<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _____ to _________.
Commission file number: 0-27596
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CONCEPTUS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3170244
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1021 HOWARD AVENUE
SAN CARLOS, CA 94070
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 802-7240
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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 at least the
past 90 days.
Yes X No
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As of June 30, 1996, 9,139,526 shares of the Registrant's Common Stock
were outstanding.
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CONCEPTUS, INC.
FORM 10-Q For the Quarter Ended June 30, 1996
INDEX
Page
Facing sheet 1
Index 2
Part I. Financial Information
Item 1. a) Balance sheets at June 30, 1996 and December 31, 1995 3
b) Statements of operations for the three and six month periods
ended June 30, 1996 and June 30, 1995 4
c) Statements of cash flows for the three and six month
periods ended June 30, 1996 and June 30, 1995 5
d) Notes to financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 12
Signature 13
Index to Exhibits 14
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<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCEPTUS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 22,834 $ 2,848
Short-term investments 23,441 2,234
Accounts receivable 69 13
Inventories 95 54
Other current assets 198 450
------------ ------------
Total current assets 46,637 5,599
Property and equipment, net 517 468
Other assets 22 25
------------ ------------
$ 47,176 $ 6,092
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 348 $ 576
Accrued compensation 289 301
Other accrued liabilities 466 152
Current portion of debt and capital lease obligations 156 163
------------ ------------
Total current liabilities 1,259 1,192
Long-term portion of debt and capital lease obligations 80 153
Commitments
Redeemable convertible preferred stock at amount paid in
3,853,957 shares issued and outstanding at
December 31,1995; aggregate liquidation
preference of $16,704 at December 31,1995 - 16,624
Stockholders' equity (net capital deficiency)
Preferred stock, $0.003 par value, 4,700,000 shares authorized,
issuable in series - Series B, Series C and Series D represent
redeemable convertible stock shown above:
Series A, 666,666 convertible shares authorized, issued and
outstanding; aggregate liquidation preference of $500 at - -
December 31, 1995
Common stock, $0.003 par value, 25,000,000 shares authorized 61,628 931
196,248 and 9,139,526 shares issued and outstanding at
December 31, 1995 and June 30, 1996, respectively
Stockholder notes receivable (49) (49)
Deferred compensation (667) (778)
Deficit accumulated during the development stage (15,075) (11,981)
------------ ------------
Total stockholders' equity (net capital deficiency) 45,837 (11,877)
------------ ------------
$ 47,176 $ 6,092
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
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CONCEPTUS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Period from
Inception
Three Months Ended Six Months Ended (September 18,
June 30, June 30, 1992) to
------------------------ ------------------------ June 30,
1996 1995 1996 1995 1996
--------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $ 105 $ 27 $ 187 $ 126 $ 819
Cost of sales 235 144 394 436 2,133
-------- -------- -------- -------- ---------
Gross profit (130) (117) (207) (310) (1,314)
Operating expenses:
Research and development 915 627 1,703 1,155 7,307
Selling, general and administrative 1,200 648 2,192 1,180 7,972
-------- -------- -------- -------- ---------
Total operating costs and expenses 2,115 1,275 3,895 2,335 15,279
-------- -------- -------- -------- ---------
Operating loss (2,245) (1,392) (4,102) (2,645) (16,593)
Interest income and other, net 622 98 1,022 153 1,599
Interest expense (6) (12) (14) (22) (81)
-------- -------- -------- -------- ---------
Net loss $ (1,629) $ (1,306) $ (3,094) $ (2,514) $ (15,075)
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Net loss per share $ (0.18) $ (0.83) $ (0.41) $ (1.59)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in computing
net loss per share 9,127 1,579 7,629 1,578
-------- -------- -------- --------
-------- -------- -------- --------
Supplemental net loss per share $ (0.18) $ (0.30) $ (0.37) $ (0.63)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in computing
supplemental net loss per share 9,127 4,330 8,382 4,004
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See notes to financial statements.
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<PAGE>
CONCEPTUS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
Three Months Ended Six Months Ended (SEPTEMBER 18,
June 30, June 30, 1992) TO
--------------------- --------------------- JUNE 30,
1996 1995 1996 1995 1996
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,629) $ (1,306) $ (3,094) $ (2,514) $ (15,075)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 76 60 139 114 575
Amortization of deferred compensation 54 - 111 - 201
Changes in operating assets and liabilities
Accounts receivable (18) 76 (56) 77 (69)
Inventory (87) (85) (41) (116) (95)
Other current assets 58 (10) 252 9 (198)
Accounts payable (69) 105 (228) 66 348
Accrued compensation (24) 10 (12) 36 289
Other accrued liabilities 75 19 314 (17) 466
------- ------- -------- -------- ---------
Net cash from operating activities (1,564) (1,131) (2,615) (2,345) (13,558)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (22,344) - (23,297) - (37,119)
Maturities of investments 184 2,757 2,090 2,757 10,716
Sales of investments - (978) - - 2,962
Capital expenditures (113) (38) (188) (49) (751)
Increase in other assets 1 2 3 3 (37)
------- ------- -------- -------- ---------
Net cash from investing activites (22,272) 1,743 (21,392) 2,711 (24,229)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of preferred stock - - - - 16,624
Proceeds from issuance of common stock 45 5,144 44,073 5,175 44,087
Proceeds from issuance of debt - - - - 209
Principal payments on debt and capital lease obligations (41) (35) (80) (67) (299)
------- ------- -------- -------- ---------
Net cash from investing activities 4 5,109 43,993 5,108 60,621
Net change in cash and cash equivalents (23,832) 5,721 19,986 5,474 22,834
Cash and cash equivalents at beginning of period 46,666 2,249 2,848 2,496 -
------- ------- -------- -------- ---------
Cash and cash equivalents at end of period $ 22,834 $ 7,970 22,834 7,970 $ 22,834
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 6 $ 12 $ 14 $ 22 $ 81
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITIES
Equipment acquired under capital lease obligation $ - $ 34 $ - $ 67 $ 327
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Issuance of common stock in exchange for note receivable $ - $ - $ - $ 24 $ 49
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
Conversion of preferred stock to common stock $ - $ - $ 16,624 $ - $ 16,624
------- ------- -------- -------- ---------
------- ------- -------- -------- ---------
</TABLE>
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
UNAUDITED
ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF PREPARATION
The accompanying balance sheet as of June 30, 1996 and the statements of
operations and cash flows for the quarters ended June 30, 1996 and 1995 have
been prepared by Conceptus, Inc. ("Conceptus" or the "Company"), without audit.
In the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations, and cash flows at June 30, 1996, and
for all periods presented, have been made.
Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures required by Generally Accepted
Accounting Principles for complete financial statements have been omitted
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). The accompanying financial data should be reviewed in conjunction with
the audited financial statements and notes thereto included in the Company's
Form 10-K for the year ended December 31, 1995. The results of operations for
the three and six months ended June 30, 1996 may not necessarily be indicative
of the operating results for the full 1996 fiscal year.
COMPUTATION OF NET LOSS PER SHARE
Except as noted below, net loss per share is computed using the weighted
average number of common shares outstanding. Common equivalent shares
are excluded from the computation as their effect is antidilutive, except that,
pursuant to the SEC Staff Accounting Bulletins, common and common equivalent
shares (stock options and convertible preferred stock) issued during the 12-
month period prior to the initial filing of the proposed offering at prices
below the assumed public offering price have been included in the calculation as
if they were outstanding for all periods through September 30, 1995 (using the
treasury stock method for stock options).
As described above, the antidilutive effect of certain stock options is
included in the calculation of loss per share for all periods through September
30, 1995, but is excluded from the calculation after that date. Supplemental
loss per share data is provided to show the calculation on a consistent basis
for the periods presented. It has been computed as described above, but
excludes the antidilutive effect of common equivalent shares from stock options
issued at prices substantially below the public offering price during the
12-month period prior to the initial filing of the public offering, and gives
retroactive effect from the date of issuance to the conversion of preferred
stock which automatically converted to common shares upon the closing of the
Company's initial public offering.
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ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"), which requires impairment losses to be recorded when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
from those assets are less than the assets' carrying amount. SFAS 121 also
addresses the accounting for long-lived assets that are expected to be sold or
otherwise disposed of. The Company will adopt SFAS 121 and, based on current
circumstances, does not believe that the effect of such Statement will be
material.
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which provides an alternative to APB Opinion No. 25,
"Accounting for Stock Issued to Employees", in accounting for stock-based
compensation issued to employees. The Statement allows for a fair value-based
method of accounting for employee stock options and similar equity instruments.
However, for companies that continue to account for stock-based compensation
arrangements under Opinion No. 25, SFAS 123 requires disclosure of the pro forma
effect on net income and earnings per share of its fair value- based accounting
for those arrangements. These disclosure requirements are effective for fiscal
years beginning after December 15, 1995, or upon initial adoption of the
Statement, if earlier. It is the Company's intention to continue to account for
employee stock options in accordance with APB Opinion No. 25 and to adopt the
"disclosure only" alternative described in SFAS No. 123. As a result, there
will be no impact on the Company's financial position upon adoption.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I-Item 1 of this
Quarterly Report. In addition, except for the historical statements contained
therein, the following discussion contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The
Company wishes to alert readers that the factors set forth in the Company's
prospectus dated February 1, 1996 under the heading "Risk Factors", as well as
other factors, including those set forth in the following discussion could in
the future affect, and in the past have affected, the Company's actual results
and could cause the Company's results for future periods to differ materially
from those expressed in any forward looking statements made by or on behalf of
the Company.
OVERVIEW
Since its inception on September 18, 1992, Conceptus has been primarily
engaged in the design, development and marketing of innovative medical devices
that provide minimally invasive access to the female reproductive system. The
Company's initial focus is on the development of systems to improve the
diagnosis and treatment of fallopian tube diseases and disorders, a primary
cause of infertility. The Company has a limited history of operations and has
experienced significant operating losses since inception. Operating losses are
expected to continue for at least the next several years as the Company
continues to expend substantial resources to fund clinical trials in support of
regulatory and reimbursement approvals, research and development and expansion
of marketing and sales activities.
The Company's primary near-term commercial products, the Transcervical
Falloposcopy System and the Transcervical Tubal Access Catheter ("TTAC") system
have generated limited sales to date. The Company commenced shipments of its
Transcervical Falloposcopy System in March 1994 in order to begin a multicenter
clinical study of its falloposcopy system in Europe and Australia. Substantially
all of the revenues in 1994 and approximately 16% of revenues in 1995, were
derived from the centers involved in this clinical study. Sales in the United
States of the Company's Transcervical Falloposcopy system are paced by Food and
Drug Administration ("FDA") approval or clearance to market. As previously
reported, the Company filed a 510(k) with the FDA seeking clearance of its
falloposcopy system for a limited fallopian tube diagnostic indication in
October 1995. The FDA subsequently withdrew the 510(k) and requested that
additional clinical data be provided to support a refiled 510(k). In June 1996
the Company refiled this 510(k) with certain updated clinical data. Based on
standard FDA procedures, the FDA should respond to the refiled 510(k) within 90
days from the date of filing. While the Company continues to believe that
510(k) clearance for the falloposcopy system for a limited fallopian tube
diagnostic indication is the appropriate regulatory pathway, there can be no
assurance that the FDA will ultimately concur with a 510(k) clearance or will
not require additional clinical data.
The Company sells its TTAC products in international markets through a
limited number of distributors who resell to physicians and hospitals. Sales to
distributors are made on open credit terms. In June 1996, the Company
strengthened its distribution capabilities by entering into a marketing and
distribution agreement with Schering Health Care Limited ("Schering"), the U.K.
subsidiary of the pharmaceutical company, Schering A.G. Schering will
distribute the Company's TTAC and falloposcopy products in the U.K. Although
the Company began marketing components of its TTAC system in the United States
in April 1995, general marketing of the system in the United States commenced
upon the receipt of a 510(k) clearance for diagnosis of proximal tubal
-8-
<PAGE>
occlusion in August 1995. In July 1996, the Company entered into a distribution
agreement with Mallinckrodt Medical ("Mallinckrodt"), a distributor of
radiological products. Mallinckrodt will distribute the Company's TTAC
products to hospitals in North, Central and South America. The Company's
direct sales force will continue sell TTAC products to non-hospital based
interventional gynocologists, in these regions.
Certain of the Company's products are manufactured by contract
manufacturers while others are manufactured by Conceptus at its facility in San
Carlos, California. If the TTAC and Transcervical Falloposcopy systems are
successful, the Company expects to increase its manufacturing operations in
order to reduce product costs and increase gross margin. Future revenues and
results of operations may fluctuate significantly from quarter to quarter and
will depend upon, among other factors, actions relating to regulatory and
reimbursement matters, the extent to which the Company's products gain market
acceptance, the rate at which the Company establishes its international and
domestic distributor networks, the timing and size of distributor purchases, the
progress of clinical trials, and the introduction of competitive products for
diagnosis and treatment of the female reproductive system.
RESULTS OF OPERATIONS
Sales increased to $105,000 and $187,000 for the three and six months ended
June 30, 1996, from $27,000 and $126,000 for the same respective periods in the
prior year. The increase is primarily due to increased shipments of the
Company's TTAC products to a significant U.S. customer and an initial shipment
to a new distributor in the U.K. Domestic sales comprised 66% and 54% of sales
for the three and six month periods ended June 30, 1996, respectively, compared
with 100% and 38% in the prior year periods.
Cost of sales increased to $235,000 for the three months ended June 30,
1996 from $144,000 for same period in the prior year. This increase is
primarily due to an increase in unapplied manufacturing overhead and increased
unit shipments in the current period of the Company's TTAC products. For the
six month period ended June 30, 1996, cost of sales decreased to $394,000 from
$436,000 in the same prior year period. This decrease is due to a higher
porportion of unit shipments in 1996 of the Company's TTAC products, which
carry lower overall manufacturing costs than the Company's falloposcopy
products, in combination with a decrease in manufacturing overhead.
Research and development ("R&D") expenses, which include clinical and
regulatory expenses increased to $915,000 and $1,703,000 for the three and six
months ended June 30, 1996 from $627,000 and $1,155,000 for the same respective
periods in the prior year. This increase is primarily due to the increased
number of employees and related personnel expenses and increased expenses
associated with supporting various R&D efforts. The Company believes that
its investment in product development is essential in its efforts to
establish its competitive position and continue the development of future
products. Accordingly, the Company expects to continue to make substantial
expenditures on product development and to increase the dollar amount
expended for R&D.
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Selling, general and administrative ("SG&A") expenses increased to
$1,200,000 and $2,192,000 for the three and six months ended June 30, 1996 from
$648,000 and $1,180,00 for the same respective periods in the prior year. This
increase is primarily due to growth of the Company's direct sales force in the
United States, increased costs associated with marketing the Company's TTAC
products in the United States, and increased administrative costs associated
with various public reporting requirements. The Company anticipates that the
dollar amount expended for SG&A will continue to increase, primarily due to
expenses associated with expanding domestic administrative functions,
introducing and market the Company's products that require increased
physician training, and sales support.
Net interest and other income increased to $622,000 and $1,022,000 for the
three and six months ended June 30, 1996 from $98,000 and $153,000 for the same
respective periods in the prior year. The increase is due to a higher average
invested cash balance from the proceeds of the Company's initial public offering
of common stock on February 1, 1996. Interest expense for the three and six
months ended June 30, 1996 and the amount for the same respective periods in the
prior year was immaterial.
As a result of the items discussed above, net loss increased to $1,629,000
and $3,094,000 for the three and six months ended June 30, 1996 from $1,306,000
and $2,514,000 for the same respective periods in 1995.
The Company has a limited history of operations. Since its inception in
September 1992, the Company has been engaged primarily in research and
development of its TTAC and Transcervical Falloposcopy systems. The Company has
generated only limited revenues, primarily from sales in international markets
for clinical trials, and does not have experience in manufacturing, marketing or
selling its products in commercial quantities. The Company has experienced
significant operating losses since inception and, as of June 30, 1996, had an
accumulated deficit of $15.1 million. The Company expects its operating losses
to continue for at least the next several years as limited product sales will
continue to be offset by the substantial resources in funding clinical trials
in support of regulatory and reimbursement approvals, expansion of
manufacturing, marketing and sales activities and research and product
development or acquisition. Due to the expense and unpredictable nature of
these activities, there can be no assurance that the Company will achieve or
sustain profitability in the future.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's cash expenditures have significantly
exceeded its sales, resulting in an accumulated deficit of $15.1 million at June
30, 1996. Prior to the Company's initial public offering, the Company funded
its operations primarily through the private placement of $16.6 million of
equity securities, as well as through interest income, equipment financing and
secured loan arrangements. On February 1, 1996, the Company completed an
initial public offering of 3,450,000 shares of its common stock at $14.00 per
share for net proceeds of approximately $44.0 million.
At June 30, 1996, Conceptus had cash, cash equivalents and short-term
investments of $46.3 million compared with $5.1 million at December 31, 1995.
The increase is due to approximately $44.0 million of net proceeds from the
Company's initial public offering partially offset by approximately $2.6 million
used in operating activities. Capital expenditures in the first half of 1996
increased to $188,000 from $49,000 in the prior year period and is largely due
to expenditures necessary to support the growth in employees.
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Conceptus believes that the net proceeds from its initial public offering,
together with interest thereon and the Company's existing capital resources,
will be sufficient to fund its operation through 1997. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the progress of the Company's clinical research and product
development programs, the receipt of and the time required to obtain regulatory
clearances and approvals, and the resources the Company devotes to developing or
acquiring, manufacturing and marketing its products. The Company's capital
requirements will also depend on, among other things, the resources required to
hire and develop a direct sales force in the United States and internationally,
the resources required to expand manufacturing capacity and facility
requirements and the extent to which the Company's products generate market
acceptance and demand. Accordingly, there can be no assurance that the Company
will not require additional financing within this time frame and, therefore, may
in the future seek to raise additional funds through bank facilities, debt or
equity offerings or other sources of capital. Additional funding may not be
available when needed or on terms acceptable to the Company, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.12* Distribution Agreement dated July 1, 1996 between the
Registrant and Mallinckrodt Groupt Inc.
11.1 Computation of net loss per share (see Note 1 to
Financial Information in Part I of this Form 10-Q).
27 Financial Data Schedule
* Confidential treatment requested as to portions of this
exhibit.
(b) Reports on Form 8-K.
None.
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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.
CONCEPTUS, INC.
By: /s/ SANFORD FITCH
----------------------------------------
Sanford Fitch
Vice President, Finance and Operations
and Chief Financial Officer
(Duly Authorized and Principal Financial
and Accounting Officer)
Date: August 14, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.12* Distribution Agreement dated July 1, 1996 between the Registrant
and Mallinckrodt Groupt Inc.
11.1 Statement Re Computation of Net Loss Per Share
27 Financial data schedule
* Confidential treatment requested as to portions of this exhibit.
-14-
<PAGE>
EXHIBIT 10.12
DISTRIBUTOR AGREEMENT
This Agreement ("Agreement") is made as of the 1st day of July, 1996 by and
between Conceptus, Inc., a Delaware corporation, with its principal offices
at 1021 Howard Avenue, San Carlos, California 94070 (hereinafter "Supplier")
and Mallinckrodt Group Inc., a New York corporation, with offices at 675
McDonnell Boulevard, St. Louis, Missouri 63134 (hereinafter "Distributor").
WHEREAS, Supplier desires to appoint a distributor for certain of its
products in a large number of countries; and
WHEREAS, Distributor wishes to act as such distributor;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. In this Agreement each of the terms listed below has the
meaning given after it.
a. "Affiliate" shall mean a legal entity controlling, controlled by or
under common control with the Party in question.
b. "Agreement" shall mean this Agreement and all Schedules thereto.
c. "Control" shall mean owning in excess of 50% of the voting shares of
equity or having the right to appoint Directors holding in excess of
50% of the vote or to manage in fact the day to day operations of a
legal entity.
d. "Effective Date" shall mean July 1, 1996.
e. "Initial Term" shall mean that period of time set forth in clause 3
hereof.
f. "Party" shall mean Supplier or Distributor as the case may be and both
Supplier and Distributor when used in the plural.
g. "Products" shall mean those products listed on Schedule A of this
Agreement.
h. "Target Agreements" shall mean the License Agreement and the Supply
Agreement between Supplier and Target Therapeutics, Inc., copies
of which have been provided to Distributor.
i. "Territory" shall mean all of those countries in the Western
Hemisphere including those in North, Central and South America.
* Confidential Treatment Requested
<PAGE>
-2-
2. APPOINTMENT. Supplier hereby appoints Distributor and Distributor
hereby accepts appointment as the exclusive distributor of the Products
to hospitals in the Territory. Distributor shall have the right to
appoint sub-distributors under this Agreement.
3. TERM. The Initial Term of this Agreement shall commence as of July 1,
1996 and shall continue through December 31, 1999. Thereafter
this Agreement shall be extended automatically for additional
periods of one (1) year each unless either party serves written notice on
the other at least six (6) months in advance of the end of the Initial
Period or the one (1) year period then in effect that this
Agreement shall terminate at the end of that period.
4. DUTIES OF DISTRIBUTOR. Distributor shall or shall cause Distributor's
Affiliates to do the following:
a. Purchase from Supplier such quantities of Products as may reasonably be
necessary to fully and promptly meet all demand for Products from
hospitals in the Territory.
b. Distribute the Products through the same sales personnel that it uses
to distribute Distributor's other devices which are promoted to
radiologists and ensure that such personnel are fully educated about
the Products.
c. Maintain adequate inventory of Products to promptly fill and ship
against customer's orders within the Territory.
d. Provide reasonable assistance to Supplier in connection with
Supplier's research and development and clinical trial efforts with
respect to Products. (The Parties contemplate such assistance
may typically consist of Distributor's field personnel working directly
with Supplier's research and development or clinical personnel.)
e. Provide Supplier with reasonable assistance in obtaining regulatory
approvals necessary to market the Products in the U.S.
f. If any other country requires the registration of any of the
Products with the health authorities in that country, take the action
required to obtain the registration of the Product in that country
and take any other actions necessary to enable Distributor to sell
the Products in that country. If Distributor should determine that
obtaining such a registration is uneconomical, Distributor may decline
to register the Product in that country and Supplier's sole remedy
shall be to eliminate that country from the definition of Territory
hereunder.
g. Produce all materials used to promote the Products in the Territory
which materials shall be subject to Supplier's prior approval, such
approval not to be unreasonably withheld.
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h. Submit to Supplier, within [* * *] after the end of each calendar
quarter, a quarterly progress report containing those items which the
Parties from time to time agree should be included in such report.
[* * * *]
Representatives of Supplier and Distributor will meet unit sales on a
quarterly basis at sites to be mutually agreed upon, to review the
sales and marketing activity in the preceding quarter.
Distributor shall maintain adequate and accurate books and records
with respect to the sale or distribution of the Products during the
term of the Agreement. Upon prior notice, an independent auditor
selected by Supplier and reasonably acceptable to Distributor shall
have the right once each calendar year during reasonable business
hours, to inspect the facilities of Distributor which are used or
provided in connection with the sale, administration and stocking
of the Products, and to inspect such books and records, but only with
respect to any calendar year ending not more than two years prior to
the date of such inspection and subject to the obligations of
confidentiality set forth in Section 19 below.
i. Respond to initial calls from customers holding damaged Product,
utilizing Distributor' sales and customer service forces, and work
with such customers to ensure the return and, if appropriate,
replacement of Product. To return a defective Product, Distributor
shall notify Supplier immediately and request a Material Return
Authorization ("MRA") number. Supplier shall provide the MRA number
to Distributor within [ * * *] of receipt of the request. Within
[ * * *] of receipt of the MRA number, Distributor shall return to
Supplier the rejected Product with the MRA number displayed on the
outside of the carton.
j. Ensure that Products are sold, and returned if applicable, in full
compliance with the laws of the country of sale including all reporting
obligations to applicable regulatory authorities.
k. If the Parties have been notified that there is a claim for patent
infringement in a particular country, Distributor and Distributor's
Affiliates shall cease to distribute the infringing Product in that
country on Supplier's request.
l. Be responsible for any losses resulting from claims relating to
the Products to the extent attributable to the negligence of
Distributor or Distributor's Affiliates or sub-distributors and
indemnify Supplier from any loss with respect thereto.
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5. DUTIES OF SUPPLIER. Supplier shall do the following:
a. Sell to Distributor and Distributor's Affiliates such quantities of
Products as may reasonably be necessary to fully and promptly meet all
demand for Products from hospitals in the Territory.
b. Be responsible for obtaining and maintaining all regulatory approvals
necessary to market the Products in the United States.
c. Provide Distributor with all reasonable assistance in obtaining all
regulatory approvals necessary to market the Products in countries
other than the United States.
d. Assist with training, field visits, exhibitions and sales meetings.
e. Provide proposed copy and data references for promotional materials
for the Products.
f. Be responsible for testing and determining the cause of all Products
malfunctions.
g. Hold Distributor and Distributor's Affiliates harmless against any
claims made against Distributor or Distributor's Affiliates by a
third party alleging that a Product infringes a patent or trademark
owned by such third party or as a result of Supplier's misuse of
proprietary information.
h. Be responsible for any losses resulting from other claims relating to
Products and indemnify Distributor and Distributor's Affiliates from
any losses with respect thereto other than to the extent the loss is
attributable to the negligence of Distributor or Distributor's
Affiliates or sub-distributors. Supplier shall maintain product
liability insurance in the amount of at least Four Million Dollars.
6. LABELING AND PACKAGING. Distributor will provide the artwork for all
overlabeling and/or outer packaging for Supplier's prior approval, which
will not be unreasonably withheld. Supplier will perform the overlabeling
and/or create the outer packaging (as appropriate) on all Products such
that both the Distributor and Supplier names and trademarks are clearly
visible and such labeling, and Product markings generally, comply with
applicable regulatory requirements, which, in the case of Territory-
specific requirements, shall have been identified by Distributor and
communicated in writing sufficiently in advance to Supplier.
[* * * *]
* Confidential Treatment Requested
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[* * * *]
7. PRICING
a. FIRST YEAR. The initial prices for the Products will be those set
forth on Schedule B attached hereto. The pricing set forth in
Schedule B for the Soft Seal Cervical Catheter shall be reviewed by
the Parties at the end of the first [* * *] following the Product
launch under this Agreement (anticipated for [* * * *].
[* * * *]
b. SUBSEQUENT YEARS. During the last [* * * *] of each contract
year, the Parties will review the transfer pricing for the Products
with the intent of making adjustments necessary
[* * * *]
c. TERMS OF SALE. Products will be prepared for shipment in accordance
with Distributor's instructions and will be delivered to Distributor's
choice of carrier F.O.B. Supplier's distribution facility in San
Carlos, California. Distributor shall be responsible for the costs of
shipping, insurance and duties.
8. ORDERS, SHIPMENT AND INVOICES. Within ten (10) days after the Effective
Date, Distributor shall place a firm order for the Products (the "Initial
Order"). Supplier shall transfer such Products to an area segregated from
its other products not earlier than [* * * *]. After filling the
Initial Order, Supplier shall transfer Products to the segregated area each
month in accordance with the firm order for that month referred to in
Clause 14. Distributor or Distributor's Affiliates or subdistributors
will take orders from hospitals and transfer the data to Supplier.
During the first [* * * *] of the initial term of this Agreement,
Supplier shall deliver the Products to Distributor's customers with
respect to Products to be sold in the United States and to such location
as Distributor may from time to time direct with respect to Products to be
sold outside the United States, after which time shipments shall be made
in a mutually agreeable manner based upon an analysis of the relative
costs incurred during the initial [* * * *] period. Distributor,
Distributor's Affiliates or
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subdistributors shall send invoices to and collect from hospitals. In no
event shall inventory held by Supplier on Distributor's behalf exceed
[* * * *] supply of Product. Supplier shall store such segregated
Products from its other products on behalf of Distributor using the same
degree of care that Supplier uses in storing its other products
9. TITLE AND RISK OF LOSS. Title to and risk of loss of Products shall
remain with Supplier until delivery to a common carrier addressed to
Distributor, Distributor's Affiliate or sub-distributor, or Distributor's
customer or until placed in a segregated inventory to be held on
Distributor's behalf, at which time title to and risk of loss of Products
shall pass from Supplier to the appropriate recipient.
10. CONTROLLING PROVISIONS. In ordering or delivering Products hereunder
Supplier or Distributor may employ their standard forms, but nothing in
those forms shall be construed to modify or amend the terms of this
Agreement and in case of conflict herewith, this Agreement shall control.
11. INVOICING AND PAYMENT. Distributor shall pay for the Initial
Order within [* * * *] of receiving notice from Supplier that the
Products included therein have been placed in a segregated area.
Thereafter, Supplier shall send an invoice to Distributor, Distributor's
Affiliates or subdistributors upon shipment or segregation of the Products.
Payment of that invoice will be made within [* * * *] of the date of
such invoice. Any invoiced amount not paid when due shall be subject to a
service charge at the lower of the rate of [* * * *] per month or the
maximum rate permitted by law. If Distributor fails to make any payment to
Supplier when due, Supplier may, without affecting its rights under this
Agreement, cancel or delay any future shipments to Distributor until such
delinquent payment is made.
12. SPECIFICATIONS. All quantities of Products delivered by Supplier hereunder
shall conform to specifications established by Supplier from time to time,
which shall in no case be less restrictive than the specifications
required by the health authorities in the country of destination.
13. SAMPLES. Supplier will provide Distributor at Supplier's cost with
[* * * *] sales aids kits containing [* * * *].
All additional samples shall be purchased at the applicable transfer price.
14. ORDERS AND FORECASTS. On the Effective Date and on or before the first
day of each month during the term hereof, Distributor shall give Supplier
(a) a forecast of Distributor's monthly requirements of Products for each
of the next [* * *] months commencing with the date of such forecast,
and (b) a forecast of its approximate requirements of the Products during
each of the next [* * *] months following the [* * *] months
referred to in Clause 14(a). The forecast referred to in 14(a) above
shall
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be considered a firm order, and the forecast referred to in 14(b)
above shall represent Distributor's reasonable estimate of the quantity
of Product that Distributor will require.
15. MINIMUM QUANTITIES.
a. UNITED STATES
a.1 FIRST YEAR. Distributor, Distributor's Affiliates and
sub-distributors must collectively take shipment of at least the
following quantities of Products (a "Minimum") during the
first year of this Agreement for sale in the United States:
[ *** ]
[ *** ]
[ *** ]
a.2 SUBSEQUENT YEARS. During the last [* * * *] of each contract
year, the Parties shall negotiate in good faith to establish the
Minimums for the United States for the following contract year.
[ *** ]
b. OTHER REGIONS. (Canada, South America, Central America)
b.1 FIRST YEAR. Distributor, Distributor's Affiliates and
sub-distributors must collectively take shipment of at least the
following quantities of Products (a "Minimum") during the first year
of this Agreement for sale in Canada, South America and Central
America (the "Other Regions"):
[ *** ]
[ *** ]
[ *** ]
Distributor will complete primary market research in the Other
Regions by [* * * *].
b.2 SUBSEQUENT YEARS. During the last [* * * *] of each contract
year, the Parties shall negotiate in good faith to establish the
Minimums for each of the Other Regions for the following contract
year. [* * * *]
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[* * * *]
c. FAILURE TO MEET MINIMUMS
If Distributor fails to meet an annual Minimum, then Supplier may appoint
one or more additional distributors to sell the Products in the
applicable Region of the Territory. Thereafter, if Distributor fails to
meet another annual Minimum, then Supplier may terminate this Agreement
with respect to the applicable Region on [* * * *] written notice to
Distributor. Notwithstanding the foregoing sentences, Distributor will
not lose exclusivity in any Other Region in the first contract year.
Lost of exclusivity or termination as provided in this paragraph shall be
Supplier's sole remedy for failure to take shipment of the Minimums and
under no circumstance shall Distributor be obligated to make payments for
Products which it did not order even though the Minimums were not ordered.
d. IMPACT OF A RECALL
In the event of a recall of any of the Products, the Minimum(s) set forth
for the contract year in the Region(s) in which the recall occurs, and any
subsequent contract year for which Minimums have then been determined,
will be renegotiated by the Parties.
16 PROFORMA INVOICE. If import licenses are required for importation
of the Products into any country in the Territory, Supplier shall
provide Distributor in a timely manner with a proforma invoice and
any other documents which may be necessary to allow Distributor to obtain
import licenses for the Products.
17. TRADEMARKS. Distributor and Distributor's Affiliates shall sell and
shall have the right to sell the Products under trademarks chosen, paid
for and owned by Supplier.
[* * * * *].
18. RIGHT OF FIRST REFUSAL. If Supplier develops other products which
are useful in the diagnosis and treatment of fallopian tube
diseases and disorders and for which there is a potential market in the
radiology departments of hospitals (specifically excluding Supplier's
Transcervical Falloposcopy System or the minimally invasive tubal
ligation product and other products of Supplier developed at the
effective date of this Agreement but excluded from the definition
of Products hereunder), Supplier shall notify Distributor in writing
that it has developed the product and that it wishes to
* Confidential Treatment Requested
<PAGE>
-9-
negotiate a distribution agreement. Supplier shall supply sufficient
information with respect to the product to enable Distributor to evaluate
it. Supplier and Distributor shall have [* * * *] from receipt of
the notice within which to discuss whether or not Distributor wishes to
distribute the product and the terms pursuant to which Distributor
would distribute the product. Supplier shall not offer such product for
distribution by any other party before or during this ninety day
period. In the event Supplier and Distributor are unable to agree
to the terms pursuant to which Distributor would distribute such a
product, Supplier shall be free to negotiate a distribution agreement with
respect thereto with any other party or to distribute such Product
itself, provided, however, that if Supplier offers the product to
another party on more favorable terms than were last offered to
Distributor, Supplier shall give Distributor notice of those terms and
Distributor shall have the right to distribute the products
pursuant to those terms.
19. PROPRIETARY INFORMATION
a. CONFIDENTIALITY. Each party acknowledges that it has or will have
access to valuable proprietary information of the other party,
including but not limited to, technical data and customer and
marketing information, all of which are the property of the other
party, have been maintained confidential, and are used in the course
of such other party's business. Except as set forth in paragraph (b)
of this Section, each party shall not, either during the term of this
Agreement or thereafter, disclose the other party's proprietary
information to anyone other than those of its employees having a need
to know and shall refrain from use of such information other
than in the performance of this Agreement. In addition, the receiving
party shall take all reasonable precautions to protect the value and
confidentiality of such information to the originating party. All
records, files, notes, drawings, prints, samples, advertising material
and the like relating to the business, products or projects of the
originating party and all copies made from such documents, shall
remain the sole and exclusive property of the originating party and
shall be returned to the originating party immediately upon written
request thereby. Each party agrees to continue to maintain all
proprietary information in confidence for a period of [* * * *]
following termination of this Agreement, unless written
authorization to disclose any such information is first obtained from
the originating party hereunder.
b. NON-PROPRIETARY INFORMATION. Neither party shall be obligated or
required to maintain in confidence or be obligated not to use any
information which it can demonstrate with written records (i) is in the
public domain or known to the receiving party prior to disclosure by
the originating party, (ii) becomes known to the public after
disclosure by the originating party, other than through breach of
this Agreement, (iii) becomes known to the receiving party from a
source other than the disclosing party without breach of any obligation
of confidence, (iv) is or has been furnished to a third party by
the originating party without restriction on the third party's right
to disclose, (v) was developed independently by the receiving party
without reference to the information
* Confidential Treatment Requested
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disclosed by the disclosing party or (vi) is disclosed
pursuant to an order or requirement of a court, administrative agency
or other government body (provided that the originating party
shall be notified sufficiently in advance of such requirement so that it
may seek a protective order (or equivalent) with respect to such
disclosure, which the other party shall full comply with).
20. REPRESENTATIONS AND WARRANTIES. Supplier hereby represents and warrants
the following:
a. Supplier has the exclusive right under its patents or those of
Target Therapeutics, Inc. to make, use and sell the Products in the
Territory, and Supplier is the owner (by invention or in-license)
of the know-how used in the manufacture, use and sale of the Products;
b. Supplier is free to enter into this Agreement;
c. There are no patents that have been brought to Supplier's attention
owned by others and there are no trade secret or proprietary rights
of others that have been brought to Supplier's attention which would
be infringed or violated by the making, using or selling of Products
by Supplier or Distributor anywhere in the Territory;
d. Other than pending patent litigation between Target Therapeutics,
Inc., Cordis Endovascular Systems, Inc. and SciMed Life Systems,
Inc., as of the Effective Date, there are no adverse actions, suits
or claims pending against Supplier or to Supplier's knowledge any
of its Affiliates in any court or by or before any governmental
body or agency with respect to the Products or patents covering the
Products;
e. The Target Agreements are the complete agreements in effect as of
the Effective Date with respect to patents of Target Therapeutics,
Inc. which cover the manufacture, use or sale of the Products; and
f. As of the Effective Date, Supplier is not engaged in discussions
to amend the Target Agreements and has no intent to attempt to amend
the Target Agreements.
21. AMENDMENT OF TARGET LICENSE. Supplier shall not agree to an amendment
of the Target Agreements which would materially and adversely
impact the ability of Supplier or Distributor to meet their
obligations hereunder without Distributor's prior written consent.
22. FORCE MAJEURE. Neither Supplier nor Distributor shall be liable to each
other or be in breach of any provision hereof for any failure or
delay on either Party's part to perform any obligation under any
provision of this Agreement because of force majeure including, but not
limited to, war, insurrection, riot, fire, explosion, flood, sabotage
* Confidential Treatment Requested
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accident, breakdown or damage of machinery, unavailability of fuel,
labor, raw materials, containers or transport facilities, accidents in
transportation, governmental action or any other cause beyond the
reasonable control of the Party failing to perform or whose prompt
performance is thus delayed.
23. RELATIONSHIP OF PARTIES. This Agreement will not constitute either
Party as a franchisee, legal agent or other legal representative of the
other for any purpose whatsoever and nothing in this Agreement shall be
deemed to create a partnership, joint venture, or similar relationship
between the parties.
24. TERMINATION. Except as otherwise set forth in this Agreement, the
Parties shall have the following rights to terminate this Agreement.
a. Either party may terminate this Agreement if the other party breaches
any of its obligations hereunder and fails to cure the breach to the
reasonable satisfaction of the non-breaching party within
[* * * *] after the non- breaching party demands its cure.
b. Either party may immediately terminate this Agreement if the other
Party ceases to conduct business in the normal course, becomes
insolvent, enters into suspension of payments, moratorium,
reorganization or bankruptcy, makes a general assignment for the
benefit of creditors, admits in writing its inability to pay debts
as they mature, suffers or permits the appointment of a receiver for
its business or assets, or avails itself of or becomes subject to
any other judicial or administrative proceeding that relates to
insolvency or protection of creditors' rights.
25. EFFECTS OF TERMINATION.
a.
[* * * *]
b. LIMITATION OF LIABILITY. In the event of termination by either party
in accordance with any of the provisions of this Agreement, neither
party shall be liable to the other, because of such termination,
for compensation, reimbursement or damages on account of the loss of
prospective profits or anticipated sales or on account of
expenditures, inventory, investments, leases or commitments in
connection with the business or goodwill of Supplier or
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Distributor. Termination shall not, however, relieve either party of
obligations incurred prior to the termination or of any obligations
arising under this Agreement which by their terms or by operation
or law survive termination. Both Distributor and Supplier shall
be entitled to cancel all Purchase Orders, to the extent Products have
not been delivered to Distributor, which are outstanding at the time
of notice of termination; provided however that, subject to payment
in advance to Supplier, Distributor shall be entitled to receive
Products necessary to fulfill valid and binding Purchase Order
accepted by Distributor prior to notification of termination of this
Agreement. Prior to filling orders for such Products, Supplier
shall be entitled to request and receive documentary evidence of
all such outstanding Purchase Orders and an accounting of Distributor's
existing inventory of Products.
26. ASSIGNMENT. This Agreement and the rights hereunder, shall not be
assignable by either Party without the prior written consent of the other
except that Distributor may assign this Agreement to any of Distributor's
Affiliates and Supplier may assign or transfer its rights and obligations
under this Agreement to a successor to all or substantially all of its
assets relating to this Agreement, whether by sale, merger, operation or
law or otherwise upon prior written notice to Distributor. Distributor
reserves the right to have any part of its obligations under this
Agreement performed by one or more of its Affiliates.
27. FEES AND EXPENSES. Distributor shall not be responsible for any
commissions, broker fees, finders fees or similar fees or compensation
with respect to this Agreement. Each Party will be responsible for its
own expenses incurred in connection with negotiating this Agreement.
28. NOTICE. All notices which are required or permitted to be given
hereunder shall be in writing and delivered by either (a) registered or
certified mail, return receipt requested, (b) overnight commercial
package courier or local delivery service, (c) facsimile or (d) personal
delivery, in all events prepaid, addressed to the respective parties at
the respective addresses set forth below:
Conceptus, Inc. Mallinckrodt Group Inc.
1021 Howard Avenue 675 McDonnell Boulevard
San Carlos, CA 94070 St. Louis, MO 63134
Attention: Vice President, Sales Attention: President,
Fax No. 415-508-7646 Imaging Division
Fax No. 314-895-7265
Copy to: Copy to:
Venture Law Group Mallinckrodt Group Inc.
2800 Sand Hill Road 7733 Forsyth Boulevard
Menlo Park, CA 94025 St. Louis, MO 63105
Attention: Michael W. Hall Attention: General Counsel
Fax No. 415-854-1121 Fax No. 314-895-5366
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Either party may designate a different or additional address for the
giving of notice by written notice to the other party. Notices shall
be effective upon receipt.
29. WAIVER. Failure to enforce or waiver, by either Party, of any of the
terms of this Agreement, at any time, shall not in any way limit or waive
such Party's rights thereafter to enforce, or require compliance with, the
terms of this Agreement.
30. VALIDITY. If any clause of this Agreement is held to be void or
unenforceable, such finding shall not affect the validity or
enforceability of other clauses of this Agreement.
31. ENTIRE AGREEMENT. The provisions set forth herein constitute the entire
Agreement between the Parties with respect to the subject matter hereof
and supersede all previous communications, representations, and/or
agreements, whether oral or written, between the Parties relating to the
subject matter hereof.
32. AMENDMENT. Modification or amendment of this Agreement shall not be of
any force or effect unless such modification or amendment is in writing,
specifically refers to this Agreement and is signed by the Party to be
bound thereby.
33. GOVERNING LAW. All interpretations and applications of this Agreement
shall be governed by the laws of California.
34. DUE DILIGENCE. Distributor shall promptly review existing patents and
patent applications (to the extent the applications are available) to
determine whether Distributor believes the sale of the Products would
infringe any third party's patents. If Distributor reasonably believes
that there would be such infringement, Distributor may terminate this
Agreement without liability for such termination at any time prior
to [* * * *].
35. CONFLICT OF INTEREST. If Distributor buys a company which sells products
in the Territory that are designed or marketed to produce the same or
similar diagnostic capabilities as the Products or any line extensions
thereof under development by the Supplier (hereinafter called the
"Competing Products") and the sales of Competing Products constitute less
than [* * * *] of the company being purchased, Supplier may terminate
this Agreement on [* * * *] written notice but Distributor will not
be considered in breach of contract. If (a) Distributor buys a company
which sells Competing Products in the Territory, sales of Competing
Products constitute [* * * * * *] of the company being purchased,
and Distributor continues to sell the Competing Product or (b) Distributor
develops and sells a Competing Product in the Territory, Supplier may
terminate this Agreement and Distributor will be considered in breach of
contract. In the event of a termination under this paragraph, (a)
Distributor will cooperate fully in transitioning the Products business
to Supplier, including sharing relevant customer information, and (b)
Supplier will have no obligation to repurchase remaining inventory from
Distributor.
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36. SUBDISTRIBUTORS AND AFFILIATES. Distributor will ensure that any
subdistributor or Distributor Affiliate appointed to distribute
Products pursuant to this Agreement will execute an agreement which
obligates Subdistributor or Distributor Affiliate to hold such
confidential information in confidence to the same extent as Distributor
is bound hereunder.
37. WARRANTY. Customer warranties, if any, will be put on package inserts
although this shall not in any way affect the allocation of
responsibilities otherwise set forth above.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of July 1, 1996.
Conceptus, Inc. Mallinckrodt Group Inc.
By: /s/ James J. Messemer By: /s/ James C. Carlile
------------------------ ---------------------------
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<PAGE>
SCHEDULE A
PRODUCTS
[* * *] SOFT SEAL CERVICAL CATHETER
[* * *] UTERINE CATHETERS
[* * *] VS RADIOLOGICAL CATHETERS
[* * *] GUIDEWIRES
[* * *] S.S. VALVE
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<PAGE>
SCHEDULE B
PRODUCTS PRICE PER
UNIT
---------
[* * *] SOFT SEAL CERVICAL CATHETER [* * *]
[* * *] UTERINE CATHETERS [* * *]
[* * *] VS RADIOLOGICAL CATHETERS [* * *]
[* * *] GUIDEWIRES [* * *]
[* * *] S.S. VALVE [* * *]
* Confidential Treatment Requested
<PAGE>
EXHIBIT 11.1
CONCEPTUS, INC.
STATEMENT RE COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss $ (1,629) $ (1,306) $ (3,094) $ (2,514)
Shares used in computing
net loss per share:
Weighted average shares
of common stock outstanding 9,127 176 7,629 175
Shares related to Staff Accounting
Bulletin Topic 4D - 1,403 - 1,403
-------- -------- -------- --------
Total shares used in computing
net loss per share 9,127 1,579 7,629 1,578
-------- -------- -------- --------
-------- -------- -------- --------
Net loss per share $ (0.18) $ (0.83) $ (0.41) $ (1.59)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in computing
supplemental net loss per share:
Weighted average shares
of common stock outstanding 9,127 176 7,629 175
Weighted average shares
of the assumed conversion
of redeemable convertible
preferred stock - 4,154 753 3,829
-------- -------- -------- --------
Total shares used in computing
supplemental net loss per share 9,127 4,330 8,382 4,004
-------- -------- -------- --------
-------- -------- -------- --------
Supplemental net loss per share $ (0.18) $ (0.30) $ (0.37) $ (0.63)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 22,834
<SECURITIES> 23,441
<RECEIVABLES> 111
<ALLOWANCES> 42
<INVENTORY> 95
<CURRENT-ASSETS> 46,637
<PP&E> 1,078
<DEPRECIATION> 561
<TOTAL-ASSETS> 47,176
<CURRENT-LIABILITIES> 1,259
<BONDS> 0
0
0
<COMMON> 61,628
<OTHER-SE> (15,791)
<TOTAL-LIABILITY-AND-EQUITY> 45,837
<SALES> 105
<TOTAL-REVENUES> 105
<CGS> 235
<TOTAL-COSTS> 2,115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> (1,629)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,629)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,629)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
