EX-10.4






EXHIBIT 10.4



SECURITY AGREEMENT




This Security Agreement (this “Agreement”) is entered into as of February 29, 2008, by and
between Silicon Valley Bank (“Bank”) and each of the following parties (each, a “Pledgor” and
collectively and jointly and severally, “Pledgors”): 3F Therapeutics, Inc., a Delaware
corporation, and ATS Acquisition Corp., a Minnesota corporation.



RECITALS




Bank and ATS Medical, Inc. (“Borrower”) have entered into that certain Loan and Security
Agreement dated as of July 28, 2004 (as amended, restated, or otherwise modified from time to time,
the “Loan Agreement”) pursuant to which Bank has agreed to make certain advances of money and to
extend certain financial accommodations to Borrower (collectively, the “Loans”), subject to the
terms and conditions set forth therein. Capitalized terms used but not otherwise defined herein
shall have the meanings given them in the Loan Agreement.



In consideration of the Amendment to Loan and Security Agreement dated June 18, 2007 between
Bank and Borrower, and the agreement of Bank to extend credit and make other financial
accommodations to Borrower under the Loan Agreement, Pledgors have executed that certain
Unconditional Guaranty of substantially even date in favor of Bank (as amended, restated, or
otherwise modified from time to time, the “Guaranty”).



Each Pledgor’s obligations under the Guaranty (all such obligations of Pledgors are
collectively referred to as the “Guarantor Obligations”) shall be secured pursuant to and in
accordance with the terms of this Agreement.



AGREEMENT




The parties agree as follows:



1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used herein shall have
the following meanings:



“Bank Expenses” means all costs and expenses (including reasonable attorneys’ fees and
expenses) incurred by Bank in preparing, negotiating, administering, amending, defending, and
enforcing this Agreement and the Guarantor Obligations (including, without limitation, those
incurred during appeals and/or Insolvency Proceedings).



“Code” means the Uniform Commercial Code as the same may, from time to time, be in effect in
the State of California.



“Collateral” means the property described in Exhibit A attached hereto.



“Default” means any event or occurrence which with the passing of time or the giving of notice
or both would become an Event of Default hereunder.



“Events of Default” are described in Section 6.



“Insolvency Proceeding” are proceedings by or against Borrower and/or a Pledgor under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for
the benefit of creditors, compositions, extensions generally with either party’s creditors, or
proceedings seeking reorganization, arrangement, or other relief.



“Material Adverse Change” is described in Section 6.5.



“Permitted Liens” with respect to a Pledgor are:



(a) Liens existing on the date hereof and shown on a Schedule hereto (if any) or arising under
this Agreement or other Loan Documents;



(b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Pledgor maintains adequate reserves on
its books, if they have no priority over any of Bank’s security interests;



(c) Purchase money Liens (i) on Equipment acquired or held by such Pledgor or incurred for
financing the acquisition of the Equipment, or (ii) existing on Equipment when acquired, if
the Lien is confined to the property and improvements and the proceeds of the Equipment;



(d) Non-exclusive licenses or sublicenses granted in the ordinary course of Pledgor’s business
and, with respect to any licenses where Pledgor is the licensee, any interest or title of a
licensor or under any such license or sublicense, if the licenses and sublicenses permit
granting Bank a security interest;



(e) Leases or subleases entered into in the ordinary course of Pledgor’s business, including
in connection with Pledgor’s leased premises or leased property;



(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (c), but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the principal amount of the
indebtedness may not increase;



(g) Liens in respect of property or assets of Pledgor imposed by law which were incurred in
the ordinary course of business, such as carriers’, warehousemen’s, and mechanics’ Liens, statutory
landlord’s Liens, and other similar Liens arising in the ordinary course of business, which (y) do
not in the aggregate materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of Pledgor and (z) which are not
delinquent;



(h) Easements, rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances with respect to real estate and not interfering in any material
respect with the ordinary conduct of the business of Pledgor;



(i) Banker’s Liens, rights of setoff and similar Liens incurred on deposits made in the
ordinary course of business;



(j) Liens arising from (i) judgments or attachments (or securing of appeal bonds with respect
thereto) in an aggregate amount of less than $250,000 provided that the same have no priority over
any of the security interests of Bank in any of the Collateral (including, without limitation, with
respect to future advances) as determined by Bank in its commercially reasonable discretion or (ii)
judgments (or securing of appeal bonds with respect thereto) in circumstances not constituting an
Event of Default under Section 6.7, provided that the aggregate of all cash and property (other
than proceeds of insurance payable by reason of such judgments, decrees or attachments) that is
deposited or delivered to secure any such judgments, or any appeal bonds in respect thereof, does
not exceed $250,000 in fair market value and provided further that the same have no priority over
any of the security interests of Bank in any of the Collateral (including, without limitation, with
respect to future advances) as determined by Bank in its commercially reasonable discretion; and



(k) Liens imposed by law incurred in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other types of social security provided that the
same have no priority over any of the security interests of Bank in any of the Collateral
(including, without limitation, with respect to future advances).



“Responsible Officer” with respect to any Pledgor is any of such Pledgor’s Chief Executive
Officer, the President, the Chief Financial Officer and the Controller.



2. CREATION OF SECURITY INTEREST



2.1 Grant of Security Interest. Each Pledgor grants Bank a continuing security
interest in the Collateral of such Pledgor to secure the prompt payment and performance of such
Pledgor’s Guarantor Obligations. Subject to any Permitted Liens that, pursuant to the terms of
this Agreement, are allowed to be prior to the security interest of Bank in any Collateral, such
security interest constitutes a valid, first priority security interest in the presently existing
Collateral of such Pledgor, and will constitute a valid, first priority security interest in
Collateral of such Pledgor acquired after the date hereof. Bank may liquidate a Pledgor’s
Collateral and apply such funds toward repayment of such Pledgor’s Guarantor Obligations. Such
liquidation shall not be deemed a set-off.



2.2 Delivery of Additional Documentation Required; Perfection Certificates. Each
Pledgor will from time to time execute and deliver to Bank, at the request of Bank, all financing
statements and other documents that Bank may reasonably request, in form satisfactory to Bank, to
perfect and continue the perfection of Bank’s security interests in the Collateral of such Pledgor.
Each Pledgor authorizes Bank to file financing statements without notice to Pledgor, in all
appropriate jurisdictions, as Bank deems appropriate, to perfect or protect Bank’s interest in the
Collateral of such Pledgor. On or before March 31, 2008, each Pledgor shall have executed and
delivered to Bank a completed Perfection Certificate, in the form previously provided by Bank, the
substance of which shall be acceptable to Bank in its discretion (each, a “Perfection Certificate”
and collectively, “Perfection Certificates”).



3. REPRESENTATIONS AND WARRANTIES



Each Pledgor represents and warrants as follows:



3.1 Due Organization and Qualification. Such Pledgor is duly existing and in good
standing under the laws of its jurisdiction of formation and is qualified and licensed to do
business in, and is in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.



3.2 Due Authorization; No Conflict. The execution, delivery, and performance of this
Agreement are within such Pledgor’s powers, have been duly authorized, and neither conflict with
nor constitute a breach of any provision contained in such Pledgor’s formation documents or bylaws,
nor will they constitute an event of default under any material agreement to which such Pledgor is
a party or by which such Pledgor is bound.



3.3 No Prior Encumbrances. Subject to Permitted Liens, such Pledgor has good title to
the Collateral, free and clear of any liens, security interests, or other encumbrances other than
the security interest in favor of Bank.



3.4 Litigation. There is no action, suit or proceeding affecting such Pledgor pending
or threatened before any court, arbitrator, or governmental authority, domestic or foreign, in
which a likely adverse decision could reasonably be expected to cause a Material Adverse Change,
other than such actions, suits or proceedings described in such Pledgor’s Perfection Certificate.



3.5 Solvency. The incurrence of such Pledgor’s obligations under this Agreement will
not cause such Pledgor to (a) become insolvent; (b) be left with unreasonably small capital for any
business or transaction in which such Pledgor is presently engaged or plans to be engaged; or
(c) be unable to pay its debts as such debts mature.



3.6 Perfection Certificate. All information set forth on its Perfection Certificate
is accurate and complete.



4. AFFIRMATIVE COVENANTS



Each Pledgor covenants and agrees that, until the Guarantor Obligations (other than contingent
indemnification Guarantor Obligations) of such Pledgor cease, such Pledgor shall do all of the
following:



4.1 Good Standing. Maintain its existence and its good standing in its jurisdiction
of formation and maintain qualification in each jurisdiction in which the failure to so qualify
could reasonably be expected to have a material adverse effect on such Pledgor’s business.



4.2 Government Compliance. Comply with all statutes, laws, ordinances and government
rules and regulations to which it is subject, noncompliance with which could reasonably be expected
to have a material adverse effect on such Pledgor’s business.



4.3 Insurance.



(a) At such Pledgor’s expense, keep the Collateral of such Pledgor insured against loss or
damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts,
as ordinarily insured against by other owners in similar businesses conducted in the locations
where such Pledgor’s business is conducted on the date hereof. Such Pledgor shall also maintain
insurance relating to such Pledgor’s ownership and use of the Collateral in amounts and of a type
that are customary to businesses similar to such Pledgor’s.



(b) All such policies of insurance shall be in such form, with such companies, and in such
amounts as reasonably satisfactory to Bank. All such policies of property insurance shall contain
a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank as an additional
insured, and shall specify that the insurer must give at least 20 days notice to Bank before
canceling its policy for any reason.



4.4 Taxes. Make timely payment of all foreign, federal, state, and local taxes or
assessments (other than taxes and assessments which such Pledgor in good faith contests its
obligations by appropriate proceedings promptly and diligently instituted and conducted), and shall
deliver to Bank, upon demand, appropriate certificates attesting to such payments.



4.5 Audit of Collateral. Allow Bank to audit Pledgor’s Collateral at Pledgor’s
expense. Such audits may be conducted (i) once every twelve months, and (ii) at such more frequent
times as the Bank may from time to time determine; provided that Bank shall not require any such
audit during any period for which Bank has agreed, under the Loan Agreement, not to require an
audit of Borrower’s collateral.



5. NEGATIVE COVENANTS



Each Pledgor covenants and agrees that, until the Guarantor Obligations (other than contingent
Guarantor Obligations) of such Pledgor cease, such Pledgor shall not do any of the following:



5.1 Dispositions. Convey, sell, lease, transfer, pledge, assign control over or
otherwise dispose of (collectively, “Transfer”) all or any part of the Collateral of such Pledgor
other than Transfers of the type permitted by Section 7.1 of the Loan Agreement.



5.2 Encumbrances. Create, incur, or allow any Lien on any of its property, or assign
or convey any right to receive income, including the sale of any Accounts, except for Permitted
Liens; subject to any Permitted Liens that, pursuant to the terms of this Agreement, are allowed to
be prior to the security interest of Bank in any Collateral, permit any Collateral from such
Pledgor not to be subject to the first priority security interest granted herein; or enter into any
agreement, document, instrument or other arrangement (except with or in favor of Bank) with any
Person which directly or indirectly prohibits or has the effect of prohibiting any Pledgor from
assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of
such Pledgor’s intellectual property, except as is otherwise permitted in Section 7.1 of the Loan
Agreement and the definition of “Permitted Lien”.



5.3 Change in Jurisdiction of Formation, Organizational Structure, Type. Without 30
days prior written notice to Bank, change its jurisdiction of formation or its organizational
structure or type.



6. EVENTS OF DEFAULT



Any one or more of the following events shall constitute an Event of Default under this
Agreement:



6.1 Covenant Default.



(a) If any Pledgor fails or neglects to perform, keep, or observe any term, provision,
condition, covenant, or agreement in the Guaranty or in Sections 5.1, 5.2 or 5.3 of this Agreement;
or



(b) If any Pledgor fails or neglects to perform, keep, or observe any other material term,
provision, condition, covenant or agreement contained in this Agreement, and as to any default
(other than those specified in this Section 6) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after
the occurrence thereof; provided, however, that if the default cannot by its nature be cured within
the ten (10) day period or cannot after diligent attempts by Pledgor be cured within such ten (10)
day period, and such default is likely to be cured within a reasonable time, then Pledgor shall
have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the default shall not be
deemed an Event of Default. Grace periods provided under this section shall not apply with respect
to subsection (a) above.



6.2 Attachment. If any material portion of any Pledgor’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is
not removed in 10 days, or if any Pledgor is enjoined, restrained, or prevented by court order from
conducting a material part of its business or if a judgment or other claim becomes a Lien on a
material portion of any Pledgor’s assets, or if a notice of lien, levy, or assessment is filed
against any of any Pledgor’s assets by any government agency and not paid within 10 days after such
Pledgor receives notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Pledgor.



6.3 Misrepresentations. If any material misrepresentation or material misstatement
exists now or hereafter in any warranty or representation set forth herein or in any certificate
delivered to Bank by any Pledgor pursuant to this Agreement or the Guaranty or to induce Bank to
enter into this Agreement or the Guaranty.



6.4 Insolvency. (a) any Pledgor becomes insolvent; (b) any Pledgor begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against any Pledgor and not
dismissed or stayed within 30 days.



6.5 Material Adverse Change. If there (a) occurs a material adverse change in the
business, operations, or financial condition of any Pledgor, or (b) is a material impairment of the
value or priority of Bank’s security interest in any of the Collateral of any Pledgor (any of the
foregoing is referred to herein as a “Material Adverse Change”).



6.6 Other Agreements. If there is a default in any agreement between Pledgor and a
third party that gives the third party the right to accelerate any Indebtedness exceeding $250,000
or that could cause a Material Adverse Change.



6.7 Judgments. If money judgments in the aggregate of at least $250,000 are rendered
against the Pledgors and are unsatisfied and unstayed for 10 days.



6.8 Event of Default Under Loan Agreement. Any Event of Default shall exist under the
Loan Agreement.



7. BANK’S RIGHTS AND REMEDIES



7.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event
of Default, Bank may, at its election, without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Pledgors:



(a) Exercise all rights available to it under the Code and applicable law;



(b) Set off and apply to the obligations any and all (i) balances and deposits of any Pledgor
held by Bank or in which Bank acts as custodian, or (ii) indebtedness at any time owing to or for
the credit or the account of any Pledgor held by Bank; and



(c) Sell all or any part of the Collateral at either a public or private sale, or both, by way
of one or more contracts or transactions, for cash or on terms, in such manner and at such places
(including any Pledgor’s premises) as Bank determines is commercially reasonable in accordance with
the Code.



7.2 Remedies Cumulative. Bank’s rights and remedies under the Loan Agreement and any
documents related thereto, the Guaranty, and this Agreement shall be cumulative. Bank shall have
all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by
Bank of any Event of Default on any Pledgor’s part shall be deemed a continuing waiver. No delay
by Bank shall constitute a waiver, election, or acquiescence by it.



7.3 Demand; Protest. Except to the extent expressly provided for in this Agreement or
the Guaranty, each Pledgor waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper,
and guarantees at any time held by Bank on which any Pledgor may in any way be liable.



7.4 Power of Attorney. Effective only when an Event of Default occurs and continues,
each Pledgor irrevocably appoints Bank as its lawful attorney to: (a) endorse such Pledgor’s name
on any checks or other forms of payment or security; (b) sign such Pledgor’s name on any invoice or
bill of lading for any account or drafts against account debtors, (c) make, settle, and adjust all
claims under such Pledgor’s insurance policies; (d) settle and adjust disputes and claims about the
accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and
(e) transfer the Collateral of such Pledgor into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign any Pledgor’s name on any documents
necessary to perfect or continue the perfection of any security interest regardless of whether an
Event of Default has occurred. Bank’s appointment as each Pledgor’s attorney in fact, and all of
Bank’s rights and powers, coupled with an interest, are irrevocable until the Guarantor Obligations
cease.



7.5 Bank Expenses. If any Pledgor fails to pay any amount due hereunder or furnish
any required proof of payment to third persons in connection with the Collateral, Bank may make all
or part of the payment and take any action Bank deems prudent, and Bank shall give written notice
to Borrower of the same promptly after making any such payment or taking any such action that is
material. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed
an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.
After the sale of any of the Collateral of any Pledgor, Bank may deduct all reasonable legal and
other expenses and attorneys’ fees for preserving, collecting, selling and delivering the
Collateral and for enforcing its rights with respect to the Guarantor Obligations of such Pledgor,
and shall apply the remainder of the proceeds to the Guarantor Obligations of such Pledgor in such
manner as Bank in its reasonable discretion shall determine, and shall pay the balance, if any, to
such Pledgor.



7.6 Bank’s Liability for Collateral. If Bank complies with reasonable banking
practices, it is not liable or responsible for the safekeeping of the Collateral.



8. NOTICES



Unless otherwise provided in this Agreement, all notices or demands by any party relating to
this Agreement shall be in writing and shall be given in accordance with the notice provision set
forth in the Guaranty.



9. CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE



California law governs this Agreement without regard to principles of conflicts of law. Each
Pledgor and Bank submits to the exclusive jurisdiction of the State and Federal courts in Santa
Clara County, California; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on any collateral or any other security for the Obligations, or to enforce a judgment or
other court order in favor of Bank. Each Pledgor expressly submits and consents in advance to such
jurisdiction in any action or suit commenced in any such court, and each Pledgor hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Each Pledgor hereby waives personal service of the summons, complaints,
and other process issued in such action or suit and agrees that service of such summons,
complaints, and other process may be made by registered or certified mail addressed to such Pledgor
at the address for notice set forth in the Guaranty and that service so made shall be deemed
completed upon the earlier to occur of such Pledgor’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.



TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PLEDGOR AND BANK WAIVES THEIR RIGHT TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE
GUARANTY, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF
DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.



WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the
parties hereto agree that any and all disputes or controversies of any nature between them arising
at any time shall be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior
Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby
submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to
and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive. The private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public
and confidential and all records relating thereto shall be permanently sealed. If during the
course of any dispute, a party desires to seek provisional relief, but a judge has not been
appointed at that point pursuant to the judicial reference procedures, then such party may apply to
the Santa Clara County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a court under the rules
of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which
shall be conducted in the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all
discovery rules and order applicable to judicial proceedings in the same manner as a trial court
judge. The parties agree that the selected or appointed private judge shall have the power to
decide all issues in the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing
in this paragraph shall limit the right of any party at any time to exercise self-help remedies,
foreclose against collateral, or obtain provisional remedies. The private judge shall also
determine all issues relating to the applicability, interpretation, and enforceability of this
paragraph



10. GENERAL PROVISIONS



10.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. No Pledgor may assign this Agreement or any rights
under it without Bank’s prior written consent which may be granted or withheld in Bank’s reasonable
discretion. Bank has the right, without the consent of or notice to any Pledgor, to sell,
transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s
obligations, rights and benefits under this Agreement.



10.2 Indemnification. Each Pledgor will indemnify, defend and hold harmless Bank and
its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities
asserted by any other party in connection with the transactions contemplated by the Guaranty and/or
this Agreement; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and such Pledgor under the Guaranty and/or Agreement
(including reasonable attorneys’ fees and expenses), except for losses caused by Bank’s gross
negligence or willful misconduct. A person seeking to be indemnified under this Section 10.2 shall
notify the applicable Pledgor of any event requiring indemnification within a reasonable time
following such person’s receipt of notice of commencement of any action or proceeding giving rise
to a claim for indemnification hereunder, provided that (i) there shall be no obligation to so
notify such Pledgor if an Event of Default has occurred and is continuing, and (ii) neither Bank
nor any such person shall have any liability or obligation for any inadvertent failure to provide
such notice, and (iii) no failure to provide such notice shall affect such Pledgor’s obligation to
provide indemnity hereunder. In such a proceeding, such person shall use commercially reasonable
efforts to keep such Pledgor reasonably informed of its defense and any settlement of any such
action or proceeding and negotiations to settle or otherwise resolve any claim, provided that (i)
such person shall have the exclusive right to decide to accept or reject any settlement offer, and
(ii) there shall be no obligation to keep such Pledgor so informed if an Event of Default has
occurred and is continuing, and (iii) neither Bank nor any such person shall have any liability or
obligation for any inadvertent failure to keep such Pledgor so informed, and (iv) no failure to
keep such Pledgor so informed shall affect such Pledgor’s obligation to provide indemnity
hereunder.



10.3 Time of Essence. Time is of the essence for the performance of all obligations
set forth in this Agreement.



10.4 Severability of Provisions. Each provision of this Agreement is severable from
every other provision in determining the enforceability of any provision.



10.5 Amendments in Writing, Integration. All amendments to this Agreement must be in
writing and executed by the parties hereto. This Agreement and the Guaranty represent the entire
agreement about this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations between the parties about
the subject matter of this Agreement merge into this Agreement and the Guaranty.



10.6 Counterparts. This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and delivered, are an
original, and all taken together, are one Agreement.



10.7 Survival. All covenants, representations and warranties made in this Agreement
continue in full force while any obligations remain outstanding. The obligations of Pledgors in
Section 10.2 to indemnify Bank will survive until all statutes of limitations for actions that may
be brought against Bank have run.



10.8 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between any
Pledgor and Bank arising out of the Guaranty or this Agreement, the prevailing party will be
entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in
addition to any other relief to which it may be entitled, whether or not a lawsuit is filed.



10.9 Disclosure of Information; Borrower Collateral. Each Pledgor acknowledges that
it has, independently of and without reliance on Bank, made its own credit analysis of Borrower and
the assets pledged by Borrower to Bank under the Loan Agreement, if any (the “Borrower
Collateral”), performed its own legal review of this Agreement, the Guaranty, the Loan Agreement
and all related documents and filings, and is not relying on Bank with respect to any of the
aforesaid items. Each Pledgor has established adequate means of obtaining from Borrower, on a
continuing basis, financial and other information pertaining to Borrower’s financial condition and
the value of the Borrower Collateral and status of Bank’s lien on and in the Borrower Collateral.
Each Pledgor agrees to keep adequately informed from such means of any facts, events or
circumstances which might in any way affect such Pledgor’s risks hereunder or under the Guaranty,
and each Pledgor further agrees that Bank shall have no obligation to disclose to Pledgor
information or material with respect to Borrower or the Borrower Collateral acquired in the course
of Bank’s relationship with Borrower. Bank makes no representation, express or implied, with
respect to the Borrower Collateral or its interest in, or the priority or perfection of its lien on
and in the Borrower Collateral. Each Pledgor acknowledges that its obligation hereunder will not
be affected by (a) Bank’s failure properly to create a lien on or in the Borrower Collateral,
(b) Bank’s failure to create or maintain a priority with respect to the lien purported to be
created in the Borrower Collateral, or (c) any act or omission of Bank (whether negligent or
otherwise) which adversely affects the value of the Borrower Collateral or Bank’s lien thereon or
the priority of such lien.



10.10 Joint and Several. If two or more Pledgors are liable under the terms hereof
for the same obligation, then such liability shall be joint and several.



10.11 Confidentiality. In handling any confidential information, Bank will exercise
the same degree of care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank’s subsidiaries or affiliates in connection with their business
with Borrower or Pledgors, (ii) to prospective transferees or purchasers of any interest in the
loans to the Borrower (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee or purchasers written agreement to the terms of this
provision), (iii) as required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank’s examination or audit and (v) as Bank considers appropriate exercising
remedies under this Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does
not know that the third party is prohibited from disclosing the information.



[Signature page follows]





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This Security Agreement is executed as of the date first above written.




Bank



SILICON VALLEY BANK



	 	 	 
	By:

	 	/s/ Nick Honigman
	
 
	 	 
	Name:

	 	Nick Honigman
	
 
	 	 
	Title:

	 	Relationship Manager






Pledgors



	 	 	 
	3F THERAPEUTICS, INC.

By: /s/ Michael Dale

	 	ATS ACQUISITION CORP.

By: /s/ Michael Dale
	 

	 	 
	Name: Michael Dale

	 	Name: Michael Dale
	 

	 	 
	Title: CEO

	 	Title: CEO
	 

	 	 






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EXHIBIT A




The Collateral consists of all of each Pledgor’s right, title and interest in and to the
following personal property of such Pledgor:



All goods and equipment now owned or hereafter acquired, including, without limitation, all
machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of
the foregoing, and all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever located;



All inventory, now owned or hereafter acquired, including, without limitation, all
merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and
finished products including such inventory as is temporarily out of Pledgor’s custody or possession
or in transit and including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title
representing any of the above;



All contract rights and general intangibles now owned or hereafter acquired, including the
Intellectual Property (as defined below) only, however, to the extent and subject to the
limitations set forth in the Exclusion Clause (as defined below);



All now existing and hereafter arising accounts, contract rights, payment
intangibles, royalties, license rights and all other forms of obligations owing to Pledgor arising
out of the sale or lease of goods, the licensing of technology or the rendering of services by
Pledgor, whether or not earned by performance, and any and all credit insurance, guaranties, and
other security therefor, as well as all merchandise returned to or reclaimed by Pledgor;



All documents, cash, deposit accounts, securities, securities entitlements, securities
accounts, investment property, financial assets, letters of credit, letter-of-credit rights,
commercial tort claims, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired; and



All Pledgor’s books and records relating to the foregoing and any and all claims, rights and
interests in any of the above and all substitutions for, additions and accessions to and proceeds
thereof.



Notwithstanding the foregoing, the Collateral shall not include any Intellectual Property,
provided that if a judicial authority (including a U.S. Bankruptcy Court) holds that a
security interest in the underlying Intellectual Property is necessary to have a security interest
in such items that are proceeds of the Intellectual Property consisting of payment intangibles,
accounts, license revenues, or general intangibles relating to rights to payment arising therefrom
or relating thereto, then in such circumstance, the Collateral shall automatically, and effective
as of the date hereof, include the Intellectual Property only to the extent necessary to permit
perfection of Bank’s security interest in such proceeds, including, without limitation, payment
intangibles, accounts, license revenues, or general intangibles relating to rights to payment (the
foregoing is referred to herein collectively as the “Exclusion Clause”).



The term “Intellectual Property” as used herein shall mean the following: Pledgor’s
right, title or interest, whether now owned or hereafter acquired, in and to any intellectual
property rights of Pledgor of any nature or character, including without limitation, and whether
domestic or foreign, the following: (i) any copyrights and copyright applications, whether
registered or unregistered, copyright registration and like protection in each work of authorship
and derivative work thereof, whether published or unpublished, and whether said copyrights are
statutory or arise under common law, and all rights, claims and demands in any way related to any
such copyrights or works, including any rights to sue for past, present or future infringement, and
any rights of renewal and extension of copyrights; (ii) any patents, patent applications, patent
rights and like protections and any licenses relating to any of the foregoing, and any
improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part
thereof and any rights to sue for past present or future infringement thereof and any rights
arising therefrom and pertaining thereto; (iii) any state (including common law), federal and
foreign trademarks, service marks and trade names, and applications for registration of such
trademarks, service marks and trade names, and any licenses relating to any of the foregoing,
whether registered or unregistered and wherever registered, any rights to sue for past, present or
future infringement of unconsented use thereof, all rights arising therefrom and pertaining and any
reissues, extensions and renewals thereof and the goodwill of the business of Pledgor connected
with and symbolized by any of the foregoing; (iv) any trade secrets, trade dress, trade styles,
logos, other source of business identifiers, mask-works, mask-work registrations or mask-work
applications, integrated circuit masks, software, circuit designs and documentation relating
thereto, and the goodwill of the business of Pledgor connected with and symbolized by any of the
foregoing, including, without limitation, any rights to unpatented inventions, know-how, and
operating manuals, including any rights to sue for past, present or future infringement or
unconsented use thereof, all rights arising therefrom and pertaining thereto, provided that
with respect to any and all of the foregoing, the term “Intellectual Property” shall not include
any proceeds thereof (other than proceeds in the direct form of Intellectual Property) and
specifically, without limitation, and regardless of any of the foregoing, the term “Intellectual
Property” shall not include any payment intangibles, accounts, license revenues, or general
intangibles relating to rights to payment arising therefrom or relating thereto.




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