EXECUTION COPY
Exhibit 10.1
================================================================================
AMENDMENT NO. 1
Dated October 12, 2005
to
SECURITIES PURCHASE AGREEMENT
by and among
ATS MEDICAL, INC.
as the Company
and
BUYERS,
as defined herein
Dated as of October 6, 2005
6% Convertible Senior Notes due 2025
and Warrants to Purchase Common Stock
================================================================================
AMENDMENT NO. 1 TO
SECURITIES PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (the "Amendment") dated October 12, 2005 to the
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 6, 2005, by
and among ATS Medical, Inc., a Minnesota corporation (the "Company"), the
Original Buyers listed on the Schedule of Buyers attached hereto as Exhibit A
(individually, an "Original Buyer" and, collectively, the " Original Buyers"),
and the Deerfield Buyers listed on the Schedule of Buyers attached hereto as
Exhibit A1 (individually, a "Deerfield Buyer" and, collectively, the "Deerfield
Buyers," the Original Buyers and the Deerfield Buyers being individually
referred to herein as a "Buyer" and collectively as the "Buyers"),
THE PARTIES TO THIS AMENDMENT enter into this Amendment on the basis of the
following facts, intentions and understandings:
A. In accordance with the terms and conditions of the Agreement, on October
7, 2005 the Company issued and sold, and the Original Buyers severally purchased
in the aggregate, (i) Nineteen Million United States Dollars ($19,000,000)
principal amount of the Company's 6% Convertible Senior Notes due 2025 (such
Convertible Senior Notes, substantially in the form attached as Exhibit A to the
Indenture (as defined below), as such form of Note may be amended, modified or
supplemented from time to time in accordance with the terms thereof, the
"Initial Notes"), which are convertible into shares of the common stock, $0.01
par value per share (the "Common Stock"), of the Company (as converted, the
"Initial Conversion Shares"), and (ii) Warrants (such Warrants, substantially in
the form attached as Exhibit A to the Warrant Agent Agreement (as defined
below), as such Form of Warrant may be amended, modified or supplemented from
time to time in accordance with the terms thereof, the "Initial Warrants") to
purchase 1,140,000 shares of Common Stock (as exercised, the "Initial Warrant
Shares"). The Initial Notes were issued pursuant to an Indenture, dated as of
October 7, 2005 (the "Indenture") by and between the Company and Wells Fargo
Bank, National Association, as trustee (the "Trustee"), substantially in the
form attached hereto as Exhibit B. The Initial Warrants were issued pursuant to
a Warrant Agent Agreement, dated as of October 7, 2005 (the "Warrant Agent
Agreement") by and between the Company and Wells Fargo Bank, National
Association, as warrant agent (the "Warrant Agent"), substantially in the form
attached hereto as Exhibit C.
B. Contemporaneously with the execution and delivery of the Agreement, the
parties to the Agreement executed and delivered a Registration Rights Agreement
substantially in the form attached hereto as Exhibit E (as the same may be
amended, modified or supplemented from time to time in accordance with the terms
thereof, the "Registration Rights Agreement") pursuant to which the Company
agreed to provide the Original Buyers with the benefit of certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act") and applicable state
securities laws, on the terms and subject to the conditions set forth therein.
C. The Company and the Buyers now desire to amend the Agreement with this
Amendment to allow the Deerfield Buyers to purchase in the aggregate (i) an
additional Three Million Four Hundred Thousand United States Dollars
($3,400,000) principal amount of Initial Notes, which shall be convertible into
additional Initial Conversion Shares, and (ii) additional Initial Warrants to
purchase 204,000 additional Initial Warrant Shares, all on the same terms and
conditions as the original purchase of Notes and Warrants by the Original Buyers
under the Agreement, and in connection therewith to enter into amendments to the
Indenture (the "First Supplemental Indenture"), the Registration Rights
Agreement (the "Registration Agreement Amendment") and the Irrevocable Transfer
Agent Instructions (the "Revised Irrevocable Transfer Agent Instructions") as of
the date of the Amendment (collectively with the Amendment, the "Transaction
Document Amendments").
NOW THEREFORE, in consideration of the promises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Buyers
hereby agree that the Agreement as originally executed shall continue in full
force and effect, except as follows:
SECTION 1. PURCHASE AND SALE OF NOTES. Section 1 of the Agreement is hereby
deleted and replaced in its entirety by the following:
(a) Purchase of Notes and Warrants.
(1) Subject to the satisfaction (or waiver, to the extent permitted by
applicable law) of the conditions set forth in Sections 6 and 7 of this
Agreement, the Company shall issue and sell to each Buyer, and each Buyer
severally and not jointly agrees to purchase from the Company, the respective
principal amount of Initial Notes, together with the related Initial Warrants,
set forth opposite such Buyer's name on the Schedule of Buyers attached hereto
as Exhibit A (the "Initial Closing") or Exhibit A1 (the "Deerfield Closing"), as
the case may be. The Company shall issue to each Buyer One Thousand United
States Dollars ($1,000) principal amount of Initial Notes and Initial Warrants
to purchase approximately 60 Initial Warrant Shares for (A) each One Thousand
United States Dollars ($1,000) tendered by each Original Buyer, and (B) each One
Thousand United States Dollars ($1,000) plus accrued interest on the Notes to be
purchased from the Closing Date through the Deerfield Closing Date tendered by
each Deerfield Buyer.
(2) The Company hereby grants the Buyers an option to purchase, severally
and not jointly, (A) up to an additional Five Million Six Hundred Thousand
United States Dollars ($5,600,000) aggregate principal amount of 6% Convertible
Senior Notes due 2025 (such Convertible Senior Notes, substantially in the form
attached as Exhibit A to the Indenture, as such form of Note may be amended,
modified or supplemented from time to time in accordance with the terms thereof,
the "Additional Notes" and, together with the Initial Notes, the "Notes"), which
shall be convertible into shares of Common Stock (as converted, the "Additional
Conversion Shares"), and (B) Warrants (such Warrants, substantially in the form
attached as Exhibit A to the Warrant Agent Agreement, as such Form of Warrant
may be amended, modified or supplemented from time to time in accordance with
the terms thereof, the "Additional Warrants" and, together with the Initial
Warrants, the "Warrants") to purchase 336,000 shares of Common Stock (as
exercised, the "Additional Warrant Shares"). The Additional Notes will be issued
pursuant to the Indenture, and the Additional Warrants will be issued pursuant
to the
2
Warrant Agent Agreement. For purposes of this Agreement, the term "Conversion
Shares" refers to Initial Conversion Shares and Additional Conversion Shares,
collectively, and the term "Warrant Shares" refers to Initial Warrant Shares and
Additional Warrant Shares, collectively.
Each Buyer may exercise this right at any time between the Closing Date
(October 7, 2005) and the one hundred and twentieth (120th) calendar day
following such Closing Date (such period of time being the "Option Period") by
giving written notice of election to exercise this option (such notice of
election being the "Option Exercise Notice") prior to 5:00 p.m., Minneapolis,
Minnesota local time, on any Business Day during such Option Period. Any Option
Exercise Notice shall specify the principal amount of Additional Notes and the
number of Additional Warrants to be purchased by the Buyer; provided that any
Buyer may not purchase more than its pro rata portion of Additional Notes and
Additional Warrants, based on the proportion of the principal amount of the
Initial Notes set forth opposite the name of such Buyer on the Schedules of
Buyers attached hereto as Exhibits A and A1 to the aggregate principal amount of
Initial Notes issued on the Closing Date and the Deerfield Closing Date
combined. The purchase price of the Additional Notes and the Additional Warrants
shall be the aggregate principal amount of the Additional Notes to be purchased
plus accrued interest on the Additional Notes from the Closing Date through the
Option Closing Date.
(b) The Initial Closing, the Deerfield Closing and the Option Closing.
(1) The date and time of the Initial Closing (the "Closing Date") shall be
10:00 a.m., Minneapolis, Minnesota local time, on October 7, 2005, subject to
the satisfaction (or waiver, to the extent permitted by applicable law) of the
conditions set forth in Sections 6 and 7 of this Agreement. The Initial Closing
shall occur on the Closing Date at the offices of Dorsey & Whitney LLP, 50 South
Sixth Street, Suite 1500, Minneapolis, Minnesota 55402. The date and time of the
Deerfield Closing (the "Deerfield Closing Date") shall be 10:00 a.m.,
Minneapolis, Minnesota local time, on October 13, 2005, subject to the
satisfaction (or waiver, to the extent permitted by applicable law) of the
conditions set forth in Sections 6 and 7 of this Agreement. The Deerfield
Closing shall occur on the Deerfield Closing Date at the offices of Dorsey &
Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis, Minnesota 55402.
(2) The payment for and delivery of the Additional Notes and the Additional
Warrants for which the Buyers have delivered timely Option Exercise Notices (the
"Option Closing") shall occur before 11:00 a.m., Minneapolis, Minnesota local
time, three (3) Business Days after the later of (A) the expiration of the
Option Period and (B) the Postponement Termination Date, if any (the "Option
Closing Date"). Notwithstanding anything to the contrary herein, the Company may
delay the Option Closing for a period not to exceed sixty (60) days (the
"Postponement Period") if, in the Company's good faith judgment, the disclosure
of any material non-public information or pending development concerning the
Company of which the Company is aware at the end of the Option Exercise Period
and/or on the original date set for the Option Closing Date, is determined to
not be in the best interests of the Company; provided, however, that the Company
shall promptly notify the Buyers in writing (the "Postponement Notice") of (A)
the existence of such material non-public information or pending development
giving rise to a Postponement Period (provided that the Company shall not
disclose the content of such material non-public information or pending
development to such Buyers) and (B) the date on which the Postponement Period is
scheduled to end. For purposes of determining the length of the
3
Postponement Period, which may not exceed sixty (60) days, the Postponement
Period shall be deemed to begin on and include the original date set for the
Option Closing Date and shall end on and include the earlier of (x) the date
stated in the Postponement Notice as the end of the Postponement Period or (y)
to the extent considered appropriate by the Company in its sole discretion, any
other date as to which the Company may advise the Buyers in writing (such notice
being the "Postponement Termination Notice") after the Company's provision of
the notices described above (the "Postponement Termination Date"); provided that
any Buyer which has submitted an Option Exercise Notice may withdraw its Option
Exercise Notice by notifying the Company in writing of such Buyer's withdrawal
at any time after the delivery of the Postponement Notice by the Company but
before 5:00 p.m., Minneapolis, Minnesota local time, on the date which is one
(1) Business Day after the Postponement Termination Date.
(c) Form of Payment. On the Closing Date, the Deerfield Closing Date and
the Option Closing Date, if any, (i) each Buyer shall pay the Company for the
Notes and the related Warrants to be issued and sold to such Buyer on the
Closing Date, the Deerfield Closing Date or the Option Closing Date, as the case
may be, by wire transfer of immediately available funds in accordance with the
Company's written wire instructions attached hereto on Schedule A, (ii) the
Company shall reimburse each Buyer for its reasonable expenses to the extent
required by Section 4(i) of this Agreement, and (iii) the Company shall issue to
each Buyer properly authenticated Notes (in the denominations of not less than
One Thousand United States Dollars ($1,000) as such Buyer shall reasonably
request) representing the principal amount of Notes which such Buyer is then
purchasing hereunder, along with Warrants representing the related number of
Warrant Shares, duly executed on behalf of the Company and registered in the
name of such Buyer, provided, that Notes eligible for services through The
Depository Trust Company ("DTC") shall be issued, countersigned, registered and
delivered in global certificate form through the facilities at DTC in such names
and denominations as each Buyer shall specify.
SECTION 2. BUYER'S REPRESENTATIONS AND WARRANTIES. The first phrase of
Section 2 of the Agreement is hereby amended to read as follows:
Each Buyer represents and warrants to the Company with respect to only
itself that as of the date of the Agreement in the case of each Original Buyer,
and as of the date of the Amendment in the case of each Deerfield Buyer:
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The first phrase
of Section 3 of the Agreement is hereby amended to read as follows:
The Company represents and warrants to the Placement Agent and each of the
Original Buyers that as of the date of the Agreement, and to each of the
Deerfield Buyers that as of the date of the Amendment:
The first sentence of Section 3(b) shall be deleted and replaced in its
entirety by the following:
The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Indenture, the Warrant
Agent Agreement, the Notes, the Warrants, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as
4
defined in Section 5 of this Agreement), and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement , in each case as any such agreement may have
been amended, as applicable (collectively, the "Transaction Documents"), and to
issue and sell the Securities in accordance with the terms hereof and thereof
SECTION 4. COVENANTS. Section 4(b), 4(e) and 4(g) of the Agreement shall be
deleted and replaced in the entirety by the following paragraphs and Schedule
4(p) to the Agreement shall be deleted and replaced in its entirety by the
Schedule 4(p) attached hereto which includes the Deerfield Buyers:
(b) Form D and Blue Sky. The Company agrees to file timely a Form D with
the Commission with respect to the Securities as required under Regulation D and
to provide, upon request, a copy thereof to each Buyer. The Company shall, on or
before the Closing Date, on or before the Deerfield Closing Date and on or
before the Option Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Initial Closing, the Deerfield Closing
and the Option Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States (or to obtain an exemption
from such qualification), in those jurisdictions identified by the Buyers and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date, the Deerfield Closing Date and the Option Closing Date. The
Company shall make all timely filings and reports relating to the offer and sale
of the Securities required under applicable securities or "Blue Sky" laws of the
states of the United States following the Closing Date, the Deerfield Closing
Date and the Option Closing Date. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(b).
(e) Reservation of Shares. The Company shall provide, free from preemptive
rights, out of its authorized but unissued shares, reserved for the purpose of
issuance, no less than one hundred five percent (105%) of the number of shares
of Common Stock needed to provide for the issuance of the Conversion Shares upon
conversion of all of the Notes and the Warrant Shares upon exercise of all of
the Warrants without regard to any limitations on conversions or exercise;
provided that until such date, if any, after the date hereof, as the
shareholders of the Company approve an increase in the authorized capital stock
of the Company such that there are sufficient shares therefor (the "Approval
Date"), the number of shares required to be reserved for conversion of the Notes
shall be reduced to the total number of the Company's authorized but unissued
shares that, as of the date of the Amendment, are available for issuance and
have not been reserved by the Company's Board of Directors for a specific
purpose as of the date of the Amendment including issuance under any existing
stock option or other equity plan of the Company or other obligation of the
Company to issue shares of Common Stock (including the Warrants).
(g) Filing of Form 8-K. On or before 8:30 a.m., New York Time, on the
Business Days following each of the Closing Date and the Deerfield Closing Date,
the Company shall issue a press release announcing the transactions contemplated
by the Agreement and the Amendment. The Company shall use reasonable efforts
within one Business Day (as defined below) after the public announcement of the
transactions contemplated by the Agreement and the Amendment to file (i) a
Current Report on Form 8-K with the Commission furnishing as an
5
exhibit to such Current Report on Form 8-K the press release announcing the
signing of the Agreement or the Amendment, as the case may be, after the
issuance of such press release, (ii) a Current Report on Form 8-K following the
Closing Date (which may be the same Form 8-K described in clause (i) above) with
the Commission describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K (A) the Agreement and the Exhibits thereto, (B) the form of Note, (C) the
form of Warrant, (D) the Registration Rights Agreement, (E) the form of
Indenture, and (F) the form of Warrant Agent Agreement, each in the form
required by the Exchange Act, and (iii) a Current Report on Form 8-K following
the Deerfield Closing Date with the Commission describing the terms of the
transactions as amended by the Transaction Document Amendments and including as
exhibits to such Current Report on Form 8-K the Transaction Document Amendments,
each in the form required by the Exchange Act; provided, however, that no
references to the names of the Buyers shall be included in any press release
filed in connection with the transactions contemplated hereby. "Business Day"
means any day other than Saturday, Sunday or other day on which commercial banks
in the City of New York are required by law to remain closed.
SECTION 5. CONDITIONS TO OBLIGATIONS TO CLOSE. Sections 6 and 7 of the
Agreement shall be deemed to be revised to provide that any representation to be
made, document to be delivered or other action to be taken at or as of the
Initial Closing, the Initial Closing Date, the Option Closing or the Option
Closing Date shall also be made, delivered or taken at or as of the Deerfield
Closing or the Deerfield Closing Date, as the case may be.
SECTION 6. MISCELLANEOUS.
(a) Ratification of Agreement. Except as expressly amended hereby, the
Agreement, including the Schedules and Exhibits thereto, are in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect.
(b) Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
(c) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
6
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date first written above.
"COMPANY"
ATS MEDICAL, INC.
By: /s/ John R. Judd
------------------------------------
John R. Judd,
Chief Financial Officer
ACKNOWLEDGED AND AGREED:
"PLACEMENT AGENT"
PIPER JAFFRAY & CO.
By: /s/ Eric Alt
---------------------------------
Its: MD - Convertible Origination
[Signatures of Buyers on Following Pages]
7
[DEERFIELD SIGNATURE PAGE TO AMENDMENT NO. 1
TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment No. 1
to the Securities Purchase Agreement to be duly executed as of the day and year
first written above.
"BUYER"
DEERFIELD PARTNERS, L.P.
By: /s/ Arnold H. Snider
------------------------------------
(signature of authorized representative)
Name: Arnold H. Snider
Its: General Partner
Buyer hereby elects to be subject to
Section 2(k)(A):
By:
------------------------------------
(signature of authorized representative)
OR
Buyer hereby elects to be subject to
Section 2(k)(B):
By:
------------------------------------
(signature of authorized representative)
8
[DEERFIELD SIGNATURE PAGE TO AMENDMENT NO. 1
TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment No. 1
to the Securities Purchase Agreement to be duly executed as of the day and year
first written above.
"BUYER"
DEERFIELD INTERNATIONAL LIMITED
By: /s/ Arnold H. Snider
------------------------------------
(signature of authorized representative)
Name: Arnold H. Snider
Its: Investment Manager
Buyer hereby elects to be subject to
Section 2(k)(A):
By:
------------------------------------
(signature of authorized representative)
OR
Buyer hereby elects to be subject to
Section 2(k)(B):
By:
------------------------------------
(signature of authorized representative)
9
[ORIGINAL BUYERS SIGNATURE PAGE TO AMENDMENT NO. 1
TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment No. 1
to the Securities Purchase Agreement to be duly executed as of the day and year
first written above.
SF CAPITAL PARTNERS LTD.
By: /s/ Brian Davidson
--------------------------------------------
Name: Brian Davidson
Its: Authorized Signatory
WHITEBOX CONVERTIBLE ARBITRAGE PARTNERS, LP
By: /s/ Andrew Redleaf
--------------------------------------------
Whitebox Convertible Arbitrage Partners, LP
Whitebox Convertible Arbitrage Advisors LLC
Whitebox Advisors LLC
Andrew Redleaf, Managing Member of the
General Partner
WHITEBOX INTERMARKET PARTNERS, LP
By: /s/ Andrew Redleaf
--------------------------------------------
Whitebox Intermarket Partners LP
Whitebox Intermarket Advisors LLC
Whitebox Advisors LLC
Andrew Redleaf, Managing Member of the
General Partner
HFR RVA COMBINED MASTER TRUST
By: /s/ Dora Hines
--------------------------------------------
Dora Hines, for and on behalf of HFR
Asset Management, LLC as attorney in
fact
DBZ ACQUISITION PARTNERS II, LLC
By: /s/ David Proshan
--------------------------------------------
Name: David Proshan
Its: General Counsel
10
[ORIGINAL BUYERS SIGNATURE PAGE TO AMENDMENT NO. 1
TO SECURITIES PURCHASE AGREEMENT]
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Jerome R. Baier
---------------------------------
Name: Jerome R. Baier
Its: Authorized Representative
RADCLIFFE SPC, LTD. FOR AND ON BEHALF OF THE
CLASS A CONVERTIBLE CROSSOVER SEGREGATED
PORTFOLIO
By: RG Capital Management, L.P.
By: RGC Management Company, L.L.C.
By: /s/ Gerald F. Stahlecker
---------------------------------
Gerald F. Stahlecker, Managing
Director
CAPITAL VENTURES INTERNATIONAL
By: HEIGHTS CAPITAL MANAGEMENT, INC.,
its authorized agent
By: /s/ Martin Kobinger
---------------------------------
Name: Martin Kobinger
Its: Investment Manager
SMITHFIELD FIDUCIARY LLC
By: /s/ Scott M. Wallace
---------------------------------
Name: Scott M. Wallace
Its: Authorized Signatory
11
EXHIBIT A1
SCHEDULE OF DEERFIELD BUYERS
DTC PRINCIPAL NUMBER OF
NAME OF BUYER PARTICIPANT AMOUNT OF INITIAL
CONTACT INFORMATION FOR BUYER NUMBER INITIAL NOTES WARRANTS
------------------------------- ----------- ------------- ---------
1. Deerfield Partners, L.P. 50 $1,632,000 97,920
780 Third Avenue
37th Floor
New York, NY 10047
2. Deerfield International Limited 50 $1,768,000 106,080
780 Third Avenue
37th Floor
New York, NY 10047
EXHIBIT F
REVISED FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
October 13, 2005
VIA FEDERAL EXPRESS
Wells Fargo Shareowner Services
Compliance Department
161 North Concord Exchange
Saint Paul, Minnesota 55075
Re: Reservation of Shares of Common Stock Pursuant to Sale by ATS
Medical, Inc. of up to $28,000,000 in Aggregate Principal Amount
of 6% Convertible Senior Notes due 2025 and Warrants to Purchase
up to 1,680,000 Shares of Common Stock
Ladies and Gentlemen:
ATS Medical, Inc., a Minnesota corporation (the "Company"), has (i) sold to
the buyers listed on Schedule A hereto (the "Original Buyers"), on October 7,
2005, Nineteen Million United States Dollars ($19,000,000) in aggregate
principal amount of 6% Convertible Senior Notes due 2025 (the "Notes"),
convertible into shares of the common stock, $0.01 par value per share (the
"Common Stock") of the Company, and warrants (the "Warrants") to purchase
1,140,000 shares of Common Stock, pursuant to that certain Securities Purchase
Agreement dated as of October 6, 2005, by and among the Company and each
Original Buyer (the "Securities Purchase Agreement"), and (ii) agreed to sell to
the buyers listed on Schedule A1 hereto (the "Deerfield Buyers"), on the date
hereof, Three Million Four Hundred Thousand United States Dollars ($3,400,000)
in aggregate principal amount of Notes, convertible into shares of Common Stock,
and Warrants to purchase 204,000 shares of Common Stock, pursuant to Amendment
No. 1 to the Securities Purchase Agreement. This Letter hereby supersedes and
replaces the Irrevocable Transfer Agent Instructions dated October 7, 2005 which
were previously provided to you. Capitalized terms used herein without
definition have the meanings assigned to them in the Securities Purchase
Agreement.
You are hereby instructed to:
Establish as of the date of this letter a reserve of 19,222 shares of
Common Stock for issuance to holders of Notes upon conversion of their Notes
(the "Conversion Share Reserve"). The Conversion Share Reserve shall be adjusted
to appropriately reflect the filing of the Articles Amendment and the effect of
any stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Common Stock), reorganization,
recapitalization, reclassification, exchange or other like change with respect
to Common Stock occurring on or after the date hereof.
Establish as of the date of this letter a reserve of 1,764,000 shares of
Common Stock for issuance to holders of Warrants upon exercise of their Warrants
(the "Warrant Share Reserve"). The Warrant Share Reserve shall be adjusted to
appropriately reflect the filing of the Articles Amendment and the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Common Stock), reorganization,
recapitalization, reclassification, exchange or other like change with respect
to Common Stock occurring on or after the date hereof.
A registration statement on Form S-3 to register the Common Stock issuable
out of the Conversion Share Reserve and the Warrant Share Reserve (the
"Registration Statement") will be filed with the Securities and Exchange
Commission (the "Commission") on or before November 6, 2005. We will forward to
you copies of the filing promptly after it is declared or deemed effective by
the Commission.
Until the Registration Statement is declared effective by the Commission,
the certificates evidencing the shares of Common Stock issued out of the
Conversion Share Reserve or the Warrant Share Reserve will bear the restrictive
legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM.
So long as you have previously received (i) an opinion of the Company's
outside counsel (which the Company shall direct be delivered to you by such
outside counsel upon the effectiveness of the Registration Statement covering
the resales of the Common Stock) stating that a Registration Statement covering
the resales of the Common Stock has been declared effective by the Commission
under the Securities Act (the "Opinion"), (ii) a certification from the clearing
broker for the Buyers as to the fact that the sale of the Common Stock was made
in compliance with the Plan of Distribution set forth in the Registration
Statement (the "Broker Certification"), (iii) a copy of the Registration
Statement and (iv) confirmation from the Company that sales are permitted under
the Registration Statement at that time, the certificates representing the
Common Stock sold pursuant to the Registration Statement shall not bear any
legend restricting transfer of the Common Stock thereby and should not be
subject to any stop-transfer restriction.
Without regard to whether or not a Registration Statement has ever been
declared effective with respect to the shares of Common Stock, so long as you
have previously received an opinion of the Company's outside counsel stating
that the shares have been sold pursuant to Rule 144 or stating that the shares
are eligible for resale pursuant to Rule 144(k), the certificates representing
such share of the Common Stock shall not bear any legend restricting transfer of
the Common Stock thereby and should not be subject to any stop-transfer
restriction.
We enclose the following additional documents:
A copy of the Securities Purchase Agreement; and
A capitalization table listing the Buyers and their respective beneficial
ownership interests in the Notes, the Warrants and any shares of Common Stock
issued pursuant thereto.
Please be advised that the Buyers have relied upon this instruction letter
as an inducement to enter into the Securities Purchase Agreement and,
accordingly, each of the Buyers is a third party beneficiary to these
instructions.
Please sign in the space provided below to evidence your acceptance and
acknowledgment of your responsibilities under this letter. Please call me at
(763) 557-2222 if you require any further information. Thank you for your
assistance.
Very truly yours,
ATS MEDICAL, INC.
By:
------------------------------------
John R. Judd,
Chief Financial Officer
Acknowledged and Agreed:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
---------------------------------
Its:
--------------------------------
cc: Mr. Eric Alt (w/o encl.)
Enclosures
SCHEDULE 4(P)
BUYERS ELECTING SECTION 4(P) TREATMENT
- - SF Capital Partners, Ltd.
- - Whitebox Convertible Arbitrage Partners, LP
- - Whitebox Intermarket Partners, LP
- - HFR RVA Combined Master Trust
- - DBZ Acquisition Partners II, LLC
- - The Northwestern Mutual Life Insurance Company
- - Radcliffe SPC, Ltd. for and on behalf of the Class A Convertible Crossover
Segregated Portfolio
- - Capital Ventures International
- - Smithfield Fiduciary LLC
- - Deerfield Partners, L.P.
- - Deerfield International Limited