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Cardima Receives Notification of Default on Secured Loan
June 20, 2005
FREMONT, Calif., Jun 20, 2005 (BUSINESS WIRE) --
Cardima, Inc. (Other OTC: CRDM) receives notification of default on secured loan.
As previously disclosed, on May 27, 2005, Cardima, Inc. (the "Company") entered into a secured Loan Agreement (the "Loan Agreement") with Agility Capital, LLC (the "Lender"), pursuant to which the Lender funded $300,000 of the loan at closing. To secure its obligations under the Loan Agreement, the Company granted the Lender a security interest in substantially all of its assets, including its intellectual property. Pursuant to the terms of the Loan Agreement, all amounts outstanding thereunder, including interest and fees, become due and payable on the earliest of an Event of Default (as defined below), August 15, 2005, or certain other events. The Loan Agreement also provides that the Company shall pay the Lender an "Exit Fee" upon an Event of Default, and certain other expenses and fees of the Lender. The Exit Fee would be $450,000 based on the amount of loans currently outstanding. Interest accrues at 12% per annum, or 18% after an Event of Default.
By letter dated June 16, 2005, the Lender notified the Company of the Lender`s view that an Event of Default had occurred under the Loan Agreement and that all amounts outstanding thereunder (including principal, interest, fees and expenses), are immediately due and payable. The Lender also froze the Company`s bank accounts, containing approximately $350,000. Correspondence from the Lender has indicated that the Lender is unwilling to fund further loans under the Loan Agreement. The Company is in discussions with the Lender about these matters but is unable to predict the outcome.
On June 17, 2005, the Company`s interim Chief Financial Officer and Secretary, Barry D. Michaels, resigned effective immediately. On June 17, 2005, the Board of Directors appointed Gabriel B. Vegh, the Company`s Chairman and Chief Executive Officer, to the additional positions of acting Chief Financial Officer and Secretary.
The Company will be unable to continue operations absent an immediate cash infusion, and the Company expects that its common stock will have no value upon a cessation of Company operations. As of June 17, 2005, the Company`s cash balances, including the funds frozen by its secured lender, were insufficient to fund any ongoing operations after making provision for accrued and unpaid wages and other accrued obligations that would arise upon termination of employees.
On June 17, 2005, the Company`s Board of Directors terminated the employment status of all employees to conserve resources.