Attached files
Exhibit 10.10
| $1,500,000 | April 14, 2010 |
THIS SENIOR CONVERTIBLE PROMISSORY NOTE (“NOTE”) AND THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE OR OTHER SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, OR ASSIGNED EXCEPT (i)
PURSUANT TO REGISTRATIONS THEREOF UNDER SUCH LAWS, OR (ii) IN COMPLIANCE WITH APPLICABLE
SECURITIES LAWS WITHOUT SUCH REGISTRATIONS.
THIS NOTE IS BEING ISSUED PURSUANT TO A LOAN AND SECURITY AGREEMENT BETWEEN MAKER AND HOLDER DATED
AS OF APRIL 14, 2010 (THE “LOAN AGREEMENT”).
SENIOR CONVERTIBLE PROMISSORY NOTE
Cardiovascular Systems, Inc., a Delaware corporation (the “Maker”), for value
received, promises to pay, so long as a Conversion Event has not occurred prior to April 14, 2015,
to Partners for Growth III, L.P. (“Holder”) the principal sum of One Million Five Hundred
Thousand Dollars (the “Principal Amount”) on April 14, 2015 or, if earlier, immediately
upon Holder demand after the occurrence of an Event of Default under the Loan Agreement that is
continuing (the “Maturity Date”) as provided herein. Capitalized terms used but not
defined herein are used with the meanings given to them in the Loan Agreement. This Note is one of
several Notes contemplated to be issued under the Loan Agreement, differing only as to issue date,
Principal Amount, interest rate and Conversion Price. The terms of the Loan Agreement shall govern
this Note and are incorporated by reference herein.
1. Payments.
(a) The interest rate payable hereunder shall be the Prime Rate from time to time, plus 2.75%,
per annum, payable monthly on the basis set forth in Section 2 of the Schedule to the Loan
Agreement. Any accrued and unpaid interest on this Note will be due and payable on the day that
all principal is due and payable, whether on the Maturity Date, by acceleration, at the time of a
Conversion Event or otherwise.
(b) Payment shall be made in lawful tender of the United States in immediately available
funds, and shall be credited first to accrued interest then due and payable with the remainder
applied to principal. This Note may not be prepaid in whole or in part at any time prior to the
Maturity Date.
2. Ranking. This Note and all principal, interest and other amounts, if any, payable
hereunder shall rank senior in right of payment to all other Maker Indebtedness, except as
otherwise specified in the Loan Agreement.
3. Conversion.
(a) This Note may be converted into that number of shares of Common Stock (rounded down to the
nearest whole share) determined by dividing the Principal Amount (excluding interest) of this Note
by $5.43 (the “Conversion Price”), subject to adjustment below, at any time upon the
election of the Holder hereof (the “Holder Conversion”) or at the election of Maker upon a “Force
Conversion, as described in Section 1(c) of the Schedule to the Loan Agreement, all in accordance
with and subject to the terms and conditions of the Loan Agreement (each a “Conversion Event”).
(b) As soon as practicable after the occurrence of a Conversion Event, and in any event within
the time periods specified in Sections 1(b) and 1(c) of the Schedule to the Loan Agreement, Maker
at its expense will cause to be issued in the name of and delivered to Holder, a certificate or
certificates for the number of shares of Conversion Stock to which Holder shall be entitled on such
conversion. No fractional Conversion Stock shall be issued on conversion of the Note. If on
conversion of the Note a fraction of a share of Conversion Stock results, Maker will pay the cash
value of that fractional share based on the Conversion Price then in effect.
(c) From and after the occurrence of a Conversion Event, Maker shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect conversion of this Note and all other Notes. Maker
will not, by amendment of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, dividend or other distribution of cash or property, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be observed or
performed hereunder by Maker, but will at all times in good faith assist in the carrying out of all
the provisions hereof, and in the taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of Holder as set forth herein against impairment.
4. Conversion Adjustments.
(a) Adjustments. The Conversion Price shall be subject to adjustment from time to
time in accordance with this Section 4.
(b) Subdivisions, Combinations and Stock Dividends. If Maker shall at any time
subdivide by split-up or otherwise, its outstanding Common Stock into a greater number of shares,
or issue additional Common Stock as a dividend, bonus issue or otherwise with respect to any Common
Stock, the Conversion Price in effect immediately prior to such subdivision or share dividend or
bonus issue shall be proportionately reduced. Conversely, in case the outstanding Common Stock of
Maker shall be combined into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(c) Reclassification, Exchange, Substitutions, Etc. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number and/or class of the
securities issuable upon conversion of this Note, Holder shall be entitled to receive, upon
conversion of this Note, the number and kind of securities and property that Holder would have
received in exchange for the securities that would have been issued on conversion if this Note had
been converted immediately before such reclassification, exchange, substitution, or other event.
Maker or its successor shall promptly issue to Holder a certificate setting forth the number
and kind of such new securities or other property issuable upon exchange or exercise of this Note
as a result of such reclassification, exchange, substitution or other event that results in a
change of the number and/or class of securities issuable upon exchange or exercise of this Note.
The certificate shall provide for adjustments (as determined in good faith by Maker’s Board of
Directors) which shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 4 including, without limitation, adjustments to the Conversion Price. The
provisions of this Section 4(b) shall similarly apply to successive reclassifications, exchanges,
substitutions, or other similar events.
(d) Notices of Record Date, Etc. In the event that Maker shall:
(1) declare or propose to declare any dividend upon its Common Stock, whether payable in cash,
property, stock or other securities and whether or not a regular cash dividend, or
(2) offer for sale any additional shares of any class or series of Maker’s stock or
securities exchangeable for or convertible into such stock in any transaction that would give rise
(regardless of waivers thereof) to pre-emptive rights of any class or series of stockholders, or
(3) effect or approve any reclassification, exchange, substitution or recapitalization of the
capital stock of Maker, including any subdivision or combination of its outstanding capital stock,
or consolidation or merger of Maker with, or sale of all or substantially all of its assets to,
another corporation, or to liquidate, dissolve or wind up (including an assignment for the benefit
of creditors), or
(4) offer holders of registration rights the opportunity to participate in any public
offering of Maker’s securities,
then, in connection with such event, Maker shall give to Holder:
(i) at least ten (10) days prior written notice of the date on which the books of Maker shall
close or a record shall be taken for such a dividend or offer in respect of the matters referred to
in (1) or (2) above, or for determining rights to vote in respect of the matters referred to in (3)
above; and
(ii) in the case of the matters referred to in (3) above, at least ten (10) days prior written
notice of the date when the same shall take place. Such notice in accordance with the foregoing
clause (1) shall also specify, in the case of any such dividend, the date on which the holders of
capital stock shall be entitled thereto and the terms of such dividend, and such notice in
accordance with clause (2) shall also specify the date on which the holders of capital stock shall
be entitled to exchange their capital stock for securities or other property deliverable upon such
reorganization, reclassification, exchange, substitution, consolidation, merger or sale, as the
case may be, and the terms of such exchange. Each such written notice shall be given by first class
mail, postage prepaid, addressed to the holder of this Note at the address of Holder; and
(iii) in the case of the matter referred to in (4) above, the same notice as is given or
required to be given to the holders of such registration rights.
(e) Adjustment by Board of Directors. If any event occurs as to which, in the opinion
of the Board of Directors of Maker, the provisions of this Section 4 are not strictly applicable or
if strictly applicable would not fairly protect the rights of the Holder in accordance with the
essential intent and principles of such provisions, then the Board of Directors shall make an
adjustment in the application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights, but in no event shall any adjustment have the effect of
increasing the Conversion Price as otherwise determined pursuant to any of the provisions of this
Section 4, except in the case of a combination of shares of a type contemplated in Section 4(b) and
then in no event to an amount larger than the Conversion Price as adjusted pursuant to Section
4(b).
(f) Officers’ Statement as to Adjustments. Whenever the Conversion Price is required
to be adjusted as provided in Section 4, Maker shall forthwith file at each the Company’s principal
office with a copy to the Holder notice parties set forth in Section 7 hereof a statement, signed
by the Chief Executive Officer or Chief Financial Officer of Maker, showing in reasonable detail
the facts requiring such adjustment and the Conversion Price that will be effective after such
adjustment; provided, however, such statement shall not be required to the extent the information
requested in this Section 4.6 is available through Maker’s current reports filed with the
Securities and Exchange Commission. If at any time the information described in this Section 4.6 is
readily available through Maker’s reports filed with the Securities and Exchange Commission, Maker
shall not be required to provide a separate notice of adjustment to the Holder; provided, however,
if such information is not readily available through Maker’s current reports filed with the
Securities Exchange Commission and made public, Maker shall cause a notice setting forth any such
adjustments to be sent by mail, first class, postage prepaid, to the record Holder of this Note at
its notice address(es) appearing in Section 7.
(g) Issue of Securities other than Common Stock. In the event that at any time, as a
result of any adjustment made pursuant to Section 4, the Holder thereafter shall become entitled to
receive any securities of Maker, other than Common Stock, thereafter the number of such other
shares so receivable upon exchange of this Note shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 4.
5. Events of Default. An Event of Default shall be deemed to have occurred under this
Note if an Event of Default has occurred under the Loan Agreement or any other Loan Document (each,
an “Event of Default”)
6. No Offset Rights. Maker may not offset any amounts due or claimed to be due from
Holder to Maker against amounts due to Holder under this Note.
7. Series of Notes. This Note is one of a series of Notes of like tenor issued in an
original aggregate principal amount of up to the Credit Limit under the Loan Agreement (plus such
additional principal amounts of Notes that may be permitted to be issued as a result of Conversion
Events and subsequent issue of Notes in accordance with the Loan Agreement.
8. Costs and Expenses. Maker promises to pay all reasonable costs and expenses
incurred, including reasonable attorneys’ fees, incurred by Holder in connection with the
enforcement of, or collection of any amounts due under, this Note. Maker hereby waives notice of
default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all
other notices or demands relative to this instrument, except for notices to which Maker is
expressly entitled under this Note.
9. Successors and Assigns. This Note shall be binding upon, and shall inure to the
benefit of, Maker and Holder and their respective successors and assigns; provided, however, that
neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, in whole or in part, by Maker without the prior written consent of
Holder.
10. Modifications and Amendments; Reissuance of Note. This Note may only be modified,
amended, or terminated (other than by payment in full) by an agreement in writing signed by Maker
and Holder. No waiver of any term, covenant or provision of this Note shall be effective unless
given in writing by Holder. Upon receipt of evidence reasonably satisfactory to Maker of the loss,
theft, destruction, or mutilation of this Note and of an unsecured agreement of indemnity
reasonably satisfactory to Maker, and upon surrender or cancellation of this Note, if mutilated,
Maker will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed, or
mutilated Note.
11. Remedies Cumulative. Each and every right, power and remedy herein given to
Holder, or otherwise existing, shall be cumulative and not exclusive and be in addition to all
other rights, powers and remedies now or hereafter granted (including, without limitation, other
rights of set-off under applicable law) or otherwise existing. Each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised from time to time
and as often and in such order as may be deemed expedient by Holder.
12. Notices. All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed effectively given in the manner set forth in the Loan
Agreement, addressed as follows:
if to Holder, at
Partners for Growth III, L.P.
180 Pacific Avenue
San Francisco, California 94111
Attention: Chief Financial Officer
Fax: (415) 781-0510
180 Pacific Avenue
San Francisco, California 94111
Attention: Chief Financial Officer
Fax: (415) 781-0510
with a copy (not constituting notice) to
Greenspan Law Office
Attn: Benjamin Greenspan, Esq.
620 Laguna Road
Mill Valley, CA 94941
Attn: Benjamin Greenspan, Esq.
620 Laguna Road
Mill Valley, CA 94941
Fax: (415) 738-5371
Email: ben@greenspan-law.com
Email: ben@greenspan-law.com
or
if to Maker, at
Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, MN 55112
Attn: Larry Betterley
Fax: (651) 259-1696
Email: lbetterley@csi360.com
651 Campus Drive
St. Paul, MN 55112
Attn: Larry Betterley
Fax: (651) 259-1696
Email: lbetterley@csi360.com
with a copy (not constituting notice) to:
Fredrikson & Byron
200 6th Street South
Minneapolis, MN 55402
Attn: Bert Ranum
Fax: (612) 492-7077
Email: rranum@fredlaw.com
200 6th Street South
Minneapolis, MN 55402
Attn: Bert Ranum
Fax: (612) 492-7077
Email: rranum@fredlaw.com
or at such other address and facsimile number as Holder shall have furnished to Maker in accordance
with this Section 12.
13. Waiver. Holder shall not by any act (except by a written instrument in accordance
with Section 10 hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any default or Event of Default or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of Holder, any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege. A waiver by
Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Holder would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
14. Miscellaneous; Interpretation. Section 3.16, Section 8 and Exhibit D of the Loan
Agreement are expressly incorporated by reference herein. In the event of any direct conflict
between the terms of this Note and the terms of the Loan Agreement or any other Loan Document
referenced herein, except as to (i) the issue date of this Note, (ii) the Principal Amount of this
Note, (iii) the interest rate applicable to this Note (due to its determination as of the issue
date of a Note in accordance with Section 2 of the Schedule to the Loan Agreement, and (iv) the
Conversion Price of this Note (due to its determination as of the issue date of a Note under
Sections 1(b) and 1(c), as applicable, of the Schedule to the Loan Agreement), the terms of the
Loan Agreement and such other Loan Document shall control.
IN WITNESS WHEREOF, Maker has caused this Note to be signed on the date first set forth above.
| MAKER: | CARDIOVASCULAR SYSTEMS, INC. |
|||
| /s/ Laurence L. Betterley | ||||
| Name: | Laurence L. Betterley | |||
| Title: | CFO | |||
ACKNOWLEDGED AND AGREED
| HOLDER: | PARTNERS FOR GROWTH III, L.P. |
|||
| By | /s/ Lorraine Nield | |||
| Name: Lorraine Nield | ||||
| Title: Manager, Partners for Growth III, LLC Its General Partner |
||||