Cardica, Inc. Note Conversion Agreement
Exhibit 10.14
EXECUTION VERSION
Cardica, Inc.
This Note Conversion Agreement (this “Agreement”) is made and entered into as of
the 7th day of November, 2006, by and among Cardica, Inc., a Delaware corporation (the
“Company”), and Guidant Investment Corporation, a California corporation (the “Holder”).
Recitals
Whereas, the Holder holds 8.75% Notes, dated August 19, 2003 and February 25, 2004
from the Company in the principal amounts of $5,000,000 and $5,250,000, respectively (collectively,
the “Notes”);
Whereas, the Notes were issued pursuant to the terms of an Agreement dated August 19,
2003, and are secured by an Intellectual Property Security Agreement dated August 19, 2003, between
the Company and the Holder (the “Security Agreement”);
Whereas, as of the date hereof, the outstanding balance of the Notes, including
principal and accrued interest thereon, is $12,901,729.19;
Whereas, the Holder has agreed to convert a portion of the principal amount of the
Notes into shares of common stock of the Company (the “Common Stock”) on the terms and conditions
set forth in this Agreement, and after such conversion the Notes shall be cancelled; and
Whereas, the parties desire to consummate the transactions contemplated by this
Agreement on the date hereof (the “Closing”).
Agreement
Now, Therefore, in consideration of the mutual promises, covenants and agreements set
forth herein, the sufficiency of which the parties acknowledge, the parties hereby agree as
follows:
1. Conversion of Notes. Effective as of the Closing, and in full settlement
of the Company’s obligations under the Notes, the Company hereby agrees to issue to the Holder (a)
an aggregate of 1,432,550 shares of Common Stock (the “Shares”), (b) payment of $5,738,979.50 by
wire transfer of immediately available funds to an account specified in writing by Holder, and (c)
the Registration Rights Agreement in the form attached hereto as Exhibit A duly executed by
the Company. Immediately following the Closing, the Holder shall promptly deliver the original
Notes to the Company for cancellation; provided, however, that in the event that the Holder is
unable to produce the original Notes, the Holder will execute and deliver a lost note affidavit in
substantially a form approved by the Company. Notwithstanding the obligations of the Holder to
deliver the Notes for cancellation by the Company, the conversion and cancellation of the
Notes shall be effective as of the Closing regardless of whether the Notes are delivered for
cancellation by the Company.
2. Termination of Security Interests. Upon conversion of the Notes as set
forth above, the Holder agrees to terminate any and all security interests that the Holder has in
any of the assets or properties of the Company pursuant to the Notes and the Security Agreement.
The Holder hereby authorizes the Company to file upon the Closing any termination statements
necessary to effect such termination and the Holder further agrees to execute and deliver to the
Company any additional documents or instruments as the Company shall reasonably request to evidence
such termination.
3. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to the Holder as follows:
3.1 Corporate Power. The Company has all requisite corporate power and authority to execute
and deliver this Agreement, and to carry out and perform the provisions of this Agreement.
3.2 Authorization. All corporate action on the part of the Company, its officers, directors
and stockholders necessary for the authorization, execution and delivery of this Agreement and the
Registration Rights Agreement and the performance of all obligations of the Company hereunder has
been taken. This Agreement and the Registration Rights Agreement, when executed and delivered by
the Company, will constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms. Without limiting the generality of the foregoing, the
board of directors of the Company has taken all action so (i) that the Holder will not be
prohibited from, or require any subsequent approval or consent in connection with, entering into or
consummating a “business combination” with the Company as an “interested stockholder” or
“interested shareholder” (in each case as such terms are used in Section 203 of the Delaware
General Corporation Law) as a result of the execution of this Agreement or consummation of the
transactions contemplated hereby and (ii) that the rights granted to the Holder under the
Registration Rights Agreement may be granted to and will not conflict with the provisions of the
Amended and Restated Investor Rights Agreement dated August 19, 2003 between the Company and the
Investors named therein. Furthermore, the issuance of the shares of Common Stock upon conversion
of the Notes will not require approval by the Company’s stockholders under any rule or regulation
of The NASDAQ Stock Market.
3.3 Sufficient Shares. The number of authorized but unissued shares of Common Stock is
sufficient to permit conversion of the Notes pursuant to the terms of this Agreement. Upon the
issuance of the shares of Common Stock upon conversion of the Notes, such shares shall be duly and
validly issued, fully paid and nonassessable, and issued in compliance with all applicable
securities laws and shall not be issued in violation of any preemptive or similar right.
3.4 Compliance with Other Instruments. The Company is not in violation or default of any term
of its charter documents or of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any judgment, decree,
order or writ other than any such violation or default that would not have a material adverse
effect on the Company. The execution, delivery, and performance of and
compliance with this Agreement and the Registration Rights Agreement, and the issuance of the
shares of Common Stock pursuant hereto, will not result in any such material violation, or be in
material conflict with or constitute a default under any such term, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval material to the Company, its business, operations, assets or properties.
4. Representations, Warranties and Covenants of the Holder. The Holder
hereby represents and warrants to the Company as follows (provided that such representations and
warranties do not lessen or obviate the representations and warranties of the Company set forth in
this Agreement):
4.1 Corporate Power. The Holder has all requisite corporate power and authority to execute
and deliver this Agreement, and to carry out and perform the provisions of this Agreement.
4.2 Authorization. All corporate action on the part of the Holder, its officers, directors
and stockholders necessary for the authorization, execution and delivery of this Agreement and the
Registration Rights Agreement and the performance of all obligations of the Holder hereunder has
been taken. This Agreement and the Registration Rights Agreement, when executed and delivered by
the Holder, will constitute valid and binding obligations of the Holder, enforceable against the
Holder in accordance with their terms.
4.3 Investment Representations. The Holder understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”) and the Holder also
understands that the Shares are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon the Holder’s representations contained in the
Agreement. The Holder hereby represents and warrants as follows:
(a) Holder Bears Economic Risk. The Holder has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar to the Company so
that it is capable of evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Holder must bear the economic risk of this investment
indefinitely unless the Shares are registered pursuant to the Securities Act, or an exemption from
registration is available. The Holder also understands that there is no assurance that any
exemption from registration under the Securities Act will be available and that, even if available,
such exemption may not allow the Holder to transfer all or any portion of the Shares under the
circumstances, in the amounts or at the times the Holder might propose.
(b) Acquisition for Own Account. The Holder is acquiring the Shares for the Holder’s own
account for investment only, and not with a view towards their distribution.
(c) The Holder Can Protect Its Interest. The Holder represents that by reason of its, or of
its management’s, business or financial experience, the Holder has the capacity to protect its own
interests in connection with the transactions contemplated in this Agreement and the Registration
Rights Agreement.
(d) Accredited Investor. The Holder represents that it is an accredited investor within the
meaning of Regulation D under the Securities Act.
(e) Rule 144. The Holder acknowledges and agrees that the Shares, are “restricted securities”
as defined in Rule 144 promulgated under the Securities Act as in effect from time to time and must
be held indefinitely unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. The Holder has been advised or is aware of the
provisions of Rule 144, which permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other things: the availability
of certain current public information about the Company, the resale occurring following the
required holding period under Rule 144 and the number of shares being sold during any three-month
period not exceeding specified limitations.
(f) Residence. The office of the Holder in which its investment decision was made is located
at the address or addresses of the Holder set forth on the signature page to the Registration
Rights Agreement.
4.4 Transfer Restrictions. The Holder acknowledges and agrees that the Shares are subject to
restrictions on transfer as set forth in the Registration Rights Agreement.
5. Miscellaneous. This Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between California residents
entered into and performed entirely in California. The representations, warranties, covenants and
agreements of the parties hereunder shall survive the enforcement, amendment or waiver of this
Agreement. Except as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties hereto. In case any
provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
This Agreement may be executed in any number of counterparts, each of which shall be an original,
but all of which shall constitute one instrument.
[Remainder of Page Intentionally Left Blank]
In Witness Whereof, each of the parties hereto has executed this Note
Conversion Agreement as of the date first above written.
| Cardica, Inc. | Guidant Investment Corporation | |||||||||
By:
|
/s/ Xxxxxxx Xxxxxx | By: | /s/ Xxxxxxxx X. Xxxxx | |||||||
| Name: Xxxxxxx Xxxxxx, M.D., Ph.D. | Name: Xxxxxxxx X. Xxxxx | |||||||||
| Title: Chief Executive Officer | Title: Vice President — Legal and Secretary | |||||||||
