EXHIBIT 10.1
ATS MEDICAL INC.
3905 Annapolis Lane, Suite 105
Minneapolis, MN 55447 USA
July 9, 2003
VIA ELECTRONIC TRANSMISSION AND FACSIMILE
Mr. David S. Wise, Secretary
Centerpulse USA Holding Co.
12 East Greenway Plaza
Suite 1000
Houston, Texas 77046
Re: The Letter Agreement between ATS Medical, Inc., a Minnesota
corporation ("ATS"), and Carbomedics Inc. (formerly Sulzer
Carbomedics, Inc.), a Delaware corporation ("CMI"), dated June
27, 2002 (the "June 27 Letter Agreement"), the Carbon
Agreement between ATS and CMI dated December 29, 1999 (such
Carbon Agreement, as amended by the June 27 Letter Agreement,
is referred to as the "Technology Agreement"), and the
Promissory Note made by ATS payable to and for the benefit of
CMI dated June 27, 2002, as amended (the "Note" and together
with the Technology Agreement and the June 27 Letter
Agreement, the "ATS Agreements").
Gentlemen:
This letter sets forth the terms and conditions of an offer by ATS to
Centerpulse USA Holding Co., a Delaware corporation, and assignee of certain
rights of CMI under the ATS Agreements ("CP USA"), to amend certain of their
respective rights and obligations under the ATS Agreements. Accordingly,
effective as of the date of this letter agreement (the "Letter Agreement") shown
above, ATS and CP USA hereby agree as follows:
1. At the closing hereunder (the "Closing"), ATS shall pay to CP USA by
wire transfer in immediately available funds USD $12.0 million (the
"ATS Payment"). The Closing shall occur on a date selected by ATS (the
"Closing Date") provided that (a) ATS shall give CP USA notice of the
Closing Date no later than the third (3rd) business day prior to the
Closing Date, (b) the Closing Date shall not occur prior to the
expiration of the right of first refusal held by SNIA S.p.A. ("SNIA")
to purchase from CP USA the rights assigned to CP USA by CMI under the
ATS Agreements which right of first refusal was triggered by the
delivery of the offer notice to SNIA under Section 5.14 of that certain
Stock Purchase Agreement among Centerpulse Ltd., CP USA, and SNIA dated
November 26, 2002, (c) if SNIA does not exercise such right of first
refusal or is deemed to have rejected such right of first refusal, the
Closing Date shall occur within forty-five (45) days of the date of
this offer and the parties hereto shall have the unconditional,
irrevocable obligation to make the ATS Payment and close the
transactions contemplated by this Letter Agreement, and in such event,
Mr. David S. Wise
July 9, 2003
Page 2
if a Closing Date has not yet been selected by ATS, the parties
hereto agree that the Closing Date shall be the date forty-five (45)
days from the date of this offer, and (d) if SNIA S.p.A. exercises
such right of first refusal, this Letter Agreement shall terminate
and be of no further force or effect, and the ATS Agreements,
including any and all security interests granted thereunder, shall
continue in effect, unaffected by this Letter Agreement.
2. In consideration of the ATS Payment and effective as of the Closing
Date, ATS shall be deemed to have satisfied in full all of its payment
obligations under (a) Section 2.5 of the Technology Agreement and (b)
the Note. At the Closing, CP USA shall cancel and deliver the
originally executed copy of the Note to ATS.
3. In addition, in consideration of and subject to the payment in full of
the ATS Payment, CP USA hereby agrees that (a) all security interests
and liens granted to CP USA, as assignee of CMI, under Section 3 of the
June 27 Letter Agreement on any real or personal property of ATS, shall
thereupon automatically terminate and be of no further force and
effect, (b) any right granted to CP USA, as assignee of CMI, under
Section 4 of the June 27 Letter Agreement to have the remedies of a
secured party under the Uniform Commercial Code as enacted in Texas or
other applicable law, shall thereupon automatically terminate and be of
no further force and effect,, (c) ATS and its counsel are hereby
authorized to prepare and record with the appropriate filing
authorities, at ATS's expense, Uniform Commercial Code financing
statements terminating the security interest and liens granted under
Section 3 of the June 27 Letter Agreement, and (d) CP USA will deliver
to ATS such other termination statements and releases as ATS or its
counsel may reasonably request in connection with the above-described
termination of all security interests and liens granted to CP USA, as
assignee of CMI, by ATS pursuant to Section 3 of the June 27 Letter
Agreement.
4. CP USA hereby represents and warrants to ATS that (a) it is duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware, (b) it has full power and authority to enter
into this Letter Agreement, (c) this Letter Agreement has been duly
authorized by all necessary corporate action, executed and delivered by
or on behalf of CP USA, and (d) this Letter Agreement constitutes a
valid and binding agreement of CP USA enforceable against CP USA in
accordance with it terms.
5. CP USA hereby represents and warrants to ATS that, as of the Closing
Date (a) any and all rights to any payments made by ATS in fulfillment
of its obligations under Section 2.5 of the Technology Agreement,
including any such payments due under the Note, will have been duly,
validly and completely assigned by CMI to CP USA, (b) CP USA will have
full power and authority to release ATS from its payment obligations
under Section 2.5 of the Technology Agreement and the Note, and (c) CP
USA will hold all of the legal interests secured by the security
interest granted by ATS to CMI pursuant to Section 3 of the June 27
Letter Agreement and will have full power and authority to authorize
the release of that security interest as provided in this Letter
Agreement.
Mr. David S. Wise
July 9, 2003
Page 3
6. CP USA (the "Indemnifying Party") shall defend and indemnify ATS, its
officers, directors, employees and agents and hold the same harmless
from any and all demands, claims, causes of action, or damages
(including reasonable attorneys fees and expenses), arising from any
breach of its covenants under Sections 2 and 3 of this Letter
Agreement. In order to seek indemnification under this Paragraph 6, ATS
shall give written notice thereof to CP USA, including the nature and
extent of the legal claim giving rise thereto. ATS shall give such
cooperation (at the expense of the Indemnifying Party) as is reasonably
requested by the Indemnifying Party, which shall control the defense
and settlement thereof in its sole discretion. ATS may participate in
such legal action at its own expense but shall not settle or compromise
such action without the written consent of CP USA. If and to the extent
that the legal counsel selected by the Indemnifying Party is subject to
a material conflict of interest under the applicable rules of
professional conduct in the defense of ATS and CP USA, ATS shall not be
required to waive such conflict and the Indemnifying Party shall
promptly engage and pay for separate legal counsel to represent ATS.
7. ATS, on behalf of itself, each of its affiliates (other than the ATS)
and each of their respective representatives, successors and assigns
(each a "Releasor"), as a free and voluntary act, hereby releases and
discharges CP USA, and each of its past, current and future
stockholders, officers, directors and employees and each of the heirs,
successors and assigns of each of the foregoing (each a "Releasee")
from all actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims, and demands whatsoever, in law,
in equity, in tort, in contract, by statute, or on any other basis, for
compensatory, punitive or other damages, expenses, reimbursements or
costs of any kind, whether known or unknown, whether liquidated or
unliquidated, against any Releasees, which such Releasor, and such
Releasor's representatives, successors and assigns ever had, now have
or hereafter can, shall or may have, from the beginning of time until
the Closing Date, for, upon, arising out of or related to the ATS
Agreements, other than claims for indemnification under Section 6 of
this Letter Agreement (the "Released Claims"); provided that,
notwithstanding the foregoing, this release is not intended to release
CMI, its successors and assigns from CMI's obligations under the
Technology Agreement and any claims against CMI, its successors and
assigns relating to those obligations under the Technology Agreement.
ATS, on behalf of itself and the other Releasors, agrees that it will
not assert against any Releasee any Released Claim.
8. Any notice to be given under this Letter Agreement shall be sent by
personal delivery, delivery by a recognized courier service,
electronically confirmed facsimile, or certified mail, postage prepaid,
to the following addresses:
Mr. David S. Wise
July 9, 2003
Page 4
CP USA: Centerpulse USA Holding Co.
12 East Greenway Plaza
Suite 1000
Houston, TX 77046 USA
Attn.: Corporate Secretary
Facsimile Number: 713-561-6380
ATS: ATS Medical, Inc.
3905 Annapolis Lane, Suite 105
Minneapolis, Minnesota 55447 USA
Attn.: President
Facsimile number: 763-553-1492
Any such notice given shall be effective upon its receipt by the
notified party. Any party may change its address by giving at least ten
(10) days prior written notice thereof to the other party.
9. Unless expressly modified by the terms of this Letter Agreement, the
terms and conditions of the ATS Agreements and all other obligations
thereunder shall remain unchanged and in full force and effect.
10. This Letter Agreement may be executed in one or more counterparts, and
by the different parties hereto in separate counterparts with the
effect of being constituted as one and the same letter agreement.
11. This Letter Agreement and the other documents referenced herein contain
the entire agreement between the parties with respect to the subject
matter hereof. No waiver, alteration or modification of any of the
provisions hereof shall be binding unless in writing and signed by the
parties hereto. This Letter Agreement is binding on the parties hereto
and their respective successors and assignees.
12. Neither CP USA nor ATS will make or authorize any other party to make
any public announcement or disclosure regarding this Letter Agreement
without the prior consent of the other party, except any such
announcement or disclosure that may be required by rule, regulation or
law, or otherwise by a contractual, legal or fiduciary obligation, in
which case the party required to make the announcement or disclosure
will, if reasonably practicable, allow the other party at least 72
hours to comment on such announcement or disclosure in advance thereof.
13. This Letter Agreement shall be governed by the laws of New York. All
actions and proceedings arising out of or relating to this Letter
Agreement shall be heard and determined in any court sitting in New
York, and the parties hereto hereby irrevocably submit to the exclusive
jurisdiction of such courts in any such action or proceeding and
irrevocably waive any defense of an inconvenient forum to the
maintenance of any such action or proceeding. In addition, each of the
parties hereto irrevocably and unconditionally waives trial by jury in
any legal action or proceeding relating to this Letter Agreement or
the transactions contemplated hereby and for any counterclaim therein.
Mr. David S. Wise
July 9, 2003
Page 5
If this Letter Agreement accurately reflects the parties' agreement
regarding the matters set forth herein, please so indicate in the space provided
below. Of course, if you have any questions or comments, please do not hesitate
to contact me.
Sincerely,
ATS MEDICAL, INC.
By: /s/ Michael Dale
---------------------------
Michael Dale
President and CEO
Agreed to this 21st day of July, 2003.
CENTERPULSE USA HOLDING CO.
By: /s/ David S. Wise
---------------------------
David S. Wise
Secretary