agrees to use its commercially
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions of the
Closing set forth herein.
ARTICLE VI
-13-
<PAGE>
CONDITIONS TO THE OBLIGATIONS OF PARENT AND PURCHASER
The obligations of Parent and Purchaser to consummate the
transactions contemplated hereunder shall be subject to the satisfaction of each
of the following conditions at or prior to the Closing, unless waived by Parent
and Purchaser in writing:
6.1 REPRESENTATIONS AND WARRANTIES TRUE. All of the representations
and warranties of Seller contained in this Agreement (including, without
limitation, the Schedules hereto) shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made on such date and Seller shall have delivered the certificate to that effect
which is described in Section 2.3(a)(ix) above.
6.2 PERFORMANCE. Seller shall have performed and complied in all
material respects with all covenants and obligations under this Agreement which
are required to be performed or complied with by Seller on or prior to the
Closing Date and Seller shall have delivered the certificate to that effect
which is described in Section 2.3(a)(ix) above.
6.3 APPROVALS, PERMITS, CONSENTS. All material consents,
authorizations, approvals, exemptions, licenses or permits of, or material
registrations, qualifications, declarations or filings with, any governmental
body or agency thereof that are required in connection with the sale and
transfer of the Assets to Purchaser pursuant to this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
obtained or made in form and substance reasonably satisfactory to Purchaser and
its counsel and shall be effective at and as of the Closing Date and, if
applicable, the specified waiting periods under the HSR Act shall have expired
without the receipt of any objections from the appropriate governmental agency.
Seller shall have delivered to Purchaser duly executed written consents of third
parties to the sale of Assets to Purchaser required pursuant to any agreement to
which Seller is a party or by which it is bound.
6.4 SHAREHOLDER AND SENIOR NOTE HOLDER APPROVAL. This Agreement and
the transactions contemplated hereby shall have been duly approved by the
shareholders of Seller in accordance with the MBCA and the Articles of
Incorporation and By-Laws of Seller and by the Senior Note Holders in accordance
with the Indenture.
6.5 DELIVERY OF CLOSING DOCUMENTS. Seller shall have delivered to
Purchaser the documents referred to in Section 2.3(a) hereof, in form and
substance reasonably satisfactory to Purchaser and its counsel.
6.6 ABSENCE OF CERTAIN EVENTS. No statute, rule or regulation shall
have been enacted or promulgated which would make any of the transactions
contemplated by this Agreement illegal or would otherwise prevent the
consummation thereof. No order, decree, writ or injunction shall have been
issued and shall remain in effect by any court or governmental body or agency
thereof which restrains, enjoins or otherwise prohibits the consummation of the
transactions contemplated hereby, and no action, suit or proceeding before any
court or governmental body or agency thereof shall be pending or, to the
knowledge of Seller, threatened by any person (or instituted or threatened by
any governmental body or agency thereof), and no investigation by any
governmental body or agency thereof shall be pending or, to the knowledge of
Seller, threatened with respect to the transactions contemplated hereby.
-14-
<PAGE>
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions
contemplated hereunder shall be subject to the satisfaction of each of the
following conditions on or prior to the Closing, unless waived by Seller in
writing:
7.1 REPRESENTATIONS AND WARRANTIES TRUE. All of the representations
and warranties of Parent and Purchaser contained in this Agreement (including,
without limitation, the Schedules hereto) shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made on such date and Purchaser shall have delivered the
certificates to that effect which are described in Section 2.3(b)(v) above.
7.2 PERFORMANCE. Parent and Purchaser shall have performed and
complied in all material respects with all covenants and obligations under this
Agreement which are required to be performed or complied with by them on or
prior to the Closing Date and Purchaser shall have delivered the certificates to
that effect which are described in Section 2.3(b)(v) above.
7.3 APPROVALS, PERMITS, CONSENTS. All material consents,
authorizations, approvals, exemptions, licenses or permits of, or material
registrations, qualifications, declarations or filings with, any governmental
body or agency thereof that are required in connection with the sale and
transfer of the Assets to Purchaser pursuant to this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
obtained or made in form and substance reasonably satisfactory to Seller and its
counsel and shall be effective at and as of the Closing Date and, if applicable,
the specified waiting periods under the HSR Act shall have expired without the
receipt of any objections from the appropriate governmental agency.
7.4 SHAREHOLDER AND SENIOR NOTE HOLDER APPROVAL. This Agreement and
the transactions contemplated hereby shall have been duly approved by the
shareholders of Seller in accordance with the MBCA and the Articles of
Incorporation and By-Laws of Seller and by the Senior Note Holders in accordance
with the Indenture.
7.5 DELIVERY OF CLOSING DOCUMENTS. Seller shall have received the
documents referred to in Section 2.3(b) hereof in form and substance reasonably
satisfactory to Seller and its counsel.
7.6 ABSENCE OF CERTAIN EVENTS. No statute, rule or regulation shall
have been enacted or promulgated which would make any of the transactions
contemplated by this Agreement illegal or would otherwise prevent the
consummation thereof. No order, decree, writ or injunction shall have been
issued and shall remain in effect, by any court or governmental body or agency
thereof which restrains, enjoins or otherwise prohibits the consummation of the
transactions contemplated hereby, and no action, suit or proceeding before any
court or governmental body or agency thereof shall be pending or, to the
knowledge of Seller, threatened by any person (or instituted or threatened by
any governmental body or agency thereof), and no investigation by any
governmental body or agency thereof shall be pending or, to the knowledge of
Seller, threatened with respect to the transactions contemplated hereby.
-15-
<PAGE>
ARTICLE VIII
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by the mutual written consent of Parent, Purchaser and
Seller;
(b) by any of Parent, Purchaser or Seller:
(i) if any statute, rule or regulation has been enacted
which would make any of the transactions contemplated by this
Agreement illegal or would otherwise prevent the consummation
thereof or if any court or governmental body or agency thereof shall
have issued any writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and all appeals and means of appeal therefrom
have been exhausted;
(ii) if the Closing shall not have occurred on or prior
to December 31, 1999; provided, however, that the right to terminate
this Agreement pursuant to this Section 8.1(b)(ii) shall not be
available to any party whose breach of any representation or
warranty or failure to perform or comply with any covenant or
obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date;
(c) by Parent or Purchaser, if this Agreement and the
transactions contemplated hereunder shall not have been duly approved by the
shareholders of Seller at the Special Meeting or by the Senior Note Holders at
the time of the Special Meeting;
(d) by Parent or Purchaser, if any of the conditions specified
in Article VI shall not have been met or waived prior to such time as such
condition can no longer be satisfied;
(e) by Seller, if the Board of Directors of Seller determines
in good faith, based upon the advice of outside counsel, that it is obligated by
its fiduciary obligations under applicable law to terminate this Agreement; or
(f) by Seller, if any of the conditions specified in Article
VII shall not have been met or waived prior to such time as such condition can
no longer be satisfied.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party as provided in Section 8.1 hereof, this Agreement shall
forthwith become null and void and there shall be no liability or obligation on
the part of any party hereto or their respective officers or directors, except
for the provisions of Article XI, which shall remain in full force and effect,
and except that nothing herein shall relieve any party hereto from liability for
a breach of this Agreement prior to the termination hereof. Notwithstanding the
foregoing, in the event that this Agreement is terminated by Parent or Purchaser
pursuant to Section 8.1(c) or (d) or by Seller pursuant to Section 8.1 (e) or
(f), Seller and Purchaser hereby agree to forthwith enter into a Cross-License
Agreement in the form attached hereto as Exhibit H.
-16-
<PAGE>
ARTICLE IX
POST-CLOSING COVENANTS
9.1 ACCESS AFTER CLOSING. (a) Each of Purchaser and Seller agree to
retain all accounting, business, financial and tax records in its possession
relating to the Assets for a period of three years from the Closing Date,
provided that, after such date, each party shall make reasonable arrangements
for the other party's continued access to any such records which it does not
otherwise destroy under its normal document retention policies. Prior to any
liquidation, Seller shall take all steps reasonably necessary to provide
Purchaser with continued access to such records following such liquidation. In
addition, from and after the Closing Date, Purchaser and Seller agree that,
subject to receiving appropriate assurances of confidentiality and restrictions
on use, each will not unreasonably withhold access by the other party and its
attorneys, accountants and other representatives (after reasonable notice and at
times to be mutually agreed, provided that such access does not disrupt the
normal operations of the other party), to such personnel, books, records and
documents relating to the Assets as the other party may reasonably deem
necessary to properly prepare for, file, prove, answer, prosecute and/or defend
any financial statements, tax return, filing, audit, judicial or administrative
proceeding, protest, claim, suit, inquiry or other proceeding relating to the
Assets.
(b) The party requesting assistance hereunder shall pay to the
party whose assistance is requested the reasonable costs of the party providing
such assistance.
9.2 FURTHER ASSURANCES. Seller shall, at any time and from time to
time after the Closing, upon the request and at the expense of Purchaser but
without further consideration, do, execute, acknowledge, deliver and file, or
shall cause to be done, executed, acknowledged, delivered and filed, all such
further acts, deeds, transfers, conveyances, assignments or assurances as may be
reasonably requested by Purchaser to transfer, convey and assign the Assets to
Purchaser's possession and use and to comply with all applicable legal
requirements, including, without limitation, making any required governmental
filings, in connection with the purchase of the Assets by Purchaser. Without
limiting the foregoing, upon the request and at the expense of Purchaser, at any
time during the period commencing on the Closing Date and ending on the third
anniversary of the Closing Date, Seller shall take all steps necessary to assign
all licenses, permits, exemptions, consents, authorizations or approvals in
respect of the Assets to Purchaser in cases where such assignment is permitted
and to reasonably cooperate with and assist Purchaser in connection with the
issuance of new licenses, permits, exemptions, consents, authorizations and
approvals in cases where such assignment is not permitted.
9.3 SUPPLY AGREEMENTS. In the event that Purchaser or any of its
affiliates enters into a supply agreement for the Flat Capacitor with Barker
Microfarads, Inc., Seller shall have the right to purchase Flat Capacitors from
Purchaser for use in the Model 2030 ICD on a cost plus basis.
ARTICLE X
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.1 INDEMNITY OBLIGATIONS OF SELLER. (a) Seller hereby agrees to
indemnify and hold Purchaser and each of its stockholders, officers, directors,
affiliates, employees and agents (each, a "Purchaser Indemnitee") harmless from,
and to reimburse any Purchaser Indemnitee for, on an
-17-
<PAGE>
after-tax basis, any Purchaser Indemnity Claims (as hereinafter defined) arising
under this Agreement. For purposes of this Agreement, the term "Purchaser
Indemnity Claim" shall mean any loss, damage, deficiency, diminution in value,
claim, liability, obligation, suit, proceeding, action, demand, fee, cost, fine,
levy, penalty, surcharge or expense of any nature whatsoever including, without
limitation, reasonable out-of-pocket expenses, reasonable investigation costs
and reasonable fees and disbursements of counsel (collectively, "Damages")
suffered or incurred by a Purchaser Indemnitee (subject to Section 10.4) arising
out of, based upon or resulting from (i) the Excluded Liabilities or Seller's
failure to pay and discharge in full, or to cause to be paid and discharged in
full, all Excluded Liabilities in a full and timely manner from and after the
Closing Date; (ii) any breach of any representation and warranty of Seller which
is contained in this Agreement or any Schedule hereto or (iii) any breach or
nonfulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of Seller contained in or made pursuant to this Agreement.
(b) The indemnification obligations of Seller under this
Article X shall apply with respect to, without limitation, Damages arising out
of any and all actions, claims, suits, proceedings, demands, assessments,
judgments, recoveries, damages, costs and expenses or deficiencies incident to
the disposal of any Purchaser Indemnity Claim under this Section 10.1, together
with any interest, penalties, costs and expenses of any Purchaser Indemnitee
(including, without limitation, reasonable out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) arising out of or related to any such Purchaser Indemnity Claims.
(c) Seller shall be liable to a Purchaser Indemnitee for any
Damages (i) only if the aggregate amount of all Damages exceeds $100,000 (the
"Basket Amount"), in which case Seller shall be obligated to indemnify the
Purchaser Indemnitee for the aggregate amount of all such Damages including the
Basket Amount, and (ii) in an amount not to exceed the Purchase Price (the "Cap
Amount"); provided, however, that the foregoing restriction shall not apply to
any claim based on (a) the untruth or inaccuracy of any representation or
warranty of Seller contained in Sections 3.1, 3.2 and 3.5 hereof, or (b) the
untruth or inaccuracy of any other representation or warranty made herein or in
any statement, certificate or schedule furnished hereunder with an intent to
deceive or defraud or with reckless disregard for the truth or accuracy thereof.
10.2 INDEMNITY OBLIGATIONS OF PARENT AND PURCHASER. (a) Parent and
Purchaser jointly and severally agree to indemnify and hold Seller and each of
its stockholders, officers, directors, affiliates, employees and agents (each, a
"Seller Indemnitee") harmless from, and to reimburse any Seller Indemnitee for,
on an after-tax basis, any Seller Indemnity Claims (as hereinafter defined)
arising under this Agreement. For purposes of this Agreement, the term "Seller
Indemnity Claim" shall mean any Damages suffered or incurred by Seller (subject
to Section 10.4) arising out of, based upon or resulting from (i) the Assumed
Liabilities; (ii) any breach of any representation and warranty of Purchaser
which is contained in this Agreement or any Schedule hereto; or (iii) any breach
or nonfulfillment of, or any failure to perform, any of the covenants,
agreements or undertakings of Purchaser contained in or made pursuant to the
terms and conditions of this Agreement.
(b) The indemnification obligations of Purchaser shall apply
with respect to, without limitation, Damages arising out of any and all actions,
claims, suits, proceedings, demands, assessments, judgments, recoveries,
damages, costs and expenses or deficiencies incident to the
-18-
<PAGE>
disposal of any such Seller Indemnity Claim under this Section 10.2, together
with any interest, penalties, costs and expenses of any Seller Indemnitee
(including, without limitation, reasonable out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) arising out of or related to any such Seller Indemnity Claims.
10.3 INDEMNIFICATION PROCEDURES. If a party seeks indemnification
hereunder for a matter that involves a claim by a third party, the party seeking
indemnification (an "Indemnitee") shall promptly notify the indemnifying party
(the "Indemnitor") of and shall provide reasonable information and details
concerning the nature of such claim. Indemnitor shall, to the extent applicable,
have the right to assume the defense at its expense of all third party claims
and shall pay all costs and damages finally awarded against the Indemnitor and
the Indemnitee in conjunction with such third party claims, provided that (i)
the Indemnitee provides prompt written notice to the Indemnitor of its receipt
of service of any such claim; (ii) the Indemnitor controls the defense of the
third party claim on behalf of all Parties; (iii) the Indemnitee consents to
representation in such claims by counsel selected by and representing the
Indemnitor; provided, however, that if outside counsel to the Indemnitee
reasonably advises the Indemnitee and the Indemnitor in a written opinion that
such joint representation raises a potential conflict of interest as between the
Indemnitee and the Indemnitor (other than a conflict concerning the right to
indemnification under this Agreement), then the Indemnitee shall have the right
to retain separate counsel to represent its interests in such third party claim
and the reasonable costs, fees and expenses thereof shall be borne equally by
the Indemnitee and the Indemnitor; and (iv) upon request of the Indemnitor, the
Indemnitee uses its best efforts to cooperate with the Indemnitor in defending
such third party claim by providing the Indemnitor with all necessary business
information and relevant documents under its control related to the third party
claim and cooperating with such other reasonable requests of the Indemnitor at
the Indemnitor's expense in accordance with Applicable Law. The Parties'
indemnity obligations under this Article X shall not apply to amounts paid in
settlement of any loss, claim, liability or action if such settlement is
effected without the consent of the Indemnitor, which consent shall not be
unreasonably withheld. The Indemnitee's failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if materially prejudicial to the Indemnitor's ability to defend such action,
shall relieve the Indemnitor of any liability to the Indemnitee under this
Article X, but not any liability that it may have to the Indemnitee otherwise
than under this Article X.
10.4 DURATION. (a) Notwithstanding anything to the contrary in this
Agreement, all representations, warranties, covenants, undertakings and
agreements of the parties contained in or made pursuant to this Agreement, and
the rights of the parties to seek indemnification with respect thereto, shall
survive the Closing; provided, however, that, except in respect of any claims
for indemnification as to which written notice shall have been duly given to the
Indemnifying Party prior to the Indemnity Termination Date in accordance with
the terms of this Agreement, and subject to the remaining provisions of this
Section 10.4, such representations, warranties, covenants, undertakings and
agreements, and the rights of the parties to seek indemnification with respect
thereto, shall expire on the date which is eighteen (18) months after the date
hereof (the "Indemnity Termination Date").
(b) Any claim for indemnification under this Article X which
is made in good faith and in writing prior to the expiration of such claim on
the Indemnity Termination Date shall survive such expiration until mutually
resolved or otherwise determined hereunder, as applicable,
-19-
<PAGE>
and the Indemnity Termination Date for all purposes hereunder shall
automatically be extended with respect to such claim until such claim is so
mutually resolved or otherwise determined hereunder. Any such claim not so made
in writing prior to the expiration of such claim on the Indemnity Termination
Date shall be deemed to have been waived.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 EXPORT CONTROLS. (a) It is understood and acknowledged that
each party is subject to regulation by governmental authorities, including the
U.S. Department of Commerce, which prohibit export or diversion of certain
products and technology to certain countries. Any and all obligations of the
parties under this Agreement shall be subject in all respects to such laws and
regulations as shall from time to time govern the export of technology and
products abroad by persons subject to the jurisdiction of such governmental
authorities, including the U.S. Export Administration Act of 1979, as amended,
any successor legislation, and the U.S. Export Administration Regulations
("EAR") issued by the U.S. Department of Commerce, International Trade
Administration, Bureau of Export Administration ("BXA"). Each party warrants
that it will comply in all material respects with all export and re-export
restrictions applicable to the Assets shipped to Purchaser hereunder.
(b) Without limiting the foregoing, Purchaser agrees that it
shall not knowingly export, re-export or transship, directly or indirectly, to
countries identified in Part 746 of the EAR which are subject to comprehensive
BXA controls (currently consisting of: Cuba, Iraq, Iran, Libya and North Korea)
any of the Assets provided to Purchaser hereunder.
11.2 FEES AND EXPENSES. Except as expressly set forth herein, each
party shall be solely responsible for the payment of the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement.
11.3 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction or panel of arbitrators (including pursuant to
enforcement of an arbitration award under this Agreement) to be invalid,
unlawful or unenforceable, it shall be modified, if possible, to the minimum
extent necessary to make it valid, lawful and enforceable or, if such
modification is not possible, it shall be stricken from this Agreement, and the
remaining provisions of this Agreement shall continue in full force and effect;
provided, however, that if a provision is so stricken and is of a nature so as
to fundamentally alter the economic arrangements of this Agreement, the party
adversely affected may terminate this Agreement by giving to the other parties
hereto sixty (60) days written notice of termination.
11.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, and the Exhibits
and Schedules hereto, contain the entire understanding of the parties with
respect to the matters referred to hereby and, except as specifically set forth
herein, neither Purchaser nor Seller makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or supplemented other than by a written instrument
signed by the party against whom enforcement of any such amendment or supplement
is sought.
-20-
<PAGE>
11.5 NOTICES. Any notice or other communication required or
permitted to be given herein shall be in writing and shall be effective (i) upon
hand delivery or delivery by 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 (ii) 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 communications shall be:
(a) if to Seller at:
Angeion Corporation
7601 Northland Drive
Brooklyn Park, MN 55428-1088
Attention: Chief Executive Officer
Facsimile: (612) 315-2059
With copies to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Steven C. Kennedy, Esq.
Facsimile: (612) 336-3026
(b) if to Purchaser to:
ELA Medical
Centre d'Affaires la Boursidiere
92357 Le Plessis Robinson
Cedex, France
Attention: President
Facsimile: 33-1-46-01-33-15
Sanofi-Synthelabo
22 avenue Galilee
B.P. 82
92355 Le Plessis Robinson
Cedex, France
Attention: General Counsel
Facsimile: 33-1-45-37-58-04
-21-
<PAGE>
with copies to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 626-4120
Attention: David A. Boillot, Esq.
Any party hereto may from time to time change its address for
notices under this Section 11.5 by giving at least ten (10) days' written notice
of such changed address to the other parties hereto. All such notices and
communications hereunder shall be deemed given when received, as evidenced by
the signed acknowledgment of receipt of the person to whom such notice or
communication shall have been personally delivered, confirmed answer back or
other evidence of transmission or the acknowledgment of receipt returned to the
sender by the applicable postal authorities. Receipt of notices sent by
facsimile shall be confirmed by telephone.
11.6 SUCCESSORS AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither this Agreement nor any interest hereunder shall be assigned or
transferred, whether directly or indirectly, including by operation of law
("Assign" or "Assignment"), by any party without the prior express written
consent of the other parties (which consent may be withheld for any reason in
the sole discretion of the party from whom consent is sought), and any such
attempt at Assignment shall be null and void. The assignment by a party of this
Agreement or any rights hereunder shall not affect the obligations of such party
under this Agreement. Notwithstanding the foregoing, any party may Assign this
Agreement to an affiliate of such party so long as any assignment is made to an
affiliate that is directly or indirectly 100% owned by, or under 100% common
control with, that party. Any permitted Assignment made pursuant to this Section
shall be valid only if (i) the assigning party remains liable under this
Agreement, and (ii) the relevant affiliate or other entity assumes in writing
all of the assigning party's obligations under this Agreement.
11.7 NO THIRD PARTY BENEFICIARIES. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors and permitted assigns.
11.8 NO WAIVER. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future of this Agreement, or a waiver of
any other provision, condition or request of this Agreement, nor shall any delay
or omission of any party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
11.9 PUBLICITY. Each party agrees, and shall cause its affiliates,
not to issue any press release disclosing the terms of, or relating to, this
Agreement, without the prior written consent of the other parties; provided,
however, that neither party or its affiliates shall be prevented from complying
with any duty of disclosure it may have pursuant to applicable law. Such
disclosing party shall use its best efforts to consult with the other parties
regarding the issuance of any such
-22-
<PAGE>
press release, or with regard to any public statement disclosing the terms of
this Agreement and shall use its best efforts to obtain confidential treatment
for any confidential information where such press release or other public
statement is required to be made by applicable law.
11.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.11 HEADINGS. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
11.12 ENGLISH LANGUAGE CONTROLS; ENTIRE AGREEMENT. The original and
controlling version of this Agreement shall be the version using the English
language. All translations of this Agreement into other languages shall be for
the convenience of the parties only, and shall not control the meaning or
application of this Agreement. All notices and other communications required or
permitted by this Agreement must be in English, and the interpretation and
application of such notices and other communications shall be based solely upon
the English language version thereof. This Agreement, and the Schedules,
certificates and other instruments and documents delivered pursuant hereto,
together with the other agreements referred to herein and to be entered into
pursuant hereto, embody the entire agreement of the parties hereto in respect
of, and there are no other agreements or understandings, written or oral, among
the parties relating to, the subject matter hereof. This Agreement supersedes
all prior agreements and understandings, written or oral, between the parties
with respect to the subject matter hereof. The invalidity, illegality or
unenforceability for any reason of any one or more provisions of this Agreement
shall not affect the validity, legality or enforceability of the remainder of
this Agreement.
11.13 GOVERNING LAW. This Agreement, and the respective rights,
duties and obligations of the parties hereunder, shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law thereunder.
11.14 RELATIONSHIP OF THE PARTIES. For all purposes of this
Agreement, Purchaser and Seller shall be deemed to be independent entities and,
anything in this Agreement to the contrary notwithstanding, nothing herein shall
be deemed to constitute Purchaser and Seller as partners, joint venturers,
co-owners, an association or any entity separate and apart from each party
itself, nor shall this Agreement constitute any party hereto an employee or
agent, legal or otherwise, of the other for any purposes whatsoever. Neither
party hereto is authorized to make any statements or representations on behalf
of the other party or in any way obligate the other party, except as expressly
authorized in writing by the other party. Anything in this Agreement to the
contrary notwithstanding, no party hereto shall assume nor shall be liable for
any liabilities or obligations of the other party, whether past, present or
future.
11.15 SOVEREIGN IMMUNITY; EXCLUSIONS. (a) Each party hereto agrees
that, to the extent that it or any of its property is or becomes entitled at any
time to any immunity on the grounds of sovereignty or otherwise from any legal
action, suit or proceeding, from set off or counterclaim, from the jurisdiction
of any set off or counterclaim, from the jurisdiction of any competent court,
from service of process, from attachment prior to judgment, from attachment in
aid of execution,
-23-
<PAGE>
from execution prior to judgment or from any other legal process in any
jurisdiction, it, for itself and its property, expressly, irrevocably and
unconditionally waives, and agrees not to plead or claim any such immunity with
respect to its obligations, liabilities or any other matter under or arising out
of or in connection with this Agreement or the subject matter of this Agreement
(including without limitation any obligation for the payment of money). Each
party hereto is not subject to withdrawal in any jurisdiction or under any
statute, including, without limitation, the Foreign Sovereign Immunities Act, 28
U.S.C. ss.ss. 1602 et seq. The foregoing waiver shall constitute a present
waiver of immunity at any time any action is initiated against any party hereto
with respect to this Agreement.
(b) The parties hereby agree to exclude application of the
following instruments and documents: United Nations Convention on the
International Sale of Goods, UNCITRAL Arbitration Rules and 1990 International
Chamber of Commerce Incoterms.
11.16 CONSULTATION AND ARBITRATION
(a) Dispute Resolution: General Dispute Principles.
(i) All disputes among Parent, Purchaser and Seller
and/or any of their affiliates under this Agreement shall be
settled, if possible, through good faith negotiations between the
relevant parties. For purposes of this Section 11.16, Purchaser,
Parent and Seller shall be referred to individually as a "Party" and
together as the "Parties".
(ii) Prior to resolving any dispute by means of
arbitration or by means of any suit, action or legal proceeding
permitted under Section 11.16(b), the relevant parties involved in
such dispute shall refer such dispute to their respective chief
executive officer or equivalent, who shall meet in person to
negotiate in good faith the possible resolution thereof on at least
two occasions within 30 days before any such party commences
arbitration or such litigation (provided that if any such party
fails or refuses to have a representative attend such meetings
within such 30 day period, the procedures of Section 11.16(b) shall
be applicable after the conclusion of such 30 day period); and
further provided, that (i) any legal proceedings seeking interim
equitable relief (including a temporary restraining order or
preliminary injunction) until such time as such interim equitable
relief can be addressed through arbitration; (ii) proceedings for
provisional relief contemplated by Section 11.16(b)(ix) below; and
(iii) third party legal proceedings under Section 11.16(a)(iii)
below may be commenced immediately.
(iii) If a Party or any of its affiliates is subject to
a claim, demand, action or proceeding by a third party and is
permitted by law or arbitral rules to join another party to such
proceeding, this Section 11.16 shall not prevent such joinder. This
Section 11.16 shall also not prevent either Party or any such
affiliate from pursuing any legal action against a third party.
(b) Arbitration of Other Disputes.
(i) In the event such good faith negotiations are
unsuccessful, either Party may, after 30 days written notice to the
other, submit any controversy or claim arising out of, relating to
or in connection with this Agreement, or the breach thereof, to
arbitration administered by the American Arbitration Association
("AAA") in accordance with its then
-24-
<PAGE>
existing International Arbitration rules, except that Sections 29
and 31 of the Commercial Arbitration Rules in effect on the date
hereof, a copy of which is attached hereto as Schedule 11.16(b),
shall govern in the event of any conflict therewith (collectively,
the "AAA Rules") and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
(ii) To the extent this Section 11.16 is deemed a
separate agreement, independent from this Agreement, the remaining
provisions of Article XI shall be incorporated herein by reference.
Either party (the "Initiating Party") may commence an arbitration by
submitting a demand for arbitration ("Demand for Arbitration") under
the AAA Rules and by notice to the other Party (the "Respondent") in
accordance with Section 11.16. Such notice shall set forth in
reasonable detail the basic operative facts upon which the
Initiating Party seeks relief and specific reference to the clauses
of this Agreement, the amount claimed, if any, and any nonmonetary
relief sought against the Respondent. After the Demand for
Arbitration, response and counterclaim, if any, and reply to
counterclaim, if any, have been submitted, either Party may propose
additional issues for resolution in the pending proceedings only if
expressly so ordered by the arbitrators.
(iii) The place of arbitration shall be New York, New
York, and the award shall be deemed a U.S. award for purposes of the
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards of 1958 (the "New York Convention").
(iv) The parties shall attempt, by agreement, to
nominate a sole arbitrator for confirmation by the AAA. If the
Parties fail so to nominate a sole arbitrator within 30 days from
the date when the Initiating Party's Demand for Arbitration has been
communicated to the Respondent, a board of three arbitrators shall
be appointed by the Parties jointly or, if the Parties cannot agree
as to three arbitrators within 30 days after the commencement of the
arbitration proceeding, then one arbitrator shall be appointed by
each of the Initiating Party and the Respondent within 60 days after
the commencement of the arbitration proceeding and the third
arbitrator shall be appointed by mutual agreement of such two
arbitrators. If such two arbitrators shall fail to agree within 75
days after commencement of the arbitration proceeding upon the
appointment of the third arbitrator, the third arbitrator shall be
appointed by the AAA in accordance with the AAA Rules.
Notwithstanding the foregoing, if either Party shall fail to appoint
an arbitrator within the specified time period, such arbitrator and
the third arbitrator shall be appointed by the AAA in accordance
with its then existing rules. For purposes of this Section, the
"commencement of the arbitration proceeding" shall be deemed to be
the date upon which the Demand for Arbitration has been delivered to
the Parties in accordance with Section 11.16. Any award shall be
rendered by a majority of the arbitrators. A hearing on the matter
in dispute shall commence within 90 days following selection of the
arbitrators, and the decision of the arbitrators shall be rendered
no later than 90 days after commencement of such hearing.
(v) An award rendered in connection with an arbitration
pursuant to this Section shall be final and binding upon the
Parties, and the Parties agree and consent that the arbitral award
shall be conclusive proof of the validity of the determinations of
the arbitrators set forth in the award and any judgment upon such an
award may be entered and enforced in any court of competent
jurisdiction.
-25-
<PAGE>
(vi) The Parties agree that the award of the arbitral
tribunal will be the sole and exclusive remedy between them
regarding any and all claims and counterclaims between them with
respect to the subject matter of the arbitrated dispute. The Parties
hereby waive all IN PERSONAM jurisdictional defenses in connection
with any arbitration hereunder or the enforcement of an order or
award rendered pursuant thereto (assuming that the terms and
conditions of this arbitration clause have been complied with).
(vii) The Parties hereby agree that for purposes of the
New York Convention, the relationship between the Parties is
commercial in nature, and that any disputes between the Parties
related to this Agreement shall be deemed commercial.
(viii) The arbitrators shall issue a written explanation
of the reasons for the award and a full statement of the facts as
found and the rules of law applied in reaching their decision to
both Parties. The arbitrators shall apportion to each Party all
costs (including attorneys' and witness fees, if any) incurred in
conducting the arbitration in accordance with what the arbitrators
deem just and equitable under the circumstances. Any provisional
remedy which would be available to a court of law shall be available
from the arbitrators pending arbitration of the dispute. Either
Party may make an application to the arbitrators seeking injunctive
or other interim relief, and the arbitrators may take whatever
interim measures they deem necessary in respect of the subject
matter of the dispute, including measures to maintain the status quo
until such time as the arbitration award is rendered or the
controversy is otherwise resolved. The arbitrator shall have the
authority to award any remedy or relief (except as ex parte relief)
that a court of the State of New York could order or grant,
including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an
injunction, or the imposition of sanctions for abuse or frustration
of the arbitration process, but specifically excluding punitive
damages.
(ix) The Parties may file an application in any proper
court for a provisional remedy in connection with an arbitrable
controversy, but only upon the ground that the award to which the
application may be entitled may be rendered ineffectual without
provisional relief. The Parties may also commence legal action in
lieu of any arbitration under this Section 11.16(b) in connection
with any third party litigation proceedings or for any matter
involving disputes related to Intellectual Property Rights.
(x) After the appointment of the arbitrators, the
parties to the arbitration shall have the right to take depositions,
ask interrogatories, obtain documentation and to obtain other
discovery regarding the subject matter of the arbitration, and, to
that end to use and exercise all the same rights, remedies and
procedures, and be subject to all of the same duties, liabilities
and obligations in the arbitration with respect to the subject
matter thereof, as if the subject matter of the arbitration were
pending in a civil action before a United States District Court for
the Southern District of New York and such persons, documents or
other requested material were located in State of New York. The
parties shall reach agreement with the arbitrator on a streamlined
and expedited discovery program in order to save costs and avoid
unnecessary delay in completing any arbitration and may present to
the arbitrator for a ruling any reasons for limiting such discovery
in order to save costs and avoid delay.
-26-
<PAGE>
(xi) For purposes of any suit, action or legal
proceeding permitted under this Section 11.16, each Party (a) hereby
irrevocably submits itself to and consents to the non-exclusive
jurisdiction of the United States District Court for the Southern
District of New York for the purposes of any suit, action or legal
proceeding in connection with this Agreement including to enforce an
arbitral resolution, settlement, order or award made pursuant to
this Agreement (including pursuant to the New York Convention, the
U.S. Arbitration Act, or otherwise), and (b) to the extent permitted
by applicable law, hereby waives, and agrees not to assert, by way
of motion, as a defense, or otherwise, in any such suit, action or
legal proceeding pending in such event, any claim that it is not
personally subject to the jurisdiction of such court, that the suit,
action or legal proceeding is brought in an inconvenient forum or
that the venue of the suit, action or legal proceeding is improper.
Each Party hereby agrees to the entry of an order to enforce any
resolution, settlement, order or award made pursuant to this Section
by the United States District Court for the Southern District of New
York and in connection therewith hereby waives, and agrees not to
assert by way of motion, as a defense, or otherwise, any claim that
such resolution, settlement, order or award is inconsistent with or
violative of the laws or public policy of the laws of the State of
New York or any other jurisdiction.
(xii) All claims arising under this Agreement brought by
the Parties and/or their affiliates at substantially the same time
shall be referred to a single arbitration to the extent arbitrable
under this Section 11.16.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ANGEION CORPORATION
By: ______________________________
Name:
Title:
ELA MEDICAL
By: ______________________________
Name:
Title:
SANOFI-SYNTHELABO
By: ______________________________
Name:
Title:
-28-
Six months ended June 30,
1999 1998
------------ ------------
Net loss $ 14,486,825 $(18,398,170)
Interest expense 958,115 379,711
Amortization of debt costs 359,812 565,847
Income tax 114,060 --
------------ ------------
Profit (loss) before fixed charges 15,918,812 (17,452,612)
Fixed charges 1,431,987 945,558
Ratio of net profit (loss) before fixed
charges to fixed charges 11.1 N/A
Sufficiency of earnings to cover fixed
charges $ 14,486,825 $ N/A
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 29,017,309
<SECURITIES> 0
<RECEIVABLES> 1,114,507
<ALLOWANCES> 170,493
<INVENTORY> 2,657,437
<CURRENT-ASSETS> 33,365,381
<PP&E> 11,215,923
<DEPRECIATION> 5,813,062
<TOTAL-ASSETS> 42,024,709
<CURRENT-LIABILITIES> 1,671,152
<BONDS> 0
0
0
<COMMON> 40,097
<OTHER-SE> 20,115,460
<TOTAL-LIABILITY-AND-EQUITY> 42,024,709
<SALES> 3,996,285
<TOTAL-REVENUES> 3,996,285
<CGS> 4,928,564
<TOTAL-COSTS> 4,928,564
<OTHER-EXPENSES> 12,951,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,317,927
<INCOME-PRETAX> 14,600,885
<INCOME-TAX> 114,060
<INCOME-CONTINUING> 14,486,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,486,825
<EPS-BASIC> 3.64
<EPS-DILUTED> 2.39
</TABLE>
