PLEDGE AGREEMENT
Exhibit 10.3
THIS PLEDGE AGREEMENT (the “Agreement”), dated as of May 21, 2010, is made and given by ATS
Medical, Inc., a Minnesota corporation (the “Pledgor”), to Medtronic, Inc., a Minnesota corporation
and its endorsees and assigns (the “Lender”).
R E C I T A L S
A. Pledgor and two of its affiliates, have executed and delivered to the Lender a Note dated
as of the date hereof in the original principal amount of $30,000,000 (as the same may hereafter be
amended, restated, or otherwise modified from time to time, the “Note”) pursuant to which the
Lender has agreed to extend to the Borrower certain credit accommodations and executed a Security
Agreement in favor of the Lender dated as of the date hereof (the “Security Agreement”).
B. The Pledgor is the owner free and clear of any liens or security interests of the Stock
(defined below).
C. It is a condition precedent to the obligation of the Lender to extend credit accommodations
pursuant to the terms of the Note that this Agreement be executed and delivered by the Pledgor.
A G R E E M E N T S
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged
by the Pledgor, it is agreed as follows:
1. Grant of Security Interest. As security for the payment and performance of the
debt, liability and obligations that arise under or are evidenced by the Note and any documents or
agreements executed in connection with the Note and any and all amendments, modifications,
replacements thereof, (hereinafter collectively referred to as the “Obligations”), upon the first
Advance under the Note, the Pledgor does transfer, assign and grant to the Lender a security
interest (the “Security Interest”) in all of Pledgor’s right, title and interest in and to the
following (hereinafter collectively referred to as the “Collateral”), whether now owned or
hereafter acquired or arising:
(a) all of Pledgor’s now existing and/or hereafter arising interest (collectively, the
“Stock”) in: ATS Medical France, SARL, a French corporation; ATS Medical GmbH, a German
corporation; and ATS Medical Belgium SPRL, a Belgian corporation (collectively, the
“Issuers”). All Stock now held by Pledgor is itemized on Schedule 1(a) attached
hereto; and
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(b) any instruments representing the Stock and all income, distributions, dividends,
cash, instruments and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Stock; and
(c) all proceeds of any and all of the foregoing (including, without limitation,
proceeds that constitute property of types described above).
2. Possession and Delivery of Pledged Collateral. The Pledgor shall deliver all
instruments, if any, representing or evidencing the Collateral to the Lender to be held by the
Lender pursuant hereto, which shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Lender. The Lender shall have the right at any time to exchange
instruments representing or evidencing Collateral for instruments of smaller or larger
denominations.
3. Voting Rights; Dividends; Etc.
(a) Subject to Section 3(d) below, the Pledgor shall be entitled to exercise or refrain
from exercising any and all voting and other consensual rights pertaining to the Collateral
or any part thereof for any purpose not inconsistent with the terms of this Agreement;
provided, however, that the Pledgor shall not exercise or refrain from exercising
any such right if such action could reasonably be expected to have a material adverse effect
on the value of the Collateral or any material part thereof.
(b) Subject to Section 3(e) below, the Pledgor shall be entitled to receive, retain, or
use in any manner not prohibited by this Agreement any and all dividends and other
distributions other than stock dividends paid in respect of the Collateral.
(c) The Lender shall execute and deliver (or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and other rights that it is entitled
to exercise pursuant to Section 3(a) hereof and to receive the dividends and other
distributions that it is authorized to receive and retain pursuant to Section 3(b) hereof.
(d) Upon the occurrence and during the continuance of any Event of Default (defined
below), the Lender shall have the right in its sole discretion,
(i) to terminate all rights of the Pledgor to exercise or refrain from
exercising the voting and other consensual rights that the Pledgor would otherwise
be entitled to exercise pursuant to Section 3(a) hereof, and all such rights shall
thereupon become vested in the Lender who shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual rights, and
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(ii) to cause any or all of the Collateral to be transferred of record into the
name of the Lender or its nominee.
The Pledgor irrevocably appoints the Lender as proxy, with full power of substitution and
revocation, upon the occurrence of any Event of Default and so long as such Event of Default
continues, to exercise the Lender’s rights to attend meetings, vote, consent to and/or take
any action respecting the Collateral or any issuer thereof as fully as the Pledgor might do.
This proxy remains effective so long as any of the Obligations are unpaid. In addition,
the Pledgor shall execute and deliver all such other proxies and other instruments as may be
necessary or appropriate to give effect to the rights specified in this Section 3(d). The
Pledgor irrevocably agrees, upon the occurrence of an Event of Default and so long as such
Event of Default continues, to the extent the Lender is incapable of exercising Pledgor’s
rights to attend meetings, vote, consent to and/or take any action respecting the collateral
or any issuer thereof as fully as the Pledgor might do, to exercise all such rights at the
Lender’s direction in the Lender’s sole discretion.
(e) Upon the occurrence and during the continuance of any Event of Default:
(i) all rights of the Pledgor to receive the dividends and other distributions
that the Pledgor would otherwise be authorized to receive and retain pursuant to
Section 3(b) hereof shall cease, and all such rights shall thereupon become vested
in the Lender who shall thereupon have the sole right to receive and hold such
dividends and other distributions as Collateral hereunder in accordance with Section
6 hereof, and
(ii) all dividends and other distributions that are received by the Pledgor
contrary to the provisions of paragraph (i) of this Section 3(e) shall be received
in trust for the benefit of the Lender, shall be segregated from other funds of the
Pledgor and shall be forthwith paid over to the Lender as Collateral in the same
form as so received (with any necessary endorsement).
4. Pledgor’s Representations, Warranties and Covenants. Pledgor represents, warrants,
covenants and agrees:
(a) Authorization. Pledgor has full power, authority and authorization to
execute, enter into, deliver and perform this Agreement. Except to the extent required
under the laws of any foreign jurisdiction under which an issuer of Stock is organized or
incorporated, the execution, delivery and performance of this Agreement will not: (i)
require any consent or approval of any entity which has not been obtained; or (ii) violate
any provision of any indenture, contract, agreement or instrument to which the Pledgor is a
party or by which the Pledgor is bound.
(b) With Respect to Collateral.
(i) The Pledgor is the legal and beneficial owner of the Collateral free and
clear of any lien, claim or encumbrance except for the security interest
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created by this Agreement. Without in any way limiting the generality of the
foregoing, the Collateral is not subject to any “blanket” security interests granted
by the Pledgor other than in favor of the Lender. The Pledgor has not granted, and
will not grant or permit to exist, any lien or security interests in all or any
portion of the Collateral other than the Permitted Liens as defined in the Security
Agreement.
(ii) The grant of the security interest in the Collateral by the Pledgor
pursuant to this Agreement, together with the filing of a UCC financing statement
covering any of the Collateral which may constitute general intangibles, creates a
valid and perfected first priority lien on and security interest in the Collateral
subject to requirements of laws of any foreign jurisdiction under which an issuer of
Stock is organized or incorporated. Pledgor shall defend the Collateral against all
claims and demands of all and any other persons at any time claiming any interest
therein adverse to the Lender.
(iii) The Pledgor agrees that the Pledgor will not (1) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, any of the Collateral, or (2) create or permit to exist any lien, claim
or encumbrance upon or with respect to any such Collateral (other than the lien in
favor of the Lender and Permitted Liens (as defined in the Security Agreement)).
(iv) The Pledgor shall promptly pay when due all taxes and other charges levied
or assessed upon or against any Collateral, and shall execute such writings and take
such other actions with respect to the Collateral as the Lender may request.
(v) The Pledgor shall deliver to the Lender upon receipt all notices, reports
and other writings received by the Pledgor as owner or holder of any Collateral.
(vi) No one except the Lender has control over any of the Stock, and the
Pledgor has not entered into any agreement that gives anyone except the Lender
control over any of the Stock. The Lender shall not permit anyone other than the
Lender to have control over any of the Stock. The Pledgor shall not enter into any
agreement that gives anyone except the Lender control over any of the Stock. In
this Agreement, the term “control” has the meaning assigned to that term in the
Uniform Commercial Code as adopted by Delaware (the “Code”).
(vii)The Pledgor shall not permit its interest in any of the Issuers to be less
than 100% of the total equity interests in such Issuer at any time.
(d) Actions and Proceedings. There are no actions at law, suits in equity or
any other proceedings before any governmental agency, commission, bureau, or other
arbitration proceedings against or affecting the Pledgor that if adversely determined would
adversely affect the Pledgor’s interest in the Collateral or would adversely affect
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the rights of the Pledgor to pledge and assign all or a part of the Collateral or the
rights and security afforded the Lender hereunder.
(e) Costs of Collection. The Pledgor shall reimburse the Lender, upon demand,
for: (i) all of the Lender’s reasonable costs and expenses, including without limitation
reasonable attorneys’ fees and legal expenses, with interest thereon, incurred by the Lender
in connection with the enforcement by the Lender during the term hereof or thereafter of any
of the rights or remedies of the Lender hereunder, including without limitation, reasonable
costs and expenses of collection in the Event of Default, whether or not suit is filed with
respect thereto and whether such costs are paid or incurred, or to be paid or incurred,
prior to or after entry of judgment; (ii) all taxes, levies, and other expenses relating to
preserving the Collateral; and (iii) all costs of the Lender incurred in disposing of the
Collateral.
5. Event of Default. It shall be an Event of Default under this Agreement upon the
happening of any of the following:
(a) an Event of Default (as defined therein) occurs under the Note or any other
document executed in connection with the Note; or
(b) the Pledgor shall fail to comply with or perform in any respect any of the terms,
conditions or covenants of this Agreement or any other agreement of the Pledgor in favor of
the Lender and such failure continues for 30 days after written notice from Lender; or
(c) any representation or warranty made by the Pledgor herein or in any document,
instrument or certificate given in connection with this Agreement shall be false when made
in any material respect.
6. Remedies. Upon an Event of Default and so long as such Event of Default continues,
the Lender may declare all Obligations immediately due and payable, and may, at its option, without
notice, do any one or more of the following:
(a) Either in person or by agent, with or without bringing any action or proceeding, or
by a receiver to be appointed by a court, enforce and exercise all of the rights of the
Pledgor and all of the rights of the Lender hereunder.
(b) Exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of a secured
party on default under the Code in effect at that time (whether or not the Code then applies
to the affected Collateral), and may also, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or private sale, at any
exchange, broker’s board or at any of the Lender’s offices or elsewhere, for cash and upon
such other terms as the Lender may reasonably believe are commercially reasonable. The
Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten
days’ prior notice to the Pledgor of the time and place of any public sale or the
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time after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. The Lender may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so adjourned.
(c) Exercise any of the remedies available to a secured party under the Code.
(d) Proceed immediately to exercise each and all of the powers, rights, and privileges
reserved or granted to the Lender under this Agreement.
(e) Proceed to protect and enforce this Agreement by suits or proceedings or otherwise,
and enforce any other legal or equitable remedy available to the Lender.
Any cash held by the Lender as Collateral and all cash proceeds received by the Lender in
respect of any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as collateral for, or then
or at any time thereafter, or if the Pledgor requests, be applied in whole or in part by the Lender
for its benefit against, all or any part of the Obligations. To the extent that such cash or such
proceeds are to be applied against all or any part of such obligations, they shall be applied as
follows:
First: to the payment of the reasonable costs and expenses of such sale or
other disposition, including the reasonable out of pocket expenses of the Lender and the
reasonable fees and expenses of counsel employed in connection therewith, and to the payment
of all advances made by the Lender for the account of the Pledgor pursuant to this
Agreement;
Second: to the payment of all reasonable costs and expenses incurred by the
Lender, in connection with the administration and enforcement of this Agreement, to the
extent they shall not have been previously reimbursed;
Third: to the payment of any and all other Obligations; and
Fourth: any surplus after such application shall be paid to the Pledgor, or as
otherwise required by law or as a court of competent jurisdiction may direct.
7. Waiver of Certain Claims. The Pledgor acknowledges that because of present or
future circumstances, a question may arise under the Securities Act of 1933, as from time to time
amended (the “Securities Laws”) with respect to any disposition of the Collateral permitted
hereunder. The Pledgor understands that compliance with the Securities Laws may very strictly
limit the course of conduct of the Lender if the Lender were to attempt to dispose of all or any
portion of the Collateral and may also limit the extent to which or the manner in which any
subsequent transferee of the Collateral or any portion thereof may dispose of the same. There may
be other legal restrictions or limitations affecting the Lender in any attempt to dispose of all or
any portion of the Collateral under the applicable Blue Sky or other securities laws or similar
laws analogous in purpose or effect. The Lender may be compelled to resort to one or more
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private sales to a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such Collateral for such purchasers’ own account for investment only and not to
engage in a distribution or resale thereof. The Pledgor agrees that the Lender shall not incur any
liability as a result of the sale of the Collateral or any portion thereof at any private sale of
stock, if a private sale is effected by the Lender in a manner that the Lender reasonably believes
is in all other respects commercially reasonable (within the meaning of the Code). The Pledgor
hereby waives any claims against the Lender arising by reason of the fact that the price at which
the Collateral may have been sold at such sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the Obligations, even if the
Lender shall accept the first offer received and does not offer any portion of the Collateral to
more than one possible purchaser. The Pledgor further agrees that the Lender has no obligation to
delay the sale of any Collateral for the period of time necessary to permit the issuer of such
Collateral to qualify or register such Collateral for public sale under the Securities Laws,
applicable Blue Sky laws and other applicable state and/or federal securities laws, even if such
issuer would agree to do so, or to delay the sale of any Collateral for any other or no reason.
Without limiting the generality of the foregoing, the provisions of this Section 7 would apply if,
for example, the Lender were to place all or any portion of the Collateral for private placement by
an investment banking firm, or if such investment banking firm purchased all or any portion of the
Collateral for its own account, or if the Lender placed all or any portion of the Collateral
privately with a purchaser or purchasers.
8. Authorization to File Financing Statements; Further Assurances. Pledgor hereby
authorizes the filing of such financing statements as the Lender may deem necessary or useful to be
filed in order to perfect the Security Interest. In addition, the Pledgor shall execute and
deliver to the Lender, promptly and at the Pledgor’s expense, such other documents and assurances,
and take such further action as the Lender may reasonably request, in order to effectively carry
out the intent and purpose of this Agreement, and to establish and protect the rights, interests
and remedies of the Lender hereunder. The Pledgor agrees that the Lender is authorized, at its
option, to file a carbon, photographic or other reproduction of this Agreement as a financing
statement and shall be sufficient as a financing statement under the Code and to file financing
statements or amendments thereto without the signature of the Pledgor and, if a signature is
required by law, then Pledgor appoints the Lender as the Pledgor’s attorney-in-fact to execute any
such financing statements.
9. Cumulative Remedies. All of the Lender’s rights and remedies herein are cumulative
and in addition to any rights or remedies available at law or in equity including the Code, and may
be exercised concurrently or separately.
10. Indemnification. The Pledgor shall and does hereby agree to indemnify against and
to hold the Lender harmless of and from any and all liability, loss or damage which it may or might
incur under or by reason of this Agreement and of and from any and all claims and demands
whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants or agreements of this Agreement,
excepting the gross negligence or willful misconduct of the Lender. The Lender shall notify
Pledgor of any event requiring indemnification within ten days following the Lender’s receipt of
notice of commencement of any action or proceeding, or the Lender’s obtaining knowledge of the
occurrence of any other event, giving rise to a claim for
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indemnification hereunder. The Pledgor will be entitled (but not obligated) to assume the defense
or settlement of any such action or proceeding or to participate in any negotiations to settle or
otherwise resolve any claim using counsel of its choice. If the Pledgor elects to assume the
defense or settlement of any such action or proceeding, the Lender (and its counsel) may continue
to participate at its own expense in such action or proceeding. If the Lender incurs any such
liability, or if the Lender is required to defend against any such claims or demands or if a
judgment is entered against the Lender, then the amount thereof, including costs, expenses, and
reasonable attorneys’ fees, shall bear interest thereon at the highest rate then in effect under
the Note, shall be secured hereby, and the Pledgor shall reimburse the Lender for the same
immediately upon demand, and upon the failure of the Pledgor so to do, the Lender may declare all
Obligations immediately due and payable.
11. Attorney in Fact. The Pledgor hereby irrevocably appoints the Lender and its
successors and assigns as the Pledgor’s agent and attorney-in-fact, which appointment is coupled
with an interest, to exercise any rights or remedies with respect to the Collateral or to receive,
endorse and collect all instruments made payable to the Pledgor representing any dividend or other
distribution in respect of the Collateral or any part thereof to the extent expressly provided
herein and to give full discharge for the same. This appointment shall become immediately
effective upon the occurrence of any Event of Default and shall continue for the continuance
thereof.
12. Lender’s Duties. The powers conferred on the Lender hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the accounting for
monies and for other properties actually received by it hereunder, the Lender shall have no duty as
to any Collateral, as to ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the
Lender has or is deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to any Collateral. The
Lender shall be deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment substantially equal to that
which the Lender accords its own property of like kind.
13. Continuing Rights. The rights and powers of the Lender or receiver hereunder
shall continue and remain in full force and effect until all Obligations are indefeasibly paid in
full.
14. Books and Records. The Pledgor will permit the Lender and its representatives to
examine the Pledgor’s books and records (including data processing records and systems) with
respect to the Collateral and make copies thereof at any time and from time to time, and the
Pledgor will furnish such information reports to the Lender and its representatives regarding the
Collateral as the Lender and its representatives may from time to time request. The Lender shall
have the authority, at any time, to require the Pledgor to place upon the Pledgor’s books and
records relating to the Collateral and other rights to payment covered by the security interest
created in this Agreement a notation stating that any such Collateral and other rights of payment
are subject to a security interest in favor of the Lender.
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15. Assigns. This Agreement and each and every covenant, agreement and provision
hereof shall be binding upon the Pledgor and its successors and assigns and shall inure to the
benefit of the Lender and its successors and assigns.
16. Governing Law. This Agreement is executed pursuant to and shall be governed by
the laws of the State of Minnesota, except to the extent that the validity or perfection of the
security interest granted hereunder, or the remedies provided hereunder, in respect of the
Collateral are mandatorily governed by the laws of a jurisdiction other than the State of
Minnesota.
17. Severability. It is the intent of this Agreement to confer to the Lender the
rights and benefits hereunder to the full extent allowable by law including all rights available
under the Code. The unenforceability or invalidity of any provisions hereof shall not render any
other provision or provisions herein contained unenforceable or invalid. Any provisions found to
be unenforceable shall be severable from this Agreement.
18. Notices. Any notices and other communications permitted or required by the
provisions of this Agreement (except for telephonic notice expressly permitted) shall be in writing
and shall be deemed to have been properly given or served by depositing the same with the United
States Postal Service, or any official successor thereto, designated as Registered or Certified
Mail, Return Receipt Requested, bearing adequate postage, or delivery by reputable private carrier
such as Federal Express, Airborne, DHL or similar overnight delivery service, and addressed as
hereinafter provided. Each such notice shall be effective upon being deposited as aforesaid. The
time period within which a response to any such notice must be given, however, shall commence to
run from the date of receipt of the notice by the addressee thereof. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice was given shall be
deemed to be receipt of the notice sent. Each notice shall be addressed to the address of the
recipient as set forth on the signature page to this Agreement. By giving to the other party
hereto at least ten (10) days’ notice thereof, either party hereto shall have the right from time
to time and at any time during the term of this Agreement to change its address and shall have the
right to specify as its address any other address within the United States of America.
19. Captions and Headings. The captions and headings of the various sections of this
Agreement are for convenience only and are not to be construed as confining or limiting in any way
the scope or intent of the provisions hereof. Whenever the context requires or permits, the
singular shall include the plural, the plural shall include the singular and the masculine,
feminine and neuter shall be freely interchangeable.
20. Marshalling; Payments Set Aside. The Lender shall be under no obligation to
xxxxxxxx any assets in favor of the Pledgor or any other person or entity or against or in payment
of any or all of the Obligations. This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any such Obligations is rescinded or must
otherwise be returned by the Lender or any other person or entity upon the insolvency,
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bankruptcy or reorganization of the Pledgor or otherwise, all as though such payment had not been
made.
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THE PLEDGOR has caused this Pledge Agreement to be duly executed and delivered as of the date
first above written.
PLEDGOR:
| ATS Medical, Inc., a Minnesota corporation |
||||
| By: | /s/ Xxxxxxx Xxxxxx | |||
| Name: | Xxxxxxx Xxxxxx | |||
| Title: | Chief Financial Officer | |||
| Address for Pledgor: Attention: Xxxxxxx Xxxxxx 0000 Xxxxxxxxx Xxxx, Xxxxx 000 Xxxxxxxxxxx, XX 00000 |
||||
Address for Lender:
Medtronic, Inc.
000 Xxxxxxxxx Xxxxxxx, XX 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Vice President, Business Development
Medtronic, Inc.
000 Xxxxxxxxx Xxxxxxx, XX 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Vice President, Business Development
STATE OF MINNESOTA)
) ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 19 day of May, 2010, by
Xxxxxxx Xxxxxx (who is known to me personally or who produced a driver’s license as
identification), the Chief Financial Officer of ATS Medical, Inc., on behalf of said corporation.
| Xxxxxxx X. Xxxxxxx | ||||
| Notary Public | ||||
(Notary Seal)
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SCHEDULE 1(a)
STOCK HELD BY PLEDGOR
| Jurisdiction of | ||||||
| Name of Issuer | Incorporation | Shares | Owner | |||
ATS Medical France, SARL |
France | 80 shares, 493,136 Euros share capital |
ATS Medical, Inc. | |||
ATS Medical GmbH
|
Germany | 25,000 Euros share capital. | ATS Medical, Inc. | |||
ATS Medical Belgium SPRL |
Belgium | 999 shares, 18,531.55 Euros share capital | ATS Medical, Inc. | |||
| 1 share, 18.55 Euros share capital. | ATS Acquisition Corp. |
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