DEBT SETTLEMENT AGREEMENT
DEBT
SETTLEMENT AGREEMENT (“Agreement”), dated as of October 3, 2007, by
and between CARDIMA, INC., a Delaware corporation (the “Company”), and
APIX INTERNATIONAL LIMITED (“Apix”).
W
I T N E S S E TH
A. Pursuant
to that certain Term Sheet dated as of August 11, 2005, as amended by the
Amended Term Sheet dated as of August 25, 2005, between Borrower and Apix
(together, the “August Term Sheets”), those certain Promissory Notes
dated as of August 11, 2005 and August 28, 2005 made by Borrower in favor of
Apix (the “Initial Notes”) and that certain Loan Agreement between Apix
and Borrower dated as of August 28, 2005 (as amended, the “Initial Loan
Agreement” and collectively with the August Term Sheets and the Initial
Notes, the “Initial Funding Documents”), Apix made a loan to Borrower in
the principal amount of $3,000,000 (the “August 2005
Loan”). The August 2005 Loan had a maturity date of February 28,
2006 (the “Initial Funding Maturity Date”).
B. Pursuant
to a Security Agreement (the “Initial Borrower Security Agreement”), a
Patent, Trademark and Copyright Security Agreement (the “Initial IP Security
Agreement”), certain supplemental short-form patent and trademark security
agreements, each dated as of August 11, 2005, by and between Borrower and Apix
(the Initial Borrower Security Agreement, the Initial IP Security Agreement
and
all Uniform Commercial Code (“UCC”) Financing Statements or other
documents executed or filed in order to perfect the Security Interest (as
defined below), collectively referred to as the “Initial Security
Documents”), Borrower granted to Apix a first priority lien upon all of its
assets, whether now owned or hereafter acquired, to Apix, including all of
its
now owned or hereafter acquired intellectual property (the “Security
Interest”), in order to secure the prompt and complete payment and
performance of Borrower’s obligations under the Initial Funding Documents, as
the same may be amended from time to time.
C. Pursuant
to that certain Loan Facility Term Sheet dated as of February 14, 2006
(the “February Term Sheet”) between Borrower and Apix, Apix made
additional financial accommodations to Borrower and agreed to amend certain
terms of the Initial Funding Documents, including without limitation, the
extension of the Initial Funding Maturity Date thereof from February 28, 2006
to
May 18, 2006 (the “Extended Maturity Date”).
D. Pursuant
to that certain Loan Facility Term Sheet dated as of January 16, 2007
(the “January Term Sheet”, and collectively with the August Term Sheets
and the February Term Sheet, the “Term Sheets”) between Borrower and
Apix, Apix agreed to provide additional financial accommodations to Borrower
and
to amend certain terms of the Initial Funding Documents, as amended up to and
including the date thereof, including, without limitation, the extension of
the
Extended Maturity Date from May 18, 2006 to December 31,
2007.
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E. Pursuant
to that certain Loan Agreement dated as of June 7, 2007, Apix agreed to provide
additional financial accommodations to Borrower and to amend certain terms
of
the Initial Funding Documents, as amended up to and including the date thereof
(together with all loan documents described in this paragraph and all previous
paragraphs, the “Loan Documents”).
F. The
parties agree that as of the date hereof the outstanding principal plus accrued
and unpaid interest, together with fees and expenses, under the Loan Documents
is $17,661,055 (the “Outstanding Balance”), and that Apix owns warrants
to purchase in the aggregate up to 20,340,000 shares of common stock of the
Company (the “Warrants”).
G. The
parties wish to provide for the extinguishment of the entire Outstanding Balance
and the repurchase and cancellation of all Warrants in exchange for the issuance
of shares of common stock of the Company (the “Common
Stock”).
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Apix hereby agree
as follows:
1. ISSUANCE
OF SHARES IN SATISFACTION OF BALANCE. On the date hereof, the Company is
issuing to Apix and/or its beneficial owners 58,870,183 shares of Common Stock
in full and final satisfaction of the Outstanding Balance and, upon issuance
of
such shares of Common Stock, no further payments with respect to the Outstanding
Balance shall be due by the Company to Apix.
2. ISSUANCE
OF SHARES IN SATISFACTION OF WARRANTS. On the date hereof, the Company is
issuing to Apix and/or its beneficial owners 29,129,817 shares of Common Stock
in exchange for the return and cancellation of the Warrants by Apix to the
Company.
3. RESTRICTIVE
LEGEND. The certificates, in due and proper form, representing the shares of
Common Stock to be issued to Apix and/oits beneficial owners will bear a legend
substantially in the following form:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
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4. APIX’S
REPRESENTATIONS AND WARRANTIES.
Apix
hereby acknowledges, represents
and warrants to, and agrees with, the Company as follows:
(a) Apix
is acquiring the Securities for Apix’s own account as principal, for investment
purposes only, and not with a view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, and no other person has a direct
or indirect beneficial interest in such Securities.
(b) Apix
acknowledges its understanding that the issuance of the Securities is intended
to be exempt from registration under the Act by virtue of Section 4(2) of the
Securities Act of 1933, as amended (the “Act”) and the provisions of Regulation
D thereunder.
(c) Apix
has the financial ability to bear the economic risk of his investment, has
adequate means for providing for his current needs and personal contingencies
and has no need for liquidity with respect to his investment in the
Company.
(d) Apix
is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D under the Act (17 C.F.R. 230.501(a)) or is not a U.S. Person as defined under
Regulation S.
(e) Apix
has made an independent investigation of the Company’s business, been provided
an opportunity to obtain additional information concerning the Company Apix
deems necessary to make an investment decision and all other information to
the
extent the Company possesses such information or can acquire it without
unreasonable effort or expense.
(f) Apix
represents, warrants and agrees that Apix will not sell or otherwise transfer
the Securities unless registered under the Act or in reliance upon an exemption
therefrom, and fully understands and agrees that Apix must bear the economic
risk of his purchase for an indefinite period of time because, among other
reasons, the Securities or underlying securities have not been registered under
the Act or under the securities laws of certain states and, therefore, cannot
be
resold, pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Act and under the applicable securities laws of
such states or an exemption from such registration is available. Apix
also understands that the Company is under no obligation to register the
Securities on his behalf or to assist Apix in complying with any exemption
from
registration under the Act. Apix further understands that sales or
transfers of the Securities or underlying securities are restricted by the
provisions of state securities laws.
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(g) Apix
has not transferred or assigned an interest in the Outstanding Balance or
Warrants to any third party.
(h) The
foregoing representations, warranties and agreements shall survive the delivery
of the Securities under this Agreement.
5. COMPANY
REPRESENTATIONS AND WARRANTIES.
The
Company hereby acknowledges,
represents and warrants to, and agrees with Apix as follows:
(a) The
Company has been duly organized, is validly existing and is in good standing
under the laws of the State of California. The Company has full
corporate power and authority to enter into this Agreement and this Agreement
has been duly and validly authorized, executed and delivered by the Company
and
is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by the United States Bankruptcy Code and laws effecting creditors rights,
generally.
(b) Subject
to the performance by Apix of its obligations under this Agreement and the
accuracy of the representations and warranties of Apix, the offering and sale
of
the shares will be exempt from the registration requirements of the
Act.
(c) The
execution and delivery by the Company of, and the performance by the Company
of
its obligations under this Agreement in accordance with the terms of this
Agreement will not contravene any provision of applicable law or the charter
documents of the Company or any agreement or other instrument binding upon
the
Company, or any judgment, order or decree of any governmental body, agency
or
court having jurisdiction over the Company, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations under
this Agreement in accordance with the terms of this Agreement.
(d) The
foregoing representations, warranties and agreements shall survive the
Closing.
6. RELEASE.
Upon
the delivery of the shares to Apix
set forth in Sections 1 and 2 of this Agreement, Apix releases and forever
discharges the Company of and from all and all manner of actions, suits, debts,
sums of money, contracts, agreements, claims and demands at law or in equity,
that Apix had, or may have arising from the Outstanding Balance and
Warrants.
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7. MISCELLANEOUS.
(a) Modification. Neither
this Agreement nor any provisions hereof shall be modified, discharged or
terminated except by an instrument in writing signed by the party against whom
any waiver, change, discharge or termination is sought.
(b) Notices. Any
notice, demand or other communication which any party hereto may be required,
or
may elect, to give to anyone interested hereunder shall be sufficiently given
if
(a) deposited, postage prepaid, in a United States mail letter box, registered
or certified mail, return receipt requested, addressed to such address as
may be given herein, or (b) delivered personally at such address.
(c) Counterparts. This
Agreement may be executed through the use of separate signature pages or in
any
number of counterparts, and each of such counterparts shall, for all purposes,
constitute one agreement binding on all the parties, notwithstanding that
all parties are not signatories to the same counterpart.
(d) Binding
Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and
assigns.
(e) Entire
Agreement. This instrument contains the entire agreement of
the parties, and there are no representations, covenants or other agreements
except as stated or referred to herein.
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(f)
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Applicable
Law. This Agreement shall be governed and construed
under the laws of the State of New
York.
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(g)
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Legal
Fees. Apix legal fees (not to exceed $50,000) will be paid
by the Company.
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IN
WITNESS WHEREOF, the Company and Apix have caused this Agreement to be executed
and delivered by their respective officers, thereunto duly
authorized.
| APIX, INC. | CARDIMA, INC. | |||
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/s/Xxxxxx
Xxxxxx
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/s/
TonyShum_
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|||
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Xxxxxx
Xxxxxx
|
Xxxx
Xxxx
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|||
|
Director
|
Chairman
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Amount
of Obligations to be cancelled:
| Outstanding Balance: | $17,661,055 |
| Warrants: | 20,340,000 |
Number
of Shares to be Issued in Exchange for:
| Outstanding Balance: | 58,870,183 |
| Warrants: | 29,129,817 |
Name
in Which Shares are to be Issued:
To
be
determined.
Address
for Delivery of Shares:
To
be
determined.
______________________________________
______________________________________
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