CONFIDENTIAL SETTLEMENT AND MUTUAL RELEASE AGREEMENT
EXHIBIT 10.80
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 & XXXXXX LLP IOLTA
Bank Name: Xxxxx Fargo Bank, N.A.
Routing Transit Number: 000000000
Account Number: 000-0000000
Swift Code (International Wires): XXXXXX0X
Attn: CarboMedics v. ATS, ATS Medical Settlement Payment (No. 1) or (No. 2)
Bank Name: Xxxxx Fargo Bank, N.A.
Routing Transit Number: 000000000
Account Number: 000-0000000
Swift Code (International Wires): XXXXXX0X
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 Xxxxxx’x
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’
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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, and assigns, forever discharge and release each other from and covenant not to xxx each
other or their respective agents, employees, directors, officers, parent companies, subsidiaries,
affiliated companies, predecessors, successors, and assigns for any and all liabilities, claims,
damages, causes of action, suits, debts, sums of money, accounts, controversies, liens, and
variances that were or could have been asserted in the Litigation, including the Counterclaims
asserted by ATS Medical and dismissed in this Litigation, up to and including the date of execution
of this Agreement. The scope of this release shall not limit the rights of either CarboMedics or
ATS Medical to enforce the terms of this Agreement. Nor shall the scope of this release limit,
waive or release any claims or rights related to the Parties’ respective intellectual property
rights, or claims, causes of action, or suits arising from future conduct, or other unrelated
claims that do not arise out of the Litigation.
5. Existing Agreements. Upon ATS Medical’s payment of the total settlement amount in
Paragraph 1, the Parties agree that all agreements among and between the Parties are hereby
terminated in all respects. Nothing in this Agreement, however, shall invalidate or affect ATS’s
license to the Licensed Product, as that term is defined in the License Agreement dated September
24, 1990, or CarboMedics’ rights to or in or ownership of any patents set forth in that License
Agreement.
6. Dismissal of Claims with Prejudice. The Parties hereby direct their respective
counsel to, within three (3) business days following ATS Medical’s payment of the total
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settlement amount in Paragraph 1, execute and cause to be filed a Stipulation and Order of
Dismissal with Prejudice of the Litigation, attached hereto as Exhibit A.
7. Confidentiality. The existence and terms of this Agreement are strictly
confidential and neither Party shall disclose its existence, terms, and conditions to any third
party without the prior written consent of the other Party to this Agreement, except (a) as
otherwise agreed to by the Parties in writing; (b) as reasonably necessary to enforce rights under
this Agreement; (c) where a disclosure is reasonably required by applicable accounting or
securities regulations; (d) under judicial or governmental subpoena, demand or requirement,
provided the disclosing Party agrees to request provisions of confidentiality; or (e) as otherwise
required by law, provided that prompt, prior notification is provided to the other Party, as soon
as practicable so that the other Party has an opportunity to seek protection from such disclosure.
This confidentiality agreement will expire three (3) business days after the second and final
payment by ATS Medical to CarboMedics is made in full consistent with this Agreement. This
confidentiality provision will also expire immediately in the event either Party breaches any of
its terms. Nothing in this paragraph or this Agreement shall affect the Parties’ obligations and
rights under the Protective Order in the Litigation. Upon ATS Medical’s payment of the total
settlement amount in Paragraph 1 and the dismissal of the Litigation pursuant to Paragraph 6, the
Parties will comply with their obligations under the Protective Order in the Litigation.
8. Costs. The Parties shall bear their own costs and attorneys’ fees incurred in
connection with the Litigation and preparation and execution of this Agreement.
9. Representation by Counsel. Each Party acknowledges that it has received
independent legal advice from counsel of its own choice regarding the advisability of entering into
this Agreement.
10. Knowing and Voluntary Agreement. Each Party has read this Agreement and
understands the contents and legal effects of this Agreement, including the releases contained
herein. Each Party hereby acknowledges that it enters into this Agreement voluntarily and not as a
result of any duress or coercion.
11. Authority to Enter into Agreement. The persons executing this Agreement have the
full right and authority to enter into this Agreement on behalf of the Parties and the full right
and authority to execute said instruments and to fully bind the Parties to the terms and
obligations of this Agreement, and that it has not heretofore assigned, encumbered, or in any
manner transferred to any third person or entity not a Party hereto or an attorney for a Party
hereto all or any portion of the claims covered by this Agreement.
12. Construction. The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent. This Agreement shall not be
construed against any Party.
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13. Captions and Headings. The Parties agree that the captions and headings contained
in this Agreement are for convenience only and shall not be deemed to constitute a part of this
Agreement.
14. Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the Parties and their successors, executors, administrators, and assigns.
15. Governing Law and Forum. Any dispute regarding this Agreement shall be resolved
in United States District Court for the District of Minnesota and each Party consents to
jurisdiction in such court. Minnesota law shall apply to this Agreement without regard to
conflicts of law or the governing law provisions contained in any other agreements between the
Parties.
16. Entire Agreement. This Agreement supersedes all prior agreements and
understandings, oral and written, between the Parties and constitutes the entire agreement between
the Parties.
17. Amendments Only In Writing. This Agreement may not be amended or modified except
by a written instrument signed by the Parties.
18. Counterparts. This Agreement may be executed in multiple counterparts, each of
which, when so executed, shall constitute an original.
19. Facsimile or Email Signatures. The executed signature pages to this Agreement may
be exchanged by facsimile or email transmission, with hard copies to follow. The exchange of
executed signature pages by facsimile or email shall be sufficient for counsel to the Parties to
file the Stipulation of Dismissal pursuant to this Agreement.
| CarboMedics, Inc. |
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| By | /s/ Xxxxx Xxxxxxxx | |||
| Its General Counsel | ||||
| ATS Medical, Inc. |
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| By | /s/ Xxxxxxx Xxxx | |||
| Its President/CEO | ||||
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