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EXHIBIT 10.1
COMMON STOCK AND WARRANT PURCHASE
AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT ("
Agreement ") is made as of the 19 th day of
December, 2008 by and among ATS Medical, Inc., a Minnesota
corporation (the " Company "), and the other Persons set
forth on the signature pages hereto (each an " Investor "
and collectively the " Investors ").
Recitals
A. The Company and the Investors are executing
and delivering this Agreement in reliance upon the exemption from
securities registration afforded by the provisions of
Regulation D (" Regulation D "), as promulgated by
the Securities and Exchange Commission (the " SEC ") under
the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the " Securities Act
");
B. The Investors wish to purchase from the
Company, and the Company wishes to sell and issue to the Investors,
upon the terms and subject to the conditions set forth in this
Agreement, an aggregate of 8,510,639 shares (the " Shares ")
of the Company’s common stock, par value $0.01 per share (the
" Common Stock "), and warrants (the " Warrants ") to
purchase an aggregate of 2,553,192 shares of Common Stock at an
exercise price as provided in the Warrants, in the form of
Exhibit A hereto, for a purchase price of $2.35 per
Share, representing an aggregate purchase price of
$20,000,001.65;
C. Contemporaneous with the sale of the
Shares, the parties hereto will execute and deliver a Registration
Rights Agreement, in the form attached hereto as
Exhibit B (the " Registration Rights Agreement
"), pursuant to which the Company will agree to provide certain
registration rights under the Securities Act; and
D. This Agreement shall be binding upon the
Company and the Investors only upon delivery of the signatures
pages hereto by the Company and the Investors.
Agreement
In consideration of the mutual promises made herein
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions . In addition to those
terms defined above and elsewhere in this Agreement, for the
purposes of this Agreement, the following terms shall have the
meanings set forth below:
" Affiliate " means, with respect to any
Person, any other Person which directly or indirectly through one
or more intermediaries controls, is controlled by, or is under
common control with, such Person.
" Business Day " means a day, other than a
Saturday or Sunday, on which banks in New York City are open for
the general transaction of business.
" Confidential Information " means trade
secrets, confidential information and know-how (including but not
limited to ideas, formulae, compositions, processes, procedures and
techniques, research and development information, performance
specifications, support documentation, drawings, specifications,
designs, business and marketing plans, and supplier lists and
related information).
" Exchange Act " means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
" Intellectual Property " means all of the
following: (i) patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether
or not reduced to practice); (ii) trademarks, service marks,
trade dress, trade names, corporate names, logos, slogans and
Internet domain names, together with all goodwill associated with
each of the foregoing; (iii) copyrights and copyrightable
works; and (iv) registrations, applications and renewals for
any of the foregoing.
" Management Rights Letter " means a
Management Rights Letter in the form of Exhibit C .
" Material Adverse Effect " means an event,
change or occurrence that, individually or together with any other
event, change or occurrence, has a material adverse impact on the
Company’s financial position, business or results of
operations, excluding any event, change or occurrence resulting
from the announcement or consummation of the transactions
contemplated by the Transaction Documents.
" Nasdaq " means The Nasdaq Stock Market,
Inc.
" Permitted Liens " means
(i) mechanics’, carriers’, or workmen’s,
repairmen’s or similar liens arising or incurred in the
ordinary course of business, (ii) liens for taxes, assessments
and other governmental charges that are not due and payable or
which may hereafter be paid without penalty or which are being
contested in good faith by appropriate proceedings and
(iii) other imperfections of title or encumbrances, if any,
that do not, individually or in the aggregate, materially impair
the use or value of the property to which they relate.
" Person " means an individual, corporation,
partnership, limited liability company, trust, business trust,
association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority
or any other form of entity not specifically listed herein.
" Registration Statement " has the meaning
set forth in the Registration Rights Agreement.
" SEC Filings " has the meaning set forth in
Section 4.6.
" Securities " means the Shares, the
Warrants and the Warrant Shares.
" Subsidiary " of any Person means another
Person, an amount of the voting securities, other voting ownership
or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body
(or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such
first Person.
" Transaction Documents " means this
Agreement, the Registration Rights Agreement, the Warrants and the
Management Rights Letter.
" Warrant Shares " mean the shares of Common
Stock issuable upon exercise of the Warrants (including shares of
Common Stock issuable upon adjustment pursuant to Section 4 of
the Warrants).
2. Purchase and Sale of the Shares and the
Warrants . Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing, each of the Investors
shall, severally and not jointly, purchase, and the Company shall
sell and issue to the Investors, the Shares and the Warrants in the
respective amounts set forth below the Investors’ names on
the signature pages hereto.
3. Closing . The purchase and sale of
the Shares and the Warrants pursuant to Section 2 shall take place
at the offices of Winstead PC, 24 Waterway Avenue, Suite 500,
The Woodlands, Texas 77380 on the date hereof (subject to the
satisfaction of the closing conditions set forth herein), or at
such other location and on such other date as the Company and the
Investors shall mutually agree (which time and place are designated
as the " Closing "). At the Closing, the Company shall
deliver to each Investor a certificate or certificates representing
the number of Shares and a Warrant for the number of shares of
Common Stock each as set forth below such Investor’s name on
the signature pages hereto against payment of the purchase price
therefore by wire transfer of immediately available funds to a bank
account designated by the Company.
4. Representations and Warranties of the
Company . The Company hereby represents and warrants to the
Investors that, except as disclosed in the SEC Filings or as set
forth in the schedules delivered herewith (collectively, the "
Disclosure Schedules "):
4.1. Organization, Good Standing and
Qualification . The Company 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
carry on its business as now conducted and to own its properties.
The Company and each of its Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the conduct of its business or its ownership
or leasing of property makes such qualification necessary, except
where the failure to so qualify, individually or in the aggregate,
would not have a Material Adverse Effect. To the Company’s
knowledge, no proceeding has been instituted in any jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail, such power and authority or qualification. The Company has
no Subsidiaries other than ATS Medical France, SARL, a French
corporation, ATS Medical GmbH, a German corporation, ATS Medical
Export GmbH, an Austrian corporation, 3F Therapeutics, Inc., a
California corporation, and ATS Acquisition Corp., a Minnesota
corporation (collectively, the " Current Subsidiaries ").
For purposes of this Section 4, all references to the
"Company" shall be deemed to refer to the Company and the Current
Subsidiaries unless the context clearly requires otherwise.
4.2. Authorization . The Company has full
corporate power and authority and has taken all requisite action on
the part of the Company, its officers, directors and shareholders
necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) the authorization of the
performance of all obligations of the Company hereunder or
thereunder and (iii) the authorization, issuance, sale and
delivery of the Securities. The Transaction Documents constitute
the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights
generally.
4.3. Capitalization . Schedule 4.3 sets
forth as of the date hereof (a) the authorized capital stock
of the Company; (b) the number of shares of capital stock
issued and outstanding; (c) the number of shares of capital
stock available for issuance pursuant to the Company’s stock
plans; and (d) the number of shares of capital stock issuable
and reserved for issuance pursuant to securities exercisable for,
or convertible into or exchangeable for any shares of capital stock
of the Company. All of the issued and outstanding shares of the
Company’s capital stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive
rights. No Person is entitled to pre-emptive or similar statutory
or contractual rights with respect to any securities of the
Company. Except as set forth on Schedule 4.3 or as a result of
the purchase and sale of the Securities, there are no outstanding
warrants, options, convertible securities or other rights,
agreements or arrangements under which the Company is obligated to
issue equity securities. Except as set forth on Schedule 4.3
or as contemplated under this Agreement, there are no contracts,
commitments, understandings or arrangements by which the Company is
bound to issue additional shares of capital stock of the Company or
options, securities or rights convertible into shares of capital
stock of the Company. Except as set forth on Schedule 4.3 or
provided in the Registration Rights Agreement, no Person has the
right to require the Company to register any securities of the
Company under the Securities Act, whether on a demand basis or in
connection with the registration of securities of the Company for
its own account or for the account of any other Person other than
registration statements that have already been filed and declared
effective. The issue and sale of the Securities will not result in
any adjustment of, or the right of any holder of Company securities
to adjust, the exercise, conversion or exchange price under such
securities. The Company owns beneficially and of record all of the
outstanding equity interests in the Current Subsidiaries, and there
are no contracts, commitments, understandings or arrangements by
which any of the Current Subsidiaries is bound to issue additional
shares of capital stock of such entity or options, securities or
rights convertible into shares of capital stock of such entity.
4.4. Valid Issuance . The Shares and the
Warrants have been duly and validly authorized and, when issued and
paid for in accordance with the applicable Transaction Document,
will be validly issued, fully paid and nonassessable, and will be
free of encumbrances and restrictions (other than those created by
the Investors), except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws.
The Warrant Shares have been reserved for issuance and, upon
issuance pursuant to the Warrants, will be duly and validly
authorized and fully paid and nonassessable.
4.5. Consents . The execution, delivery and
performance by the Company of the Transaction Documents and the
offer, issuance and sale of the Securities and the Warrant Shares
requires no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official, filings that
have been made pursuant to applicable state securities laws and
post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the
applicable time periods. No vote of the Company’s
shareholders is required pursuant to the Marketplace Rules of the
National Association of Securities Dealers or otherwise in
connection with the issuance of the Shares or the shares of Common
Stock issuable upon the exercise of the Warrants.
4.6. Delivery of SEC Filings . The Company
has made available to the Investors through the EDGAR system, true
and complete copies of (a) the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2007 filed
with the SEC on March 14, 2008, including all exhibits thereto
and documents incorporated by reference therein, (b) the
Company’s Quarterly Reports on Form 10-Q for the quarter
ended March 29, 2008 filed with the SEC on May 7, 2008,
for the quarter ended June 28, 2008 filed with the SEC on
August 7, 2008, and for the quarter ended September 27,
2008 filed with the SEC on November 6, 2008, including all
exhibits thereto, and documents incorporated by reference therein
and (c) the Company’s Current Reports on Form 8-K filed
with the SEC on January 31, 2008, February 4, 2008,
February 25, 2008, March 6, 2008, April 4, 2008,
May 5, 2008, May 13, 2008, July 2, 2008,
July 8, 2008, August 4, 2008, November 3, 2008 and
November 4, 2008, including all exhibits thereto and documents
incorporated by reference therein (collectively, the " SEC
Filings "). The SEC Filings are the only periodic filings
required of the Company pursuant to the Exchange Act through the
date hereof.
4.7. Use of Proceeds . The net proceeds of
the sale of the Shares and the Warrants hereunder shall be used by
the Company to fund the settlement of litigation with CarboMedics
Inc., a unit of Sorin SpA, and to pay all attorneys’ fees
related to such settlement, for business development and for
working capital.
4.8. No Material Adverse Change . Since
September 27, 2008 there has not been:
(a) any change in the consolidated assets,
liabilities, financial condition or operating results of the
Company from that reflected in the financial statements included in
the Company’s Quarterly Report on Form 10-Q for the quarter
ended September 27, 2008, except for changes in the ordinary
course of business which would not have, individually or in the
aggregate, a Material Adverse Effect;
(b) any declaration or payment of any
dividend, or any authorization or payment of any distribution, on
any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company (other than in
connection with a termination of employment);
(c) any material damage, destruction or loss
to any assets or properties of the Company;
(d) any waiver, not in the ordinary course of
business, by the Company of a material right or of a material debt
owed to it;
(e) any change or amendment to the
Company’s Articles of Incorporation or Bylaws, or change to
any material contract or arrangement by which the Company is bound
or to which its assets or properties is subject;
(f) any material labor difficulties or labor
union organizing activities with respect to employees of the
Company;
(g) any transaction entered into by the
Company other than in the ordinary course of business;
(h) the loss of the services of any key
employee, or material change in the composition or duties of the
senior management of the Company; or
(i) any other event or condition of any
character that has had or would reasonably be expected to have a
Material Adverse Effect.
4.9. SEC Filings . At the time of filing
thereof, the SEC Filings complied as to form in all material
respects with the requirements of the Exchange Act and did not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading.
4.10. No Conflict, Breach, Violation or
Default . Neither the execution, delivery and performance of
the Transaction Documents by the Company nor the consummation of
any of the transactions contemplated hereby (including without
limitation the issuance and sale of the Securities) will conflict
with or result in violation of any of the terms and provisions of
the Company’s Articles of Incorporation or Bylaws, both as in
effect on the date hereof or will give rise to the right to
terminate or accelerate the due date of any payment under or
conflict with or result in a breach of any term or provision of, or
constitute a default (or any event which with notice or lapse of
time or both would constitute a default) under, or require any
consent or waiver under or result in the execution or imposition of
any lien, charge or encumbrance upon the properties or assets of
the Company pursuant to the terms of any indenture, mortgage, deed
of trust or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of its
assets or properties is subject or any license, permit, statute,
rule, regulation, judgment, decree or order of any governmental
agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any of its assets or properties,
other than a conflict, breach or default that would not have a
Material Adverse Effect.
4.11. Tax Matters . The Company has timely
prepared and filed all tax returns required to have been filed by
the Company with all appropriate governmental agencies and timely
paid all taxes shown thereon or otherwise owed by it, except as
would not have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are
no material unpaid assessments against the Company. All taxes and
other assessments and levies that the Company is required to
withhold or to collect for payment have been duly withheld and
collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or, to the
Company’s knowledge, threatened against the Company or any of
its assets or property, other than Permitted Liens. There are no
tax audits or investigations pending, which if adversely determined
would result in a Material Adverse Effect. There are no outstanding
tax sharing agreements or other such arrangements between the
Company and any other Person. The Company does not have any
deferred compensation arrangements and has not paid or is not
required to pay any deferred compensation that would be subject to
Section 409A of the Internal Revenue Code.
4.12. Title to Properties . The Company has
good and marketable title to all properties and assets owned by it,
in each case free from liens, encumbrances and defects, other than
Permitted Liens. The Company holds any leased real or personal
property under valid and enforceable leases. The Company does not
own any real property.
4.13. Certificates, Authorities and Permits
. The Company possesses adequate certificates, approvals,
authorities or permits ("Permits") issued by governmental agencies
or bodies necessary to own, lease and license its assets and
properties and conduct the business now operated by it, all of
which are valid and in full force and effect, except where the lack
of such Permits, individually or in the aggregate, would not have a
Material Adverse Effect. The Company has performed in all material
respects all of its material obligations with respect to such
Permits and no event has occurred that allows, or after notice or
lapse of time, would allow, revocation or termination thereof. The
Company has not received any written notice of proceedings relating
to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company,
would, individually or in the aggregate, have a Material Adverse
Effect.
4.14. Labor Matters .
(a) The Company is not a party to or bound by
any collective bargaining agreement. The Company has not violated
in any material respect any laws, regulations, orders or contract
terms, affecting the collective bargaining rights of employees,
labor organizations or any laws, regulations or orders affecting
employment discrimination, equal opportunity employment or
employees’ health, safety, welfare, wages and hours.
(b) (i) There are no labor disputes
existing, or to the Company’s knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions,
disputes, lockouts or any other disruptions of or by the
Company’s employees, (ii) there are no unfair labor
practices or petitions for election pending or, to the
Company’s knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor
commission relating to the Company’s employees, (iii) no
demand for recognition or certification heretofore made by any
labor organization or group of employees is pending with respect to
the Company and (iv) to the Company’s knowledge, the
Company enjoys good labor and employee relations with its
employees.
(c) The Company is in compliance in all
material respects with applicable laws respecting employment
(including laws relating to classification of employees and
independent contractors) and employment practices, terms and
conditions of employment, wages and hours, and immigration and
naturalization. No claims are pending against the Company before
the Equal Employment Opportunity Commission or any other
administrative body or in any court asserting any violation of
Title VII of the Civil Rights Act of 1964, the Age Discrimination
Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other
federal, state or local law, statute or ordinance barring
discrimination in employment.
(d) The Company is not a party to, or bound
by, any employment or other contract or agreement that contains any
severance, termination pay or change of control liability or
obligation, including, without limitation, any "excess parachute
payment," as defined in Section 280G(b) of the Internal
Revenue Code of 1986, as amended.
4.15. Intellectual Property .
(a) To the Company’s knowledge, all
Intellectual Property of the Company is valid and enforceable. No
Intellectual Property owned or licensed by the Company that is
necessary for and material to the conduct of Company’s
business as currently conducted or as proposed to be conducted as
described in the SEC Filings is involved in any cancellation,
dispute or litigation, and, to the Company’s knowledge, no
such action is threatened. No issued patent owned by the Company is
involved in any interference, reissue, re-examination or opposition
proceeding.
(b) All of the in-bound licenses and
sublicenses and consent, royalty or other agreements concerning
Intellectual Property which are necessary for the conduct of the
Company’s business as currently conducted and as proposed to
be conducted as described in the SEC Filings to which the Company
is a party (other than generally commercially available,
non-custom, off-the-shelf software application programs having a
retail acquisition price of less than $50,000 per license)
(collectively, " In-Bound License Agreements ") are, to the
Company’s knowledge, valid and binding obligations of the
Company and the counterparty thereto, enforceable in accordance
with their terms, except to the extent that enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the
enforcement of creditors’ rights generally, and, to the
Company’s knowledge, neither the Company nor the counterparty
thereto is in material breach of any of its obligations under any
such In-Bound License Agreements.
(c) The Company owns or has the valid right to
use all of the Intellectual Property that is necessary for the
conduct of the Company’s business as currently conducted and
as proposed to be conducted as described in the SEC Filings and for
the ownership, maintenance and operation of the Company’s
properties and assets, free and clear of all liens, encumbrances,
adverse claims or, with respect to Intellectual Property owned by
the Company, obligations to license such Intellectual Property,
other than licenses of the Intellectual Property owned by the
Company that are entered into in the ordinary course of the
Company’s business. To the Company’s knowledge, the
Company has a valid and enforceable right to use all third party
Intellectual Property and Confidential Information used or held for
use in the business of the Company.
(d) To the Company’s knowledge, the
conduct of the Company’s business as currently conducted or
as proposed to be conducted as described in the SEC Filings, the
use or exploitation of any Intellectual Property owned by the
Company, or to its knowledge, the use or exploitation of any
Intellectual Property licensed by the Company does not infringe,
misappropriate or otherwise materially impair or conflict with
(collectively, " Infringe ") any Intellectual Property
rights of any third party and, to the Company’s knowledge,
the Intellectual Property owned by the Company which is necessary
for the conduct of Company’s business as currently conducted
or as proposed to be conducted as set forth in the SEC Filings is
not being Infringed by any third party. There is no litigation,
court order, claim or assertion pending or outstanding or, to the
Company’s knowledge, threatened, that seeks to limit or
challenge the ownership, use, validity or enforceability of any
Intellectual Property owned or licensed by the Company or the
Company’s use of any Intellectual Property owned by a third
party.
(e) To the Company’s knowledge, the
consummation of the transactions contemplated hereby and by the
other Transaction Documents will not result in the (i) loss,
material impairment of or material restriction on any of the
Intellectual Property or Confidential Information owned by the
Company which is necessary for the conduct of Company’s
business as currently conducted or as proposed to be conducted as
set forth in the SEC Filings or (ii) material breach of any
In-Bound License Agreement.
(f) To the Company’s knowledge, the
Company has taken reasonable steps to protect the Company’s
rights in its Intellectual Property and Confidential Information.
Each employee and consultant who has access to the Company’s
Confidential Information necessary for the conduct of
Company’s business as currently conducted has executed an
agreement to maintain the confidentiality of such Confidential
Information. To the Company’s knowledge, and except pursuant
to non-disclosure or other confidentiality agreements entered into
between the Company and third parties in the ordinary course of
business, there has been no disclosure of the Company’s
Intellectual Property or Confidential Information to any third
party. To the Company’s knowledge, there have been no
misappropriations or infringements by any Person of any
Intellectual Property used in the conduct or operation of the
Company’s business.
4.16. Environmental Matters . The Company is
not in violation of any statute, rule, regulation, decision or
order of any governme
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