CONFIDENTIAL SETTLEMENT AND
MUTUAL RELEASE AGREEMENT
This Confidential
Settlement and Mutual Release Agreement (“Agreement”)
is entered into as of November ___, 2008 by and between
CarboMedics, Inc. and ATS Medical, Inc.
(“Parties”);
WHEREAS,
CarboMedics has commenced a breach of contract action 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) (“Litigation”);
WHEREAS,
CarboMedics and ATS Medical desire to settle the
Litigation;
NOW, THEREFORE, in
consideration of the mutual promises, covenants, warranties and
representations set forth in this Agreement, the Parties agree as
follows:
1.
Payment. ATS Medical shall pay CarboMedics a total amount of
$7,500,000.00 in settlement of the Litigation. ATS Medical shall
pay CarboMedics $3,000,000.00 by December 29, 2008 and ATS
Medical shall pay CarboMedics an additional $4,500,000.00 by
April 30, 2009. Each ATS Medical payment shall be wire
transferred to the following account by 3:30 pm CST on the relevant
date:
FAEGRE &
BENSON LLP IOLTA
Bank Name: Wells Fargo Bank, N.A.
Routing Transit Number: 121000248
Account Number: 000-0005434
Swift Code (International Wires): WFBIUS6S
Attn: CarboMedics v. ATS, ATS Medical Settlement Payment
(No. 1) or (No. 2)
2.
Enforcement of Agreement. If ATS Medical fails to make
either of the payments in Paragraph 1 by the deadlines in
Paragraph 1, the Parties agree that CarboMedics will give ATS
Medical 10 days notice of a hearing in which it will request
entry of judgment for all amounts unpaid (that is, $7,500,000.00
minus amounts paid by ATS). Thereafter, the Court will hold a
hearing to determine whether payment has been made consistent with
Paragraph 1. If the Court determines that payment has not been
made consistent with Paragraph 1, the Court will enter
judgment for all amounts that remain unpaid. The Parties consent to
Magistrate Judge Graham’s jurisdiction to confirm nonpayment
and enter this judgment. ATS Medical agrees that the Court’s
judgment shall be entered immediately after the hearing and ATS
Medical waives any right to appeal from such judgment.
3.
Security Interest in ATS Inventory. ATS Medical hereby
grants to CarboMedics, its successors and assigns, a security
interest in all of ATS Medicals’
1
Inventory,
whether now owned or hereinafter acquired, together with the
products and proceeds thereof. Until terminated, as provided herein
or by mutual agreement of the Parties, this security interest is
granted to secure all material obligations of ATS Medical now or
hereafter as owed to CarboMedics under this Agreement. As used
herein, the term “Inventory” means all Components,
Valves, raw materials, work in process, or materials used for or
consumed to produce Valves, and all finished goods inventory
without any requirement to maintain any specific inventory level,
which includes Components or Valves (whether contained in sealed
packages and whether such packages contain other goods), wherever
located, in the possession or control of ATS Medical. While the
security interest remains in effect, ATS Medical shall not sell any
Inventory in or as part of a Bulk Sale or outside the ordinary
scope of business. As used herein, the term “Bulk Sale”
shall mean any sale or transfer or series of sales or transfers
made or consummated within any given 90-day period of 5,000 or more
of the Component Sets and/or Valves to one party or groups of
related parties. Upon any breach by ATS Medical of its payment
obligations under the Agreement, CarboMedics shall have the
remedies of the Uniform Commercial Code as enacted in Minnesota or
other applicable law. Upon ATS Medical’s payment of the total
settlement amount in Paragraph 1, the security interest
granted in this Agreement shall immediately terminate for all
purposes.
4. Mutual
Release. Upon ATS Medical’s payment of the total
settlement amount in Paragraph 1, CarboMedics and ATS Medical,
on behalf of themselves and their agents, employees, directors,
officers, parent companies, subsidiaries, affiliated companies,
predecessors, successors,
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