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.
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.
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.
(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.
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, ad-dressed 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, notwith-standing that
all
parties are not signatories to the same coun-terpart.
(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)
|
Applicable
Law.
This Agreement shall be governed and construed under the laws of
the State
of New York.
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(g)
|
Legal
Fees.
Apix legal fees (not to exceed $50,000) will be paid by the
Company.
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[REMINDER
OF PAGE LEFT BLANK]
IN
WITNESS WHEREOF, the Company and Apix have caused this Agreement to be executed
and delivered by their respective officers, thereunto duly
authorized.
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CARDIMA,
INC.
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|||
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By:
|
/s/ Xxxx Xxxx
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| Name: Xxxx Xxxx | |||
| Title: Chairman | |||
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APIX,
INC.
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By:
|
/s/Xxxxxx
Xxxxxx
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| Name: Xxxxxx Xxxxxx | |||
| Title: Director | |||
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.
______________________________________
______________________________________
