Amendment To And Consent Regarding Loan and Security Agreement
Exhibit 10.79
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 0000 Xxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000.
Recitals
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.
Agreement
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. Consents.
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 Xxxxx’x 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.
3.1 Amendment to Liquidity Ratio. Section 6.7 of the Loan Agreement reads as follows:
“Borrower will maintain at all times, on a consolidated basis:
(i) Liquidity Ratio.
Commencing with the month ending June 30, 2008 and each
month ending thereafter through December 31, 2008:
(A) As of the end of each of the first two months of each
fiscal quarter, a ratio of (y) the sum of (1) unrestricted cash
(and equivalents) of Borrower on deposit with Bank plus (2) 50%
of Borrower’s accounts receivable arising from the sale or lease
of goods, or provision of services, in the ordinary course of
business, (z) divided by Indebtedness of Borrower to Bank for
borrowed money, of equal to or greater than 1.10 to 1.00; and
SVBwp/ATS/08-12 Amend-Consent/Amend-3
3
(B) As of the end of the third month of each fiscal quarter,
a ratio of (y) the sum of (1) unrestricted cash (and equivalents)
of Borrower on deposit with Bank plus (2) 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business, (z)
divided by Indebtedness of Borrower to Bank for borrowed money,
of equal to or greater than 1.40 to 1.00.
Notwithstanding the foregoing, if the amount of Borrower’s
Eligible Accounts ever becomes less than 50% of Borrower’s
accounts receivable arising from the sale or lease of goods, or
provision of services, in the ordinary course of business, then
part “2” above (of each of clause (A) and (B)) shall be deemed to
read “(2) the lesser of the amount of Borrower’s Eligible
Accounts or 50% of Borrower’s accounts receivable arising from
the sale or lease of goods, or provision of services, in the
ordinary course of business”, unless the Bank shall consent in
writing otherwise.
Commencing January 1, 2009 and each month ending thereafter:
A ratio of (y) the sum of (1) unrestricted cash (and equivalents)
of Borrower on deposit with Bank plus (2) 50% of Borrower’s
accounts
receivable arising from the sale or lease of goods, or provision
of services, in the ordinary course of business, (z) divided by
Indebtedness of Borrower to Bank for borrowed money, of equal to
or greater than 1.40 to 1.00. Notwithstanding the foregoing, if
the amount of Borrower’s Eligible Accounts ever becomes less than
50% of Borrower’s accounts receivable arising from the sale or
lease of goods, or provision of services, in the ordinary course
of business, then part “2” above shall be deemed to read “(2) the
lesser of the amount of Borrower’s Eligible Accounts or 50% of
Borrower’s accounts receivable arising from the sale or lease of
goods, or provision of services, in the ordinary course of
business”, unless the Bank shall consent in writing otherwise.”
The language “equal to or greater than 1.40 to 1.00” contained in said Section 6.7 (in two
places) is hereby amended to read “equal to or greater than 2.00 to 1.00”, provided that,
if no Event of Default has occurred and is continuing, upon Borrower’s written request
made within 60 days after the security interest granted to CarboMedics, Inc. has been
released and any UCC financing statement filed in connection therewith has been terminated
and Borrower has provided Bank with evidence of the foregoing reasonably satisfactory to
Bank, Bank shall enter into an amendment with Borrower amending such language to again
read “equal to or greater than 1.40 to 1.00”.
SVBwp/ATS/08-12 Amend-Consent/Amend-3
4
3.2 Deposit Requirement. Until the security interest granted to CarboMedics, Inc. has been
released and any UCC financing statement filed in connection therewith has been terminated and
Borrower has provided Bank with evidence of the foregoing reasonably satisfactory to Bank,
Borrower shall at all times maintain with Bank unrestricted and unencumbered (except in favor of
Bank) cash and Cash Equivalents in an aggregate amount of at least $4,500,000 and Borrower shall
not make any withdrawal or transfer or take any other action that would result in such amount
being reduced to below $4,500,000.
3.3 Conforming Changes to Compliance Certificate. The Bank may make such changes to the
Compliance Certificate that is required pursuant to Section 6.2(c) of the Loan Agreement as from
time to time may be necessary to conform the Compliance Certificate to any amendments that have
been or may hereinafter be made to the Loan Agreement. For purposes of illustration and not by
way of limitation, the required Liquidity Ratio as set forth in the Compliance Certificate shall
be changed to “2:00:1.00” to conform with the amendment to the Liquidity Ratio being made
pursuant to this Amendment.
4. Limitation of Amendments.
4.1 The consents and amendments set forth herein are effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to
any amendment, waiver or modification of any other term or condition of any Loan Document, or (b)
otherwise prejudice any right or remedy which Bank may now have or may have in the future under
or in connection with any Loan Document.
4.2 This Amendment shall be construed in connection with and as part of the Loan Documents
and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are
hereby ratified and confirmed and shall remain in full force and effect.
5. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower
hereby represents and warrants to Bank as follows:
5.1 Immediately after giving effect to this Amendment (a) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material respects as of
the date hereof (except to the extent such representations and warranties relate to an earlier
date, in which case they are true and correct as of such date), and (b) no Event of Default has
occurred and is continuing;
SVBwp/ATS/08-12 Amend-Consent/Amend-3
5
5.2 Borrower has the power and authority to execute and deliver this Amendment and to
perform its obligations under the Loan Agreement, as amended by this Amendment;
5.3 The Third Restated Articles of Incorporation of ATS Medical, Inc. filed with the
Minnesota Secretary of State on June 11, 2008, a copy of which was provided to Bank via email on
June 18, 2008, remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;
5.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, have been duly
authorized;
5.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not
contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual
restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or
other governmental or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;
5.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, do not require any
order, consent, approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and
5.7 This Amendment has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium
or other similar laws of general application and equitable principles relating to or affecting
creditors’ rights.
6. Counterparts. This Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same instrument.
SVBwp/ATS/08-12 Amend-Consent/Amend-3
6
7. Fees and Expenses. In consideration for Bank entering into this Amendment, Borrower shall
concurrently pay Bank a fee in the amount of $10,000, which fee is deemed fully earned on the date
hereof, and shall be non-refundable and in addition to all interest and other fees payable to Bank
under the Loan Documents. Without limitation on the terms of the Loan Documents, Borrower agrees
to reimburse Bank for all its costs and expenses (including reasonable attorneys’ fees) incurred in
connection with this Amendment. Bank is authorized to charge said fees, costs and expenses to
Borrower’s loan account or any of Borrower’s deposit accounts maintained with Bank.
8. Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and
delivery of this Amendment by each party hereto, and (b) Bank’s receipt of the Acknowledgment of
Amendment and Reaffirmation of Guaranty substantially in the form attached hereto as Schedule 1,
duly executed and delivered by each guarantor named therein.
[Signature page follows]
SVBwp/ATS/08-12 Amend-Consent/Amend-3
7
In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed
and delivered as of the date first written above.
| BANK | BORROWER | |||||
| Silicon Valley Bank | ATS Medical, Inc. | |||||
By:
|
/s/ Xxxx Xxxxxxxx | By: | /s/ Xxxxxxx X. Xxxxxx | |||
Name:
|
Xxxx Xxxxxxxx | Name: | Xxxxxxx X. Xxxxxx | |||
Title:
|
Relationship Manager | Title: | Chief Financial Officer | |||
SVBwp/ATS/08-12 Amend-Consent/Amend-3
Schedule 1
ACKNOWLEDGMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
AND REAFFIRMATION OF GUARANTY
Section 1. Each of the undersigned guarantors hereby acknowledges and confirms that it has
reviewed and approved the terms and conditions of the Amendment to and Consent Regarding Loan and
Security Agreement of substantially even date herewith (the “Amendment”).
Section 2. Each guarantor hereby consents to the Amendment and agrees that its guaranty
relating to the Obligations of Borrower under the Loan Agreement shall continue in full force and
effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the
execution of the Amendment or any other document or instrument delivered in connection herewith.
Section 3. Each guarantor represents and warrants that, after giving effect to the Amendment,
all representations and warranties contained in the guaranty are true, accurate and complete as if
made the date hereof.
Dated as of December 19, 2008
| 3F THERAPEUTICS, INC. | ATS ACQUISITION CORP. | |||||
By:
|
/s/ Xxxxxxx Xxxx | By: | /s/ Xxxxxxx Xxxx | |||
Name:
|
Xxxxxxx Xxxx | Name: | Xxxxxxx Xxxx | |||
Title:
|
Director | Title: | Director | |||
XXXxx/XXX/00-00 Xxxxx-Xxxxxxx/Xxxxx-0
