Apix International Limited
--------------------------
Loan Facility Term Sheet
Loan Roll-Over and Facility Increase
Borrower:
---------
Cardima Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn:Xxxx Xxxx
Lender:
-------
Apix International Limited
Attn: Xx. Xxxxxx Xxx
Attn: Xx. Xxxxxx Xxxxxx
Facility:
---------
$3,000,000.00 (provided to date and fully drawn down)
$660,000.00 New Facility
Current Status:
---------------
Cardima Inc. (the "Borrower") has entered into a Loan Agreement and related
security agreements with Apix International Limited (the "Lender" and/or
"Apix"). The Borrower has borrowed US$3 million under this Loan Agreement (the
"Loan). The Loan and the related Fees, Interest and Expenses will mature on
February 28, 2006 when an amount in excess of US$4,100,000 shall be due and
owning to the Lender.
The Borrower has indicated to the Lender that it will be unable to repay the
Loan or any part thereof owing on the Maturity Date. The Borrower has requested
that the Lender extend the maturity of the existing Loan and provide an
additional loan facility.
The purpose of this Term Sheet is to set forth terms for the roll-over of the
existing loan facility and the grant of an additional loan facility to the
Borrower.
New Term/ Maturity Date:
------------------------
Subject to the terms set forth herein the existing loan facility of US $3
million which matures on February 28 will have its maturity date extended to May
18, 2006 (the "Maturity Date"). Interest will
continue to be calculated on the entire principal amount advanced from time to
time on the same terms. The Fees and Warrants granted will be adjusted as set
forth herein.
Fee Adjustment:
---------------
In recognition of the inability of the Borrower to repay the Loan and Fees as
due and owing and in consideration of the extra-ordinary risk the Lender is
undertaking in extending the facility the related fees shall be adjusted as
follows:
The Facility Fee for originating the loan of $60,000.00 shall be increased to
$80,000.00.
The Facility Fee is partial compensation to the Lender for the economic benefit
provided to the Borrower. The Facility Fee is a material inducement for the
Lender's willingness to extend the loan facility to the Borrower and such fee is
not intended to reimburse the Lender for any costs or expenses associated with
or incurred by the Lender in connection with the loan transaction.
The Exit Fee for providing the loan facility at a critical time and now for
extending the loan facility at a critical time and for terminating the loan (on
or before the Maturity Date) and releasing the security shall be increased from
$900,000 to $1,300,000.00.
The Exit Fee is additional consideration to the Lender for the economic benefit
provided to the Borrower. The Exit Fee is a material inducement for the Lender's
willingness to extend the loan facility to the Borrower and to grant an
extension of the Maturity Date to May 18, 2006.
The Facility Fee and Exit Fee shall be payable on or before the new maturity
date of May 18, 2006.
The Lender may elect to accept cash or shares of the company, or a combination
of cash and shares in any proportion, at its sole discretion, for satisfaction
of both the Facility Fee and Exit Fee. If the Lender elects to receive shares
for all, or a portion of the fees, the number of shares shall be calculated by
taking the amount of fees and using a price of six-cents per share and dividing
the fee amount by six-cents. This would mean if the entire $1,380,000 were to be
paid for in shares the Lender would receive 23 Million shares of the Borrower.
Any shares issued in satisfaction of fees shall be registered by the Borrower as
provided below.
The Facility Fee and Exit Fee shall be fully payable on the Maturity Date, 18
May 2006 once this Term Sheet has been executed by the Borrower and the Lender
irrespective of the actual amount of funds utilized by the Borrower under the
facility or early or pre-payment by the Borrower.
Loan Principal Convertible:
----------------------------
The Borrower hereby grants the Lender the right to convert all or any part of
the principal amount advanced under the original loan facility and all or any
part of the principal amounts advanced under this new extended loan facility
into common shares of the Borrower on the same terms as the convertibility of
the Fees. The amount of principal elected to be converted by the Borrower shall
be converted into common shares of the Borrower using a price of six-cents per
share and dividing the principal amount elected to be converted by six-cents. On
this basis if the Lender elected to convert $1.2 million of principal into
common shares it would receive 20 million common shares.
New Warrant & Price Adjustment:
-------------------------------
The Borrower is currently obligated to deliver to the Lender a Warrant for 30
million common shares with an exercise price of ten-cents ($0.10). The Borrower
hereby agrees to adjust the exercise price of this existing warrant to six-cents
($0.06) with all other terms to remain the same.
Whereas the extension of the Maturity Date of this loan is critical for the
survival of the Borrower and the Borrower would be unable to continue to operate
without this extension and whereas the Lender has taken on extraordinary risk in
making the loan and extending the loan Maturity Date the Borrower hereby offers
and the Lender accepts as an additional material inducement for the Lender to
extend the Maturity Date and to continue to provide the loan facility and as
additional consideration a Warrant to purchase the capital stock ("Shares") of
the Borrower on the following terms:
Number of Shares: 20 Million (20,000,000)
Strike Price: $0.06
Term: The Warrant (the "March 8 Warrant") shall be delivered within 14 days
from the date the Term Sheet is executed and may be exercised commencing on
March 8, 2006 and shall be valid for a term of ten (10) years from March 8,
2006.
Denominations:
--------------
The warrant shall be issued in amounts divisible by units of 500,000 shares or
such lesser amount as is required to round out the total and shall be
exercisable in whole or in part at any time at the sole discretion of the
holder. In the event a warrant is partially exercised the Borrower shall deliver
a warrant for the unexercised balance in the same form within 15 days.
Registration Rights:
--------------------
Xxxxxxxx agrees to cause the Shares issuable or issued to the Lender in
connection with the satisfaction of the Fees, Interest payable, or Principal
amounts of the loan or in connection with the exercise of the Warrant to be
registered under the Securities Act on an effective and current registration on
Form S-1 (the "Registration Statement") by filing a registration statement with
the SEC as soon as reasonably practicable after the date of issuing this
warrant, but in any event no later than 5:00 pm Eastern Time on May 31, 2006
(the "Outside Registration Date") shall cause the Registration Statement to be
declared effective; provided however, the Outside Registration Date shall be
extended for delays beyond Borrowers controls but only to the extent the
Borrower has promptly responded to all requests, requirements and orders of the
SEC and/or such government agencies with jurisdiction over such Registration
Statement. Borrower shall keep the Registration Statement effective and current
and shall obtain and maintain in full force and effect all related
qualifications, registrations or other compliances that may be necessary under
the laws of any applicable jurisdiction, including, without limitation, state
securities or "blue sky" laws, until such time as all of the shares issued for
fees or under the warrant have been sold or otherwise disposed of and the
warrant has expired.
Availability of New Facility:
-----------------------------
First Draw Down:
$200,000.00 Bridge Loan advanced immediately upon signing of this Term Sheet.
Second Draw Down:
$220,000.00 on or after March 3, 2006 (the "Second Draw Down") subject to an
amended loan agreement being executed in accordance with the terms of this Term
Sheet and subject to the sole and absolute discretion of the Lender.
Third Draw Down:
$240,000 on or after March 22, 2006 (the "Third Draw Down") is subject to the
sole and absolute discretion of the Lender.
The "Second Draw Down" and "Third Draw Down" loan advances detailed above shall
be provided at the Lenders sole and absolute discretion. The Lender shall have
no obligation to act reasonably or otherwise in exercising its discretion and
may elect to terminate further loan advances for any reason whatsoever or for no
reason.
The Lender at its sole and absolute discretion may elect to terminate the loan
facility at any time on or after March 28, 2006 and all amounts then outstanding
including principal, interest, fees and expenses shall become immediately due
and owing.
New Facility Fees:
------------------
A. First Draw Down
For the first $200,000 loan of the new facility the fees and warrants shall be
increased as follows:
Additional Exit Fee: $80,000.00
Additional Warrants: 3,800,000 on the same date and terms as provided for above
for the March 8 Warrant.
B. Second Draw Down
For the second $220,000 loan of the new facility the Fees and Warrants shall be
increased as follows:
Additional Exit Fee: $80,000.00
Additional Warrants: 3,800,000 on the same date and terms as provided for above
for the March 8 Warrant.
C. Third Draw Down
For the third $240,000 loan of the new facility the Fees and Warrants shall be
increased as follows:
Additional Exit Fee: $100,000.00
Additional Warrants: 4,200,000 on the same date and terms as provided for above
for the March 8 Warrant.
Accordingly if all three drawn downs are advanced to the Borrower then the Exit
Fee will increase by an amount of $260,000.00 and the Warrants will increase by
an amount of 11,800,000.
Repayment Date:
---------------
It is the obligation of the Borrower to repay the Loan and all outstanding
interest and Fees in full on or before May 18, 2006.
Closing:
--------
The Closing Date shall be as soon as practical following the execution of this
Term Sheet subject to the absolute discretion of the Lender. The Lender accepts
no obligation whatsoever to extend the loan or to advance any funds to the
Borrower until both the Borrower and the Lender have agreed to and executed all
of the documents and agreements contemplated herein, namely, the Term Sheet; the
Amended Loan Agreement; the Intellectual Property Security Agreement; the
Warrant; and all additional documents and steps contemplated and referred to
therein required to be delivered on Closing.
Entering into the Term Sheet and advancing further funds shall not obligate the
Lender to advance any additional funds unless the Borrower shall complete and
execute the documents contemplated on Closing including the Final Term Sheet,
the Amended Loan Agreement and any other documents reasonably required by the
Lender to bring the terms hereof into effect.
Interest Rate:
--------------
10% per annum calculated with simple interest on the outstanding balance.
Interest accrued during the loan term shall be payable in full on or before the
Maturity Date. The Lender may elect, at the Lender's sole and absolute
discretion, to accept shares of the Borrower in satisfaction of the outstanding
interest accrued and owing on the Maturity Date. In the event it elects to
accept shares, in whole or in part, in proportions it shall determine at the
Lender's sole discretion, then the number of shares shall be determined by
dividing the amount of interest to be satisfied with shares by six-cents ($0.06)
per share to determine the total number of shares to be issued. Accordingly,
$12,000.00 of interest would require 200,000 shares to be issued for payment.
The conversion rate of six-cents shall apply to all interest accrued including
the interest in respect of the initial loan facility.
Authorized Share Availability
-----------------------------
The exercise by the Lender of the right to convert Fees, Interest or Principal
into shares of the Borrower shall be subject to the availability, in each
instance, of sufficient authorized shares in the share capital of the Borrower
being available for this purpose. In the event the Lender wishes to convert then
it shall be entitled to convert until all authorized shares have been utilized.
Any portion of Fees, Interest or Principal not capable of conversion shall be
deferred for a period of 120 days. During the period of deferral the Lender can
elect (at any time) to either await an increase in capital by the company or to
accept a two-year warrant in an equal number of shares at the same exercise
price (the exercise of which shall be subject to an increase in the authorized
capital) and cash payment. In the event the Lender elects to await an increase
in the authorized capital and such increase cannot occur for any reason within 6
months from the election then the Lender may accept cash payment together with
the warrant for this unconverted portion.
Term-Maturity Date:
-------------------
The loan shall be repayable, in full, together with interest thereon, Facilities
Fees, and Exit Fee and any other amounts owing on May 18, 2006.
Deposit Account
---------------
Control:
--------
Lender and Xxxxxxxx shall enter into a "deposit account control agreement" on
commercially reasonable terms in which all the Borrower's accounts with any
financial institution shall be subject to the Lender's right, in the event of
Xxxxxxxx's default under the terms of the Loan Agreement, to direct such
institution to restrict the use of such accounts and to turn over the proceeds
from such accounts to Lender.
At Lender's election and sole discretion, upon seven (7) days written notice
following the event of Xxxxxxxx's default under the terms of the Loan Agreement,
Borrower shall direct all accounts receivable payments and any payments due to
the Borrower whatsoever to be paid to an account controlled by the Lender.
Reporting:
----------
The Borrower shall keep the Lender well informed of all material information
that can affect the Borrower's financial status, the ability to repay the loan
on time or at all and its general business prospects for continuing operations.
In addition to keeping the Lender well informed and current on all material
information, the Borrower will specifically provide the following:
1. Accounts Receivable and Payables monthly.
2. Exceptional material events of any kind, as soon as practicable by
phone and email, but not more than 12 hours.
3. Company prepared financial statements monthly, within fifteen (15)
days of month end.
4. Bank statements to be faxed or emailed immediately upon receipt or the
Borrower may provide the Lender on-line "view only" access to such
accounts.
5. Year end financial statements and tax returns within 90 days of FYE.
6. Legal documents or demands served on the Borrower, liens or claims
filed in respect of the Borrower's assets, immediately by fax or email
with phone confirmation to follow.
Collateral:
-----------
As security for all the Borrower's obligations under the Loan Agreement and
related documents the Borrower shall grand to the Lender a first priority
security interest in all of the Borrower's assets now owned or hereafter
acquired (hereinafter referred to collectively as, the "Collateral"), including,
but not limited to: bank accounts, certificates of deposit, investment vehicles
or accounts, cash, accounts receivable, instruments, chattel, paper, and other
general intangibles, real estate, leases, leasehold improvements, inventory,
machinery, equipment, furniture, fixtures, tools, copyrights, patents, licenses,
trademarks, trade names, and any and all other forms of intellectual property
(all intellectual property being collectively referred to as "IP") owned or
licensed by Borrower. The recordation of a UCC- Financing Statement (and Deed of
Trust, if applicable) evidencing Xxxxxx's security interest in the Collateral
together with all other documents necessary to perfect Xxxxxx's security
interest in Xxxxxxxx's IP shall be required before funding.
Notwithstanding the foregoing, the Collateral shall exclude any equipment
subject to existing equipment leases or motor vehicles leases or equipment lines
of credit in place prior to the Closing and such other equipment or motor
vehicles subsequently acquired under such facilities.
The Borrower warrants and represents that at the time of the execution of this
Term Sheet there are no liens or claims against the Borrower's intellectual
property other than the claims made by Agility which shall be discharged
immediately with the proceeds of the Bridge Loan hereunder.
Prepayment:
-----------
Xxxxxxxx may pay off the entire loan together with the fees and interest due and
owing without penalty. All payments will be applied first against all
obligations under the Loan Agreement other than interest and principal, then in
satisfaction of all accrued and unpaid interest through the date of such payment
and then against principal.
The Borrower shall give the Lender not less than ten (10) days advance written
notice of the intention to prepay the loan and shall allow the Lender to elect
to receive cash or shares for any portion of the obligations for which the
Lender shall be entitled hereunder to elect shares.
Other Conditions:
-----------------
1. The sale of any assets of the company in excess of US$20,000 in value
shall be subject to the approval of the Lender and the Lender shall be
given 14 days notice of any proposed sale to consider the commercial
fairness of the terms.
2. The Borrower shall not undertake any other form of loan or equity
financing without the express written consent of the Lender which
shall not be unreasonably withheld. The Borrower may enter into
discussions regarding loan or equity financing but shall keep the
Lender informed of such discussions.
3. The Borrower shall inform the Lender of any proposed issuance of
shares or granting of options.
4. No payments shall be made to the Directors or Senior Officers of the
Borrower other than those expressly approved under the loan budget or
payments for the reimbursement of incidental expenses related to
company authorized travel or the ordinary conduct of the Borrower's
business without the express written consent of the Lender.
Debt Subordination:
----------------------
Any and all loans or other obligations of the Borrower shall be subordinated to
interest of the Lender excepting there from only Borrower's obligations under
equipment leases existing prior to the date of the Closing, provided such
facilities are only secured by such equipment or related software and were
undertaken in the normal course of business.
The Borrower hereby warrants and represents that it currently has no outstanding
loans except the amounts owing to Agility. The amounts owing and claimed by
Agility from the Borrower have been fully disclosed to the Lender.
The Lender further acknowledges that its rights may be subject to the statutory
legal rights of employees to compensation for termination as provided for by
law.
Full Repayment::
----------------
The outstanding principal balance, all accrued interest unpaid and all other
amounts due and owing under the terms of the Loan Agreement shall be immediately
due and payable in full on or before the Maturity Date of May 18.
TIME IS OF THE ESSENCE WITH RESPECT TO ANY PAYMENT DUE HEREUNDER. The Borrower
shall be in immediate default hereunder if any payment is not made in a timely
manner, without any right to cure unless such right to cure is granted by the
Lender in each instance, which consent shall be in the sole discretion of the
Lender and may be withheld for any reason or for no reason whatsoever.
The Lender is not in the ordinary business of extending loans to distressed
companies and it is agreed and acknowledged by the Borrower that the Lender
shall suffer substantial and material harm if the full amounts owing under the
terms of the Loan Agreement and related documents are not paid in full on or
before May 18, 2006.
The Borrower shall give the Lender not less than ten (10) full days written
notice prior to its intention to repay the amounts owing to the Lender in full
or in part and shall allow the Lender to elect during such 10 day period what
amounts shall be repaid in cash and which amounts the Lender shall elect to
accept payment for in shares. Accordingly if payment is to be made by the
Borrower on 18 May, 2006, written notice of such intention shall be issued by
the Borrower not later than 7 May, 2006.
Notwithstanding the Maturity Date, in the event the Borrower effects and the
Lender consent to:
1. a sale of the Borrower's surgical rights;
2. a sale of other assets for proceeds in excess of $1,000,000;
3. a new loan facility;
4. an equity financing with proceeds in excess of $1,000,000;
5. a sale of the entire company or EP rights;
Then all obligations under the Loan Agreement shall become immediately due and
payable in full (including all accrued interest through to the date of repayment
and such other amounts due and owing) and the loan facility shall be terminated
(the above events being referred to as a "Triggering Event").
Upon the occurrence of a Triggering Event, Lender shall be entitled to one
hundred percent (100%) of the proceeds of such transaction(s) after deducting
the reasonable non-operating out-of-pocket costs of such transaction until such
time as the loan facility has been indefeasibly repaid in full (including,
without limitation, all principal, accrued interest thereon, fees and other
amounts due the Lender). In the event the consideration payable to Borrower in
connection with such transaction(s) is other than cash in an amount sufficient
to indefeasibly satisfy all of the Borrower's obligations under the loan
facility, Lender shall be entitled to receive, in addition to such cash (or, at
Lender's election, unrestricted, publicly tradable marketable securities,
provided such securities are traded on a major public exchange and in regular
daily volume sufficient to allow immediate liquidation thereof without
negatively impacting the value of such non-cash consideration (after deducting
the reasonable non-operating out-of-pocket costs of sale) until full repayment.
In the event the Lender elects to receive such unrestricted, publicly tradable
marketable securities, Lender shall credit the then outstanding balance under
the loan facility, including without limitation, all accrued interest due
thereon, fees and other amounts payable to the Lender, with the fair market
value of such securities (based on the average closing price per share or unit
for the five (5) trading days immediately preceding the date the Lender receives
such securities. In the event the Borrower receives non-cash consideration in
connection with such transaction, Borrower shall sell, as soon as reasonably
practical, such non-cash consideration in a commercially reasonable manner in
order to maximize the proceeds of such sale until all amounts owing to the
Lender have been indefeasibly paid in full.
Event of Dissolution:
---------------------
Prior to the full repayment of the Borrower's obligations under the Loan
Agreement and related documents, upon the occurrence of any Event of Default (as
such term is defined in the various loan documents), including without
limitation;
1. Any action (voluntary or involuntary) to liquidate, dissolve and/or
wind down the business of Borrower; or
2. any action to suspend trading with respect to the Borrower's
securities by the Securities Exchange Commission or any other State or
Federal governmental agency; or
3. A legal demand being made on the company by any creditor or alleged
creditor demanding an amount of $40,000 or greater;
4. The FDA issuing a rejection of the Borrower's continued efforts for
approval of the EP catheter AF treatment device currently subject of
the FDA dispute resolution process or any indication from the FDA that
it has terminated the dispute resolution process without granting an
approval letter for the device;
Then all amounts due and owing by the Borrower to the Lender shall become
immediately due and payable, including without limitation, all amounts of
principal, interest accrued to the date of payment, fees and other amounts as
may be due and owing under the Loan Agreement and together with any shares the
Lender elects to receive in payment and satisfaction of these various
obligations as is their right to elect hereunder.
Exit Fee and Facility Fee:
--------------------------
The Exit Fee and Facility Fee as provided for herein are additional
consideration and are a material inducement for the Lender to provide the
proposed loan facility. The Lender shall be entitled to payment of the Exit Fee
and Facility Fee in full upon the earlier of the Maturity Date (18 May, 2006) or
the occurrence of a Triggering Event or the occurrence of an Event of Default.
Financial Covenants:
--------------------
None.
Documentation:
--------------
The Lender shall be entitled to review and approve at its sole and absolute
discretion all of the documents to be executed and/or delivered in association
with this loan transaction. These documents shall include:
1. Term Sheet;
2. IP Security Agreement;
3. Final Term Sheet;
4. Loan Agreement;
5. Final IP Security Agreement;
6. Warrant;
7. Bank Account Control Agreement;
And such other reasonable documents based upon the structure of the transaction
contemplated herein.
Expenses:
---------
Borrower shall reimburse Lender on the Maturity Date for all of Xxxxxx's costs
in connection with the loan transaction and documenting and funding the loan and
this extension of the loan. These costs shall include, but are not limited to,
the following: a due-diligence fee of $50,000 and documentation review and
preparation fee of $75,000 together with any actual attorneys fees paid to
attorneys qualified in California for the review and approval of all
documentation, attorneys fees in respect of any actions required to be taken in
furtherance of the loan or recovery of any amounts owing, or any matter in
dispute with the Borrower, any direct out of pocket expenses related to the loan
transaction, any direct out of pocket travel expenses to attend any meeting
contemplated by the loan transaction. The Lender will provide the Borrower a
list of all such expenses and amounts three (3) days prior to the Maturity Date.
In the event the Lender does not provide a list then the Borrower shall pay the
Lender the amount of $75,000.00.
Confidentiality:
-------------------
This Term Sheet is confidential and proprietary to all parties. This Term Sheet
shall not be disclosed to third parties.
This Term Sheet is hereby agreed between the parties hereto subject to execution
of the Loan Agreement and execution and delivery of the various documents
contemplated hereby.
Apix International Limited Cardima Inc.
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxx
----------------- -------------------
Xxxxxx Xxxxxx Xxxxxxx X. Xxxx
Dated this 14th day of February, 2006.
