ex101.htm


     

    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.

    


    
      	
              (f)  

            	
              Applicable
                Law.   This Agreement shall be governed and construed
                under the laws of the State of New
                York.

            


    

    


    
      	
              (g)  

            	
              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.	 
	
              /s/Robery
                Cheney

            	 	 	
              /s/
                TonyShum_

            	 
	
              Robert
                Cheney

            	 	 	
              Tony
                Shum

            	 
	
              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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