AMENDMENT NO. 2 TO
SUBORDINATED CONVERTIBLE NOTE AGREEMENT
This AMENDMENT
NO. 2 TO SUBORDINATED CONVERTIBLE NOTE AGREEMENT (this “
Amendment ”) is dated as of March 30, 2007 and
entered into by and between Cardica, Inc., a Delaware corporation
(“ Company ”), and Century Medical, Inc.
(“ Century ”). Capitalized terms used herein
without definition shall have the same meanings herein as set forth
in the Note Agreement (as defined below).
WHEREAS,
the Company and Century have entered into that certain Convertible
Note Agreement dated as of June 16, 2003, as amended by
Amendment No. 1 to Subordinated Convertible Note Agreement
dated August 6, 2003 (collectively, the “ Note
Agreement ”);
WHEREAS,
Pursuant to the terms of the Note Agreement and the Note issued
thereunder, the Company has borrowed from Century $3,000,000.00
which is scheduled to mature on June 17, 2008;
WHEREAS,
Century has not exercised its right under the Note Agreement to
convert the Note into common shares of the Company, and such right
has expired according to its terms;
WHEREAS,
the Company has requested an extension of the Maturity Date of the
Note to allow the Company to repay the Loan in installments through
June 17, 2010;
WHEREAS,
the Company and Century desire to amend the Note Agreement in
accordance with the terms hereof to (i) extend the Maturity
Date of the Note, (ii) increase the interest rate for the
period from June 18, 2008 until the Maturity Date,
(iii) conform the Note Agreement to reflect the extinguishment
of Senior Indebtedness (as defined therein) and the expiration of
Century’s right to convert the Note, and (iv) make
certain conforming and clarifying changes and other amendments as
set forth below;
WHEREAS,
Company and Century desire to amend that certain Distribution
Agreement dated as of June 16, 2003, by entering into that
certain First Amendment to Distribution Agreement of even date
herewith (collectively, the “ Amended Distribution
Agreement ”);
WHEREAS,
Upon the execution of this Amendment and the First Amendment to
Distribution Agreement, Company shall issue to Century an amended
and restated note pursuant to this Amendment, on the terms and
conditions set forth herein all as more fully described below;
and
WHEREAS,
the Company and Century desire to make certain representations,
warranties, covenants and agreements in connection with entering
into this Amendment and desire to prescribe certain conditions
precedent to this Amendment;
NOW,
THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree
as follows:
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1.
AMENDMENTS TO THE NOTE AGREEMENT
1.1 Amendments to Article 1: Description of
Note and Commitment .
A. Amendment
to Section 1.2(a). Section 1.2(a) of the Note Agreement
is hereby deleted in its entirety and replaced with the following
provision:
“(a)
Interest. The Loan shall bear interest from the Disbursement
Date (as defined in Section 2.1) on the unpaid principal
amount thereof until the earlier to occur of an Event of Default or
the Maturity Date, at a rate per annum equal to: (i) five
percent (5%) from the Disbursement Date until June 17, 2008;
and (ii) six percent (6%) from June 18,
2008.”
B. Amendment
to Section 1.4. Section 1.4 of the Note Agreement is
hereby amended by deleting subsection (b) therein in its
entirety and replacing the following therefor:
“(b)
Loan Payment. The Company shall repay the outstanding
principal amount of the Loan in two installments in the amounts and
on the Repayment Dates set forth on the attached Principal
Repayment Schedule, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived;
provided, however , that in the event of any prepayment of
principal pursuant to Section 1.4(c) below, (i) the Principal
Repayment Schedule shall be revised to reflect such prepayment,
with such prepayment being applied first, to principal amounts due
on the later Repayment Date, and second, to principal amounts due
on the earlier Repayment Date, and (ii) corresponding changes
shall be made to the installments set forth on Schedule I to
the Note.”
C. Amendment
to Section 1.4. Section 1.4(d) of the Note Agreement is
hereby deleted in its entirety.
D. Amendment
to Section 1.6. Section 1.6 of the Note Agreement is
hereby amended by deleting such section in its entirety and
replacing the following therefor:
“ 1.6
Note. The Loan made by Century pursuant to this Agreement shall
be evidenced by a Note, in the form attached hereto as
Exhibit B , or several Notes, resulting from a
Permitted Transfer, as described in Section 9.2 (the “
Note ” or “ Notes ”), and shall be
payable to Century on the relevant Repayment Date or an Event of
Default of the Loan. The Company hereby authorizes Century or the
Registered Holder to indicate upon a schedule attached to the Note
all payments of principal and interest thereon. Absent manifest
error, such notations shall be presumptive as to the aggregate
unpaid principal amount of the Loan, and interest due thereon, but
any failure by Century or the Registered Holder to make such
notations or the inaccuracy or incompleteness of any such notations
shall not affect the obligations of the Company hereunder or under
the Note.”
E. Amendment
to Exhibit B. Exhibit B of the Note
Agreement is hereby deleted and replaced in its entirety by a new
Exhibit B attached hereto.
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1.2 Amendments to Article 2: Interpretation of
Agreement; Definitions.
A. Amendment
to Section 2.1. Section 2.1 of the Note Agreement is
hereby amended by amending the definition of “Maturity
Date” by replacing “the date five (5) years from
the Disbursement Date of the Loan” with “June 17,
2010.”
B. Additions
to Section 2.1. Section 2.1 of the Note Agreement is
hereby amended by adding thereto the following definition:
“Repayment Date” shall mean the dates set forth on the
Principal Repayment Schedule attached hereto.
C. Deletions
to Section 2.1. Section 2.1 of the Note Agreement is
hereby amended by deleting the definitions of “Conversion
Price” and “Senior Indebtedness”.
D. Amendment
to Section 2.4. Section 2.4 of the Note Agreement is
hereby amended by deleting such section in its entirety and
replacing the following therefor:
“ 2.4
Legal Holidays. In any case where any Interest Payment Date or
Stated Maturity of the Note shall not be a Business Day, then
(notwithstanding any other provision of this Agreement or of the
Note) payment of interest or principal, as the case may be, shall
be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, or at the Stated
Maturity.”
1.3 Amendments to Article 8: Subordination and
Security Interest of Century.
A. Amendment to
Article 8. Article 8 of the Note Agreement is hereby
amended by deleting the following phrase:
“The
Indebtedness evidenced by the Note is hereby expressly subordinated
to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of the Senior
Indebtedness.”
B. Deletions to
Article 8. Sections 8.1, 8.2, 8.3 and 8.4 and 8.5 of the
Note Agreement are hereby deleted in their entirety and the
remaining Sections renumbered accordingly.
C. Amendment to
Section 8.1. Section 8.1 of the Note Agreement is hereby
amended by deleting such section in its entirety and replacing the
following therefor:
“ 8.1
No Subordination to Future Debt. During the term of this
Agreement and until the performance of all obligations to Century,
the Company shall not incur or permit to exist any Indebtedness
unless (i) approved by Century in its sole discretion in
writing, or (ii) the holder’s right to repayment of such
Indebtedness, the priority of any Lien securing the same, and the
rights of the holder thereof to enforce remedies against the
Company following default have been made subordinate to the Liens
of Century and the prior payment of the obligations to Century
under the loan documents pursuant to a written subordination
agreement satisfactory
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to Century,
which agreement may provide that regularly scheduled payments of
accrued interest on such subordinated Indebtedness may be paid by
the Company and retained by the holder so long as no Event of
Default has occurred.”
D. Amendment to
Section 8.2. Section 8.2 of the Note Agreement is hereby
amended by deleting such section in its entirety and replacing the
following therefor:
“ 8.2
Security Interest. To secure the prompt payment of the Loan
when amounts thereunder are due and payable, the Company hereby
grants a continuing security interest to Century in all personal
property and assets of the Company, including without limitation,
all of the Company’s right, title and interest in and to all
equipment, general intangibles, intellectual property, inventory,
investment property, receivables, fixtures, deposit accounts and
other goods and personal property, whether tangible or intangible,
whether now owned or hereafter acquired and wherever located, all
proceeds of each of the foregoing and all accessions to,
substitutions and replacements f
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