EXHIBIT 10.1
BRIDGE NOTE PURCHASE
AGREEMENT
This Agreement is made as of
December 31, 2004, by and among MedicalCV, Inc., a Minnesota
corporation (“ MDCV ”), and each investor who
becomes a signatory to this Agreement (each an “
Investor ” and collectively, the “
Investors ”).
AGREEMENT
SECTION 1 - PURCHASE AND SALE OF
NOTES
1.1
MDCV hereby agrees to issue and sell
to each Investor, and each Investor hereby agrees to purchase from
MDCV on the Closing Date (hereinafter defined) a Convertible
Promissory Note (each a “ Note ” and
collectively, the “ Notes ”), in the principal
amount set forth opposite such Investor’s name on Exhibit
A , and a five-year warrant for the purchase of the number of
shares of MDCV common stock set forth opposite such
Investor’s name on Exhibit A (each a “ Bridge
Warrant ” and collectively, the “ Bridge
Warrants ”). The Notes shall be in the form
attached as Exhibit B . The Bridge Warrants shall be
in the form attached as Exhibit C . Within 10 days of
the issuance of Next Shares (as defined herein), each Investor will
be required to elect one of the following two alternatives:
(1) convert the outstanding principal of, and accrued but unpaid
interest on, the Note into a number of Next Shares equal to (a) the
amount of the Note being converted divided by (b) 80% of the per
share sales price or per unit sales price, as applicable, of the
Next Shares (but not to exceed $1.49), and retain the Bridge
Warrant (“Alternative 1”), or (2) surrender the Note
and the Bridge Warrant to MDCV in exchange for the issuance of a
number of Next Shares and any accompanying warrants issuable in
connection with the Next Shares (the “Additional
Warrants”), equal to the amount of such securities that could
be purchased using the outstanding principal of, and accrued but
unpaid interest on, the Note (“Alternative 2”).
MDCV will provide each Investor with written notice as soon as
practicable following the issuance of Next Shares. If any
Investor fails to make his, her, or its election within 10 days of
the issuance of the Next Shares, such Investor will be deemed to
have elected Alternative 1. The Notes, the Next Shares
issuable upon conversion of the Notes, the Bridge Warrants, the
shares issuable upon exercise of the Bridge Warrants, the Next
Shares issuable upon exchange of the Notes, any Additional Warrants
issuable upon exchange of the Notes, and the shares issuable upon
exercise of any Additional Warrants are sometimes referred to
herein as “ Securities .” The term “
Next Shares ” mean the equity securities issuable by
MDCV in connection with MDCV’s next round of equity financing
subsequent to the date of this Agreement, subject to the terms and
conditions set forth in the Note.
1.2
The closing of the purchase of the
Notes and Bridge Warrants and delivery of the purchase price of the
Notes shall take place at the offices of MedicalCV, Inc., 9725
South Robert Trail, Inver Grove Heights, MN 55077, at 10:30 a.m. on
Friday, December 31, 2004 (the “Closing Date”).
At such closing, each Investor will deliver the purchase price to
MDCV and MDCV will deliver to each Investor an executed original of
the Note purchased hereunder and an executed original of the Bridge
Warrant purchased hereunder. All payments will be made in
United States currency and remittance to MDCV shall be by
cashier’s check or wire transfer.
SECTION 2 - REPRESENTATIONS AND
WARRANTIES OF MDCV
To induce the Investors to purchase
the Notes and Bridge Warrants hereunder, MDCV represents to each
Investor as follows:
2.1
Existence of Company
. MDCV is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Minnesota, and has the requisite corporate power and
authority to own its properties and to carry on its business in all
material respects as it is now being conducted. MDCV is duly
qualified or licensed as a foreign corporation in good standing in
each jurisdiction wherein the nature of its activities or of its
properties owned or leased makes such qualification or licensing
necessary and failure to be so qualified or licensed would have a
material adverse impact on its business.
2.2
Authority to Execute
. The execution, delivery and
performance by MDCV of this Agreement and each Note and Bridge
Warrant (collectively, the “ Loan Documents ”)
to which it is a party are within MDCV’ s corporate powers,
have been duly authorized by all necessary corporate action, do not
and will not conflict with any provision of law or of the charter
or by-laws of MDCV or, of any agreement or contractual restrictions
binding upon or affecting MDCV or any of its property, and need no
further shareholder or creditor consent.
2.3
Binding Obligation
. This Agreement is, and the
Notes and Bridge Warrants when delivered hereunder will be, legal,
valid, and binding obligations of MDCV enforceable against MDCV in
accordance with their respective terms.
2.4
Disclosure
. MDCV has delivered to each
Investor a Confidential Private Placement Memorandum, dated
December 21, 2004 (the “PPM”), which describes the
business of MDCV.
2.5
Defaults . MDCV is not in default in the payment of
principal or interest on any indebtedness and is not in default
under any instrument or agreement to which it is a party, and no
event has occurred and is continuing which, with or without the
lapse of time or the giving of notice, or both, constitutes or
would constitute an event of default under any such instrument or
agreement or under this Agreement.
2.6
Litigation
. No litigation or
governmental proceeding is pending or threatened against MDCV that
may, alone or together with all other such matters, have a
materially adverse effect on the financial condition, operations,
or prospects of MDCV, and no basis therefore exists.
2.7
Securities Laws
. Based in part upon the
representations and warranties contained in Section 3 hereof,
no consent, authorization, approval, permit or order of or filing
with any governmental or regulatory authority, other than a Current
Report on Form 8-K which will be filed with the U.S. Securities and
Exchange Commission within 4 business days of the Closing Date and
a Form D which will be filed with the U.S. Securities and Exchange
Commission within 15 days of the Closing Date, is required under
current laws and regulations in connection with the execution and
delivery of the Loan Documents or the offer, issuance, sale or
delivery of the Notes and Bridge Warrants. Under the
circumstances contemplated hereby, the offer, issuance, sale and
delivery of the Notes and Bridge Warrants will not under current
laws and regulations require compliance with the prospectus
delivery or registration requirements of the Securities Act of
1933, as amended (the ” Act ”).
SECTION 3 - REPRESENTATIONS OF
THE INVESTOR
3.1
Each Investor, severally and not
jointly, hereby represents to MDCV:
a)
Investor has full power and
authority to enter into this Agreement and this Agreement and each
other Loan Document to which it is a party constitutes a valid and
legally binding obligation of the Investor, enforceable in
accordance with its terms, subject, as to
enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization and
similar laws affecting creditors’ rights generally and to
general equitable principles.
b)
Investor has had the opportunity to
ask questions of, and receive answers from, executive officers of
MDCV concerning the terms and conditions of the investment and the
business and affairs of MDCV, and to obtain any additional
information necessary to verify such information as the Investor
considers necessary or advisable in order to form a decision
concerning an investment in MDCV. Investor also acknowledges
that he has received and has carefully reviewed the PPM.
c)
The Securities are being acquired
for investment for the Investor’s own account and not with
the view to, or for resale in connection with, any distribution or
public offering thereof. Investor understands that the
Securities have not been registered under the Act, or any state
securities laws, by reason of the contemplated issuance in a
transaction exempt from the registration requirements of the Act
and applicable state securities laws and that the reliance of MDCV
upon these exemptions is predicated in part upon these
representations by the Investor. Investor further understands
that the Securities may not be transferred or resold without
registration under the Act and any applicable state securities
laws, or an exemption from the requirements of the Act and
applicable state securities laws.
d)
Investor is able to bear the loss of
his investment in the Securities without any material adverse
effect on the Investor’s financial position or prospects, and
Investor has such knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks
of the investment to be made pursuant to this Agreement.
Without limiting the foregoing, Investor understands that the
Securities are highly speculative, involve a high degree of risk,
and should be purchased only by persons who can afford the loss of
their entire investment. The Investor has carefully
considered the risks described under the caption “Risk
Factors” in the PPM.
e)
Investor is (i) a natural person
whose individual net worth (assets less liabilities), or joint net
worth with his or her spouse, exceeds $1,000,000, or (ii) a natural
person whose individual income was in excess of $200,000, or whose
joint income with his or her spouse was in excess of $300,000, in
each of the two most recent years, and who has a reasonable
expectation of reaching the same income level for the current
year.
f)
This Agreement has been duly
authorized by all necessary action on the part of the Investor, has
been duly executed and delivered by the Investor, and is a valid
and binding agreement of the Investor.
g)
Investor is NOT subject to backup
withholding provisions of Section 3406(a)(i)(C) of the Internal
Revenue Code of 1986, as amended (note: you are subject to backup
withholding if (i) you fail to furnish your Social Security number
or taxpayer identification number herein; (ii) the Internal Revenue
Service notifies MDCV that you furnished an incorrect Social
Security number or taxpayer identification number, (iii) you are
notified that you are subject to backup withholding; or (iv) you
fail to certify that you are not subject to backup withholding or
fail to certify your Social Security number or taxpayer
identification number).
h)
It is understood that the
certificates evidencing the Securities may bear legends required by
applicable federal and state securities laws as well as the
following legend:
THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS.
SECTION 4 -
DEFAULTS
4.1
Events of Default
. Each of the following events
shall be an event of default (the ” Events of
Default ”) for purposes of this Agreement and the
Notes:
a)
Failure of MDCV to pay the principal
or interest on the Notes when due;
b)
Failure of MDCV to perform or
observe any covenant or agreement as required by the Loan Documents
(other than payment obligations) and continuation of such failure
for a period of 10 days following notice from one or more
Investors;
c)
MDCV shall generally not pay its
debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against MDCV seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, custodianship, protection, or relief of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, custodian
trustee, or other similar official for it or for any substantial
part of its property;
d)
The entry against MDCV of a final
judgment, decree or order for the payment of money in the excess of
$100,000 and the continuance of such judgment, decree or order
unsatisfied for a period of 30 days without a stay of execution;
or
e)
Any of the material representations
or covenants of MDCV made in this Agreement or other Loan Documents
are proven not to have been true and correct in any material
respect as of the date of this Agreement.
4.2
Rights and Remedies
. If any Event of Default
shall occur, the Investors holding Notes representing a majority of
the aggregate principal amount of all of the Notes may elect to
exercise any or all of the following rights and
remedies:
a)
Declare the Notes, all interest
thereon, and all other obligations under, or pursuant to, the Loan
Documents to be immediately due and payable, and upon such
declaration, such Notes, interest and other obligations shall
immediately be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are expressly
waived; and
b)
Exercise any and all other rights
and remedies available to the Investors at law and in
equity.
4.3
Notice of Defaults
. Within five days of the
occurrence or existence of an Event of Default, MDCV shall give
written notice thereof to each Investor.
4.4
Termination of Section
4 . This Section 4
will terminate upon repayment of all principal and accrued interest
on the Note or conversion or exchange of the Note in accordance
with its terms, whichever occurs earlier.
SECTION 5 – SECURITIES
REGISTRATION
MDCV will grant to Investors any
securities registration rights it grants to purchasers of the Next
Shares.
SECTION 6 -
MISCELLANEOUS
6.1
No Waiver; Cumulative
Remedies . No
failure or delay on the part of the Investors in exercising any
right or remedy under, or pursuant to, any Loan Document shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy or power preclude other or
further exercise thereof, or the exercise of any other right,
remedy or power. The remedies in the Loan Documents are
cumulative and are not exclusive of any remedies provided by
law.
6.2
Amendments and Waivers
. No amendment or waiver of
any provisions of any Loan Document shall be effective unless such
amendment or waiver is in writing signed by Investors holding Notes
representing a majority of the aggregate principal amount of all
Notes issued pursuant to this Agreement and such amendment or
waiver shall be effective only in the specific instance and for the
specific purpose for which it was given.
6.3
Notices, Etc
. All notices, requests,
consents and other communications hereunder to any party shall be
deemed to be sufficient if contained in a written instrument
delivered in person, sent by facsimile transmission to the fax
number set forth on the signature page hereof, or such other number
as may hereinafter be designated in writing by the recipient to the
sender, or duly sent by first class registered or certified mail,
return receipt requested, postage prepaid, addressed to such party
at the address set forth on the signature page hereof or such other
address as may hereafter be designated in writing by the addressee
to the addresser. All such notices, requests, consents and
communications shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the
case of facsimile transmission, on the date of transmission if sent
within normal business hours, otherwise on the following business
day, and (c) in the case of mailing, on the third day after the
posting thereof.
6.4
Governing Law
. All Loan Documents will be
governed by and construed in accordance with the laws of the State
of Minnesota, excluding that body of law relating to conflict of
laws.
6.5
Severability
. If any term in this
Agreement or other Loan Documents shall be held to be illegal or
unenforceable, the remaining portions of this Agreement or other
Loan Documents, as the case may be, shall not be affected, and this
Agreement or other Loan Documents, as the case may be, shall be
construed and enforced as if this Agreement or other Loan
Documents, as the case may be, did not contain the term held to be
illegal or unenforceable.
6.6
Binding Effect;
Assignment . All
Loan Documents shall be binding upon and inure to the benefit of
MDCV and the Investor and their respective successors and
assigns. MDCV may not assign its rights or interest under the
Loan Documents without the prior written consent of the
Investors.
6.7
Survival of Warranties
. Except as otherwise noted in
this Agreement, the representations and warranties of contained in
or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement.
The undersigned hereby agrees to be
bound by the terms and conditions of this Agreement.
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MEDICALCV, INC.
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By John H. Jungbauer
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Its Vice President, Finance and
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Chief Financial Officer
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Address: 9725 South Robert
Trail
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Inver Grove Heights, MN 55077
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Phone:
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(651) 452-3000
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Fax:
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(651) 452-4948
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COUNTERPART SIGNATURE
PAGE
TO
NOTE PURCHASE
AGREEMENT
The undersigned hereby agrees to be
bound by the terms and conditions of this Agreement and
acknowledges that the other parties listed on Exhibit A have
executed this Agreement.
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INVESTOR
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By:
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Name:
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Mailing Address:
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Residence Address:
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Phone:
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Fax:
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SSN:
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EXHIBIT A
TO
NOTE PURCHASE
AGREEMENT
SCHEDULE OF NOTE
PURCHASERS
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Name and Address of
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Principal Amount of
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Shares Purchasable
upon
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Note Pu
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