EXHIBIT 2.1
EXECUTION VERSION
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
entered into as of June 13, 2006, by and among ATS Medical, Inc., a Minnesota
corporation ("Parent"), Seabiscuit Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of Parent ("Merger Subsidiary"), 3F Therapeutics,
Inc., a Delaware corporation (the "Company"), and Boyd D. Cox, as Stockholder
Representative (the "Stockholder Representative" and, together with Parent,
Merger Subsidiary and the Company, the "Parties").
RECITALS
WHEREAS, the Parties entered into that certain Agreement and Plan of Merger
dated January 23, 2006 (the "Merger Agreement");
WHEREAS, the Merger Agreement provides that, on or after June 15, 2006 (the
"Termination Date"), and provided that certain conditions are met, any of
Parent, Merger Subsidiary or the Company may terminate the Merger Agreement and
abandon the transactions contemplated therein;
WHEREAS, the Parties desire to amend the Merger Agreement in order to,
among other things, extend the Termination Date as provided herein;
WHEREAS, if (a) by 11:59 p.m. Pacific time on June 13, 2006 this Amendment
is not fully executed by the Parties hereto, and (b) by 11:59 a.m. Pacific time
on June 14, 2006, evidence of the approval, by the Principal Stockholders and
each director of the Company who is also a Stockholder, of this Amendment is not
received by Parent, this Amendment will terminate without further action by any
party hereto;
WHEREAS, Section 5.26 of the Merger Agreement provides that the Company
will cause all holders of Company Stock Options to agree in writing that any
such options that remain outstanding as of the Effective Time shall terminate
and be cancelled at such time, and if this covenant is not satisfied, the
Stockholders agreed to fully indemnify Parent, pursuant to Sections 9.2(e) and
9.5(b), for all costs and Losses arising in connection with the failure by the
Company to satisfy such covenant;
WHEREAS, the Parties desire to amend the Merger Agreement to provide that,
in the event that any of the current holders of options to purchase shares of
the Company's common stock fail to fully exercise or agree to terminate such
options prior to ten (10) days before the Effective Time (which amends Section
5.26 of the Merger Agreement previously providing for fifteen (15) days), and if
Parent agrees to waive the failure of the relevant closing condition, Parent
shall reserve and continue to keep available for issuance that number of shares
of Parent Common Stock equal to the number of such shares that such
non-exercising and non-terminating option holders would have been entitled to
had they fully exercised such options; and
WHEREAS, the boards of directors of Parent, Merger Subsidiary and the
Company, as well as the stockholders of the Company, have approved this
Amendment.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. AMENDMENTS.
(a) The final sentence of Section 2.1(b)(ii) is hereby amended by adding
the following to the end thereof:
"; provided, however, that, no payment of Milestone Consideration
shall be made to holders of Outstanding Options until, and only
to the extent that, such options have been exercised in
accordance with their terms and, prior to such exercise, all
Milestone Consideration that would otherwise have been issuable
to such holders shall be reserved for issuance and available for
distribution thereunder when and if the Outstanding Options are
exercised and Milestones are achieved. If, following the
achievement of the final Milestone, not all of the Milestone
Consideration is paid in connection with such achievement (due to
the fact that Outstanding Options remain outstanding as of such
date), then, following the expiration, termination or exercise of
the last to expire, terminate or be exercised of the Outstanding
Options, all Milestone Consideration remaining as of such time
shall be deposited by Parent with the Exchange Agent for
distribution in accordance with the terms of the Exchange
Agreement."
(b) The first sentence of Section 2.2 is hereby amended and restated in
its entirety as follows:
"At the Closing, Parent shall deposit, or cause to be deposited,
with the escrow agent (the "Escrow Agent"), for the benefit of
the Stockholders, a certificate (issued in the name of the Escrow
Agent or its nominee) representing the Escrow Shares and Parent
shall reserve and continue to keep available for issuance a
number of shares of Parent Common Stock equal to the Reserved
Shares."
(c) The second sentence of Section 2.2 is hereby amended by adding the
following to the end thereof:
"; provided, however, that Reserved Shares may only be issued to
a holder of Outstanding Options following the later of (i) the
Effective Time and
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(ii) the date on which the Outstanding Options are exercised in
accordance with its terms by such holder in accordance with
Section 2.5 of this Agreement, and such Reserved Shares shall not
be subject to set-off rights to satisfy any indemnification
obligation of the Stockholders (except to the extent provided for
in the Escrow Agreement); provided, further, that at the time
when the last Outstanding Option is exercised, expires, or is
terminated in accordance with its terms, Parent shall issue and
deposit the remaining Reserved Shares, if any, with the Exchange
Agent for distribution in accordance with the terms and
conditions of the Exchange Agreement."
(d) The parties acknowledge that summons and complaints were filed by
Arthur Abbey (x) on January 19, 2006 against, among others, Theodore
C. Skokos ("Skokos") and the Company (the "First Complaint"), and (y)
on June 7, 2006 against Skokos and the Company (the "Second Complaint"
and, together with the First Complaint, the "Complaints"); and further
that in recognition of the additional risk presented by the
Complaints, the Parties agree and hereby amend the Merger Agreement to
provide that any Damages (as defined in the Merger Agreement) incurred
by the Company prior to the Closing that arise out of or in connection
with the Complaints (the "Abbey Damages") will result in a
dollar-for-dollar adjustment to the calculation of the Actual Net
Operating Assets, provided that no such adjustment to the Initial
Merger Consideration will be made to the extent that the Abbey
Damages, if any, are offset by positive adjustments, if any, to the
calculation of the Actual Net Operating Assets. Accordingly, the
parties agree that Section 9.2 of the Merger Agreement is hereby
amended as follows:
(i) Delete the word "and" currently placed between the comma at the
end of subsection (f) and "(g)".
(ii) The following is inserted immediately before the period at the
end of this section:
", and (h) the summons and complaints filed by Arthur Abbey
("Plaintiff") (i) on January 19, 2006 against, among others,
Theodore C. Skokos ("Skokos") and the Company, alleging,
among other matters, the violation of federal securities
laws in connection with the purchase by Plaintiff of certain
securities of 3F Partners Limited Partnership II, and (ii)
on June 7, 2006 against Skokos and the Company, among other
matters, fraud and breach of fiduciary duties in connection
with the purchase by Plaintiff of certain securities of 3F
Partners Limited Partnership II (such allegations, the
"Abbey Claims")"
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(e) Section 9.5(b) of the Merger Agreement is hereby amended as follows:
(i) Delete the word "and" currently placed between "(c)" and "(e)" in
the first sentence.
(ii) Insert a comma immediately following "(c)" in the first sentence.
(iii) Insert " and (h)" immediately following "(e)" in the first
sentence.
(f) Section 9.6 of the Merger Agreement is hereby amended by replacing
"(g)" with "(h)" in the first sentence.
(g) The final sentence of Section 9.6 is hereby amended as follows:
(i) In the fifth line from the end thereof, insert "or Set-Off
Shares" after "Escrow Shares"; and
(ii) In the third line from the end thereof, insert "Escrow Shares or"
before "Set-Off Shares".
(h) Subsection (v) of Section 11.1 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
"(v) "Closing Date Shares" shall mean that number of Parent
Common Shares equal to (i) 9,000,000 (with appropriate
adjustments thereto in the event of any stock splits, stock
combinations, stock dividends, recapitalizations or other similar
transaction in Parent Common Stock after the date hereof and
prior to the Effective Time), minus (ii) the Escrow Shares, minus
(iii) the Reserved Shares, minus (iv) the Reduction Shares, if
any."
(i) Subsection (kkk) of Section 11.1 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
"(kkk) "Escrow Shares" means 1,400,000 fully paid and
nonassessable shares of Parent Common Stock."
(j) Subsection (ggggg) of Section 11.1 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
"(ggggg) "Milestone Ratio" means a number, subject to adjustment
as provided in this Agreement, calculated to five (5) decimal
points, equal to the quotient obtained by dividing (i) Milestone
Shares, by (ii) a sum equal to (A) the Fully-Diluted Outstanding
Shares, plus (B) that number of shares of Company Common Stock
issuable upon the exercise of all Outstanding Options."
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(k) The following definition is hereby inserted immediately prior to
existing Subsection (ooooo) of Section 11.1, and the subsequent
subsections are hereby renumbered accordingly:
"(ooooo) "Outstanding Options" means that aggregate number of
Company Stock Options that remain issued and outstanding, and
whose holders have not otherwise agreed to terminate such
options, as of the date that is ten (10) days before the
Effective Time."
(l) To reflect the Parties' agreement that Reserved Shares shall be
created and reserved out of the Initial Merger Consideration, the
following definition is hereby inserted immediately prior to existing
Subsection (nnnnnn) of Section 11.1, and the subsequent subsections
are hereby renumbered accordingly:
"(nnnnnn) "Reserved Shares" means that number of shares of
Initial Merger Consideration to which all holders of Outstanding
Options would have been entitled had such holders exercised such
options prior to the date that is ten (10) days before the
Effective Time."
(m) Subsection (bbbbbbb) of Section 11.1 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
"(bbbbbbb) "Termination Date" shall mean August 31, 2006."
(n) Section 12.2(a) is hereby amended and restated in its entirety as
follows:
"(a) Subject to Applicable Law, any provision of this Agreement
may be (i) waived, if such waiver is in writing and signed
by the party against whom the waiver is to be effective, or
(ii) amended (A) if such amendment is in writing and signed
by all Parties hereto, or (B) if such amendment in writing,
is approved by the respective boards of directors of Parent
and the Company and is signed by authorized representatives
of both Parent and the Company."
(o) The following section is hereby added to the end of the Merger
Agreement:
"12.14 Additional Agreements. The Parties hereto acknowledge and
agree that:
(a) On the date that this Agreement was originally
executed, the First Complaint had been filed but had
not been disclosed to Parent or Merger Subsidiary prior
to such execution and therefore the existence of the
Abbey Claims constitutes a breach of certain of the
Company's representations and warranties under Article
3, including without limitation Section 3.20, thereby
entitling the Parent to indemnification rights under
Article 9 of this Agreement (without being subject to
the Basket Amount).
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(p) The Operating Budget attached to the Merger Agreement as Exhibit B,
with respect to June, July and August 2006, is being amended to
reflect an increase in anticipated operating expenses of the Company
due to the change in the timing of the Closing and thus is being
amended hereby in its entirety to read as Exhibit A attached to this
Amendment.
3. NO OTHER AMENDMENTS. Except as specifically set forth in Section 2 of this
Amendment, the Merger Agreement shall remain unchanged and shall continue
in full force and effect.
4. RESERVATION OF RIGHTS; EXPRESS ACKNOWLEDGEMENT. Except to the extent
explicitly waived by Parent or Merger Subsidiary in this Amendment, Parent
and Merger Subsidiary reserve all rights of any nature whatsoever under the
Merger Agreement with respect to the Complaint or the Outstanding Options.
Solely for purposes of determining Parent's and Merger Subsidiary's rights
to terminate the Merger Agreement pursuant to Article 8 thereof, and not
for any other purpose (including without limitation not for the purpose of
determining any of Parent's or Merger Subsidiary's indemnification rights
under Article 9 of the Merger Agreement), Parent hereby expressly
acknowledges that it does not have knowledge of any fact or circumstance
which, to the actual knowledge of Parent as of the date hereof, constitutes
a material breach of any representation or warranty of the Company set
forth in Article 3 of the Merger Agreement, other than the litigation
underlying the Complaints, both of which are addressed further in this
Amendment; provided, however, that Parent reserves all its rights to
evaluate and consider any such facts or circumstances (of which Parent has
actual knowledge before executing this Amendment), together with any facts
or circumstances of which it acquires actual knowledge after executing this
Amendment, and to treat any one or all such facts and circumstances (of
which Parent has actual knowledge before the execution of this Amendment)
on a cumulative basis as a material breach of any representation or
warranty of the Company. For purposes of this Section 4, "Parent's actual
knowledge" means only the actual knowledge, without any implication of any
inquiry, of Michael Dale, Jack Judd, Rick Curtis, Rachel Nachreiner, and Al
Putnam of specific facts and circumstances related to a matter and
appreciation of the significance thereof under the Merger Agreement.
5. STOCKHOLDER APPROVALS. By 11:59 a.m. Pacific time on June 14, 2006 and
following execution and delivery of this Amendment by the parties hereto,
the Principal Stockholders, and each director of the Company who is also a
Stockholder, shall have delivered to Parent executed written consents
approving this Amendment. The failure to timely deliver any of the consents
described in this Section 5 shall result in the immediate termination of
this Amendment without further action by any party hereto.
6. ESCROW AND EXCHANGE AGENT AGREEMENTS. In connection with the consummation
of the Merger, and subject to any further comments from any third parties
thereto, the relevant parties hereto will enter into the Escrow Agreement
and the Exchange Agent
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Agreement, substantially in the forms attached hereto as Exhibit B and
Exhibit C, respectively.
7. WAIVER REGARDING SECOND CLAIM. The Company hereby waives its right to
receive notice from Parent under Section 5.17(a) of the Merger Agreement
with respect to the existence of the Second Claim.
8. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this Amendment
shall inure to the benefit of and be binding upon and be enforceable
by the respective heirs, successors and assigns of the parties hereto.
Nothing in this Amendment, express or implied, is intended to confer
upon any party, other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Amendment, except as expressly
provided in this Amendment.
(b) GOVERNING LAW. This Amendment shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware
(regardless of the laws that might otherwise govern under applicable
principles of conflicts of law).
(c) COUNTERPARTS. This Amendment may be signed in any number of
counterparts and the signatures delivered by facsimile, each of which
shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Amendment shall
become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
above written.
PARENT: ATS MEDICAL, INC.
By: /s/ Michael D. Dale
------------------------------------
Michael D. Dale
President and Chief Executive
Officer
MERGER SUBSIDIARY: SEABISCUIT ACQUISITION CORP.
By: /s/ Michael D. Dale
------------------------------------
Michael D. Dale
Chief Executive Officer
COMPANY: 3F THERAPEUTICS, INC.
By: /s/ Walter A. Cuevas
------------------------------------
Walter A. Cuevas
President and Chief Executive
Officer
STOCKHOLDER REPRESENTATIVE:
/s/ Boyd D. Cox
----------------------------------------
Boyd D. Cox
SIGNATURE PAGE
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT NO.1 TO AGREEMENT AND PLAN OF MERGER
EXHIBITS LIST
Exhibit A - Amended Operating Plan
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Exchange Agreement
SIGNATURE PAGE
AMENDMENT NO. 1 TO MERGER AGREEMENT