Amendment
To
And
Consent Regarding
Loan and Security Agreement
THIS AMENDMENT
TO AND CONSENT REGARDING LOAN AND SECURITY AGREEMENT (this
“Amendment”) is entered as of December 19, 2008 by
and between Silicon Valley Bank (“Bank”) and ATS
Medical, Inc., a Minnesota corporation (the “Borrower”)
whose address is 3905 Annapolis Lane, Suite 105, Minneapolis,
Minnesota 55447.
A.
Bank and Borrower have entered into that certain Loan and Security
Agreement dated as of July 28, 2004 (as amended, modified,
supplemented or restated from time to time, the “Loan
Agreement”).
B.
Bank has extended credit to Borrower for the purposes permitted in
the Loan Agreement.
C.
Borrower has requested that Bank amend the Loan Agreement and
provide certain consents as set forth herein.
D.
Bank has agreed to so amend certain provisions of the Loan
Agreement, but only to the extent, in accordance with the terms,
subject to the conditions and in reliance upon the representations
and warranties set forth below.
Now, Therefore, in
consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
1. Definitions. Capitalized terms used but not defined
in this Amendment shall have the meanings given to them in the Loan
Agreement.
SVBwp/ATS/08-12
Amend-Consent/Amend-3
1
2.1 Consent to Acquisition . Borrower has requested that
Bank consent to Borrower purchasing certain assets (the
“Novarre Assets”) from Novarre Surgical
(“Seller”) for a cash price not exceeding $2,150,000.
In connection with the Borrower’s request for Bank’s
consent, the Borrower represents, warrants and agrees as follows:
no Default or Event of Default shall occur as a result of the
Borrower’s purchase of the Novarre Assets and the Novarre
Assets shall be purchased free and clear of all Liens.
Notwithstanding anything to the contrary contained in the Loan
Documents, Bank hereby consents to Borrower’s purchase of the
Novarre Assets (the “Novarre Purchase”), for the price
described above, on or before January 31, 2008, conditioned
upon the following (which conditions Borrower agrees to satisfy):
(a) no Default or Event of Default has occurred and is
continuing at the time of, or would occur as a result of,
Borrower’s purchase of the Novarre Assets, (b) the
Novarre Assets shall be purchased free and clear of all Liens, and
(c) on or after the date hereof and prior to Borrower’s
purchase of the Novarre Assets, Borrower shall have satisfied the
Additional Conditions (as defined below). This consent does not
constitute a consent to any other transaction or event, whether or
not similar or related to the Novarre Purchase, including, without
limitation, any other transaction or event that may be described in
any asset purchase documentation related to the Novarre Purchase.
In addition, for purposes of clarity and not for purposes of
broadening by implication what Bank is consenting to, Borrower
acknowledges that Bank is not consenting to any breach of any
financial covenant contained in the Loan Documents that may result
from the Novarre Purchase.
2.2 Consent to Settlement and Security Interest. Borrower
has requested that Bank consent to Borrower (i) paying a total
amount of $7,500,000 to CarboMedics, Inc., in an installment of
$3,000,000 by December 29, 2008 and an installment of
$4,500,000 by April 30, 2009, in settlement of the breach of
contract action by CarboMedics, Inc. against ATS Medical in the
United States District Court for the District of Minnesota
captioned CarboMedics, Inc. v. ATS Medical, Inc., 06-6401
(PJS/JJG), and (ii) providing CarboMedics, Inc. with a
security interest in certain of Borrower’s Inventory to
secure Borrowers obligation to pay CarboMedics, Inc. such
$7,500,000 (the “Settlement Amount”). Notwithstanding
anything to the contrary contained in the Loan Documents, Bank
hereby consents to Borrower paying the Settlement Amount to
CarboMedics, Inc. pursuant to the above-described schedule and to
Borrower providing CarboMedics, Inc. with a security interest in
components, valves, raw materials, work in process, or materials
used for or consumed to produce valves, and all finished goods
inventory, which includes components or valves (whether contained
in sealed packages and whether such packages contain other goods)
(the “Specified Inventory”), to secure the Settlement
Amount, such consents to the foregoing (the
“Settlement-Related Transactions”) being conditioned
upon the following (which conditions Borrower agrees to satisfy):
(a) no Default or Event of Default has occurred and is
continuing at the time of, or would occur as a result of, the
Settlement-Related Transactions, (b) the security interest
granted to CarboMedics, Inc. shall be limited to the Specified
Inventory, and such limitation must be reflected in the
documentation pursuant to which Borrower grants a security interest
to CarboMedics, Inc. and in any UCC financing statement filed with
respect thereto, (c) the Settlement Amount must be fully paid
and satisfied, the security interest granted to CarboMedics, Inc.
must be released and any UCC financing statement filed in
connection therewith terminated, and Borrower must provide Bank
with evidence of the foregoing reasonably satisfactory to Bank, by
April 30, 2009, and (d) on or after the date hereof and
prior to consummation of any of the Settlement Transactions,
Borrower shall have satisfied the Additional Conditions (as defined
below). This consent does not constitute a consent to any other
transaction or event, whether or not similar or related to the
Settlement-Related Transactions, including, without limitation, any
other transaction or event that may be described in any
documentation related to the Settlement-Related Transactions. In
addition, for purposes of clarity and not for purposes of
broadening by implication what Bank is consenting to, Borrower
acknowledges that Bank is not consenting to any breach of any
financial covenant contained in the Loan Documents that may result
from the Settlement-Related Transactions.
SVBwp/ATS/08-12
Amend-Consent/Amend-3
2
2.3 Additional Conditions to Consents. As additional
conditions (the “Additional Conditions”) precedent to
the consents provided in Sections 2.1 and 2.2 above, Borrower
shall have (a) received net proceeds of at least $18,000,000
from the issuance of stock to Essex Woodlands Health Ventures Fund
VIII, L.P., and (b) in accounts maintained with Bank
unrestricted and unencumbered (except in favor of Bank) cash and
Cash Equivalents in an aggregate amount of at least $4,500,000. For
purposes of this Amendment, “Cash Equivalents” means
(a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof
having maturities of not more than one (1) year from the date
of acquisition; (b) commercial paper maturing no more than one
(1) year after its creation and having the highest rating from
either Standard & Poor’s Ratings Group or Moody’s
Investors Service, Inc.; (c) Bank’s certificates of
deposit issued maturing no more than one (1) year after issue;
and (d) money market funds at least ninety-five percent (95%)
of the assets of which constitute Cash Equivalents of the kinds
described in clauses (a) through (c) of this
definition.
3. Amendments to Loan Agreement.
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