Exhibit 10.14
EXECUTION VERSION
Cardica, Inc.
Note Conversion Agreement
     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/ Bernard Hausen       By:   /s/ Lawrence J. Knopf    
 
                    Name: Bernard Hausen, M.D., Ph.D.       Name: Lawrence J.
Knopf     Title:   Chief Executive Officer       Title: Vice President — Legal
and Secretary