Document:

exv10w3

 

Exhibit 10.3

LETTER AMENDMENT No. 7

Dated as of April 30, 2007

M&I Marshall & Ilsley Bank

651 Nicollet Mall

Minneapolis, Minnesota 55402-1611

Ladies/Gentlemen:

     We refer to the Revolving Credit and Term Loan Agreement dated as of October 17, 2003, as
amended (the “Credit Agreement”) between you and us (under our former name of MedAmicus, Inc.).
Unless otherwise defined in this letter amendment, terms defined in the Credit Agreement are used
in this letter amendment as defined in the Credit Agreement.

     It is hereby agreed by you and us as follows:

     The Credit Agreement is, effective the date first above written, hereby amended as follows:

	 	(a)	 	Section 1.1(g) [Definition of Tangible Net Worth] is amended to
read in full as follows:

(g) “EBITDA” means in any period the sum of the Borrower’s and
Medacquisition’s consolidated net income during that period plus
interest, depreciation, amortization and income tax expense during
that period and plus non-cash, stock-based compensation during that
period.

	 	(b)	 	Section 2.1 is amended by changing the Termination Date to be
April 30, 2008.
	 
	 	(c)	 	Section 5.1(f) is amended to read in full as follows:

(f) Tangible Net Worth. Maintain Tangible Net Worth of not
less than the following amounts at each fiscal year end. The minimum
Tangible Net Worth shall be $10,000,000.00 at December 31, 2007. At
each fiscal year end thereafter, the minimum Tangible
Net Worth shall increase by an amount equal to 25% of the net income
(but not net loss) in the year then ended.

 

 

	 	(d)	 	Section 5.1(g) is amended to read in full as follows:

(g) Senior Funded Debt Ratio. Maintain as of the end of
each fiscal quarter a Senior Funded Debt Ratio of not more than the
following:

	 	 	 
	Time Period 	 	Maximum Ratio
	Through 9/30/07

	 	1.75 to 1
	Thereafter

	 	1.50 to 1

	 	(e)	 	Section 5.1(h) is amended to provide that no minimum Fixed
Charge Coverage Ratio shall apply in the fiscal quarters ended June 30, 2007
and September 30, 2007.

     On and after the effective date of this letter amendment, each reference in the Credit
Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the
Credit Agreement, and each reference in the Notes and the Security Agreement to “the Credit
Agreement”, “thereunder”, “thereof”, or words of like import referring to the Credit Agreement,
shall mean and be a reference to the Credit Agreement as amended by this letter amendment. The
Credit Agreement, as amended by this letter amendment, is and shall continue to be in full force
and effect and is hereby in all respects ratified and confirmed.

     This letter amendment may be executed in any number of counterparts and by any combination of
the parties hereto in separate counterparts, each of which counterparts shall be an original and
all of which taken together shall constitute one and the same letter amendment.

     If you agree to the terms and provisions hereof, please evidence your agreement by executing
and returning one counterpart of this letter amendment to us. This letter amendment

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shall become effective as of the date first above written when and if counterparts of this letter
amendment shall have been executed by you and us.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	Enpath Medical, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	   Its
	 	 

	 	 
	 

	 	 	 	 

	 	 

Agreed as of the date

first above written:

M&I Marshall & Ilsley Bank

	 	 	 	 	 
	By
	 	 	 	 
	   Its

	 	 

	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	   Its

	 	 

	 	 
	 

	 	 

	 	 

RENEWAL REVOLVING PROMISSORY NOTE

			
	 

$4,000,000.00
	 	Dated as of April 30, 2007

     For value received, on April 30, 2008, Enpath Medical, Inc., a Minnesota corporation (the
“Borrower”) promises to pay to the order of M&I Marshall & Ilsley Bank (the “Bank”), at its offices
in Minneapolis, Minnesota, in lawful money of the United States of America, the principal amount of
Four Million and no/100 Dollars ($4,000,000.00) or, if less, the aggregate unpaid principal amount
of Advances made by the Bank to the Borrower pursuant to the Loan Agreement (as defined below);
together with interest on any and all principal amounts remaining

-3-

 

unpaid hereon from the date of this Note until such principal amounts are fully paid at a
fluctuating annual rate equal to 2.25% above LIBOR (as defined in the Loan Agreement). Interest
shall be due and payable on the last day of each calendar month starting on May 31, 2007. Each
change in the fluctuating interest rate shall take effect simultaneously with the corresponding
change in LIBOR.

     All Advances made by the Bank to the Borrower pursuant to the Loan Agreement and all principal
payments made by the Borrower on this Note shall be recorded by the Bank.

     This Note is the Revolving Note referred to in, and is entitled to the benefits of, the
Revolving Credit and Term Loan Agreement dated as of October 17, 2003, as amended (the “Loan
Agreement”) between the Borrower (under its former name of MedAmicus, Inc.) and the Bank, which
Loan Agreement, among other things, contains provisions for the acceleration of the maturity of
this Note upon the happening of certain stated events, for an increase to the interest rate upon
the happening of certain stated events, and for prepayments of the principal amount due under this
Note upon stated terms and conditions.

     This Note is a renewal and replacement of a $4,000,000.00 promissory note dated as of May 1,
2006 from the Borrower to the Bank which prior note remains unpaid but the principal balance of
which has been incorporated into this Note.

	 	 	 	 	 	 	 
	 	 	Enpath Medical, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	   Its
	 	 

	 	 
	 

	 	 	 	 

	 	 

-4-exv10w4

 

	 	 	 	 	 
	Release 3:00pm CDT

	 	Approved By:
	 	Scott Youngstrom, CFO (763)
	 

	 	 	 	951-8211
	 

	 	 	 	Enpath Medical, Inc.
	 
	 	 	 	 
	 

	 	Contacts:
	 	Investors
	 

	 	 	 	EVC Group (415) 896-6820
	 

	 	 	 	Doug Sherk
	 

	 	 	 	Jennifer Beugelmans
	 
	 	 	 	 
	 

	 	 	 	Media
	 

	 	 	 	EVC Group
	 

	 	 	 	Steve DiMattia (646) 277-8706

May 2, 2007

Exhibit 10.4

Enpath Medical Reports Record First Quarter Revenues

Company Earns $.05 Per Share

Conference Call Previously Scheduled for Today is Cancelled

MINNEAPOLIS—Enpath Medical, Inc. (Nasdaq: NPTH), a leading developer and
manufacturer of proprietary products for blue-chip medical device companies operating
worldwide, today reported first quarter results.

Revenue increased 7% to $10.1 million, the Company’s first quarter over $10 million,
compared with $9.4 million for the same quarter in 2006. Introducer and lead product
line revenue increases were partially offset by a reduction in catheter product line
revenue.

Revenue from the introducer product line increased 16% to $6.6 million compared with $5.7
million in the first quarter last year. Revenue from the stimulation leads product line
for the quarter increased to $3.1 million, up from the $2.3 million in the
first quarter of 2006 due primarily to increased leads and contract manufacturing
revenues when compared to the same period last year.

Revenue from the catheter product line decreased to $390,000 compared with $1.4 million
in the first quarter last year. First quarter 2006 catheter line revenue was favorably
influenced by two customers preparing to launch their catheter based products.

Gross margins for the quarter were 36% compared with 39% in the first quarter of 2006 due
primarily to costs associated with the duplicate facilities and the expenses associated
with moving to our new facility. Selling, general and administrative expenses totaled
$2.1 million, or 21% of revenue, during the first quarter of 2007 as compared to $1.5
million, or 16% of revenue, recorded for the first quarter of 2006. Recognition of
additional rental expense on the new facility, legal expenses associated with our patent
infringement defense and moving-related expenses impacted the Company’s overall quarterly
SG&A results when compared to the 2006 first quarter. Research and development
expenditures for the quarter totaled $900,000, or 9% of revenues, compared with $1.2
million in the first quarter of 2006, or 13% of revenues.

Net income was $330,000 or $0.05 per fully diluted share in the first quarter of 2007 as
compared to $650,000 or $0.11 per fully diluted share in the first quarter of 2006.

Definitive Merger Agreement Signed on Monday, April 30, 2007

Enpath Medical, Inc. announced on Monday, April 30, 2007, that it has entered into a
definitive merger agreement under which Greatbatch, Inc. will acquire Enpath for $14.38
per share in cash, or approximately $102 million, including assumption of debt. Under the
terms of the agreement,

 

 

Greatbatch, Inc. will commence a tender offer for all of Enpath’s
outstanding shares no later than May 8, 2007. The proposed transaction is subject to
customary closing conditions and regulatory approvals and the tender of a majority of
Enpath’s outstanding shares, on a fully diluted basis. The transaction has been
unanimously approved by the Boards of Directors of both companies and is expected to
close in late June 2007.

Annual Shareholder Meeting Update

Enpath’s Annual Shareholder Meeting, scheduled for 3:45 PM on Thursday, May 3,
will proceed as scheduled but will not include an executive report on the Company’s
business.

Conference Call Previously Scheduled for Today has been Cancelled

About Enpath Medical

Enpath Medical, Inc., headquartered in Plymouth, Minnesota, is a leader in the design,
development, manufacture and marketing of percutaneous delivery systems and stimulation
leads technologies. Its proprietary products include venous vessel introducers,
articulating and fixed curve delivery catheters, epicardial and endocardial stimulation
leads, and other products for use in pacemaker, defibrillator, catheter and infusion port
procedures as well as neuromodulation markets. Its products, which are primarily finished
goods, are sold worldwide through partnering relationships with other medical device
companies.

Safe Harbor

This news release contains forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. Certain important factors could cause results
to differ materially from those anticipated by some statements made herein. All
forward-looking statements involve risks and uncertainties. A number of factors that
could cause results to differ materially are discussed in our Annual Report on Form 10-K
for the year ended December 31, 2006, as well as in our quarterly reports on Form 10-Q
and Current Reports on Form 8-K. Among the factors that could cause results to differ
materially are the following: Enpath’s dependence upon a limited number of key customers
for its revenue; Enpath’s ability to successfully protect its intellectual property
against misappropriation or claims of infringement by third parties; the ability of
Enpath’s customers to successfully develop and market therapies that utilize the
Company’s advanced delivery systems; Enpath’s ability to effectively manufacture its
products, specifically steerable catheters, in anticipated required quantities; Enpath’s
ability to develop or acquire new products to increase its revenues; Enpath’s ability to
attract and retain key personnel; introduction of competitive products; government
regulatory matters; economic conditions; and Enpath’s ability to raise capital. In
addition to those risks, there are risks and uncertainties associated with the tender
offer that will made by Greatbatch, Inc. for Enpath’s common stock. Those risks include
risks that the transaction will not be consummated on the terms or timeline first
announced on Monday, April 30, 2007. Further information concerning those risks will be
included in the Company’s filings with the Securities and Exchange Commission in response
to the tender offer. All forward-looking statements of Enpath, whether written or oral,
and whether made by or on behalf of Enpath, are expressly qualified by these cautionary
statements. In addition, Enpath disclaims any obligation to update forward-looking
statements to reflect events or circumstances after the date hereof.

 

 

Enpath Medical, Inc.

Condensed Balance Sheets

	 	 	 	 	 	 	 	 	 
	 	 	Unaudited	 	 	 	 
	 	 	03/31/07	 	 	12/31/06	 
	Assets
	 	 	 	 	 	 	 	 
	Cash and cash equivalents
	 	$	904,457	 	 	$	523,483	 
	Inventory, receivables and prepaids
	 	 	12,714,350	 	 	 	11,177,186	 
	Other current assets
	 	 	253,791	 	 	 	313,686	 
	Property, plant and equipment, net
	 	 	9,913,975	 	 	 	5,900,115	 
	Goodwill
	 	 	9,487,975	 	 	 	9,487,975	 
	Intangible assets with finite lives and other
	 	 	5,833,118	 	 	 	5,990,466	 
	 
	 	 	 	 	 	 
	Total Assets
	 	$	39,107,666	 	 	$	33,392,911	 
	 
	 	 	 	 	 	 
	Liabilities & Shareholders’ Equity
	 	 	 	 	 	 	 	 
	Bank line of credit
	 	$	—	 	 	$	—	 
	Current liabilities
	 	 	5,176,017	 	 	 	4,477,198	 
	Long-term liabilities
	 	 	4,823,708	 	 	 	727,058	 
	Shareholders’ equity
	 	 	29,107,941	 	 	 	28,188,655	 
	 
	 	 	 	 	 	 
	Total Liabilities & Shareholders’ Equity
	 	$	39,107,666	 	 	$	33,392,911	 
	 
	 	 	 	 	 	 

Enpath Medical, Inc.

Statements of Operations (Unaudited)

	 	 	 	 	 	 	 	 	 
	 	 	Three Months Ended	 
	 	 	March 31, 2007	 	 	March 31, 2006	 
	Net sales
	 	$	10,104,517	 	 	$	9,422,689	 
	Cost of sales
	 	 	6,509,684	 	 	 	5,709,670	 
	 
	 	 	 	 	 	 
	Gross profit
	 	 	3,594,833	 	 	 	3,713,019	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Operating expenses:
	 	 	 	 	 	 	 	 
	Research and development
	 	 	949,799	 	 	 	1,203,088	 
	Selling, general and administrative
	 	 	2,148,767	 	 	 	1,459,409	 
	 
	 	 	 	 	 	 
	Total operating expenses
	 	 	3,098,566	 	 	 	2,662,497	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Operating income
	 	 	496,267	 	 	 	1,050,522	 
	 
	 	 	 	 	 	 	 	 
	Other income (expense):
	 	 	 	 	 	 	 	 
	Interest expense
	 	 	(43,191	)	 	 	(50,599	)
	Interest income
	 	 	233	 	 	 	231	 
	Other
	 	 	(7,921	)	 	 	3,798	 
	 
	 	 	 	 	 	 
	Total other income (expense)
	 	 	(50,879	)	 	 	(46,570	)
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Income before income taxes
	 	 	445,388	 	 	 	1,003,952	 
	Income tax expense
	 	 	115,356	 	 	 	351,383	 
	 
	 	 	 	 	 	 
	Net income
	 	$	330,032	 	 	$	652,569	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Net income per common share:
	 	 	 	 	 	 	 	 
	Basic
	 	$	0.05	 	 	$	0.11	 
	Diluted
	 	$	0.05	 	 	$	0.11	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Weighted average common and common equivalent shares
outstanding:
	 	 	 	 	 	 	 	 
	Basic
	 	 	6,336,515	 	 	 	6,104,568	 
	Diluted
	 	 	6,444,378	 	 	 	6,209,405

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