<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1996
REGISTRATION NO. 333-04879
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CAMBRIDGE HEART, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 3845 13-3679946
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
(STATE OR OTHER IDENTIFICATION
JURISDICTION OF NUMBER)
INCORPORATION OR ---------------
ORGANIZATION)
1 OAK PARK DRIVE, BEDFORD, MA 01730
(617) 271-1200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JEFFREY M. ARNOLD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAMBRIDGE HEART, INC.
1 OAK PARK DRIVE
BEDFORD, MA 01730
(617) 271-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOHN A. BURGESS, ESQ. DAVID J. BEVERIDGE, ESQ.
STEVEN D. SINGER, ESQ. SHEARMAN & STERLING
HALE AND DORR 599 LEXINGTON AVENUE
60 STATE STREET NEW YORK, NEW YORK 10022
BOSTON, MASSACHUSETTS 02109 (212) 848-4000
(617) 526-6000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE
SECURITIES TO BE TO BE OFFERING PRICE OFFERING AMOUNT OF
REGISTERED REGISTERED(1)(3) PER SHARE(2) PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par
value per share....... 3,450,000 shares $13.00 $44,850,000 $15,466
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 450,000 shares which the Underwriters have the option to purchase
from the Company to cover over-allotments, if any. See "Underwriting".
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
(3) The shares of Common Stock are not being registered for the purpose of
sale outside the United States.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CAMBRIDGE HEART, INC.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM AND CAPTION LOCATION IN PROSPECTUS
---------------------- ----------------------
<S> <C>
1.Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.......................... Outside Front Cover Page
2.Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front Cover Page; Outside
Back Cover Page
3.Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.. Prospectus Summary; Risk Factors;
The Company
4.Use of Proceeds....................... Prospectus Summary; Use of Proceeds
5.Determination of Offering Price....... Underwriting
6.Dilution.............................. Dilution
7.Selling Security Holders.............. Not Applicable
8.Plan of Distribution.................. Outside Front Cover Page;
Underwriting
9.Description of Securities to be
Registered.......................... Description of Capital Stock
10.Interests of Named Experts and
Counsel............................. Legal Matters; Experts
11.Information With Respect to the
Registrant:
(a)Description of Business............. Business
(b)Description of Property............. Business--Facilities
(c)Legal Proceedings................... Not Applicable
(d)Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters....... Front Cover Page; Dividend Policy;
Description of Capital Stock;
Shares Eligible for Future Sale
(e)Financial Statements................ Financial Statements; Capitalization
(f)Selected Financial Data............. Selected Financial Data
(g)Supplementary Financial
Information....................... Not Applicable
(h)Management's Discussion and Analysis
of Financial Condition and Results Management's Discussion and Analysis
of Operations..................... of Financial Condition and Results
of Operations
(i)Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.............. Not Applicable
(j)Directors, Executive Officers,
Promoters and Control Persons..... Management--Executive Officers and
Directors; Certain Transactions
(k)Executive Compensation.............. Management--Executive Compensation
(l)Security Ownership of Certain
Beneficial Owners and Management.. Principal Stockholders
(m)Certain Relationships and Related
Transactions...................... Certain Transactions
12.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... Not Applicable
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts. All amounts shown are estimates except for the
Securities and Exchange Commission ("SEC") registration fee and the National
Association of Securities Dealers, Inc. ("NASD") filing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 15,500
NASD Filing Fee.................................................. 45,000
Nasdaq Listing Fee............................................... 5,000
Blue Sky Fees and Expenses....................................... 25,000
Transfer Agent and Registrar Fees................................ 10,000
Accounting Fees and Expenses..................................... 150,000
Legal Fees and Expenses.......................................... 200,000
Printing, Engraving and Mailing Expenses......................... 100,000
Miscellaneous.................................................... 74,500
--------
Total.......................................................... $625,000
========
</TABLE>
- --------
* To be completed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Nine of the Registrant's Restated Certificate of Incorporation (the
"Restated Certificate of Incorporation") provides that no director of the
Registrant shall be personally liable for any monetary damages for any breach
of fiduciary duty as a director, except to the extent that the Delaware
General Corporation Law prohibits the elimination or limitation of liability
of directors for breach of fiduciary duty.
Article Nine of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any
litigation or other legal proceeding (other than an action by or in the right
of the Registrant) brought against him by virtue of his position as a director
or officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the Registrant, except that no indemnification shall be made with respect
to any matter as to which such person shall have been adjudged to be liable to
the Registrant, unless a court determines that, despite such adjudication but
in view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
II-1
<PAGE>
Indemnification is required to be made unless the Registrant determines that
the applicable standard of conduct required for indemnification has not been
met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent
to the right of indemnification, the director or officer must give the
Registrant notice of the action for which indemnity is sought and the
Registrant has the right to participate in such action or assume the defense
thereof.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred
in connection with an action or proceeding to which he is or is threatened to
be made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if
such person had no reasonable cause to believe his conduct was unlawful;
provided that, in the case of actions brought by or in the right of the
corporation, no indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
Under Section Eight of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of shares of Common and Preferred Stock issued, and the number of options
granted, by the Registrant since May 1, 1993. Further included is the
consideration, if any, received by the Registrant for such shares and options,
and information relating to the section of the Securities Act of 1933 (the
"Securities Act"), or rule of the Securities and Exchange Commission under
which exemption from registration was claimed. All awards of options did not
involve any sale under the Securities Act and none of these securities was
registered under the Securities Act.
1. In September 1993, the Registrant sold 1,200,000 and 1,300,000 shares
of Series A Convertible Preferred Stock to Financial Strategic Portfolios,
Inc. - Health Sciences Portfolio and the Global Health Sciences Fund,
respectively, at $1.00 per share for aggregate consideration of $2,500,000.
2. In September 1993, October 1993 and December 1993, the Registrant sold
3,533,083, 372,500 and 72,500 shares of Series A Convertible Preferred
Stock, respectively, to certain individual investors at $1.00 per share,
for a total aggregate consideration of $3,978,083.
3. In September 1993, the Registrant converted $100,000 of notes payable
due to individual investors into 100,000 shares of Series A Convertible
Preferred Stock.
4. In September 1993, the Registrant issued warrants to purchase 328,904
shares of Common Stock to KBL Healthcare, Inc. in exchange for certain
investment banking services. The warrant is exercisable at $2.00 per share.
5. In December 1993, the Registrant issued a warrant to purchase 109,634
shares of Common Stock to Dr. Richard Cohen in exchange for certain
consulting services to the Company. The warrant is exercisable at $2.00 per
share.
6. In December 1993, the Registrant sold 180,000 shares of Common Stock
to the Massachusetts Institute of Technology pursuant to a certain Option
Agreement dated as of February 10, 1993 at $.002 per share for an aggregate
consideration of $360.
II-2
<PAGE>
7. In August 1994, the Registrant sold 22,500 shares of Common Stock to
Paul Albrecht pursuant to the exercise of options at $.002 per share for
aggregate consideration of $45.
8. In October 1994, the Registrant sold 8,334 shares of Common Stock to a
member of the Scientific Advisory Board pursuant to the exercise of options
at $.02 per share for an aggregate consideration of $167.
9. In March 1995, the Registrant sold 91,163 shares of Common Stock to
Jeffrey M. Arnold pursuant to the exercise of options at $.02 per share for
aggregate consideration of $1,823.
10. In March 1995, the Registrant sold 8,333 shares of Common Stock to
David F. Rollo pursuant to the exercise of options at $.02 per share for an
aggregate consideration of $167.
11. In April 1995, the Registrant sold 8,333 shares of Common Stock to a
member of the Scientific Advisory Board pursuant to the exercise of options
at $.02 per share for an aggregate consideration of $167.
12. In April 1995, the Registrant sold 2,333,333 shares of Series B
Convertible Preferred Stock to certain investment partnerships organized by
Morgan Stanley & Co. at $1.50 per share for aggregate consideration of
$3,500,000.
13. In June 1995, the Registrant sold 2,000 shares of Common Stock to an
employee pursuant to the exercise of options at $.20 per share for
aggregate consideration of $400.
14. In June 1995, the Registrant sold 22,500 shares of Common Stock to
Paul Albrecht pursuant to the exercise of options at $.002 per share for
aggregate consideration of $45.
15. In March 1996, the Registrant sold 45,000 shares of Common Stock to
Paul Albrecht pursuant to the exercise of options at $.20 per share for
aggregate consideration of $9,000.
16. From May 15, 1993 through May 15, 1996, the Registrant granted
options to purchase an aggregate of 916,500 shares of Common Stock to
officers, employees and consultants of the Registrant pursuant to the
Registrant's Amended and Restated 1993 incentive and Non-Qualified Stock
Option Plan. Exercise prices range from $0.002 to $4.00 per share,
resulting in an aggregate consideration of approximately $964,700.
The shares of capital stock and securities issued in the above transactions
were offered and sold in reliance upon the exemption from registration under
Section 4(2) of the Securities Act or Regulation D or Rule 701 promulgated
under the Securities Act, relative to sales by an issuer not involving a
public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Form of U.S. Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
3.1 Certificate of Incorporation, as amended, of the Registrant.
3.2 Form of Restated Certificate of Incorporation of the Registrant to be
filed upon the closing of the public offering.
3.3 By-Laws of the Registrant, as amended.
4.1* Specimen Certificate for shares of Common Stock, $.001 par value, of
the Registrant.
5.1* Opinion of Hale and Dorr with respect to the validity of the
securities being offered.
10.1# 1993 Incentive and Non-Qualified Stock Option Plan, as amended.
10.2 1996 Equity Incentive Plan.
10.3 1996 Employee Stock Purchase Plan.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.4 1996 Director Stock Option Plan.
10.5 Consulting and Technology Agreement between the Registrant and Dr.
Richard J. Cohen, dated February 8, 1993.
10.6 Employment Agreement between the Registrant and Jeffrey M. Arnold,
dated September 1, 1993.
10.7 Employment Agreement between the Registrant and Paul Albrecht, Ph.D.,
dated April 27, 1993.
10.8* License Agreement By and Between the Registrant and Dr. Richard J.
Cohen, dated February 8, 1993.
10.9 Lease By and Between the Registrant and R.W. Connelly, dated June 1,
1995.
10.10#+ Exclusive distribution agreement by and between the Registrant and
Kontron Instruments Ltd., dated December 28, 1995.
10.11#+ Exclusive Distributorship Agreement by and between the Registrant and
Fukuda Denshi Co., Ltd.
10.12 License Agreement by and between the Registrant and the Massachusetts
Institute of Technology, dated September 28, 1993, relating to the
technology of "Assessing Myocardial Electrical Stability".
10.13 License Agreement by and between the Registrants and the Massachusetts
Institute of Technology, dated September 28, 1993, relating to the
technology of "Cardiac Electrical Imaging".
10.14 License Agreement by and between the Registrant and the Massachusetts
Institute of Technology, dated September 28, 1993, relating to the
technology of "Pacing Technology For Prevention of Cardiac
Dysrhythmias".
10.15 License Agreement by and between the Registrant and the Massachusetts
Institute of Technology, dated September 28, 1993, relating to the
technology of "Cardiovascular Identification".
10.16# Investors' Rights Agreement by and among the Company, Financial
Strategic Portfolios, Inc.--Health Sciences Portfolio and the Global
Health Sciences Fund, dated September 29, 1993.
10.17# Investors' Rights Agreement by and among the Company and Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital
Fund II, C.V. and Morgan Stanley Venture Investors, L.P., dated April
19, 1995.
10.18# Warrant to Purchase Shares of common Stock of the Company in favor of
Richard J. Cohen, dated September 29, 1993.
10.19# Form of additional warrant to purchase shares of Common Stock of the
Company.
10.20# Form of Registration Rights Agreement by and between the Company and
various Founders, each dated March 29, 1993.
11 Computation of pro forma net loss per share.
23.1 Consent of Hale and Dorr (included in Exhibit 5).
23.2 Consent of Price Waterhouse LLP.
24 Powers of Attorney (included on page II-6).
27 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
# Filed herewith.
+ Confidential treatment requested as to certain portions.
All other exhibits have been previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
All applicable information is readily determinable from the notes to the
Company's financial statements.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Registrant and the laws
of the State of Delaware, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWN OF BEDFORD,
COMMONWEALTH OF MASSACHUSETTS, ON THIS 11TH DAY OF JUNE, 1996.
CAMBRIDGE HEART, INC.
/s/ Jeffrey M. Arnold*
By: _________________________________
JEFFREY M. ARNOLD PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Cambridge Heart, Inc., hereby
severally constitute and appoint Jeffrey M. Arnold, Thomas V. Hennessey, Jr.,
John A. Burgess and Steven D. Singer, and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Registration
Statement on Form S-1 filed herewith and any and all pre-effective and post-
effective amendments to said Registration Statement and any subsequent
Registration Statement for the same offering which may be filed under Rule
462(b), and generally to do all such things in our names and on our behalf in
our capacities as officers and directors to enable Cambridge Heart, Inc. to
comply with the provisions of the Securities Act, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them, to said Registration Statement and any and all amendments thereto.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Jeffrey M. Arnold* President, Chief June 11, 1996
- ------------------------------------- Executive Officer
JEFFREY M. ARNOLD and Director
(Principal
Executive Officer)
/s/ Thomas V. Hennessey, Jr. Chief Financial June 11, 1996
- ------------------------------------- Officer, Vice
THOMAS V. HENNESSEY, JR. President of
Operations and
Treasurer
(Principal
Financial and
Accounting Officer)
II-6
<PAGE>
SIGNATURE TITLE DATE
Chairperson,
/S/ Marlene Krauss* Secretary and June 11, 1996
- ------------------------------------- Director
MARLENE KRAUSS
Director
/S/ Zachary C. Berk* June 11, 1996
- -------------------------------------
ZACHARY C. BERK
Director
/S/ Richard J. Cohen* June 11, 1996
- -------------------------------------
RICHARD J. COHEN
Director
/S/ M. Fazle Husain* June 11, 1996
- -------------------------------------
M. FAZLE HUSAIN
Director
/S/ David F. Muller* June 11, 1996
- -------------------------------------
DAVID F. MULLER
Director
/S/ David F. Rollo* June 11, 1996
- -------------------------------------
DAVID F. ROLLO
Director
/S/ Rolf S. Stutz* June 11, 1996
- -------------------------------------
ROLF S. STUTZ
*By: _/S/ Thomas V. Hennessey, Jr.
June 11, 1996
THOMAS V. HENNESSEY, JR. Attorney-
in-fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1.1* Form of U.S. Underwriting Agreement.
1.2* Form of International Underwriting Agreement.
3.1 Certificate of Incorporation, as amended, of the Registrant.
3.2 Form of Restated Certificate of Incorporation of the
Registrant to be filed upon the closing of the public
offering.
3.3 By-Laws of the Registrant, as amended.
4.1* Specimen Certificate for shares of Common Stock, $.001 par
value, of the Registrant.
5.1* Opinion of Hale and Dorr with respect to the validity of the
securities being offered.
10.1# 1993 Incentive and Non-Qualified Stock Option Plan, as
amended.
10.2 1996 Equity Incentive Plan.
10.3 1996 Employee Stock Purchase Plan.
10.4 1996 Director Stock Option Plan.
10.5 Consulting and Technology Agreement between the Registrant and
Dr. Richard J. Cohen, dated February 8, 1993.
10.6 Employment Agreement between the Registrant and Jeffrey M.
Arnold, dated September 1, 1993.
10.7 Employment Agreement between the Registrant and Paul Albrecht,
Ph.D., dated April 27, 1993.
10.8* License Agreement By and Between the Registrant and Dr.
Richard J. Cohen, dated February 8, 1993.
10.9 Lease By and Between the Registrant and R.W. Connelly, dated
June 1, 1995.
10.10#+ Exclusive distribution agreement by and between the Registrant
and Kontron Instruments Ltd., dated December 28, 1995.
10.11#+ Exclusive Distributorship Agreement by and between the
Registrant and Fukuda Denshi Co., Ltd.
10.12 License Agreement by and between the Registrant and the
Massachusetts Institute of Technology, dated September 28,
1993, relating to the technology of "Assessing Myocardial
Electrical Stability".
10.13 License Agreement by and between the Registrants and the
Massachusetts Institute of Technology, dated September 28,
1993, relating to the technology of "Cardiac Electrical
Imaging".
10.14 License Agreement by and between the Registrant and the
Massachusetts Institute of Technology, dated September 28,
1993, relating to the technology of "Pacing Technology For
Prevention of Cardiac Dysrhythmias".
10.15 License Agreement by and between the Registrant and the
Massachusetts Institute of Technology, dated September 28,
1993, relating to the technology of "Cardiovascular
Identification".
10.16# Investors' Rights Agreement by and among the Company,
Financial Strategic Portfolios, Inc.--Health Sciences
Portfolio and the Global Health Sciences Fund, dated September
29, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.17# Investors' Rights Agreement by and among the Company and Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture
Capital Fund II, C.V. and Morgan Stanley Venture Investors,
L.P., dated April 19, 1995.
10.18# Warrant to Purchase Shares of common Stock of the Company in
favor of Richard J. Cohen, dated September 29, 1993.
10.19# Form of additional warrant to purchase shares of Common Stock
of the Company.
10.20# Form of Registration Rights Agreement by and between the
Company and various Founders, each dated March 29, 1993.
11 Computation of pro forma net loss per share.
23.1 Consent of Hale and Dorr (included in Exhibit 5).
23.2 Consent of Price Waterhouse LLP.
24 Powers of Attorney (included on page II-6).
27 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
# Filed herewith.
+ Confidential treatment requested as to certain portions.
All other exhibits have been previously filed.
<PAGE>
CAMBRIDGE HEART, INC.
AMENDED AND RESTATED
1993 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
1. Purpose
-------
The purpose of this Amended and Restated 1993 Incentive and
Non-Qualified Stock Option Plan (the "Plan") is to encourage and
enable selected management and other key employees of, or
consultants to, Cambridge Heart, Inc. (the "Company") or a parent
or subsidiary of the Company to acquire a proprietary interest in
the Company through the ownership of common stock, par value $.001
per share (the "Common Stock"), of the Company. Such ownership
will provide such persons with a more direct stake in the future
welfare of the Company, and encourage them to remain with, or
serve the Company or a parent or subsidiary of the Company. It is
also expected that the Plan will encourage qualified persons to
seek and accept employment with the Company or a parent or
subsidiary of the Company. Pursuant to the Plan, such persons
will be offered the opportunity to acquire such Common Stock
through the grant of incentive stock options and "non-qualified"
stock options.
As used herein, the term "parent" or "subsidiary" shall mean
any present or future corporation which is or would be a "parent
corporation" or "subsidiary corporation" of the Company as the
term is defined in Section 424(e) and 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code") (determined as if
the Company were the employer corporation).
2. Administration of the Plan
--------------------------
The Plan shall be administered by a Stock Option Committee
(the "Committee") as appointed from time to time by the Board of
Directors of the Company, which committee shall consist of not
less than three members of the Board of Directors. None of the
<PAGE>
members of the Committee shall be, or shall have been within one
year prior to their becoming a member, eligible to be granted
options under the Plan.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretations and
decisions made by the Committee with regard to any question
arising under the Plan shall be final and conclusive on all
persons participating or eligible to participate in the Plan.
Subject to the provisions of the Plan, the Committee shall
determine the terms of all options granted pursuant to the Plan,
including, but not limited to, the persons to whom, and the time
or times at which, grants shall be made, the number of options to
be included in the grants, the number of options which shall be
treated as incentive stock options or designated as non-qualified
stock options, the duration and vesting of such options, and the
option price.
3. Shares of Stock Subject to the Plan
-----------------------------------
Except as provided in subparagraphs 6(h) and 6(i), the number
of shares that may be issued or transferred pursuant to the
exercise of options granted under the Plan shall not exceed
2,750,000 shares of Common Stock. Such shares may be authorized
and unissued shares or previously issued shares acquired or to be
acquired by the Company and held in treasury. Any shares subject
to an option which for any reason expires or is terminated
unexercised as to such shares or which are used to pay for the
exercise of an option may again be subject to an option right
under the Plan. If the aggregate fair market value (determined at
the time the option is granted) of the stock with respect to which
incentive stock options are exercisable for the first time by any
optionee during any calendar year (under the Plan and any other
plan of the Company or a parent or a subsidiary of the Company)
exceeds $100,000 then the Committee may designate which options
-2-
<PAGE>
are non-qualified stock options and which are incentive stock
options.
4. Eligibility
-----------
Incentive stock options may be granted only to management and
other key employees who are employed by the Company or a parent or
subsidiary of the Company. An incentive stock option may be
granted to a director of the Company or a parent or subsidiary of
the Company, provided that the director is also an officer or key
employee. Directors who are not officers or key employees may
only be granted non-qualified stock options.
5. Granting of Options
-------------------
All options pursuant to this Plan shall be granted within 10
years from the effective date of this Plan. The date of the grant
of any option shall be the date on which the Committee authorizes
the grant of such option.
6. Options
-------
Options shall be evidenced by stock option agreements in such
form, not inconsistent with this Plan, as the Committee shall
approve from time to time, which agreements need not be identical
and shall be subject to the following terms and conditions:
(a) Option Price. The purchase price under each
------------
incentive stock option shall be not less than 100% of the
fair market value of the Common Stock at the time the option
is granted and not less than the par value of such Common
Stock. In the case of an incentive stock option granted to
an employee owning more than 10% of the total combined voting
power of all classes of stock of the Company or of any parent
or subsidiary of the Company (a "10% Stockholder"), actually
or constructively under Section 422(b)(6) and 424(d) of the
Code, the option price shall not be less than 110% of the
fair market value of the Common Stock subject to the option
at the time of its grant. The purchase price under each
non-qualified stock option shall be specified by the
Committee, but shall in no case be less than the par value of
the Common Stock subject to the non-qualified stock option.
The fair market value of the Common Stock on any date shall
be determined in a manner consistent with the requirements of
the Code.
-3-
<PAGE>
(b) Payment of Exercise Price. Payment of the option
-------------------------
exercise price shall be made in full at the time the notice
of exercise of the option is delivered to the Company and
shall be in cash, bank certified or cashier's check or
personal check (unless at the time of exercise the Option
Committee in a particular case determines not to accept a
personal check) for the Common Stock being purchased.
The Option Committee can determine at the time the
option is granted for incentive stock options, or at any time
before exercise for nonqualified stock options, that
additional forms of payment will be permitted. To the extent
permitted by the Option Committee and applicable laws and
regulations (including, but not limited to, federal tax and
securities laws and regulations and state corporate law), an
option may be exercised by:
(i) delivery of shares of stock of the Company
held by an Optionee having a fair market value equal to
the exercise price, such fair market value to be
determined in good faith by the Option Committee;
provided, however, that payment in stock held by an
Optionee subject to Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") shall not be
made unless the stock shall have been owned by the
Optionee for a period of at least six months;
(ii) delivery of a properly executed exercise
notice, together with irrevocable instructions to a
broker, all in accordance with the regulations of the
Federal Reserve Board, to promptly deliver to the
Company the amount of sale or loan proceeds to pay the
exercise price and any federal, state or local
withholding tax obligations that may arise in connection
with the exercise; provided, that the Option Committee,
in its sole discretion, may at any time determine that
this subparagraph (b), to the extent the instructions to
the broker call for an immediate sale of the shares,
shall not be applicable to any Optionee who is subject
to Section 16(b) of the Exchange Act, or is not an
employee at the time of exercise;
(iii) delivery of a properly executed exercise
notice together with instructions to the Company to
withhold from the shares that would otherwise be issued
upon exercise that number of shares having a fair market
value equal to the option exercise price.
The Company or any related corporation shall have the
right to retain and withhold from any payment of cash or
Common Stock under the Plan the amount of taxes required by
any government to be withheld or otherwise deducted and paid
with respect to such payment. At its discretion, the Company
may require an Optionee receiving shares of Common Stock to
-4-
<PAGE>
reimburse the Company for any such taxes required to be
withheld by the Company and withhold any distribution in
whole or in part until the Company is so reimbursed. In lieu
thereof, the Company shall have the right to withhold from
any other cash amounts due or to become due from the Company
to the Optionee an amount equal to such taxes or retain and
withhold a number of shares having a market value not less
than the amount of such taxes required to be withheld by the
Company to reimburse the Company for any such taxes and
cancel (in whole or in part) any such shares so withheld. If
required by Section 16(b) of the Exchange Act, the election
to pay withholding taxes by delivery of shares held by any
person who at the time of exercise is subject to Section
16(b) of the Exchange Act, shall be made either six months
prior to the date the option exercise becomes taxable or at
such other times as the Company may determine as necessary to
comply with Section 16(b) of the Exchange Act.
(c) Waiting Period. The waiting period and time for
--------------
exercising an option shall be prescribed by the Committee in
each particular case; provided, however, that no incentive
stock option may be exercised after 10 years from the date it
is granted. In the case of an incentive stock option granted
to a 10% Stockholder, such option, by its terms, shall be
exercisable only within five years from the date of grant.
(d) No Rights as a Stockholder. A recipient of options
--------------------------
shall have no rights as a stockholder with respect to any
shares issuable or transferable upon exercise thereof until
the date a stock certificate is issued to him for such
shares. Except as otherwise expressly provided in the Plan,
no adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock
certificate is issued.
(e) Non-Assignability of Options. No option shall be
----------------------------
assignable or transferable by the recipient, except by will
or by the laws of descent and distribution. During the
lifetime of a recipient, options shall be exercisable only by
him, his guardian or legal representative.
(f) Effect of Termination of Employment or Death. No
--------------------------------------------
option granted to an employee shall be exercisable after
termination of employment with the Company or any parent or
subsidiary of the Company unless such termination of
employment occurs by reason of retirement with the consent of
the Company or death. In the event of the retirement of a
recipient of options with the consent of the Company, the
options or unexercised portions thereof which were otherwise
exercisable on the date of retirement shall expire unless
exercised within a period of three months after the date of
retirement; provided, however, that if such retirement is due
to disability within the meaning of Section 422(c)(6) and
22(e)(3) of the Code, then the aforementioned right to
exercise such option shall exist for one year following the
date of retirement. In the event of the death of a recipient
of options while an employee of the Company or any parent or
subsidiary of the Company or in the event of the death of the
-5-
<PAGE>
recipient within the three-month (or one year) period
following termination of employment by reason of retirement
with the consent of the Company, the options which were
otherwise exercisable on the date of termination of
employment shall be exercisable by his personal
representatives, heirs, or legatees at any time prior to the
expiration of one year from the date of his death. In no
event, however, shall an incentive stock option be
exercisable after 10 years from the date it is granted. In
the event that a recipient ceases to be an employee of the
Company or of any parent or subsidiary of the Company for any
reason, including death or retirement, prior to the lapse of
any applicable waiting period, his option shall terminate and
be null and void. The Committee may, if it determines that
to do so would be in the Company's best interests, provide in
a specific case or cases for the exercise of options which
would otherwise terminate upon termination of employment with
the Company for any reason, upon such terms and conditions as
the Committee determines to be appropriate. Option rights
shall not be affected by any change of employment as long as
the recipient continues to be employed by either the Company
or a parent or subsidiary of the Company. Nothing in the
Plan or in any option agreement shall confer any right to
continue in the employ of the Company or any parent or
subsidiary of the Company or interfere in any way with the
right of the Company or any parent or subsidiary of the
Company to terminate the employment of a recipient at any
time.
(g) Leave of Absence. In the case of a recipient on an
----------------
approved leave of absence, the Committee may, if it
determines that to do so would be in the best interests of
the Company, provide in a specific case for continuation of
options during such leave of absence, such continuation to be
on such terms and conditions as the Committee determines to
be appropriate, except that in no event shall an incentive
stock option be exercisable after 10 years from the date it
is granted.
(h) Recapitalization. In the event that dividends
----------------
payable in Common Stock during any fiscal year of the Company
exceed in the aggregate 5% of the Common Stock issued and
outstanding at the beginning of the year, or in the event
there is during any fiscal year of the Company one or more
splits, subdivisions, or combinations of shares of Common
Stock resulting in an increase or decrease by more than 5% of
the shares outstanding at the beginning of the year, the
number of shares available under the Plan shall be increased
or decreased proportionately, as the case may be, and the
number of shares deliverable upon the exercise without change
in the aggregate purchase price. Common Stock dividends,
splits, subdivisions, or combinations during any fiscal year
which do not exceed in the aggregate 5% of the Common Stock
issued and outstanding at the beginning of such year shall be
ignored for purposes of the Plan. All adjustments shall be
made as of the day such action necessitating such adjustment
becomes effective.
-6-
<PAGE>
(i) Sale or Reorganization. In case the Company is
----------------------
merged or consolidated with another corporation, or in case
the property or stock of the Company is acquired by another
corporation, or in case of a separation, reorganization, or
liquidation of the Company, the Board of Directors of the
Company, or the board of directors of the corporation
assuming the obligations of the Company hereunder, shall
either (i) make appropriate provisions for the protection of
any outstanding options by the substitution on an equitable
basis of appropriate stock of the Company, or appropriate
stock of the merged, consolidated, or otherwise reorganized
corporation, provided only that such substitution of options
shall comply with the requirements of Section 424 of the
Code, or (ii) give written notice to optionees that their
options, which will become immediately exercisable
notwithstanding any waiting period otherwise prescribed by
the Committee, must be exercised within 30 days of the date
of such notice or they will be terminated.
(j) General Restrictions. Each option granted under
--------------------
the Plan shall be subject to the requirement that, if at any
time the Board of Directors or the Committee shall determine,
in its discretion, that the listing, registration, or
qualification of the shares issuable or transferable upon
exercise thereof upon any securities exchange or under any
state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable in
accordance with any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the
granting of such option or the issue, transfer, or purchase
of shares thereunder, such option may not be exercised in
whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected
or obtained free of any conditions not acceptable to the
Board of Directors.
The Company shall not be obligated to sell or issue any
shares of Common Stock in any manner in contravention of the
Securities Act of 1933, as amended, or any state securities law.
The Board of Directors or the Committee may, in connection with
the granting of each option, require the individual to whom the
option is to be granted to enter into an agreement with the
Company stating that as a condition precedent to each exercise of
the option, in whole or in part, he shall, if then required by the
Company, hold the Common Stock received upon such exercise for a
period prescribed by the Committee not to exceed two years and
represent to the Company in writing that such exercise is for
investment only and not with a view to distribution, and also
-7-
<PAGE>
setting forth such other terms and conditions as the Board of
Directors or the Committee may prescribe. Such agreements may
also, in the discretion of the Board of Directors or the
Committee, contain provisions requiring the forfeiture of Common
Stock received upon exercise of any option in the event of the
termination of employment or association (unless caused by death),
as the case may be, of the optionee with the Company during a
period not to exceed two years after the exercise of the option.
Upon any forfeiture of Common Stock pursuant to an agreement
authorized by the preceding sentence, the Company shall return the
purchase price for such Common Stock to the optionee, without
interest thereon or deduction therefrom.
7. Termination and Amendment of the Plan
-------------------------------------
The Board of Directors shall have the right to amend,
suspend, or terminate the Plan at any time; provided, however,
that no such action shall affect or in any way impair the rights
of a recipient under any option right theretofore granted under
the Plan; and, provided, further, that unless first duly approved
by the stockholders of the Company entitled to vote thereon at a
meeting (which may be the annual meeting) duly called and held for
such purpose, except as provided in subparagraphs 6(h) and 6(i),
or by a consent of stockholders, no amendment or change shall be
made in the Plan: (a) increasing the total number of shares which
may be issued or transferred under the Plan; (b) changing the
purchase price hereinbefore specified for the shares subject to
options; (c) extending the period during which options may be
granted or exercised under the Plan; or (d) changing the
designation of persons eligible to receive options under the Plan.
8. Restriction on Sale of Shares
-----------------------------
Without the written consent of the Company, no stock acquired
by an optionee upon exercise of an incentive stock option granted
hereunder may be disposed of by the optionee within two years from
the date such incentive stock option was granted, nor within one
-8-
<PAGE>
year after the transfer of such stock to the optionee; provided,
however, that a transfer to a trustee, receiver, or other
fiduciary in any insolvency proceeding, as described in Section
422(c)(3) of the Code, shall not be deemed to be such a
disposition. The optionee shall make appropriate arrangements
with the Company for any taxes which the Company is obligated to
collect in connection with any such disposition, including any
Federal, state, or local withholding taxes.
9. Effective Date of the Plan
--------------------------
This Plan shall become effective September 15, 1993, the date
of its adoption by the favorable vote of the majority of the Board
of Directors of the Company, subject, however, to approval by the
stockholders of the Company within 12 months next following such
adoption by the Board of Directors; and if such approval is not
obtained, the Plan shall terminate and any and all options granted
during such interim period shall also terminate and be of no
further force or effect. The Plan shall, in all events, terminate
on March 29, 2003, or on such earlier date as the Board of
Directors of the Company may determine. Any option outstanding at
the termination date shall remain outstanding until it has either
expired or has been exercised.
-9-
<PAGE>
AMENDMENTS TO THE
CAMBRIDGE HEART, INC.
AMENDED AND RESTATED
1993 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
1. All terms used herein which are defined in the Amended and
Restated 1993 Incentive and Non-Qualified Stock Option Plan
(the "Plan") and not otherwise defined herein are used herein
as defined therein.
2. Section 3 of the Plan is hereby amended by deleting the
number "2,750,000" appearing in the first sentence therein
and substituting the number "3,377,326" in its place.
3. Section 4 of the Plan is hereby amended by inserting the
phrase "and non-qualified stock options" after the phrase
"Incentive stock options" appearing in the first sentence
therein.
4. Section 6(e) of the Plan is hereby amended by adding the
sentence "Notwithstanding anything to the contrary contained
in this Section, in the event non-qualified stock options are
to be granted, the Committee may, if it chooses in its sole
discretion to do so, provide for the assignability of such
options upon such terms and conditions as it may deem
advisable or appropriate in a specific case or cases" at the
end thereof.
5. Section 6(f) of the Plan is hereby amended by adding the
sentence "Notwithstanding anything to the contrary contained
in this Section, in the event non-qualified stock options are
to be granted, the Committee may, if it chooses in its sole
discretion to do so, provide for such terms and conditions to
be included in such non-qualified stock options as it may
deem advisable or appropriate in a specific case or cases" at
the end thereof.
6. Section 8 of the Plan is hereby amended by adding the
sentence "Notwithstanding anything to the contrary contained
in this Section, in the event non-qualified stock options are
to be granted, the Committee may, if it chooses in its sole
discretion to do so, provide for such terms and conditions to
be included in such non-qualified stock options as it may
deem advisable or appropriate in a specific case or cases."
<PAGE>
Exhibit 10.10
-------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTES SUCH OMISSIONS.
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
-----------------------------------
AGREEMENT, made as of the 28th day of December, 1995, by
and between CAMBRIDGE HEART, INC., a corporation duly incorporated
under the laws of the State of Delaware (hereinafter referred to
as "Cambridge Heart"), having its office at One Oak Park, Bedford,
Massachusetts 01730, and KONTRON INSTRUMENTS LTD., a corporation,
having its principal office at Blackmoor Lane, Croxley Business
Park, Watford, Herts, United Kingdom WD1 8XQ (hereinafter referred
to as "Distributor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Cambridge Heart is engaged in the development
of systems performing exercise stress test or measuring electrical
alternans; and
WHEREAS, Cambridge Heart has no distribution facilities,
places of business or employees in Europe and desires to arrange
for the distribution of its products in the area specified as the
Territory on Attachment A (the "Territory"); and
WHEREAS, Distributor desires to become the exclusive
distributor in Europe of Cambridge Heart's exercise stress test
system;
NOW THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter contained, it is hereby
agreed as follows:
1. Appointment and Territory.
-------------------------
1.1 Distributor is appointed exclusive and sole distributor in
the Territory for the Cambridge Heart Products (the "Products")
listed in Attachment A and their successors and extensions,
subject to the terms and conditions set forth in this agreement.
Cambridge Heart shall have the right subject to the prior written
approval of the distributor to appoint one or more OEMs in the
Territory to sell a private label version of the Product,
incorporated in a system or product consisting of a substantial
amount of other hardware and/or software which such OEM
manufactures, integrates or develops, and which will not include
electrical alternans calculation. The distributor shall not
unreasonably withhold such approval.
1.2 Kontron does not become an agent of Cambridge Heart by
virtue of this Agreement but rather shall purchase and sell in its
own name and for its own account, without being entitled to act in
<PAGE>
the name of Cambridge Heart or to obligate Cambridge Heart in any
form towards any third party.
1.3 Kontron shall safeguard the interests of Cambridge Heart
with the due diligence of a responsible businessman and keep
Cambridge Heart informed as to its activities.
1.4 Kontron is entitled to appoint distributors, sub-
distributors, or directly/indirectly employed agents for the sale
of Cambridge Heart products in the Territory. Lists of such
agents shall be at Cambridge Heart's disposal for consultation at
any time. Such distributors, sub-distributors, or
directly/indirectly employed agents shall be subject to the terms
of this Agreement.
1.5 This Agreement and the rights, duties and obligations
hereunder, may not be assigned or delegated by any party without
the prior written consent of the party. Except that Kontron may
specifically assign the Agreement to any of its sister companies
listed in Attachment B, provided, that no such assignment shall
relieve Kontron of any responsibility or liability hereunder
(including its responsibility to coordinate its distribution
activities from a single point of contact). Notwithstanding the
foregoing, Cambridge Heart may assign its rights or delegate its
duties hereunder to any affiliated person or entity which
controls, is controlled by, or is under common control with,
Cambridge Heart or to any successor to its business.
2. Term and Termination
--------------------
2.1 Term: This agreement commences on the date of the
----
execution of this agreement and continues until December 31, 1997,
unless sooner terminated in accordance with the provisions of the
Paragraphs below. This agreement shall be automatically renewed
for successive two-year periods unless terminated in accordance
with the provisions for termination outlined in the Agreement.
2.2 The parties agree to negotiate in good faith new Sales
Minima and Marketing Plans for each renewal term commencing no
later than ninety (90) days before the end of the initial term or
two year renewal term. The Sales Minima for subsequent periods
shall not be less than the greater of the actual sales of Products
in the Territory and the Sales Minima for the previous 12 month
periods ending with the start of negotiations or with the end of
the previous term.
If either party believes at the end of such 90-day negotiation
period that the other is not negotiating concerning renewal terms
in good faith, such party may require that the renewal terms be
finally settled by arbitration in Boston, Massachusetts, under the
-2-
<PAGE>
Rules of Conciliation and Arbitration of the International Chamber
of Commerce by three arbitrators appointed in accordance with such
Rules; The arbitrator shall decide between the final proposal of
Distributor and of Cambridge Heart made prior to the end of the
ninety-day period.
2.3 Ordinary termination will require 24 months written notice
by either party. Such notice cannot be given before December,
1996. In the event of such a notice of termination by Cambridge
Heart, Cambridge Heart shall have the right to render the
Distributor's exclusive distribution rights non-exclusive by at
least 90 days notice in writing but not effective prior to the
expiration of the first 12 months of the 24 months ordinary
termination notice period. In the event of such a notice of
termination by Distributor, Cambridge Heart may terminate this
agreement at any time upon thirty (30) days written notice.
During the period of the 24 months termination phase in which the
Distributor's rights remain exclusive, Distributor must continue
to achieve the Sales Minima and must sell not less in any calendar
quarter than the amount sold in the equivalent quarter in the year
before termination.
During the period of the 24 month termination phase in which the
Distributor rights may be non-exclusive, the distributor will
continue to use its best efforts to continue to promote, advertise
and market the products of Cambridge Heart, but will not be
required to meet any sales Minimum or Marketing Plans and will
receive terms of trade as favorable as those offered to any other
distributor operating in the Territory.
2.4 Cambridge Heart shall also have the right, by at least six
(6) months' written notice to Distributor given within 6 months of
the event, to terminate the agreement (the ability to so terminate
being a material inducement to Cambridge Heart to the appointment
of and grant of a license to Distributor hereunder), if
Distributor has failed to achieve the Sales Minima defined in
Appendix C.
In the event that Distributor's failure to reach an agreed Sales
Minimum results from any of the following specified conditions,
Distributor shall be entitled to delay its compliance with sales
minimas adversely affected by such condition, by the amount of
such delay:
(a) The failure of Cambridge Heart to obtain regulatory
approval of the Product specified in Paragraph 9.1
hereof by January 31, 1995;
(b) The failure of Cambridge Heart to ship products
-3-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTES SUCH OMISSIONS.
within the applicable period for orders properly
placed at least 45 days prior to the end of such
period.
2.5 This agreement may be terminated by mutual consent of the
parties hereto and may also be terminated by written notice to any
party hereto as follows:
(a) In the case of dissolution or liquidation of either
party.
(b) In the case of insolvency or bankruptcy of either
party.
(c) If either party shall sell its company or business
in whole or in part or shall sell or assign all or
any of its shares to any competitor.
(d) If such party shall fail to perform or comply with
any material terms, provisions or conditions of
this agreement to be performed or complied with or
by it and shall fail to remedy such default or
failure, or, in the event that such remedy is not
entirety within its control, shall have failed to
take all reasonable steps within its control to
affect such remedy, within thirty (30) days after
receipt of written notice thereof.
2.6 During any 24 month ordinary termination period Cambridge
Heart may terminate without any further notice or payment by the
payment of:
(a) for each remaining month of the exclusive portion
of the ordinary termination period a sum equal to
******* of the sales by Cambridge Heart to
Distributor in the 12 months prior to termination,
and
(b) for each remaining month of the non-exclusive
portion of the ordinary period a sum equal to
******* of the sales by Cambridge Heart to
Distributor.
It being agreed by the parties that this payment constitutes the
total due for compensation and damages due to Distributor, whether
awarded by a court or otherwise, for any such termination.
Cambridge Heart sales is defined as the revenues received by
Cambridge Heart from Distributor for system sales only does not
include service parts or accessories. In this context, the word
-4-
<PAGE>
system includes hardware and software and includes the cost of any
hardware included in the system per Appendix A and supplied
locally by Kontron.
3. Obligation at Termination
------------------------
3.1 The termination of this Agreement shall not release either
party from any liability or obligation which existed as of the
date of notice of such termination.
3.2 Upon termination or expiration of this agreement,
Distributor shall immediately discontinue the use of the Software
and of any trade names, trademarks, symbols or designations
associated with Cambridge Heart or the Products and shall
immediately discontinue designating itself as an authorized
distributor of Cambridge Heart. In such event, all rights of
Distributor in or to Software, including the right to copy, and
distribute and market Software shall cease, and Distributor shall
return to Cambridge Heart all copies of Software in its possession
or control.
3.3 Except as set forth below, in the event of termination or
expiration of this agreement, Distributor shall immediately return
to Cambridge Heart all copies of Software, sales manuals,
operating and service manuals, parts identification data,
instructions, catalogs, descriptions, price lists, order forms,
advertising, and other similar materials and all confidential or
proprietary information furnished to Distributor by Cambridge
Heart and all materials derived therefrom. Notwithstanding the
foregoing, provided Distributor is not then in default under
Distributor's obligations hereunder and provided Distributor will
continue to service products after expiration of this agreement,
upon expiration of this agreement, Distributor may retain such of
the foregoing materials as Cambridge Heart may deem necessary for
Distributor's continued servicing of Products. However, should
Distributor cease servicing Products at any time thereafter,
Distributor shall immediately, return to Cambridge Heart all such
materials retained by Distributor and all materials derived
therefrom.
3.4 In the event of the termination or expiration of this
agreement, unless otherwise requested by Cambridge Heart,
Distributor shall have the obligation to continue to provide
warranty service and Cambridge Heart shall continue to supply
spare parts for such service. For systems out of warranty the
parties will negotiate in good faith the means to provide
continued service to their customers and the associated
disposition of distributors remaining spare parts inventory.
3.5 Termination or expiration of this agreement shall not
-5-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
affect the rights of any Software licensees not affiliated with
Distributor and, to the extent the licenses under this agreement
apply to Distributor or its affiliates as end users of the
Product, termination or expiration shall not affect the rights of
the Distributor or its affiliates to the licenses granted.
3.6 Upon termination but only if such is initiated by Cambridge
Heart and for a twelve month period thereafter, Cambridge Heart
shall refrain from hiring people who are employed directly or
indirectly as "agenti mono-mandatari" at that time or in any
previous six months by Kontron, other than subdistributors not
affiliated with Kontron, unless specifically exempted in writing
from this requirement by Kontron.
4. Prices and Payment Terms
------------------------
4.1 All purchases of Products by Distributor shall be at the
prices, terms and discounts described in Attachment A. All prices
are exclusive of, and Distributor is responsible to pay, all
tariffs, duties and taxes due in the country of destination, and
all insurance, delivery and shipping charges. All payments to
Cambridge Heart shall be paid in U.S. dollars. Cambridge Heart
may change its prices from time to time and will give Distributor
at least ninety (90) days' notice of such price changes, but in no
case shall Distributor be required to pay more than any other
distributor of Cambridge Heart with similar terms.
4.2 Price increases for the Product without Alternans during
the initial term or any two-year renewal term must not exceed ***
umulatively per year plus the cumulative increase in the U.S.
Producer Price Index ("PPI"). In the event that Cambridge Heart
experiences a material increase in product cost in excess of ****
**********, Cambridge Heart will notify Distributor and the
parties will negotiate new prices in good faith. If at the time
of any such price increase there are any quotes outstanding,
copies of which have been received and approved by Cambridge
Heart, those quotes will be honored for up to six (6) months.
These restrictions do not apply to the Alternans module or any
future modules.
4.3 Should the ECU to U.S. Dollar exchange rate deviate more
than plus or minus ten (10) per cent from the rate prevailing at
the time of the Agreement, then either of the parties may initiate
a review of pricing; both parties agreeing herein to conduct such
a review with good faith.
4.4 All orders for products shall be placed only on
Distributors standard purchase order form and will be valid upon
acceptance and confirmation in writing by Cambridge Heart.
Cambridge Heart is only obliged to accept orders place in
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<PAGE>
accordance with agreed marketing plans, sales minimas and
forecasts and to the established or agreed specifications.
Cambridge Heart will use its best efforts to ship orders within
Distributors most recent quarterly forecast within 45 days after
receipt of the Purchase Order and other required ordering
documentation.
4.5 Payment for shipments through December 31, 1997 shall be
45 days from the date of shipment; payment for shipments
thereafter shall be due 60 days from the date of shipment.
5. Forecasting
-----------
5.1 On or before the first day of each calendar quarter during
the term of this agreement, Distributor will deliver to Cambridge
Heart a written forecast of the number and type of products
Distributor intends to order during each of the next six
successive calendar months.
6. Software
--------
6.1 Cambridge Heart grants to Distributor a nontransferable
limited license to (i) use and display the object code version of
the Software in promoting and servicing Products in accordance
with this agreement, and (ii) copy and grant sublicenses of the
run time version of the Software included in the Product for use
solely with and as part of the Product for which license fees are
paid to Cambridge Heart in accordance with this agreement. For
purposes hereof, "Software" shall mean the programs, routines,
subroutines, algorithms, translations, compilers and operating
systems which Cambridge Heart has developed or has the right to
sublicense for general commercial use with the Product.
6.2 In order to constitute a valid license of the Software
object code, prior to delivery of Software to each end user,
Distributor shall have each end user execute a Software License
Agreement with Distributor acting on behalf of and assigning its
rights to Cambridge Heart in a form approved in advance by
Cambridge Heart (the "Software License Agreement"). Upon execution
of the Software License Agreement by the end user, Distributor
shall forward an original, executed copy of such license agreement
to Cambridge Heart. Distributor shall use reasonable efforts to
ensure that all end users comply with the terms of the Software
License Agreement at all times and shall promptly notify Cambridge
Heart of any breaches of such agreements when such breaches become
known to Distributor.
The parties recognize that it may be difficult to obtain
signatures from certain types of customers or in certain
jurisdictions, and in the event that Kontron encounters such
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<PAGE>
difficulties in general, the parties will negotiate in good faith
an alternative to this requirement consistent with Kontron's
obligation to protect Cambridge Heart's software with the same
diligence with which it protects its own.
6.3 Distributor agrees to the terms and provisions of the
Software License Agreement attached as Appendix D with respect to
the Software as if set forth in full herein, except that
Distributor may transfer copies of the Software in object code
form to valid licensees of Cambridge Heart in accordance with the
terms of this agreement. Title to and ownership of the Software
shall at all times remain the exclusive property of Cambridge
Heart or of Cambridge Heart's licensors, as appropriate.
Distributor shall have no access to the source code for the
Software. Distributor shall not make any modification to or
enhancement of the Software without the prior written consent of
Cambridge Heart.
6.4 Distributor shall maintain such books and records as are
necessary to properly calculate and verify the amount of license
fees or other amounts to be paid pursuant to this agreement.
Distributor will maintain and supply to Cambridge Heart at its
reasonable request a complete and accurate listing of the
disposition of all systems shipped by Cambridge Heart and the
software options installed upon each. Cambridge Heart shall have
the right from time to time to inspect all of the accounting,
sales and customer service books and records of Distributor as
they pertain to Products to ensure compliance with the terms of
this agreement. Any such audit may be conducted by Cambridge
Heart staff and/or a certified public accountant or other
representative selected by Cambridge Heart, upon reasonable notice
and during normal business hours, in such manner as not to
interfere with Distributor's normal business activities. The cost
of any such inspection shall be borne by Cambridge Heart, except
that if any such inspection or the inspections with respect to any
twelve-month period shall indicate a shortfall in the payment of
royalties or other amounts of ten percent (10%) or more,
Distributor shall bear the expense of such inspection or
inspections.
7. Marketing and Promotion
-----------------------
7.1 Distributor agrees to use its best efforts to promote,
advertise and market the Products and solicit orders. Distributor
shall install Products, train customers and provide service for
the products, in accordance with Cambridge Heart's approved
procedures, and provide Cambridge Heart with current and timely
information regarding market conditions in the Territory in a
professional manner. Distributor also agrees to accomplish the
marketing activities specified in the Marketing Plan attached as
-8-
<PAGE>
Appendix B.
7.2 It is understood and agreed that all patents and patent
rights, trademarks, copyrights, tradenames and other property
rights in and with respect to the Products are and will remain
exclusively the property of the Cambridge Heart and Distributor
shall not be entitled to register or attempt to register any such
mark, name or right in any jurisdiction in the name of
Distributor. Solely for the purpose of marketing Products,
Distributor may, during the term of this agreement, indicate that
it is an authorized distributor for Products and may advertise the
same under the trademark for the product of Cambridge Heart. All
Distributor advertising using any tradename, trademark, service
marks, or logos of Cambridge Heart shall appropriately credit
Cambridge Heart.
7.3 If Distributor advertises the sale and service of Products,
Distributor shall not use any advertising which tends to mislead
or deceive the public. Distributor may use printed advertising
and promotional materials furnished by Cambridge Heart or may use
its own materials. Copies of all such materials will be made
available to Cambridge Heart upon reasonable request; Distributor
is encouraged to make them available in advance for a review of
accuracy. Cambridge Heart agrees to provide reasonable quantities
of its own sales literature, training and promotional materials in
English free of charge.
7.4 Demo Units. Distributor agrees to purchase and maintain,
----------
or cause its subdistributors to purchase and maintain, in its
possession and in working order during the term of this agreement
a minimum of one fully configured demo system in each Country of
the Territory. The schedule for such purchases is described in
Appendix B. Each subdistributor of Distributor in the Primary and
Secondary Distributor Territories may sell and replace one demo
unit per year, each must be held for one year before being sold.
8. New Products
------------
Cambridge Heart intends to develop an imaging system for stress
test to be added to the CH 2000 line which, if development is
successful, will be offered to Distributor for distribution or
sale. Distributor agrees to develop and execute a marketing plan
for such system comparable in scope to the Marketing Plan for the
CH 2000. The parties agree to negotiate the details of such
Marketing Plans, the Sales Minimas and Prices for such system in
good faith. In the event that the parties cannot agree on such
matters within ninety (90) days after the first notification by
Cambridge Heart to Distributor of the terms of distribution for
such new system, then Cambridge Heart may offer the new imaging
system to another distributor at terms more favorable to Cambridge
-9-
<PAGE>
Heart in some material way to those last offered by Distributor or
require Distributor to distribute the new imaging system with an
automatic *** increase in the existing Sales Minimas to reflect
the sales of the new system.
In the event that Cambridge Heart develops other future systems
for exercise stress test, targeted at a different market segment
or price point, which are suitable for distribution through direct
sales, Cambridge Heart will first negotiate with Distributor, for
ninety (90) days, for the distribution of such systems in the
Territory.
9. Regulatory Compliance
---------------------
9.1 Cambridge Heart will obtain CE mark approval for the
product prior to January 31, 1995 and name Distributor as its
European Representative. Distributor agrees to be named as
Cambridge Heart's European Representative for regulatory purposes
for European countries outside of the Territory. Cambridge Heart
will bear all the costs relating to the obtainment of such
regulatory approvals.
9.2 Distributor will at all times fully comply with all
regulations of the United States Food and Drug Administration and
applicable European authorities with respect to the monitoring of
complaints and maintenance of repair and other records.
Distributor shall forward such documents to Cambridge Heart at
such frequency as shall be reasonably requested by Cambridge
Heart, and shall cooperate with Cambridge heart in all complaint
measures deemed by Cambridge heart to be necessary or appropriate,
including any voluntary recall of Products. Cambridge Heart will
cooperate fully with Kontron's CAR/F3 complaint handling
procedure.
9.3 Distributor agrees that neither it nor its customers intend
to or will, directly or indirectly, export the Products or
transmit the Software or related documentation and technical data
to any country if such export or transmission is prohibited by any
U.S. regulation or statute without the prior written consent of
the bureau of Export Administration of the U.S. Department of
Commerce or such other government entity as may have jurisdiction
over such export or transmission. Cambridge Heart agrees to
notify Distributor of any changes to the list of countries to
which such export is prohibited.
10. Support and Service
-------------------
Distributor shall support and service Products in the Territory,
and provide all labor necessary for repairs of Products, including
warranty service. Such service shall be provided by Distributor
-10-
<PAGE>
faithfully and to the best of its ability, in a professional and
responsible manner, at a level and with response times, rates and
other attributes consistent with the highest performance offered
in the Territory for other stress test equipment, by competitors
or others. Distributor shall develop a written Service Plan by no
later than March 31, 1996 for discussion with and approval by
Cambridge Heart. Distributor shall purchase and maintain a spare
parts inventory and provide customer training in accordance with
the Service Plan. Distributor will also ensure that all
subdistributors are formally trained in service of the product and
maintain in their possession adequate spare parts in accordance
with such Service Plan.
11. Limited Warranty; Disclaimers
-----------------------------
11.1 Cambridge Heart warrants for a period of fifteen (15)
months from shipment by Cambridge Heart to Distributor, or twelve
(12) months from shipment by Distributor to its customer,
whichever is shorter ("Warranty Period"), that the Product shall
(a) conform to Cambridge Heat's standard Product Specifications in
effect at the time of the confirmation of the purchase order,
(b) shall be free from defects in material and workmanship under
normal and proper use, and (c) if used in accordance with the
Instructions for Use of Cambridge Heart applicable thereto are fit
for use for the specific purposes set forth in the Instructions
for Use and Product Specifications, but Cambridge Heart makes no
warranties for use for any other purpose. Distributor agrees to
provide the necessary labor to replace any defective parts at
Distributor's expense and to provide a 12-month parts and labor
warranty to its customers of the Products.
THE EXPRESS WARRANTIES SET FORTH IN PARAGRAPH 11.1 CONSTITUTES THE
ONLY WARRANTIES WITH RESPECT TO THE PRODUCTS. CAMBRIDGE HEART
MAKES NO REPRESENTATION OR WARRANTY OF ANY OTHER KIND, EXPRESS OR
IMPLIED.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY OR ANYONE
CLAIMING THROUGH OR ON BEHALF OF THE OTHER PARTY, INCLUDING LOSS
OF USE, REVENUE, OR PROFITS, IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY BREACH OF THIS AGREEMENT BY CAMBRIDGE HEART
OR THE EXISTENCE, FURNISHING, FUNCTIONING, OR DISTRIBUTOR'S OR ANY
THIRD PARTY'S USE OF ANY PRODUCTS OR SERVICES PROVIDED FOR IN THIS
AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
Cambridge Heart's sole liability with respect to any product
furnished under this Agreement shall be limited to the remedies
provided in Paragraph 11.4 of this Agreement.
-11-
<PAGE>
11.2 Cambridge Heart's warranties set forth in Paragraph 11.1
shall not apply in circumstances that would be excluded by its
standard end user warranty terms, such as misuse or alteration of
the Product or use of the Product for other than the specific
purpose for which it is designed.
11.3 Cambridge Heart's sole obligation under the hardware
warranty set forth in Paragraph 11.1 shall be, at no cost to
Distributor, to repair or replace, at Cambridge Heart's option,
the defective or nonconforming hardware. Cambridge Heart's sole
obligation under the Software warranty set forth in Paragraph 11.1
shall be to: (i) accept, analyze and provide written response to
any reports from Distributor of Software malfunction or error; and
(ii) use best efforts to provide responses to correct such errors
within a commercially feasible time scale when they reflect
significant deviations from Cambridge Heart's design
specifications for the current release of the Software.
12. Confidentiality
---------------
12.1 Distributor agrees to keep confidential any and all trade
information, proprietary information (including, without
limitation, the Software) and business information of Cambridge
Heart acquired pursuant to this agreement except as authorized in
writing by Cambridge Heart.
13. Covenant; Indemnity
-------------------
13.1 Distributor does not, and shall not during the term of this
agreement (including any two-year period following termination of
the contract initiated by the distributor) directly or indirectly,
manufacture, develop, distribute or sell in whole or in part, a
system for performing an exercise stress test or measuring
electrical alternans, other than a Product of Cambridge Heart,
without the express written permission of Cambridge Heart.
The relationship between Kontron Instruments and Pulse Biomedical
Inc. for their laptop based ECG system which incorporates stress
test type software is specifically excluded from this Covenant.
13.2 Cambridge Heart shall keep Kontron indemnified and harmless
against any liability or damages caused by any claim of a third
party relating to the manufacture of a Product furnished to
Kontron by Cambridge Heart which did not meet the specifications
in effect at the time of confirmation of the purchase order, or
from the negligence or other wrongdoing of Cambridge Heart or any
employee or agent of Cambridge Heart (other than Kontron).
Kontron shall keep Cambridge Heart indemnified and harmless
against any liability or damages caused by packaging by Kontron,
registration, distribution, promotion of the products for use or
-12-
<PAGE>
use of the Products outside of their specifications or against
their specific warnings, precautions or contraindications, or from
the negligence, failure to comply with instructions regarding use
of the Product, or other wrongdoing of Kontron or any employee or
agent of Kontron.
In the event that other damages which arise out of transactions
related to this agreement are alleged against either Kontron or
Cambridge Heart or both, then Kontron and Cambridge Heart shall
cooperate to defend against and defeat such allegations, but if
such damages should be found and allowed against either Kontron or
Cambridge Heart or both, then Kontron and Cambridge Heart shall
indemnify each other against the same, such that the parties shall
bear the damages and the costs of defense equally.
14. Miscellaneous
-------------
14.1 All notices, demands, requests, consents, approvals or
other communications required or permitted to be given under this
agreement or which are given with respect to this agreement shall
be in writing and may be personally served or may be deposited in
the United States federal Territory mail, registered or certified,
return receipt requested, postage prepaid, addressed to a party at
its address set forth above or such other address as such party
shall have specified most recently by written notice. Notice
mailed as provided herein shall be deemed given on the tenth
business day following the date so mailed.
14.2 The headings of the Paragraphs of this agreement are for
convenience only and will not be of any effect in construing the
meaning of the Sections. This agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute but one and the same
instrument.
14.3 This agreement may not be modified, changed or
supplemented, nor may any obligations hereunder be waived or
extensions of time for performance granted, except by written
instrument signed by the party to be charged.
14.4 No waiver of any breach of any agreement or provision
herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision
herein contained.
14.5 This agreement and the provisions hereof shall be binding
upon each of the parties, their successors and permitted assigns.
14.6 Cambridge Heart shall release Kontron instruments from any
obligations made to third party distributors, subdistributors or
-13-
<PAGE>
agents, actual or potential, that may have been made or could be
assumed to have been made by Cambridge Heart prior to the signing
of this Agreement. Cambridge Heart shall indemnify Kontron
Instruments and keep it harmless against any claims or actions
made by any such distributors, subdistributors or agents.
15. Choice of Law, Arbitration and Force Majeure
--------------------------------------------
15.1 This Agreement including the arbitration clause, shall be
interpreted and construed in accordance with the laws of England,
it being expressly understood that the United Nations
International Conventions on the Sale of goods shall not apply.
15.2 Any differences or disputes arising from this Agreement or
from agreements regarding its performance, shall be settled by an
amicable effort on the part of both parties to the Agreement by
their respective chief executive officers or their delegates. An
attempt to arrive at a settlement shall be deemed to have failed
as soon as one of the parties to this agreement notifies the other
party in writing.
15.3 If an attempt at settlement has failed, disputes, including
those relating to Paragraph 2 hereof, shall be finally settled in
the English language under the rules of the Conciliation and
Arbitration of the International Chamber of Commerce by three
arbitrators appointed in accordance with the Rules, the place of
arbitration being Boston, Massachusetts; Notwithstanding the
foregoing arbitration agreement, the parties shall be entitled to
apply to any court of competent jurisdiction for a prearbital
injunction, prearbital attachment or other order in aid of
arbitration proceedings and enforcement of an arbitration award.
15.4 The arbitral decision shall be substantiated in writing.
The arbitral tribunal shall decide on the matter of costs of the
arbitration.
15.5 Neither party shall be liable for failure to perform
obligations under this Agreement if the failure results from the
force majeure, such as fire, explosion, acts of ware, or
hostilities of any nature, accident, refusal of license, or other
governmental act (including regulatory approvals and export/import
licenses), industrial dispute, or anything manifestly beyond the
parties' control.
This Agreement consists of 21 pages, including two attachments,
five appendices and one amendment.
IN WITNESS WHEREOF, the parties hereto have duly
executed the agreement on this date and year first above written.
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<PAGE>
KONTRON INSTRUMENTS LTD. CAMBRIDGE HEART, INC.
By: ______________________ By: _________________________
Name: L. Smith Name: J. Arnold
--------------------- ------------------
Date: 28.12.95 Date: 1.11.96
-------------------- -------------------
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<PAGE>
ATTACHMENT A
------------
1. Products. CH 2000 Stress Test System. The Product
--------
will conform in all material respect with the Specifications
attached hereto as Appendix E. Upon receipt of the first unit
purchased by Distributor, Distributor shall evaluate it in
relation to such Specifications and, within thirty (30) days after
receipt of such initial unit, give Cambridge Heart written notice
of any respects in which such unit does not conform to the
Specifications therefor.
2. Territory. Consists of:
---------
(a) Direct Territories: The Countries of France, Spain
(includes Portugal), Germany (includes Austria and Switzerland)
and Italy;
(b) Primary Distributor Territories: The Countries of
Turkey, Russia, Belgium (includes Luxembourg), Sweden and Greece;
and
(c) Secondary Distributor Territories: The Countries
of Hungary, the Czech Republic, Saudi Arabia (includes the Gulf
States: Kuwait, United Arab Emirates, Oman and Qatar), Egypt and
South Africa. Distributor must obtain advance permission from
Cambridge Heart in writing for sales outside of the Territory.
3. Prices and Discounts. During the initial term,
--------------------
Product prices and Distributor discounts shall be as set forth on
Appendix A. Distributor may purchase the Monitor locally.
Cambridge Heart reserves the right to make unrestricted changes to
the prices of components of the systems which do not affect the
total system prices.
4. Documentation. Cambridge Heart will provide an
-------------
operator's manual in English, German, Italian and French.
Distributor will obtain translations for other languages which it
may require to meet regulatory or marketing requirement.
5. Shipment Terms. Products will be shipped F.O.B.
--------------
Cambridge Heart designated depot. In the absence of instructions
to the contrary, Cambridge Heart on behalf of Distributor will
select the carrier but shall not be deemed thereby to assume any
liability in connection with the shipment nor shall the carrier be
construed to be an agent of Cambridge Heart. Risk of loss for the
Products purchased hereunder shall pass to the Distributor at the
time of delivery into the hands of a common carrier for shipment.
-16-
<PAGE>
Insurance for Products during transit will be the responsibility
of Distributor.
6. Failure to Take Delivery of Orders. If Distributor
----------------------------------
fails to take delivery of any shipment, or any portion of a
shipment, upon arrival at the designated delivery point, Cambridge
Heart shall have the right to place the Products in storage, and
Distributor shall be liable for all reasonable transportation,
loading, storage, and costs incurred by Cambridge Heart by reason
of Distributor's failure to take delivery of the Products.
7. Packaging. Products will be shipped in Cambridge
---------
Heart's standard packaging. Unless otherwise agreed upon by
Cambridge Heart in writing, Cambridge Heart shall be under no
obligation to provide special or military packaging.
-17-
<PAGE>
ATTACHMENT B: KONTRON AFFILIATES
---------------------------------
Kontron Instruments GMBH Germany
Kontron Instruments SA France
Kontron Instruments SpA Italy
Kontron Instruments SA Spain
Kontron Instruments lda Portugal
Kontron Instruments AG Switzerland
Kontur AS Turkey
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<PAGE>
APPENDIX A: PRICE LIST
PRODUCTS KONTRON PRICE LIST PRICE DISC
-------- ------------- ---------- ----
APPENDIX A
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
APPENDIX B: MARKETING PLAN
APPENDIX B
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
APPENDIX C: SALES MINIMA
APPENDIX C
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
APPENDIX D: SOFTWARE LICENSE AGREEMENT
CH-2000 Cardiac Diagnostic System
This is a legal agreement between you (either individual or
entity), the end user, and Cambridge Heart, Inc. ("CHI").
CAMBRIDGE HEART LICENSE AGREEMENT
Grant of License. Upon acceptance by CHI, CHI grants to you the
----------------
right to use one copy of the CHI software program identified above
(the "Software") on the single computer on which the Software is
initially installed by CHI (the "Dedicated Computer"), in the
country indicated across from your signature below.
Ownership; Copyright. As the licensee, you own the physical media
--------------------
on which the Software is originally or subsequently recorded, but
CHI and its licensors (if any) retain title and ownership of the
Software recorded on the original disk or other media and all
subsequent copies of the Software, regardless of the form or media
in or on which the original and other copies may exist. This
license is not a sale of the original Software or any copy
thereof. The Software and the accompanying written materials are
patented and copyrighted and are protected by United States patent
and copyright laws and international treaty provisions, and
further, contain trade secret and proprietary information.
Therefore, you must treat the Software like any other patented and
copyrighted material (e.g., a book or musical recording) and trade
secret information. Subject to these restrictions, you may either
(a) make one copy of the Software solely for backup purposes in
support of your permitted use of the Software on the Dedicated
Computer, or (b) transfer the Software to a single hard disk on
the Dedicated Computer provided you keep the original solely for
backup purposes. (Programs, however, may include mechanisms to
limit or inhibit copying, and they are marked "copy protected";
programs on CD-ROM will not be copyable.) The patent, copyright
and other notices must be reproduced on the backup copy. You may
not copy the written materials accompanying the Software.
Other Restrictions. You may not rent or lease the software, but
------------------
you may transfer your rights under this Agreement on a permanent
basis in conjunction with your transfer of the Dedicated Computer,
provided at the same time you transfer the Software (including all
copies, whether in printed, machine readable form or otherwise,
and all accompanying written materials) and Dedicated Computer you
retain no copies, the recipient agrees in writing to accept the
terms of this Agreement and such writing is delivered to and
accepted by CHI. Any such transfer, or any transfer of possession
of any Software in whole or in part to another party shall
-22-
<PAGE>
automatically terminate your license. If the Software is an
update, any transfer must include the update and all prior
versions. YOU MAY NOT DISTRIBUTE COPIES OF THE SOFTWARE OR THE
ACCOMPANYING WRITTEN MATERIALS TO OTHERS. YOU MAY NOT MODIFY,
ADAPT, TRANSLATE, REVERSE ENGINEER, DECOMPILE, DISASSEMBLE, OR
CREATE DERIVATIVE WORKS BASED ON THE SOFTWARE OR THE WRITTEN
MATERIALS.
Dual Media Software. If the Software package contains both
-------------------
diskettes and CD-ROM, then you may use only the media appropriate
for your single Dedicated Computer. You may not use the other
media on another computer or computer network, or loan, rent,
lease or transfer it to another user except as part of a transfer
or other use as expressly permitted by this Agreement.
Limited Warranty. CHI does not warrant that the functions
----------------
contained in the Software will meet your requirements or that the
operation of the Software will be uninterrupted or error free.
However, CHI warrants to you, the original licensee, that the
Software will perform substantially in accordance with the
accompanying written materials under normal use and serve for a
period of one (1) year. This limited warranty shall not apply to
Software which CHI determines has been subject to misapplication,
improper installation, repair, modification or alteration by
anyone other than CHI, or which has been subject to accident or
abuse or merged with or incorporated into any other program.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES. THE
SOFTWARE IS LICENSED ON AN "AS IS" BASIS WITHOUT ANY, AND CHI AND
ITS LICENSORS (IF ANY) HEREBY DISCLAIM ALL OTHER WARRANTIES,
EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. SOME JURISDICTIONS DO NOT ALLOW THE LIMITATION OF
IMPLIED WARRANTIES, SO THE ABOVE LIMITATION MAY NOT APPLY TO YOU.
THIS LIMITED WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS AND YOU MAY
ALSO HAVE OTHER RIGHTS WHICH MAY VARY FROM JURISDICTION TO
JURISDICTION.
Limitation of Remedies. CHI's entire liability and your exclusive
----------------------
remedy shall be, at CHI's option, either (1) the replacement of
any diskette(s) or other media not meeting CHI's "Limited
Warranty" and which is returned to CHI or an authorized CHI
Software distributor or dealer within such one (1) year period
with a copy of your receipt, or (2) if CHI or the distributor or
dealer is unable to deliver within 180 days after such return a
replacement diskette(s) or other media meeting CHI's "Limited
Warranty," you may terminate this Agreement by returning the
Software (and all related documentation) and your money will be
refunded. Any replacement of the Software will be warranted for
the remainder of the original warranty period or thirty (30) days,
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<PAGE>
whichever is longer.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT
WILL CHI OR ANY OTHER PARTY WHO HAS BEEN INVOLVED IN THE CREATION,
PRODUCTION OR DELIVERY OF THE SOFTWARE BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER DAMAGES WHATSOEVER
(INCLUDING, WITHOUT LIMITATION, DAMAGES FOR PERSONAL INJURY OR
DEATH, DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, BUSINESS
INTERRUPTION, LOSS OF INFORMATION OR ANY OTHER PECUNIARY LOSS),
WHETHER RESULTING FROM DEFECTS IN THE MEDIA, OR ARISING OUT OF THE
USE OR PERFORMANCE OF OR INABILITY TO USE OR THE RESULTS OF USE
OF, THE DOCUMENTATION OR SOFTWARE, EVEN IF CHI OR AN AUTHORIZED
SOFTWARE DISTRIBUTOR OR DEALER HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. SOME
JURISDICTION DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY
FOR INCIDENTAL OR CONSEQUENTLY DAMAGES, SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU.
General. You may not sublicense, assign or transfer the license
-------
of the Software except as expressly provided in this Agreement.
Any attempt otherwise to sublicense, assign or transfer any of the
rights, duties, or obligations thereunder is void. No amendment
to or modification of this Agreement shall be binding unless in
writing and signed by a duly authorized representative of CHI.
This Agreement is governed by the internal laws of the
Commonwealth of Massachusetts, U.S.A., without the conflict of
laws, principles thereof and, to the extent not inconsistent
therewith, the United Nations Convention on the International
Sales of Goods. Should you have any questions concerning this
Agreement, or if you desire to contact CHI for any reason, please
write:
Cambridge Heart, Inc.
1 Oak Park
Bedford, MA 01730
You further agree that this Agreement is the complete and
exclusive statement of the agreement with respect to the subject
matter of this Agreement, which supersedes any proposal of prior
agreement, oral or written, and any other communications relating
to the subject matter of this Agreement.
______________________________
Signature of Licensee
______________________________
Please Print Name as Signed
-24-
<PAGE>
________________________
Institution
________________________
Date
-25-
<PAGE>
APPENDIX E: CH 2000 SPECIFICATIONS
APPENDIX E
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
-26-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
AMENDMENT 1: KONTRON'S SALE OF ESAOTE STRESS TEST SYSTEMS
16. Kontron hereby requests and Cambridge Heart hereby gives its
permission under paragraph 13.1 of the Exclusive Distributorship
Agreement for Kontron to have the right to sell Esaote's Stress
Test Systems, as part of a distribution agreement for other Esaote
Products, only in the countries of France and Spain, subject to
the terms and restrictions described herein. Kontron will be
assumed to be selling such systems in these countries until it
notifies Cambridge Heart in writing of its discontinuation of such
sales.
17. Kontron commits that its agreement with Esaote does not and
will not include unit or revenue sales targets or minima
specifically for Esaote's Stress Test Systems; revenue minima for
all of Esaote's products, however, are acceptable.
18. For any year or part in which Kontron is selling (as
described above) Esaote's Stress Test Systems in any country it
must meet the specific country Sales Minima for that country for
that year. The country Sales Minima is equal to *** of that
country's Sales Target in Appendix C of the Agreement. If Kontron
fails to meet the Sales Minima in any such country then Cambridge
Heart shall have the right to terminate Kontron's distribution
rights in that country on six months notice.
19. If Cambridge Heart chooses to terminate the distribution
rights of Kontron in any country in this manner, the ordinary
termination period for the Exclusive Distributorship Agreement
shall be reduced to 12 months and the maximum discount allowable
in the remaining countries shall become ***.
KONTRON INSTRUMENTS LTD CAMBRIDGE HEART, INC.
By: By:
----------------------- ----------------------
Name: L. Smith Name: J. Arnold
--------------------- --------------------
Date: 28.12.95 Date: 1/11/96
--------------------- ---------------------
-27-
<PAGE>
Exhibit 10.11
-------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTES SUCH OMISSIONS.
EXCLUSIVE DISTRIBUTORSHIP AGREEMENT
-----------------------------------
Cambridge Heart, Inc., A Massachusetts corporation having its
principal office at 1 Oak Park Drive, Bedford, MA 01730 U.S.A.
("CHI"), and Fukuda Denshi Co., Ltd., a Japanese corporation
having its principal office at 35-8, Hongo 2-chome, Bunkyo-ku,
Tokyo, Japan ("FD") agree on May 30, 1996 as follows:
1. Appointment and Territory. FD shall be appointed
-------------------------
exclusive and sole distributor in Japan ("Territory") for all of
CHI's stress test related products including the CH 2000 system
and its successors and extensions ("Products"), subject to the
terms and conditions set forth in this Agreement.
2. Term and Renewal. This Agreement commences on the date
----------------
set forth above and extends through March 31, 1998, unless
terminated earlier pursuant to paragraph 17 hereof. The parties
shall negotiate in good faith the terms (including Prices,
Marketing Plans and Sales Minimums) for successive one year
renewal periods starting one hundred and twenty (120) days before
the end of each term.
3. Sales Minimums and Sales Targets. (a) In consideration
--------------------------------
of this grant of exclusivity, FD shall purchase no less than the
Sales Minimums defined in Appendix A and to use its best efforts
to purchase the Sales Targets also described in Appendix A.
(b) Notwithstanding Paragraph 3.(a) above, if FD's
failure to reach an agreed Sales Minimum results from any of the
following specified conditions, FD shall be entitled to suspend
its obligation to make purchases to meet such Sales Minimum as a
result thereof, and that if such period shall extend beyond six
months, then either party may terminate this Agreement by written
notice to the other:
(i) Demo Units or Products supplied by CHI shall
fail to conform to the Specifications described in Appendix C (the
"Specifications") and CHI shall fail to remedy such nonconformance
within sixty (60) days after receipt of written notice thereof
from FD, which notice from FD must be within thirty (30) days
after receipt of such goods from CHI; and
(ii) CHI shall fail to comply with its obligations
under Paragraph 10(c) hereof, and CHI shall fail to remedy such
failure within sixty (60) days after receipt of written notice
thereof from FD: and
-1-
<PAGE>
(iii) CHI shall fail to provide to FD technical
support as required by this Agreement, which failure materially
and adversely affects the ability of FD to maintain and repair
Products, and CHI shall fail to remedy such support within sixty
(60) days after receipt of written notice thereof from FD; and
(iv) CHI shall fail to comply with the delivery
terms provided for under Paragraph 8 hereof.
(c) FD shall not be required to meet quarterly Sales
Minimums in the first contract year in Appendix A until FD shall
have received the first six (6) Demo Units meeting the
Specifications. Should CHI be delayed in shipping such Demo
Units, the annual Sales Minimums shall be reduced by one-twelfth
(1/12) for each month of such delay.
4. Prices, Terms, Discounts. All purchases by FD shall be
------------------------
at the prices, terms and discounts described in Appendix B. All
shipping, duty and taxes shall be paid by FD. In addition, all
payments shall be made by wire transfer of U.S. dollars within
thirty (30) days from the date of shipment by CHI.
5. Demo Units. FD shall place an order for six (6) fully
----------
configured demo systems ("Demo Units") no later than June 31,
1996. CHI shall ship the Demo Units within one (1) month from the
receipt of the approval from MOH. FD shall maintain in its
possession and in working order no less than nine (9) Demo Units.
FD may sell and replace any Demo Units. FD shall hold each Demo
Unit for at least one (1) year before sale. The number of the
Demo Units FD has purchased shall be counted in the Sales Minimums
in Appendix A.
6. Specifications. The Demo Units described in Paragraph 5
--------------
and all subsequent systems shipped by CHI shall meet the
Specifications including the Improvements requested by FD. CHI
shall upgrade the three (3) previously shipped Demo Units in FD's
possession to meet these Specifications no later than one (1)
month after receipt of MOH approval.
7. Marketing, Distribution and Service. (a) FD shall
-----------------------------------
appoint a Project Manager, who is acceptable to CHI, with full
responsibility and accountability for successful implementation of
this project.
(b) FD shall use its best efforts to promote, advertise
and market the Products, obtain orders, and execute the Specific
Marketing Plan in Appendix D.
-2-
<PAGE>
(c) FD shall support and service the Products in the
Territory and provide all personnel necessary for the repair of
Products, including warranty service. FD shall purchase and
maintain in its possession adequate spare parts in amounts agreed
by the parties.
(d) FD shall use its best efforts to obtain a new
reimbursement code for T-wave alternans at the earliest reasonable
date.
8. Forecast and Delivery. Prior to the first day of each
---------------------
calendar quarter, FD will deliver to CHI a written forecast of the
number and type of Products FD will order during the next six (6)
successive calendar months. CHI shall ship the Products against
FD's orders, within FD's most recent forecast, within sixty (60)
days from receipt of the purchase order and other required
ordering documentation.
9. T-Wave Alternans and Other New Products. (a) CHI shall
---------------------------------------
use its best efforts to develop the Software in order to make the
Products able to measure T-wave alternans to indicate the
possibility of sudden death of patients caused by cardiologic
diseases.
(b) For other products related to stress test, CHI
shall notify FD of their expected availability and shall first
negotiate with FD for their distribution for a period not to
exceed ninety (90) days.
10. Regulatory Compliance. (a) Each party shall at all
---------------------
times comply with all regulations of the United States Food and
Drug Administration ("FDA"), MOH and any other applicable
authorities in the Territory. Each party shall cooperate with the
other in meeting the requirements of FDA and MOH including all
monitoring, compliant and repair measures deemed to be necessary
or appropriate, including any voluntary or involuntary recall of
the Products.
(b) FD shall be responsible, with CHI's support, for
obtaining and maintaining MOH approval for the Products. FD shall
supply to CHI, on a timely basis, copies of all information
developed for and/or submitted for MOH approvals.
(c) CHI shall perform testing and record keeping in
accordance with the requirements set forth in the Confirmation of
the Quality of Medical Devices Imported by Medical Device
Importers (Notification of Director of Inspection and Guidance
Division, Pharmaceutical Affairs Bureau, MHW. No. 40 of June 11,
1991), a copy of which is attached a Appendix G.
-3-
<PAGE>
11. Documentation. CHI shall supply an English language
-------------
operators manual to FD. FD shall develop a Japanese language
version. FD may use printed advertising and promotional materials
furnished by CHI or may use its own materials. CHI shall provide
reasonable quantities of sales literature, training and
promotional materials to FD and to provide photographs used in
CHI's promotional materials for use by FD in creating its own
materials. Each party shall provide the other, in a timely
manner, copies of all materials used for promotion and training.
12. Warranty. In accordance with the terms in Appendix E,
--------
CHI shall warrant for a period of fifteen (15) months from
shipment by CHI to FD, or twelve (12) months from shipment by FD
to its customer, whichever is shorter ("Warranty Period"), that
the Products shall conform to Specifications and shall be free
from any defects and defective workmanship under normal and proper
use in accordance with CHI's instructions, provided, however, that
in case FD receives any claim of or relating to the above-
mentioned CHI warranty from FD's customers during the Warranty
Period and such claim shall be forwarded by FD to CHI within
thirty (30) days thereafter, such claim shall be deemed made in a
timely fashion, notwithstanding the expiration of the Warranty
Period.
13. Software License. (a) CHI grants to FD a non-
----------------
transferable license to use the Software object code included in
the Products for use with and as part of the Products subject to
the terms and conditions of the end-user Software License
Agreement attached hereto, provided that in case any term or
condition set forth in this Agreement conflicts with Appendix F,
this Agreement shall prevail. CHI also grants to FD the right to
demonstrate the Software with and as part of the Products without
separating the Software from the Products. FD shall have the
right to sell licenses of the Software in object code form to
valid licensees of CHI, provided that such Software shall remain
part of and integrated with the Product and not in any way
separated or transferred as a stand-alone product or used with or
merged into any other software or product. Title to Software and
any and all accompanying written materials, and all intellectual
property rights therein, shall remain the property of CHI and its
licensors. Consideration for the grant of the license hereunder
shall be included in the price of the Product, and FD shall not be
obligated to pay to CHI any other license fee, royalty or
whatsoever for use of the Software. For purposes hereof,
"Software" means the programs, routines, subroutines, algorithms,
translators, compilers and operating systems which CHI has
developed or has the right to sublicense for general commercial
use with the Products.
-4-
<PAGE>
(b) FD shall have each end user execute a Software
License Agreement substantially in the form of Appendix F, as
approved by CHI, and shall forward an original, executed copy of
such license agreement to CHI. FD shall use reasonable efforts to
ensure that all end users comply with the terms of the Software
License Agreement of Appendix F and shall promptly notify CHI of
any breaches of such agreements known to FD.
(c) CHI shall hold harmless and be responsible for or
defend at its expense any claim or action brought against FD by
any third party to the extent that it is based on a claim that CHI
does not have the right to grant the license to FD set forth in
this Paragraph 13, or the Software or any patents or copyrights
contained therein when used within the scope of this Agreement
infringes a patent or copyright or misappropriates a trade secret
or other proprietary right of a third party ("Infringement"). CHI
shall be entitled to sole control of any such action and, except
to the extent provided below, shall pay any costs, damages and
attorneys' fees finally awarded against FD in such action to the
extent attributable to such claim, provided that FD notifies CHI
promptly in writing of the claim. FD will have the right to
participate in the defense of any such suit, investigation or
other proceeding through counsel of its own choosing and at its
expense. Should the Software become, or in either Party's opinion
is likely to become, the subject of a claim of Infringement, CHI
may, at its option and in satisfaction of its obligations under
this Paragraph, procure for FD the right to continue using the
Software or replace or modify the Software to make it non-
infringing. CHI may withhold further shipment of any infringing
or allegedly infringing items, subject to the provision of one of
the foregoing remedies.
CHI shall have no liability or obligation under this
Agreement or otherwise to FD or anyone claiming through or on
behalf of FD or for any Infringement based upon (i) any program
loaded on a Product by anyone other than CHI or its agents;
(ii) use of the Product in combination with a device or product
not purchased by FD from CHI or configured by CHI as part of the
Product, where the Product would not itself be infringing;
(iii) use of the Product in an application or environment for
which it was not designed or contemplated; (iv) modification of
the Product or Software by other than CHI or without CHI's
approval; and (v) any claim of Infringement of intellectual
property in which FD has an interest or license.
The foregoing states the entire liability of CHI with
respect to infringement or misappropriation of patent, copyright,
trade secret or other intellectual property rights by any of the
Products or Software, or any portion thereof, or by the
-5-
<PAGE>
performance, operation or use thereof, and is in lieu of (and CHI
hereby disclaims) any other warranty, express or implied, as to
any such infringement or misappropriation. CHI's OBLIGATIONS
UNDER THIS PARAGRAPH SHALL BE FD'S SOLE AND EXCLUSIVE REMEDY FOR
ANY ALLEGED INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK OR
OTHER INTELLECTUAL PROPERTY RIGHT.
14. Covenant. (a) During the term of this Agreement, FD
--------
may not develop or enter into any arrangements with any entity for
the sale of systems capable of measuring T-wave alternans without
the express written permission of CHI. This paragraph shall not
apply to any products FD has dealt in the Territory on or before
the date of the execution of this Agreement.
(b) CHI may not during the term of this Agreement and
any extension thereof directly or indirectly sell the Products by
itself in the Territory.
15. Patents and Trademarks. All patents and patent rights,
----------------------
trademarks, copyrights, tradenames and other property rights in
and with respect to the Products shall exclusively belong to CHI.
Solely for the purpose of marketing Products, FD may, during the
term of this Agreement and any extension thereof, indicate that it
is an authorized distributor for Products and may advertise the
Same under the trademark for the Products of CHI. FD shall
provide timely copies to CHI of all advertising using any
tradenames, trademarks, servicemarks, or logos of CHI, and, when
used, shall appropriately credit CHI.
16. Confidentiality. Both Parties shall keep confidential
---------------
any and all trade information, proprietary information (including,
without limitation, the Software) and business information
acquired from the other pursuant to this Agreement except as
authorized in writing by the other.
17. Termination. (a) Either Party may terminate this
-----------
Agreement at any time by written notice as follows:
(i) If the other Party fails to perform or comply
with any material provision or conditions of this Agreement and
fails to remedy such default within thirty (30) days after receipt
of written notice thereof;
(ii) If any case, proceeding or other action is
commenced by or against the other Party seeking to have an order
for relief entered on that Party's behalf as debtor or to
adjudicate that Party as bankrupt or insolvent, or seeking the
reorganization, arrangement, adjustment, liquidation, dissolution
or composition of that Party's debts.
-6-
<PAGE>
(iii) If either Party sells all or substantially all
of its assets or any patent, patent right, trademark, copyright,
tradenames or other property right necessary for manufacturing and
selling the Products, liquidate, be bought by or merged into
another company and, in the case of a merger, does not own greater
than fifty percent (50%) of the surviving shares.
(b) In addition, FD may terminate this Agreement by
timely notice if:
(i) CHI materially delays the delivery of the Demo
Units.
(ii) The Demo Units fail to meet the
Specifications, including the FD's Improvements, or have a
material problem with quality or reliability and such failure to
meet the Specification or problem has not been cured by CHI within
ninety (90) days of a timely notice by FD.
18. Effect of Termination. (a) Upon termination or
---------------------
expiration of this Agreement or any extension thereof, FD shall
have the right to sell the Products, on a non-exclusive basis, for
a six (6) month extension term ("Extension Term"). Upon the
expiration of the Extension Term, the parties shall discuss the
disposition of any Products then in the possession of FD.
(b) Upon the expiration of the Extension Term, FD shall
immediately discontinue the use of any tradenames, trademarks,
symbols or designations associated with CHI or the Products and
shall immediately discontinue designating itself as an authorized
distributor of CHI.
(c) Upon the termination or expiration of this
Agreement or any extension thereof, the Parties shall cooperate
with each other and negotiate in good faith the means to insure
continued service to the customers through FD. CHI shall continue
to sell spare parts to FD for FD to be able to make repairs to
Products it has sold.
(d) Upon the termination or expiration of this
Agreement or any extension thereof, FD shall cooperate fully with
CHI in effecting a transfer of MOH approval to CHI or to CHI's
representative.
(e) Except as agreed to by the Parties for FD's use in
providing continuing service to the customers, in the event of the
expiration of the Extension Term, FD shall immediately return to
CHI all copies of sales manuals, operating and service manuals,
parts identification data, instructions, catalogs, descriptions,
-7-
<PAGE>
price lists, order forms, and other similar materials and all
confidential or proprietary information furnished to FD by CHI and
all materials derived therefrom.
(f) Termination or expiration of this Agreement shall
not affect the rights of any Software licensee not affiliated with
FD and, to the extent the licenses under this Agreement apply to
FD or its affiliates as end users of the Products, termination or
expiration shall not affect the rights of FD or its affiliates to
the licenses granted.
19. Training and Technical Support. (a) CHI shall provide
------------------------------
up to five days training in the maintenance and repair of the
Products, to be attended by up to five qualified FD employees, at
the offices of CHI in Massachusetts, U.S.A. The starting date of
the training shall be as agreed by the parties. FD shall be
responsible for all costs and expenses of its trainees, including
room, board, transportation, salary, insurance and other benefits,
and other expenses, while attending or traveling to or from the
training. Neither FD nor the trainees shall be entitled to any
salary, overtime, or other compensation from CHI for their
participation in the training. Each trainee shall execute an
undertaking, in a form supplied by CHI, to be bound by the
provisions of this Agreement relating to confidential information
before attending the training. CHI SHALL NOT UNDER ANY
CIRCUMSTANCES BE RESPONSIBLE FOR ANY ALLEGED DEFICIENCY IN THE
TRAINING.
(b) CHI shall provide to FD a reasonable number of its
standard service manuals in English. CHI shall also make
available to FD service supervisors reasonable assistance by
telephone or facsimile during CHI's normal business hours, for
technical questions with respect to reproducible warranty claims
received by FD from customers or failure of Products sold by FD.
20. Notices. All notices, demands, requests, consents,
-------
approvals or other communications required or permitted to be
given under this Agreement or which are given with respect to this
Agreement shall be in writing and shall be personally served or
sent by facsimile with the mail for confirmation, registered or
certified, return receipt requested, postage prepaid, and
addressed as follows:
To CHI: Cambridge Heart, Inc.
1 Oak Park Drive
Bedford, MA 01730 U.S.A.
Attention: President
-8-
<PAGE>
To FD: Fukuda Denshi Co., Ltd.
35-8 Hongo 2-Chome, Bunkyo-ku
Tokyo 113 Japan
Attention: Mr. Teruo Haraguchi
or such other address as such Party shall have specified most
recently or written notice. Notice sent by facsimile shall be
deemed to be received by the other Party on the fifth (5) business
day following the date so sent.
21. Miscellaneous. (a) This Agreement may be executed in
-------------
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute but one and the same
instrument.
(b) This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with, the laws of
the Commonwealth of Massachusetts applicable to agreements made
and to be performed wholly within the Commonwealth of
Massachusetts and, to the extent not inconsistent therewith, the
United Nations Convention on the International Sales of Goods.
(c) This Agreement may not be modified, changed or
supplemented, nor may any obligations hereunder be waived or
extensions of time for performance granted, except by written
instrument signed by the Party to be charged.
(d) No waiver of any right or remedy for the breach of
any of the provisions hereunder shall be deemed a waiver of any
right or remedy for any preceding or succeeding breach thereof or
of any further provisions of this Agreement.
(e) FD hereby represents that it is an independent
contractor, and is not an agent of CHI. FD shall not be
authorized to accept any orders on behalf of CHI. Nothing herein
shall be construed so as to create an employer-employee, agency,
partnership, or joint venture relationship between the Parties.
(f) This Agreement and the rights, duties, and
obligations hereunder may not be assigned or delegated by any
party without the prior written consent of the other Party.
(g) This Agreement and the provisions hereof shall be
binding upon each of the Parties, their successors and permitted
assigns.
In Witness Whereof, the Parties have caused this Agreement to be
signed by their duly authorized representative on the day and year
first above written.
-9-
<PAGE>
FUKUDA DENSHI CO., LTD. CAMBRIDGE HEART, INC.
__________________________ ____________________________
Signed Signed
__________________________ ____________________________
Name Name
__________________________ ____________________________
Title Title
__________________________ ____________________________
Date Date
-10-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
ASTERISKS DENOTES SUCH OMISSIONS.
APPENDIX A: Sales Minimum and Targets
Annual Sales Minimums and Sales Targets
Contract Year Minimums Targets
------------- -------- -------
1st year *** ***
2nd year *** ***
Quarterly Percentages
Quarter Quarterly %
------- -----------
1st quarter ***
2nd quarter ***
3rd quarter ***
4th quarter ***
1. FD shall purchase no less than the Annual Sales Minimum in
each year for delivery within the year and no less than
Quarterly Percentage of the Minimum for delivery by the end
of each quarter subject to the conditions set forth in
paragraph 3 and subparagraphs thereof of the Exclusive
Distributorship Agreement on May 30, 1996 between CHI and FD.
2. FD shall use its best efforts to purchase and sell the Annual
Sales Targets in each year and the Quarterly Percentage of
the Target by the end of each Quarter.
3. If FD has met its Sales Target in any quarter, it may
purchase the Products at the Target Price set forth in
Appendix B in the following quarter.
-11-
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS DENOTE SUCH OMISSIONS.
APPENDIX B: Price, Terms, Discounts
CH 2000 with Thermal Recorder
Total Systems/year Stress Only w/Alternans
------------------ ----------- -----------
Target ***** *****
Target Price ***** *****
100 Unit Price ***** *****
1. The Target Price and the 100 Unit Price shall apply for all
Products sold to FD during the year if FD has purchased for
delivery during the year more than the Annual Sales Target or
more than *** systems respectively.
2. At the end of the contract year CHI shall credit to FD or FD
shall credit to CHI any required adjustments in the price
based upon the actual amount purchased for delivery within
the year.
3. FD may purchase Demo Units with alternans at the 100 Unit
Price.
Standard Terms
1. Shipment Terms. Products shall be shipped F.O.B. Boston.
--------------
All prices shall be exclusive of, and FD shall be responsible
to pay, all tariffs, duties and taxes due in the country of
destination, and all insurance, delivery and shipping
charges. Title to and risk of loss of Products sold
hereunder shall pass to FD upon delivery to the carrier at
the F.O.B. point. In the absence of instructions to the
contrary, CHI on behalf of FD may select the carrier who
meets the international standard of practice. Insurance for
Products during transit shall be the responsibility of FD.
Products shall be shipped in CHI's standard packaging unless
otherwise agreed upon by CHI in writing.
2. Security Interest. FD hereby grants to CHI a security
-----------------
interest in all Products sold to FD and any proceeds
(including accounts receivable) thereof as security for all
its payment obligations for Products purchased and not paid
for by FD under this Agreement. Upon request by CHI, FD
shall execute any instrument required to perfect such
security interest.
-12-
<PAGE>
3. Failure to Take Delivery of Orders. If FD fails to take
----------------------------------
delivery of any shipment, or any portion of a shipment, upon
arrival at the designated delivery point in the Territory,
CHI shall have the right to place the Products in storage,
and FD shall be liable for all reasonable transportation,
loading, storage, and costs incurred by CHI by reason of FD's
failure to take delivery of the Products. FD may refuse to
accept delivery of any Products that are the subject of
physical damage apparent from a visual inspection, unless
such physical damage is the result of negligence or
malfeasance of FD or any contractor of FD (other than CHI).
4. Purchase Orders. All orders for Products shall be placed
---------------
only on FD's standard purchase order form.
-13-
<PAGE>
APPENDIX C: Specifications
APPENDIX C
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
-14-
<PAGE>
APPENDIX D: Marketing Plans
APPENDIX D
CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
-15-
<PAGE>
APPENDIX E: Warranty
A. CHI warrants for a period of fifteen (15) months from
shipment by CHI to FD, or twelve (12) months from shipment by FD
to its customer, whichever is shorter ("Warranty Period"), that
the Product shall conform to CHI's standard specifications and
shall be free from defences in material and workmanship under
normal and proper use in accordance with any instructions and
directions of CHI applicable thereto; provided, however, in case
FD receives any claim of or relating to such warranty from FD's
customers during the Warranty Period and such claim shall be
forwarded by FD to CHI within thirty (30) days thereafter, such
claim shall be deemed made in a timely fashion, notwithstanding
the expiration of the Warranty Period. Such warranty shall not
apply in circumstances that would be excluded by CHI's standard
end user warranty terms, such as misuse or alteration of the
Product or use of the Product for other than the specific purpose
for which it is designed. CHI's sole obligation under such
hardware warranty shall be to repair or replace, at CHI's option,
the defective or non-conforming hardware. CHI's sole obligation
under such Software warranty shall be to: (i) accept, analyze and
provide written response to any reports from FD of Software
malfunction or error, and (ii) use best efforts to provide
responses to correct such errors when they reflect significant
deviations from CHI's design specifications for the current
release of the Software. The time required to repair or replace
any defective Product shall not extend the Warranty Period.
B. FD shall provide the necessary personnel to replace any
defective parts at [FD's/CHI's] expense and to provide a 12-month
parts and labor warranty to its customers of the Products.
C. CHI shall indemnify, protect and save FD harmless from any
and all claims, demands, litigations or actions, including but not
limited to reasonable actions, including but not limited to
reasonable attorney's fees incurred in connection therewith, which
may be asserted by any third party against FD for Product
Liability regardless of the Warranty Period. "Product Liability"
means the liability for damages or injuries to lives, bodies and
properties of users of the Products or third parties, which is
caused by lack of insufficiency of reasonably experienced safety
of Products, other than any of same as may be caused by the
negligence or willful misconduct of FD or its employees or agents.
D. THE EXPRESS WARRANTIES SET FORTH IN PARAGRAPH A CONSTITUTE
THE ONLY WARRANTIES WITH RESPECT TO THE PRODUCTS. CHI MAKES NO
REPRESENTATION OR WARRANTY OF ANY OTHER KIND, EXPRESS OR IMPLIED
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<PAGE>
(EITHER IN FACT OR BY OPERATION OF LAW), WITH RESPECT TO THE
PRODUCTS, WHETHER AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE (EXCEPT THE PERFORMANCE OF STRESS TEST AS PROVIDED IN AND
IN ACCORDANCE WITH CHI'S PRODUCT DOCUMENTATION), OR ANY OTHER
MATTER.
E. NEITHER PARTY SHALL BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY OR ANYONE
CLAIMING THROUGH OR ON BEHALF OF SUCH OTHER PARTY. THIS
LIMITATION OF LIABILITY EXTENDS TO THE LOSS OF ACTUAL OR
ANTICIPATED USE, REVENUE, OR PROFITS IN CONNECTION WITH OR ARISING
OUT OF THIS AGREEMENT OR ANY BREACH OF THIS AGREEMENT OR THE
EXISTENCE, FURNISHING, FUNCTIONING, OR THE OTHER PARTY'S OR ANY
THIRD PARTY'S USE, OF ANY PRODUCTS OR SERVICES PROVIDED FOR IN
THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. SUCH LIMITATION OF LIABILITY SHALL
NOT EXTEND TO ANY CLAIM BY FD AGAINST CHI FOR DAMAGES AGAINST FD
FOR PERSONAL INJURY TO A USER OF A PRODUCT TO THE EXTENT CAUSED BY
THE LACK OR INSUFFICIENCY OF REASONABLY EXPECTED SAFETY OF THE
PRODUCTS UNDER NORMAL AND PROPER USE IN ACCORDANCE WITH ANY
INSTRUCTIONS AND DIRECTIONS OF CHI APPLICABLE THERETO.
F. THIS WARRANTY IS VALID ONLY IN JAPAN.
-17-
<PAGE>
APPENDIX F: Software License Agreement for End Users
This is a legal agreement between you (either individual or
entity), the end user, and Cambridge Heart, Inc. ("CHI").
CAMBRIDGE HEART LICENSE AGREEMENT
Grant of License. Upon acceptance by CHI, CHI grants to you the
----------------
right to use one copy of the CHI software program identified above
(the "Software") on the single computer on which the software is
initially installed by CHI (the "Dedicated Computer") in the
country indicated across from your signature below.
Ownership; Copyright. As the licensee, you own the physical media
--------------------
on which the Software is originally or subsequently recorded, but
CHI and its licensors (if any) retain title and ownership of the
Software recorded on the original disk or other media and all
subsequent copies of the Software, regardless of the form or media
in or on which the original and other copies may exist. This
license is not a sale of the original Software or any copy
thereof. The Software and the accompanying written materials are
patented and copyrighted and are protected by United States patent
and copyright laws and international treaty provisions, and
further, contain trade secret and proprietary information.
Therefore, you must treat the Software like any other patented and
copyrighted material (e.g., a book or musical recording) and trade
secret information. Subject to these restrictions, you may either
(a) make one copy of the Software solely for backup purposes in
support of your permitted use of the Software on the Dedicated
Computer, or (b) transfer the Software to a single hard disk on
the Dedicated Computer provided you keep the original solely for
backup purpose. (Programs, however, may include mechanisms to
limit or inhibit copying, and they are marked "copy protected";
programs on CD-ROM will not be copyable.) The patent, copyright
and other notices must be reproduced on the backup copy. You may
not copy the written materials accompanying the Software.
Other Restrictions. You may not rent or lease the Software, but
------------------
you may transfer your rights under this Agreement on a permanent
basis in conjunction with your transfer of the Dedicated Computer,
provided at the same time you transfer the Software (including all
copies, whether in printed, machine readable form or otherwise,
and all accompanying written materials) and Dedicated Computer you
retain no copies, the recipient agrees in writing to accept the
terms of this Agreement and such writing is delivered to and
accepted by CHI. Any such transfer, or any transfer of possession
of any Software in whole or in part to another party, shall
automatically terminate your license. If the Software is an
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<PAGE>
update, any transfer must include the update and all prior
versions. YOU MAY NOT DISTRIBUTE COPIES OF THE SOFTWARE OR THE
ACCOMPANYING WRITTEN MATERIALS TO OTHERS. YOU MAY NOT MODIFY,
ADAPT, TRANSLATE, REVERSE ENGINEER, DECOMPILE, DISASSEMBLE, OR
CREATE DERIVATIVE WORKS BASED ON THE SOFTWARE OR THE WRITTEN
MATERIALS.
Dual Media Software. If the Software package contains both
-------------------
diskettes and CD-ROM, then you may use only the media appropriate
for your single Dedicated Computer. You may not use the other
media on another computer or computer network, or loan, rent,
lease or transfer it to another user except as part of a transfer
or other use as expressly permitted by this Agreement.
Limited Warranty. CHI does not warrant that the functions
----------------
contained in the Software will meet your requirements or that the
operation of the Software will be uninterrupted or error free.
However, CHI warrants to you, the original licensee, that the
Software will perform substantially in accordance with the
accompanying written materials under normal use and service for a
period of one (1) year. This limited warranty shall not apply to
software which CHI determines has been subject to misapplication,
improper installation, repair, modification or alteration by
anyone other than CHI, or which has been subject to accident or
abuse or merged with or incorporated into any other program.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES. THE
SOFTWARE IS LICENSED ON AN "AS IS" BASIS WITHOUT ANY, AND CHI AND
ITS LICENSORS OR LICENSEES (IF ANY) HEREBY DISCLAIM ALL, OTHER
WARRANTIES, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE. SOME JURISDICTIONS DO NOT ALLOW THE
LIMITATION OF IMPLIED WARRANTIES. SO THE ABOVE LIMITATION MAY NOT
APPLY TO YOU. THIS LIMITED WARRANTY GIVES YOU SPECIFIC LEGAL
RIGHTS AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH MAY VARY FROM
JURISDICTION TO JURISDICTION.
Limitation of Remedies. CHI's entire liability and your exclusive
----------------------
remedy shall be, at CHI's option, either (1) the replacement of
any diskette(s) or other media not meeting CHI's "Limited
Warranty" and which is returned to CHI or an authorized CHI
Software distributor or dealer within such one (1) year period
with a copy of your receipt, or (2) if CHI or the distributor or
dealer is unable to deliver within 180 days after such return a
replacement diskette(s) or other media meeting CHI's "Limited
Warranty," you may terminate this Agreement by returning the
Software (and all related documentation) and your money will be
refunded. Any replacement of the Software will be warranted for
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<PAGE>
the remainder of the original warranty period or thirty (30) days,
whichever is longer.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT
WILL CHI OR ANY OTHER PARTY WHO HAS BEEN INVOLVED IN THE CREATION,
PRODUCTION OR DELIVERY OF THE SOFTWARE BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER DAMAGES WHATSOEVER
(INCLUDING, WITHOUT LIMITATION, DAMAGES FOR PERSONAL INJURY OR
DEATH, DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, BUSINESS
INTERRUPTION, LOSS OF INFORMATION OR ANY OTHER PECUNIARY LOSS),
WHETHER RESULTING FROM DEFECTS IN THE MEDIA, OR ARISING OUT OF THE
USE OR PERFORMANCE OF OR INABILITY TO USE OR THE RESULTS OF USE
OF, THE DOCUMENTATION OR SOFTWARE, EVEN IF CHI OR AN AUTHORIZED
SOFTWARE DISTRIBUTOR OR DEALER HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. SOME
JURISDICTION DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY
FOR INCIDENTAL OR CONSEQUENTLY DAMAGES, SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU.
General. You may not sublicense, assign or transfer the license
-------
of the Software except as expressly provided in this Agreement.
Any attempt otherwise to sublicense, assign or transfer any of the
rights, duties, or obligations thereunder is void. No amendment
to or modification of this Agreement shall be binding unless in
writing and signed by a duly authorized representative of CHI.
This Agreement is governed by the internal laws of the
Commonwealth of Massachusetts, U.S.A., without the conflict of
laws, principles thereof and, to the extent not inconsistent
therewith, the United Nations Convention on the International
Sales of Goods. Should you have any questions concerning this
Agreement, or if you desire to contact CHI for any reason, please
write:
Cambridge Heart, Inc.
1 Oak Park
Bedford, MA 01730
You further agree that this Agreement is the complete and
exclusive statement of the agreement with respect to the subject
matter of this Agreement, which supersedes any proposal of prior
agreement, oral or written, and any other communications relating
to the subject matter of this Agreement.
_________________________
Signature of Licensee
_________________________
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<PAGE>
Please Print Name as Signed
_____________________________
Institution
_____________________________
Date
-21-
<PAGE>
CAMBRIDGE HEART, INC.
INVESTORS' RIGHTS AGREEMENT
_______________________
<PAGE>
TABLE OF CONTENTS
Page
1. Registration Rights.................................... 1
1.1 Definitions..................................... 1
1.2 Request for Registration........................ 2
1.3 Company Registration............................ 5
1.4 Obligations of the Company...................... 5
1.5 Furnish Information............................. 7
1.6 Expenses of Demand Registration................. 7
1.7 Expenses of Company Registration................ 7
1.8 Underwriting Requirements....................... 8
1.9 Delay of Registration........................... 8
1.10 Indemnification................................. 8
1.11 Reports Under Securities Exchange Act of 1934... 11
1.12 Form S-3 Registration........................... 12
1.13 Assignment of Registration Rights............... 13
1.14 "Market Stand-Off" Agreement.................... 14
1.15 Termination of Registration Rights.............. 14
1.16 Additional Registration Rights.................. 15
2. Covenants of the Company............................... 15
2.1 Financial Statements and Other Information...... 15
2.2 Inspection of Property.......................... 16
2.3 Board Visitation Rights......................... 17
2.4 Preemptive Right................................ 17
2.5 Positive Covenants.............................. 19
2.6 Termination of Certain Covenants................ 21
3. Miscellaneous.......................................... 21
3.1 Successors and Assigns.......................... 21
3.2 Governing Law................................... 21
3.3 Counterparts.................................... 21
3.4 Titles and Subtitles............................ 21
3.5 Notices......................................... 21
3.6 Expenses........................................ 21
3.7 Amendments and Waivers.......................... 22
3.8 Severability.................................... 22
3.9 Entire Agreement................................ 22
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<PAGE>
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made
as of the 29th day of September, 1993, by and between Cambridge
Heart, Inc., a Delaware corporation (the "Company"), Financial
Strategic Portfolios, Inc. - Health Sciences Portfolio ("ISP") and
The Global Health Sciences Fund ("Global Fund") (ISP and Global
Fund are referred to individually herein as the "Investor" and
collectively as the "Investors").
RECITALS
--------
WHEREAS, the Company and the Investors are parties to a
Series A Preferred Stock Purchase Agreement of even date herewith
(the "Stock Purchase Agreement");
WHEREAS, in order to induce the Company to enter into the
Stock Purchase Agreement and to induce the Investors to invest
funds in the Company pursuant to the Stock Purchase Agreement, the
Investors and the Company hereby agree that this Agreement shall
govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the Investors and
certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees
-------------------
as follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Common Stock" means shares of the common
stock of the Company, par value $.001 per share.
(c) The term "Excluded Registration" means a
registration statement relating either to the sale of securities
to employees, directors or consultants of the Company pursuant to
a stock option, stock purchase or similar plan or a business
combination within the meaning of SEC Rule 145.
(d) The term "Form S-3" means such form under the Act
as in effect on the date hereof or any substantially similar
registration form under the Act subsequently adopted by the SEC.
(e) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 1.13 hereof.
<PAGE>
(f) The term "1934 Act" means the Securities Exchange
Act of 1934, as amended.
(g) The term "Qualified Public Offering" means a firm
commitment, underwritten public offering pursuant to an effective
registration statement under the Act, covering the offer and sale
of the Company's Common Stock to the general public with aggregate
gross proceeds to the Company of at least $10,000,000 (before
deducting underwriting discounts and commissions and expenses) and
a price to the public of at least $3.00 per share (subject to
adjustment for stock splits, combinations or similar events).
(h) The term "Series A Preferred Stock" means shares of
the Company's Series A Convertible Preferred Stock, par value
$.001 per share.
(i) The term "register", "registered", and
"registration" refer to a registration effected by preparing and
filing a registration statement or similar document in compliance
with the Act, and the declaration or ordering of effectiveness of
such registration statement or document.
(j) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series A
Preferred Stock, (ii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right
or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement
of the shares referenced in (i) and (ii) above, excluding in all
cases, however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not
assigned.
(k) The term "SEC" shall mean the Securities and
Exchange Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the
earlier of (i) three (3) years after the Closing (as defined in
Section 1.2 of the Stock Purchase Agreement) or (ii) six (6)
months after the effective date of the first registration
statement for a public offering of securities of the Company
(other than an Excluded Registration), a written request from the
Investors that the Company file a registration statement under the
Act covering the registration of Registrable Securities then
outstanding with a reasonably anticipated aggregate offering price
of at least $2,500,000, the Company shall:
(i) within ten (10) days of the receipt thereof,
give written notice, in accordance with Section 3.5 hereof, of
such request to all Holders; and
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<PAGE>
(ii) file as soon as practicable, and in any event
within ninety (90) days of the receipt of such request with
respect to a Form S-1 and within sixty (60) days of the receipt of
such request with respect to a Form S-3, and use its best efforts
to cause to become effective as soon as practicable, the
registration under the Act of all Registrable Securities which the
Investors and any other Holders request to be registered, subject
to the limitations of Subsection 1.2(b).
(b) If the Investors intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to Subsection 1.2(a), and the Company shall
include such information in the written notice referred to in
Subsection 1.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in
interest of the Investors. In such event, the right of any Holder
to include his, her or its Registrable Securities in such
registration shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Investors and
such Holder) to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall
(together with the Company as provided in Subsection 1.4(e)) enter
into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Investors in writing that marketing
factors require a limitation of the number of shares to be
underwritten, then the Investors shall so advise all Holders of
Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Investors, in
proportion (as nearly as practicable) to the amount of Registrable
Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included
in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall
furnish to the Investors a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such
registration statement to be filed and it is therefore essential
to defer the filing of such registration statement, the Company
shall have the right to defer taking action with respect to such
filing for a period of not more than ninety (90) days after
receipt of the request of the Investors; provided, however, that
the Company may not utilize this right more than once in any
twelve (12) month period.
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<PAGE>
(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant
to this Section 1.2:
(i) After the Company has effected two (2)
registrations pursuant to this Section 1.2, excluding any
registrations effected on Form S-3, and such registrations have
been declared or ordered effective;
(ii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date
of filing of, and ending on a date one hundred eighty (180) days
after the effective date of, the first registration statement for
a public offering subject to Section 1.3 hereof; provided that the
Company is actively employing in good faith all reasonable efforts
to cause such registration statement to become effective;
(iii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date
of filing of, and ending on a date ninety (90) days after the
effective date of, any subsequent registration statement for a
public offering subject to Section 1.3 hereof; provided that the
Company is actively employing in good faith all reasonable efforts
to cause such registration statement to become effective;
(iv) If the Investors propose to dispose of shares
of Registrable Securities that may be immediately registered on
Form S-3 pursuant to a request made pursuant to Section 1.12
below; or
(v) If the Company delivers to the Investors an
opinion, in form and substance reasonably acceptable to such
Investors, of counsel reasonably satisfactory to the Investors
that the Registrable Securities requested to be registered by the
Investors may be sold or transferred pursuant to Rule 144(k) of
the Act.
1.3 Company Registration. If (but without any obligation to
--------------------
do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders
other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities
(other than an Excluded Registration, a registration on any form
which does not include substantially the same information as would
be required to be included in a registration statement covering
the sale of the Registrable Securities or a registration in which
the only Common Stock being registered is Common Stock issuable
upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written
request of each Holder given within twenty (20) days after giving
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<PAGE>
of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the provisions of Section 1.8, cause to
be registered under the Act all of the Registrable Securities that
each such Holder has requested to be registered. Neither the
giving of any notice nor the making of any request hereunder shall
impose any obligation on a Holder to sell any shares.
1.4 Obligations of the Company. Whenever required under
--------------------------
this Section 1 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become
effective, and keep such registration statement effective for a
period of up to one hundred twenty (120) days or until the
distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such
one hundred twenty (120) day period shall be extended for a period
of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company,
and provided further that in the case of any registration of
Registrable Securities on Form S-3 that are intended to be offered
on a continuous or delayed basis, such one hundred twenty (120)
day period shall be extended until all such Registrable Securities
are sold, if applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any
prospectus required by Section 10(a)(3) of the Act or (II)
reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement,
the incorporation by reference of information required to be
included in (I) and (II) above to be contained in periodic reports
filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as, in the opinion
of counsel to the Company, may be necessary to comply with the
provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
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<PAGE>
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders; provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the
Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations
under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on
which similar securities issued by the Company are then listed.
If no similar securities issued by the Company are then listed on
an exchange, facilitate the reporting of the Registrable
Securities on NASDAQ.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the
effective date of such registration.
(i) Take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of the
Registrable Securities pursuant to the registration statement.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any
selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's
Registrable Securities.
(b) The Company shall have no obligation with respect
to any registration requested pursuant to Section 1.2 or Section
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<PAGE>
1.12 if, due to the operation of Subsection 1.5(a), the
anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the
anticipated aggregate offering price required to originally
trigger the Company's obligation to initiate such registration as
specified in Subsection 1.2(a) or Subsection 1.12(b)(2), whichever
is applicable.
1.6 Expenses of Demand Registration. All expenses other
-------------------------------
than underwriting discounts and commissions incurred in connection
with registrations, filings or qualifications pursuant to Section
1.2, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees
and disbursements of one counsel for the selling Holders shall be
borne by the Company.
1.7 Expenses of Company Registration. The Company shall
--------------------------------
bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to Section 1.3 for each
Holder, including (without limitation) all registration, filing,
and qualification fees, printers' and accounting fees relating or
apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any
-------------------------
offering involving an underwriting of shares of the Company's
capital stock, the Company shall not be required under Section 1.3
to include any of a Holder's securities in such underwriting
unless such Holder accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or
by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the
Company that the underwriters determine in their sole discretion
is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included
to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be
included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by the selling
stockholders).
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<PAGE>
1.9 Delay of Registration. No Holder shall have any right
---------------------
to obtain or seek an injunction restraining or otherwise delaying
any such registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this
Section 1.
1.10 Indemnification. In the event any Registrable
---------------
Securities are included in a registration statement under this
Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers and
directors of each Holder participating in such registration, any
underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may
become subject under the Act, or the 1934 Act, or otherwise
insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of
the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, or any
rule or regulation promulgated under the Act, or the 1934 Act, and
the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
Subsection 1.10(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter
or controlling person. With respect to any untrue statement or
alleged untrue statement made in, or omission or alleged omission
from, any preliminary prospectus or prospectus, the indemnity
agreement contained in this Section 1.10(a) with respect to such
preliminary prospectus or prospectus, to the extent it is based on
the claim of a person who purchased any Registrable Securities
directly from a Holder shall not inure to the benefit of such
Holder (or to the benefit of any of its officers and directors or
any person controlling such Holder) if the prospectus (or the
prospectus as amended or supplemented if the Company shall have
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<PAGE>
filed with the Commission any amendment or supplement thereto)
which shall have been furnished to such Holder by the Company in a
timely manner and in sufficient quantities, does not contain such
statement, alleged statement, omission, or alleged omission and a
copy of the prospectus (or the prospectus as amended or
supplemented if the Company shall have filed with the Commission
any amendment or supplement thereto) shall not have been sent or
given to such person by the Holder (and the Holder shall have been
obligated so to furnish such a prospectus) and such person shall
not otherwise have received a copy thereof at or prior to the
written confirmation of such sale to such person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within
the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the
Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified
pursuant to this Subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any selling Holder's
liability under this Subsection 1.10(b) exceed the proceeds
received by such Holder from the offering (net of any underwriting
discounts and commissions)
(c) Promptly after receipt by an indemnified party
under this Section 1.10 of notice of the commencement of any
action (including any governmental action), such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without
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<PAGE>
conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.10, but
the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability,
claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in
the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders under
this Section 1.10 shall survive the completion of any offering of
Registrable Securities in a registration statement under this
Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a
---------------------------------------------
view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the
SEC that may at any time permit a Holder to sell securities of the
Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
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<PAGE>
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all
times after ninety (90) days after the effective date of the first
registration statement filed under the Act by the Company for the
offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act,
as is necessary to enable the Holders to utilize Form S-3 for the
sale of their Registrable Securities, such action to be taken as
soon as practicable after the end of the fiscal year in which the
first registration statement filed under the Act by the Company
for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the
1934 Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety
(90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall
---------------------
receive at any time after six months following the completion of
the first registration statement for a public offering of
securities of the Company (other than an Excluded Registration), a
written request from the Investors that the Company effect a
registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Investors, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders; and
(b) as soon as practicable, use its best efforts to
effect such registration and all such qualifications and
compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of
such Investors' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request
-11-
<PAGE>
as are specified in a written request given within twenty (20)
days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance,
pursuant to this Section 1.12: (1) if Form S-3 is not available
for such offering by the Holders; (2) if the Investors, together
with the Holders of any other securities of the Company entitled
to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriting discounts or
commissions) of less than $500,000; (3) if the Company shall
furnish to the Investors a certificate signed by the President of
the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 Registration to
be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after
receipt of the request of the Investors under this Section 1.12;
provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period; (4) if the Company
has already effected three (3) registrations on Form S-3, or any
equivalent successor form, for the Holders pursuant to this
Section 1.12; or (5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute
a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and
other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the
Investors. All expenses incurred in connection with a
registration requested pursuant to this Section 1.12, including,
without limitation, all registration, filing, qualification,
printers' and accounting fees and the reasonable fees and
disbursements of one (1) counsel for the selling Holders and
counsel for the Company, but excluding any underwriting discounts
or commissions associated with Registrable Securities, shall be
borne by the Company. Registrations effected pursuant to this
Section 1.12 shall not be counted as registrations effected
pursuant to Sections 1.2 or 1.3.
(d) The Company shall not be obligated to effect any
registration pursuant to this Section 1.12 if the Company delivers
to the Investors requesting registration under this Section 1.12
an opinion, in form and substance acceptable to such Investors, of
counsel satisfactory to the Investors, that the Registrable
Securities so requested to be registered may be sold or
transferred pursuant to Rule 144(k) under the Act.
1.13 Assignment of Registration Rights. The rights to cause
---------------------------------
the Company to register Registrable Securities pursuant to this
Section 1 may be assigned (but only with all related obligations)
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<PAGE>
by an Investor to: (i) in the case of an Investor that is an
investment company registered under the Investment Company Act of
1940, to another such investment company (a "Related Mutual Fund")
that has the same investment adviser as the transferring
investment company, without restriction or requirement as to
number of shares; or (ii) to a transferee or assignee of such
securities who, as a result of such assignment or transfer,
acquires at least fifty percent (50%) of such transferring
Investor's shares of Registrable Securities (in either such case,
a "Permitted Transferee"), provided: (a) the Company is, within a
reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing
to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section
1.14 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under
the Act.
1.14 "Market Stand-Off" Agreement. Each Investor hereby
----------------------------
agrees that, during the period of duration specified by the
Company and an underwriter of Common Stock or other securities of
the Company, following the effective date of a registration
statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by
it at any time during such period except Common Stock included in
such registration; provided, however:
(a) that such market stand-off time period shall not
exceed one hundred eighty (180) days following the effective date
of the Company's first registration of Common Stock or other
securities under the Act and ninety (90) days following the
effective date with respect to all subsequent registrations; and
(b) all officers and directors of the Company and all
five percent (5%) or greater stockholders of the Company enter
into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable
Securities of each Investor (and the shares or securities of every
other person subject to the foregoing restriction) until the end
of such period.
Notwithstanding the foregoing, the obligations described in
this Section 1.14 shall not apply to an Excluded Registration.
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<PAGE>
1.15 Termination of Registration Rights. No Investor shall
----------------------------------
be entitled to exercise any right provided for in this Section 1
after five (5) years following the effective date of the Company's
first registration of Common Stock or other securities under the
Act, other than an Excluded Registration.
1.16 Additional Registration Rights. The registration
------------------------------
rights provided to the Investors in this Agreement are in addition
to, and not in lieu of, the rights and obligations of the
Investors pursuant to a Registration Agreement of even date
herewith among the Company, the Investors and the other purchasers
of Series A Preferred Stock named therein.
2. Covenants of the Company.
------------------------
2.1 Financial Statements and Other Information. Except as
------------------------------------------
otherwise set forth below in this Section 2.1, until the Company
is subject to the reporting requirements of the 1934 Act, the
Company will deliver to each of the Investors, for so long as such
Investor holds any shares of the Company's Series A Preferred
Stock (or Common Stock issued upon conversion thereof)
(a) as soon as available, but in any event within sixty
(60) days after the end of each quarterly accounting period in
each fiscal year, unaudited consolidated statements of operations
and consolidated cash flows of the Company and its subsidiaries
for such quarterly period and for the period from the beginning of
the fiscal year to the end of such quarter, and consolidated
balance sheets of the Company and its subsidiaries as of the end
of such quarterly period, setting forth in each case comparisons
to the annual budget and to the corresponding period in the
preceding fiscal year, and all such statements will be prepared in
accordance with generally accepted accounting principles,
consistently applied (except for the absence of notes and subject
to normal year-end adjustments);
(b) as promptly as possible (but in any event within
one hundred twenty (120) days) after the end of each fiscal year,
consolidated statements of operations and a consolidated statement
of cash flows of the Company and its subsidiaries for such fiscal
year and consolidated balance sheets and statements of
stockholders' equity of the Company and its subsidiaries as of the
end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles,
consistently applied, and accompanied by an unqualified opinion
(except for qualifications regarding specified contingent
liabilities) of an independent accounting firm selected by the
Company's Board of Directors;
(c) prior to the end of each fiscal year, an annual
budget (approved by the Board of Directors) prepared on a monthly,
consolidated basis for the Company and its subsidiaries for the
succeeding fiscal year (displaying detailed anticipated statements
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<PAGE>
of operations and cash flows and balance sheets), and promptly
upon preparation thereof any other significant budgets which the
Company prepares and any revisions of such annual or other
budgets;
(d) promptly (and in any event within thirty (30) days)
after the discovery or receipt of notice of any event or
circumstance affecting the Company or its subsidiaries that is
determined in good faith by the Company to be material to the
Company and its subsidiaries, taken as a whole, including but not
limited to, the filing of any material litigation against the
Company or its subsidiaries, acquisitions, mergers, substantial
sales of assets, significant regulatory action directly affecting
the Company, the commencement of voluntary or involuntary
bankruptcy proceedings, natural or other disasters, significant
changes in management or directors, changes in auditors, and
execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief
Financial Officer of the Company specifying the nature and period
of existence thereof and, in the case of material litigation, what
actions the Company and its subsidiaries have taken and propose to
take with respect thereto;
(e) promptly after transmission thereof, copies of all
financial statements, proxy statements, reports and any other
written communications which the Company sends to its stockholders
generally and copies of all registration statements and all
regular, special or periodic reports which it files with the SEC
or with any securities exchange on which any of its securities are
then listed, and copies of all press releases and other statements
made available generally by the Company to the public; and
(f) a notice specifying the terms of all sales of the
Company's securities, promptly following the consummation thereof.
Each of the financial statements referred to in this Section
2.1 will be true and correct in all material respects and will
fairly present the Company's consolidated financial position and
results of operations as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements
to changes resulting from normal year-end audit adjustments (none
of which would, alone or in the aggregate, be materially adverse
to the Company's financial condition, operating results or
business prospects). The Company's obligation to provide to the
Investors the materials described in Subsection (e) above will
continue after the Company is subject to the reporting
requirements of the 1934 Act and until the Investors no longer
hold any shares of the Company's Series A Preferred Stock (or
Common Stock issued upon conversion thereof)
2.2 Inspection of Property. Until the Company is subject to
----------------------
the reporting requirements of the 1934 Act, the Company will
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<PAGE>
permit each of the Investors, or any representatives designated by
an Investor, upon reasonable notice and during normal business
hours and such other times as an Investor may reasonably request,
to (i) visit and inspect any of the properties of the Company and
its subsidiaries, (ii) examine the corporate and financial records
of the Company and its subsidiaries and make copies thereof or
extracts therefrom, (iii) discuss the affairs, finances and
accounts of the Company and its subsidiaries with the directors,
senior management and independent accountants of the Company and
its subsidiaries, and (iv) consult with and advise the management
of the Company and its subsidiaries as to their affairs, finances
and accounts; provided that such Investor or representative shall
agree to hold any such copies or extracts in confidence and
provided further that the Company reserves the right to withhold
any information and to exclude such Investor or such
representative from any meeting or portion thereof to the extent
necessary to preserve attorney-client privilege.
2.3 Board Visitation Rights. Until the Company is subject
-----------------------
to the reporting requirements of the 1934 Act, the Company shall
invite a representative of the Investors to attend all meetings of
its Board of Directors in a non-voting observer capacity and, in
this respect, shall give such representative copies of all
notices, minutes, consents, and other materials that it provides
to its directors; provided that such representative shall agree to
hold such materials in confidence and provided further that the
Company reserves the right to withhold any information and to
exclude such representative from any meeting or portion thereof to
the extent necessary to preserve attorney-client privilege.
2.4 Preemptive Right. Subject to the terms and conditions
----------------
specified in this Section 2.4, the Company hereby grants to each
Investor a preemptive right with respect to future sales by the
Company of its Shares (as hereinafter defined). An Investor shall
be entitled to apportion the preemptive right hereby granted it
among itself and its partners and affiliates and, in the case of
an Investor that is a registered investment company, among itself
and its Related Mutual Funds, in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any
class of its capital stock ("Shares"), the Company shall make an
offering of such Shares to each Investor in accordance with the
following provisions:
(a) The Company shall deliver a notice ("Notice") to
the Investors stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii)
the price and terms, if any, upon which it proposes to offer such
Shares.
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<PAGE>
(b) By written notification received by the Company,
within twenty (20) calendar days after giving of the Notice, the
Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares
which equals the proportion that the number of shares of Common
Stock issued and held, or issuable upon conversion of the Series A
Preferred Stock then held, by such Investor bears to the total
number of shares of Common Stock of the Company then outstanding
(assuming full conversion of all convertible securities) ("Pro
Rata Share").
(c) If all Shares referred to in the Notice which
Investors are entitled to obtain pursuant to Subsection 2.4(b) are
not elected to be obtained as provided in Subsection 2.4(b)
hereof, the Company may, during the ninety (90) day period
following the expiration of the period provided in Subsection
2.4(b) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than, and upon
terms no more favorable to the offeree than those specified in the
Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not
consummated within thirty (30) days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such
Shares shall not be offered unless first reoffered to the
Investors in accordance herewith.
(d) The preemptive right in this Section 2.4 shall not
be applicable to
(i) shares of Common Stock issuable or issued to
employees, advisors, consultants or outside directors of the
Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company so
long as the cumulative total number of shares of Common Stock so
issuable and issued (and not repurchased at cost by the Company in
connection with the termination of employment) does not exceed at
any time the greater of (i) 2.75 million shares of Common Stock or
(ii) twelve percent (12%) of the outstanding shares of Common
Stock (assuming the exercise or conversion into Common Stock of
all securities then outstanding that are exercisable for or
convertible into Common Stock);
(ii) Common Stock issued in connection with bona
fide research, licensing or corporate partnering relationships, in
connection with equipment lease financings, or upon exercise of
warrants issued to institutional lenders in connection with
non-convertible debt financings, in each case approved by the
Board of Directors of the Company, provided that such issuances
are for other than primarily equity financing purposes, and
provided, further, that the cumulative, aggregate number of shares
issued in connection with such equipment lease financings and debt
financings combined does not exceed five percent (5%) of the
number of shares of Common Stock then outstanding (assuming the
exercise or conversion into Common Stock of all other securities
then outstanding that are exercisable for or convertible into
Common Stock);
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<PAGE>
(iii) Common Stock issued or issuable upon
conversion of the Series A Preferred Stock;
(iv) Common Stock issued or issuable in connection
with a merger or consolidation as a result of which the holders of
the Company's outstanding securities immediately prior to the
consummation of such transaction hold securities in excess of
fifty percent (50%) of the voting power of the surviving or
resulting entity; or
(v) Common Stock issued in a registered public
offering.
(e) The preemptive right set forth in this Section 2.4
may not be assigned or transferred, except to a Permitted
Transferee.
No holder shall be entitled to exercise any preemptive right
provided for in this Section 2.4 after the earlier of
(i) the effective date of a Qualified Public Offering or (ii) such
date as the Investors, together with any Related Mutual Funds,
hold fewer than 800,000 shares (adjusted for stock splits, stock
dividends, combinations, reclassifications and similar events) of
Series A Preferred Stock (and/or Common Stock issued on conversion
thereof).
2.5 Positive Covenants. So long as any shares of the Series
------------------
A Preferred Stock are outstanding, the Company agrees as follows:
(a) The Company will retain independent public
accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In
the event the services of the independent public accountants so
selected, or any firm of independent public accountants hereafter
employed by the Company are terminated, the Company will promptly
thereafter notify the Investors and will request the firm of
independent public accountants whose services are terminated to
deliver to the Investors a letter from such firm setting forth the
reasons for the termination of their services. In the event of
such termination, the Company will promptly thereafter engage
another firm of independent public accountants of recognized
national standing. In its notice to the Investors the Company
shall state whether the change of accountants was recommended or
approved by the Board of Directors of the Company or any committee
thereof.
(b) The Company will cause senior management (except
for Marlene Krauss, Chairman of the Board) personnel and key
employees now or hereafter employed by it or any subsidiary to
enter into a proprietary information and inventions agreement,
which agreement shall include a provision with respect to
noncompetition.
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<PAGE>
(c) The Company shall, promptly following the date of
this Agreement, obtain, and thereafter maintain in full force and
effect, fire, casualty, workmen's compensation and liability
insurance policies, with extended coverage, in such amounts and
with such coverage as are carried by companies in a position
similar to that of the Company.
(d) The Company shall, within ninety (90) days of the
date of this Agreement, use its best efforts to obtain and shall
thereafter maintain (i) a key person life insurance policy in the
amount of $2.0 million on Dr. Richard J. Cohen, M.D. and (ii) a
key person life insurance policy in the amount of $1.0 million on
Jeffrey M. Arnold, with the Company listed as the beneficiary on
both policies.
(e) The Company's Board of Directors shall meet at
least once every fiscal quarter.
(f) The Company shall conduct all transactions with
affiliates on an arm's-length basis; provided, however, that
nothing contained herein shall be deemed to prohibit the Company
from performing its obligations under any existing agreements
between the Company and any of its affiliates as in effect on the
date hereof but not any supplements, amendments, modifications,
waivers, renewals or extensions thereof.
(g) The Company shall exercise in full its purchase
rights under the Restricted Stock Agreement dated of even date
herewith between the Company and Dr. Richard J. Cohen, M.D. (the
"Restricted Stock Agreement") and shall refrain from amending,
altering or agreeing to waive any of its purchase rights under the
Restricted Stock Agreement. The Company shall comply in all
material respect's with its obligations under the Consulting and
Technology Agreement dated as of February 8, 1993 between the
Company and Dr. Cohen.
2.6 Termination of Certain Covenants. The covenants set
--------------------------------
forth in Section 2.5 shall terminate and be of no further force or
effect upon the consummation of a Qualified Public Offering.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided
----------------------
herein, the terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and
assigns of the parties (excluding transferees, other than
Permitted Transferees as defined in Section 1.13 hereof, of any
shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this
Agreement.
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<PAGE>
3.2 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of New York, disregarding
New York principles of conflicts of laws which would otherwise
provide for the application of the substantive laws of another
jurisdiction.
3.3 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
3.4 Titles and Subtitles. The titles and subtitles used in
--------------------
this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required
-------
or permitted under this Agreement shall be given in writing and
shall be deemed effectively given upon personal delivery to the
party to be notified or four (4) days after deposit with the
United States Post Office or air courier in the case of non-U.S.
Investors, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written
notice to the other parties with a copy for the Company to
Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin, 551 Fifth Avenue,
New York, New York 10176, attention Kenneth R. Koch.
3.6 Expenses. If any action at law or in equity is
--------
necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief
to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may
----------------------
be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the holders of fifty one percent (51%) of the
Registrable Securities then outstanding, except that the
observance of any terms of this Agreement which benefits only the
Investors and Permitted Transferees may be waived by the Investors
or the Permitted Transferees, as applicable. Any amendment or
waiver effected in accordance with this Section 3.7 shall be
binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable
Securities, and the Company.
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<PAGE>
3.8 Severability. If one or more provisions of this
------------
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of
the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
3.9 Entire Agreement. This Agreement constitutes the full
----------------
and entire understanding and agreement between the parties with
regard to the subjects hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CAMBRIDGE HEART, INC.
By:/s/Jeffrey M. Arnold
-------------------------------
Jeffrey M. Arnold
President
Address: 645 Madison Avenue
New York, New York 10169
Attention: Marlene R. Krauss, M.D.
Chairman of the Board
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<PAGE>
INVESTORS:
FINANCIAL STRATEGIC PORTFOLIOS,
INC.-HEALTH SCIENCES PORTFOLIO
By: /s/Glen A. Payne
------------------------------
Name: Glen A. Payne
----------------------------
Title: Secretary
---------------------------
Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attention:
THE GLOBAL HEALTH SCIENCES FUND
By: /s/Glen A. Payne
------------------------------
Name: Glen A. Payne
----------------------------
Title: Secretary
---------------------------
Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attention:
-23-
<PAGE>
CAMBRIDGE HEART, INC.
INVESTORS' RIGHTS AGREEMENT
---------------------------
<PAGE>
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made
as of the 19th day of April, 1995, by and between Cambridge Heart,
Inc., a Delaware corporation (the "Company"), Morgan Stanley
Venture Capital Fund II, L.P. ("MSVCLP"), Morgan Stanley Venture
Capital Fund II, C.V. ("MSVCCV") and Morgan Stanley Venture
Investors, L.P. ("MSVI") (MSVCLP, MSVCCV and MSVI are referred to
individually herein as an "Investor" and collectively as the
"Investors").
RECITALS
--------
WHEREAS, the Company and the Investors are parties to a
Series B Preferred Stock Purchase Agreement of even date herewith
(the "Stock Purchase Agreement");
WHEREAS, in order to induce the Company to enter into the
Stock Purchase Agreement and to induce the Investors to invest
funds in the Company pursuant to the Stock Purchase Agreement, the
Investors and the Company hereby agree that this Agreement shall
govern the rights of the Investors to cause the Company to
register shares of Common Stock issuable to the Investors and
certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees
-------------------
as follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of
1933, as amended.
(b) The term "Common Stock" means shares of the
common stock of the Company, par value $.001 per share.
(c) The term "Excluded Registration" means a
registration statement relating either to the sale of securities
to employees, directors or consultants of the Company pursuant to
a stock option, stock purchase or similar plan or a business
combination within the meaning of SEC Rule 145.
(d) The term "Form S-1" means such form under the
Act as in effect on the date hereof or any substantially similar
registration form under the Act subsequently adopted by the SEC.
(e) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any substantially similar
registration form under the Act subsequently adopted by the SEC.
<PAGE>
(f) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 1.13 hereof.
(g) The term "1934 Act" means the Securities
Exchange Act of 1934, as amended.
(h) The term "Qualified Public Offering" means a
firm commitment/underwritten public offering pursuant to an
effective registration statement under the Act, covering the offer
and sale of the Company's Common Stock to the general public with
aggregate gross proceeds to the Company of at least $10,000,000
(before deducting underwriting discounts and commissions and
expenses) and a price to the public of at least $3.00 per share
(subject to adjustment for stock splits, combinations or similar
events).
(i) The term "Series B Preferred Stock" means
shares of the Company's Series B Convertible Preferred Stock, par
value $.001 per share.
(j) The term "register," "registered," and
"registration" refer to a registration effected by preparing and
filing a registration statement or similar document in compliance
with the Act, and the declaration or ordering of effectiveness of
such registration statement or document.
(k) The term "Registrable Securities" means
(i) the Common Stock issuable or issued upon conversion of the
Series B Preferred Stock, (ii) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in
replacement of the shares referenced in (i) above, excluding in
all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Section 1 are not
assigned.
(l) The term "SEC" shall mean the Securities and
Exchange Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after
the earlier of (i) three (3) years after the Closing (as defined
in Section 1.2 of the Stock Purchase Agreement) or (ii) six (6)
months after the effective date of the first registration
statement for a public offering of securities of the Company
(other than an Excluded Registration), a written request from the
Investors that the Company file a registration statement under the
Act covering the registration of Registrable Securities then
-2-
<PAGE>
outstanding with a reasonably anticipated aggregate offering Price
of at least $2,500,000, the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice, in accordance with Section 3.5
hereof, of such request to all Holders; and
(ii) file as soon as practicable, and in any
event within ninety (90) days of the receipt of such request with
respect to a Form S-1 and within sixty (60) days of the receipt of
such request with respect to a Form S-3, and use its best efforts
to cause to become effective as soon as practicable, the
registration under the Act of all Registrable Securities which the
Investors and any other Holders request to be registered, subject
to the limitations of Subsection 1.2(b). For purposes of
Sections 1.2 through 1.12 of this Agreement, the term Holders
shall be deemed to include the Series A Investors (as such term is
defined in the Stock Purchase Agreement) and the term Registrable
Securities shall be deemed to include (i) Common Stock issuable or
issued upon conversion of the Series A Preferred Stock held by the
Series A Investors and (ii) Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of the shares
referenced in (i) above.
(b) If the Investors intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to Subsection 1.2(a), and the Company shall
include such information in the written notice referred to in
Subsection 1.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in
interest of the Investors. In such event, the right of any Holder
to include his, her or its Registrable Securities in such
registration shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise
mutually agreed by a majority in interest of the Investors and
such Holder) to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall
(together with the Company as provided in Subsection 1.4(e)) enter
into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Investors in writing that marketing
factors require a limitation of the number of shares to be
underwritten, then the Investors shall so advise all Holders of
Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be
-3-
<PAGE>
allocated among all Holders thereof, including the Investors and
the Series A Investors, in proportion (as nearly as practicable)
to the amount of Registrable Securities of the Company requested
by each Holder, including the Series A Investors, to be included
in the underwriting; provided, however, that the number of shares
of Registrable Securities of the Holders, including the Series A
Investors, to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded
from the underwriting.
(c) Notwithstanding the foregoing, if the Company
shall furnish to the Investors a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith
judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such
registration statement to be filed and it is therefore essential
to defer the filing of such registration statement, the Company
shall have the right to defer taking action with respect to such
filing for a period of not more than ninety (90) days after
receipt of the request of the Investors; provided, however, that
the Company may not utilize this right more than once in any
twelve (12) month period.
(d) In addition, the Company shall not be
obligated to effect, or to take any action to effect, any
registration pursuant to this Section 1.2:
(i) After the Company has effected two (2)
registrations pursuant to this Section 1.2, excluding any
registrations effected on Form S-3, and such registrations have
been declared or ordered effective;
(ii) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date one hundred eighty (180)
days after the effective date of, the first registration statement
for a public offering subject to Section 1.3 hereof; provided that
the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective;
(iii) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date ninety (90) days after the
effective date of, any subsequent registration statement for a
public offering subject to Section 1.3 hereof; provided that the
Company is actively employing in good faith all reasonable efforts
to cause such registration statement to become effective;
-4-
<PAGE>
(iv) If the Investors propose to dispose of
shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to
Section 1.12 below; or
(v) If the Company delivers to the Investors
an opinion, in form and substance reasonably acceptable to such
Investors, of counsel reasonably satisfactory to the Investors,
that the Registrable Securities requested to be registered by the
Investors may be sold or transferred pursuant to Rule 144(k) of
the Act.
1.3 Company Registration. If (but without any
--------------------
obligation to do so) the Company proposes to register (including
for this purpose a registration effected by the Company for
stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of
such securities (other than an Excluded Registration, a
registration on any form which does not include substantially the
same information as would be required to be included in a
registration statement covering the sale of the Registrable
Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt
securities which are also being registered), the Company shall, at
such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given
within twenty (20) days after giving of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the
provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has
requested to be registered. Neither the giving of any notice nor
the making of any request hereunder shall impose any obligation on
a Holder to sell any shares.
1.4 Obligations of the Company. Whenever required
--------------------------
under this Section 1 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become
effective, and keep such registration statement effective for a
period of up to one hundred twenty (120) days or until the
distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such
one hundred twenty (120) day period shall be extended for a period
of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company,
and provided further that in the case of any registration of
-5-
<PAGE>
Registrable Securities on Form S-3 that are intended to be offered
on a continuous or delayed basis, such one hundred twenty (120)
day period shall be extended until all such Registrable Securities
are sold, if applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any
prospectus required by Section 10(a)(3) of the Act or
(II) reflects facts or events representing a material or
fundamental change in the information set forth in the
registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus
used in connection with such registration statement as, in the
opinion of counsel to the Company, may be necessary to comply with
the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies
of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders; provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the
Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities,
covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or
-6-
<PAGE>
necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(g) Cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities
exchange on which similar securities issued by the Company are
then listed. If no similar securities issued by the Company are
then listed on an exchange, facilitate the reporting of the
Registrable Securities on NASDAQ.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for
all such Registrable Securities, in each case not later than the
effective date of such registration.
(i) Take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of the
Registrable Securities pursuant to the registration statement.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any
selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's
Registrable Securities.
(b) The Company shall have no obligation with
respect to any registration requested pursuant to Section 1.2 or
Section 1.12 if, due to the operation of Subsection 1.5(a), the
anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the
anticipated aggregate offering price required to originally
trigger the Company's obligation to initiate such registration as
specified in Subsection 1.2(a) or Subsection 1.12(b)(2), whichever
is applicable.
1.6 Expenses of Demand Registration. All expenses
other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant
to Section 1.2, including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable
fees and disbursements of one counsel for the selling Holders
shall be borne by the Company.
-7-
<PAGE>
1.7 Expenses of Company Registration. The Company
--------------------------------
shall bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to Section 1.3 for each
Holder, including (without limitation) all registration, filing,
and qualification fees, printers' and accounting fees relating or
apportionable thereto and the reasonable fees and disbursements of
one counsel for the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any
-------------------------
offering involving an underwriting of shares of the Company's
capital stock, the Company shall not be required under Section 1.3
to include any of a Holder's securities in such underwriting
unless such Holder accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or
by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the
Company that the underwriters determine in their sole discretion
is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included
to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be
included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by the selling
stockholders).
1.9 Delay of Registration. No Holder shall have any
---------------------
right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or
implementation of this Section 1.
1.10 Indemnification. In the event any Registrable
---------------
Securities are included in a registration statement under this
Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the officers and
directors of each Holder participating in such registration, any
underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the
-8-
<PAGE>
meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may
become subject under the Act, or the 1934 Act, or otherwise
insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of
the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, or any
rule or regulation promulgated under the Act, or the 1934 Act, and
the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this
Subsection 1.10(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter
or controlling person. With respect to any untrue statement or
alleged untrue statement made in, or omission or alleged omission
from, any preliminary prospectus or prospectus, the indemnity
agreement contained in this Subsection 1.10(a) with respect to
such preliminary prospectus or prospectus, to the extent it is
based on the claim of a person who purchased any Registrable
Securities directly from a Holder shall not inure to the benefit
of such Holder (or to the benefit of any of its officers and
directors or any person controlling such Holder) if the prospectus
(or the prospectus as amended or supplemented if the Company shall
have filed with the Commission any amendment or supplement
thereto) which shall have been furnished to such Holder by the
Company in a timely manner and in sufficient quantities, does not
contain such statement, alleged statement, omission, or alleged
omission and a copy of the prospectus (or the prospectus as
amended or supplemented if the Company shall have filed with the
Commission any amendment or supplement thereto) shall not have
been sent or given to such person by the Holder (and the Holder
shall have been obligated so to furnish such a prospectus) and
such person shall not otherwise have received a copy thereof at or
prior to the written confirmation of such sale to such person.
-9-
<PAGE>
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within
the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the
Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified
pursuant to this Subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any selling Holder's
liability under this Subsection 1.10(b) exceed the proceeds
received by such Holder from the offering (net of any underwriting
discounts and commissions).
(c) Promptly after receipt by an indemnified party
under this Section 1.10 of notice of the commencement of any
action (including any governmental action), such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
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<PAGE>
liability to the indemnified party under this Section 1.10, but
the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability,
claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained
in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders
under this Section 1.10 shall survive the completion of any
offering of Registrable Securities in a registration statement
under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934.
---------------------------------------------
With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all
times after ninety (90) days after the effective date of the first
registration statement filed under the Act by the Company for the
offering of its securities to the general public;
-11-
<PAGE>
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act,
as is necessary to enable the Holders to utilize Form S-3 for the
sale of their Registrable Securities, such action to be taken as
soon as practicable after the end of the fiscal year in which the
first registration statement filed under the Act by the Company
for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act
and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144 (at any time after ninety
(90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall
---------------------
receive, at any time after six months following the completion of
the first registration statement for a public offering of
securities of the Company (other than an Excluded Registration), a
written request from the Investors that the Company effect a
registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Investors, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
other Holders; and
(b) as soon as practicable, use its best efforts
to effect such registration and all such qualifications and
compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of
such Investors' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request
as are specified in a written request given within twenty (20)
days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance,
-12-
<PAGE>
pursuant to this Section 1.12: (1) if Form S-3 is not available
for such offering by the Holders; (2) if the Investors, together
with the Holders of any other securities of the Company entitled
to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriting discounts or
commissions) of less than $500,000; (3) if the Company shall
furnish to the Investors a certificate signed by the President of
the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 registration to
be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after
receipt of the request of the Investors under this Section 1.12;
provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period; (4) if the Company
has already effected three (3) registrations on Form S-3, or any
equivalent successor form, for the Holders pursuant to this
Section 1.12; or (5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute
a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities
and other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the
Investors. All expenses incurred in connection with a
registration requested pursuant to this Section 1.12, including,
without limitation, all registration, filing, qualification,
printers' and accounting fees and the reasonable fees and
disbursements of one (1) counsel for the selling Holders and
counsel for the Company, but excluding any underwriting discounts
or commissions associated with Registrable Securities, shall be
borne by the Company. Registrations effected pursuant to this
Section 1.12 shall not be counted as registrations effected
pursuant to Sections 1.2 or 1.3.
(d) The Company shall not be obligated to effect
any registration pursuant to this Section 1.12 if the Company
delivers to the Investors requesting registration under this
Section 1.12 an opinion, in form and substance acceptable to such
Investors, of counsel satisfactory to the Investors, that the
Registrable Securities so requested to be registered may be sold
or transferred pursuant to Rule 144(k) under the Act.
1.13 Assignment of Registration Rights. The rights to
---------------------------------
cause the Company to register Registrable Securities pursuant to
this Section 1 may be assigned (but only with all related
obligations) by an Investor to: (i) in the case of an Investor
-13-
<PAGE>
that is an investment company registered under the Investment
Company Act of 1940, to another such investment company (a
"Related Mutual Fund") that has the same investment adviser as the
transferring investment company, without restriction or
requirement as to number of shares; or (ii) to a transferee or
assignee of such securities who, as a result of such assignment or
transfer, acquires at least fifty percent (50%) of such
transferring Investor's shares of Registrable Securities (in
either such case, a "Permitted Transferee"), provided: (a) the
Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which
such registration rights are being assigned; (b) such transferee
or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, including without
limitation the provisions of Section 1.14 below; and (c) such
assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
1.14 "Market Stand-Off" Agreement. Each Investor
----------------------------
hereby agrees that, during the period of duration specified by the
Company and an underwriter of Common Stock or other securities of
the Company, following the effective date of a registration
statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, directly or
indirectly, sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by
it at any time during such period except Common Stock included in
such registration; provided, however:
(a) that such market stand-off time period shall
not exceed one hundred eighty (180) days following the effective
date of the Company's first registration of Common Stock or other
securities under the Act and ninety (90) days following the
effective date with respect to all subsequent registrations; and
(b) all officers and directors of the Company and
all five percent (5%) or greater stockholders of the Company enter
into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable
Securities of each Investor (and the shares or securities of every
other person subject to the foregoing restriction) until the end
of such period.
-14-
<PAGE>
Notwithstanding the foregoing, the obligations described in
this Section 1.14 shall not apply to an Excluded Registration.
1.15 Termination of Registration Rights. No Investor
----------------------------------
shall be entitled to exercise any right provided for in this
Section 1 after five (5) years following the effective date of the
Company's first registration of Common Stock or other securities
under the Act, other than an Excluded Registration.
2. Covenants of the Company.
------------------------
2.1 Financial Statements and Other Information. Except
------------------------------------------
as otherwise set forth below in this Section 2.1, until the
Company is subject to the reporting requirements of the 1934 Act,
the Company will deliver to each of the Investors, for so long as
such Investor holds any shares of the Company's Series B Preferred
Stock (or Common Stock issued upon conversion thereof):
(a) as soon as available, but in any event within
forty-five (45) days after the end of each monthly accounting
period in each fiscal year (other than the last month in each such
year), unaudited consolidated statements of operations and
consolidated cash flows of the Company and its subsidiaries for
such monthly period and for the period from the beginning of the
fiscal year to the end of such month, and consolidated balance
sheets of the Company and its subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the
annual budget and to the corresponding period in the preceding
fiscal year, and all such statements will be prepared in
accordance with generally accepted accounting principles,
consistently applied (except for the absence of notes and subject
to normal year-end adjustments);
(b) as promptly as possible (but in any event
within one hundred twenty (120) days) after the end of each fiscal
year, consolidated statements of operations and a consolidated
statement of cash flows of the Company and its subsidiaries for
such fiscal year and consolidated balance sheets and statements of
stockholders' equity of the Company and its subsidiaries as of the
end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles,
consistently applied, and accompanied by an unqualified opinion
(except for qualifications regarding specified contingent
liabilities) of an independent accounting firm selected by the
Company's Board of Directors;
(c) prior to the end of each fiscal year, an
annual budget (approved by the Board of Directors) prepared on a
-15-
<PAGE>
monthly, consolidated basis for the Company and its subsidiaries
for the succeeding fiscal year (displaying detailed anticipated
statements of operations and cash flows and balance sheets), and
promptly upon preparation thereof any other significant budgets
which the Company prepares and any revisions of such annual or
other budgets;
(d) promptly (and in any event within thirty (30)
days) after the discovery or receipt of notice of any event or
circumstance affecting the Company or its subsidiaries that is
determined in good faith by the Company to be material to the
Company and its subsidiaries, taken as a whole, including but not
limited to, the filing of any material litigation against the
Company or its subsidiaries, acquisitions, mergers, substantial
sales of assets, significant regulatory action directly affecting
the Company, the commencement of voluntary or involuntary
bankruptcy proceedings, natural or other disasters, significant
changes in management or directors, changes in auditors, and
execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief
Financial Officer of the Company specifying the nature and period
of existence thereof and, in the case of material litigation, what
actions the Company and its subsidiaries have taken and propose to
take with respect thereto;
(e) promptly after transmission thereof, copies of
all financial statements, proxy statements, reports and any other
written communications which the Company sends to its stockholders
generally and copies of all registration statements and all
regular, special or periodic reports which it files with the SEC
or with any securities exchange on which any of its securities are
then listed, and copies of all press releases and other statements
made available generally by the Company to the public; and
(f) a notice specifying the terms of all sales of
the Company's securities, promptly following the consummation
thereof.
Each of the financial statements referred to in this
Section 2.1 will be true and correct in all material respects and
will fairly present the Company's consolidated financial position
and results of operations as of the dates and for the periods
stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit
adjustments (none of which would, alone or in the aggregate, be
materially adverse to the Company's financial condition, operating
results or business prospects). The Company's obligation to
provide to the Investors the materials described in Subsection (e)
above will continue after the Company is subject to the reporting
requirements of the 1934 Act and until the Investors no longer
hold any shares of the Company's Series B Preferred Stock (or
Common Stock issued upon conversion thereof).
-16-
<PAGE>
2.2 Inspection of Property. Until the Company is
----------------------
subject to the reporting requirements of the 1934 Act, the Company
will permit each of the Investors, or any representatives
designated by an Investor, upon reasonable notice and during
normal business hours and such other times as an Investor may
reasonably request, to (i) visit and inspect any of the properties
of the Company and its subsidiaries, (ii) examine the corporate
and financial records of the Company and its subsidiaries and make
copies thereof or extracts therefrom, (iii) discuss the affairs,
finances and accounts of the Company and its subsidiaries with the
directors, senior management and independent accountants of the
Company and its subsidiaries, and (iv) consult with and advise the
management of the Company and its subsidiaries as to their
affairs, finances and accounts; provided that such Investor or
representative shall agree to hold any such copies or extracts in
confidence and provided further that the Company reserves the
right to withhold any information and to exclude such Investor or
such representative from any meeting or portion thereof to the
extent necessary to preserve attorney-client privilege.
2.3 Participation Right. Subject to the terms and
-------------------
conditions specified in this Section 2.3, the Company hereby
grants to each Investor a participation right with respect to
future sales by the Company of its Shares (as hereinafter
defined). An Investor shall be entitled to apportion the
participation right hereby granted it among itself and its
partners and affiliates and, in the case of an Investor that is a
registered investment company, among itself and its Related Mutual
Funds, in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any
class of its capital stock ("Shares"), the Company shall make an
offering of such Shares to each Investor in accordance with the
following provisions:
(a) The Company shall deliver a notice ("Notice")
to the Investors stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer
such Shares.
(b) By written notification received by the
Company, within twenty (20) calendar days after giving of the
Notice, the Investor may elect to purchase or obtain, at the price
and on the terms specified in the Notice, up to that portion of
-17-
<PAGE>
such Shares which equals the proportion that the number of shares
of Common Stock issued and held, or issuable upon conversion of
the Series B Preferred Stock then held, by such Investor bears to
the total number of shares of Common Stock of the Company then
outstanding (assuming full conversion of all convertible
securities) ("Pro Rata Share").
(c) If all Shares referred to in the Notice which
Investors are entitled to obtain pursuant to Subsection 2.3(b) are
not elected to be obtained as provided in Subsection 2.3(b)
hereof, the Company may, during the ninety (90) day period
following the expiration of the period provided in
Subsection 2.3(b) hereof, offer the remaining unsubscribed portion
of such Shares to any person or persons at a price not less than,
and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if
such agreement is not consummated within thirty (30) days of the
execution thereof, the right provided hereunder shall be deemed to
be revived and such Shares shall not be offered unless first
reoffered to the Investors in accordance herewith.
(d) The participation right in this Section 2.3
shall not be applicable to
(i) shares of Common Stock issuable or issued
to employees, advisors, consultants or outside directors of the
Company directly or pursuant to a stock option plan or restricted
stock plan approved by the Board of Directors of the Company so
long as the cumulative total number of shares of Common Stock so
issuable and issued (and not repurchased at cost by the Company in
connection with the termination of employment) does not exceed at
any time the greater of (i) 3,337,326 shares of Common Stock or
(ii) twelve percent (12%) of the outstanding shares of Common
Stock (assuming the exercise or conversion into Common Stock of
all securities then outstanding that are exercisable for or
convertible into Common Stock);
(ii) Common Stock issued in connection with
bona fide research, licensing or corporate partnering
relationships, in connection with equipment lease financings, or
upon exercise of warrants issued to institutional lenders in
connection with non-convertible debt financings, in each case
approved by the Board of Directors of the Company, provided that
such issuances are for other than primarily equity financing
purposes, and provided, further, that the cumulative, aggregate
number of shares issued in connection with such equipment lease
financings and debt financings combined does not exceed five
percent (5%) of the number of shares of Common Stock then
outstanding (assuming the exercise or conversion into Common Stock
of all other securities then outstanding that are exercisable for
or convertible into Common Stock);
-18-
<PAGE>
(iii) Common Stock issued or issuable upon
conversion of any class or series of preferred stock;
(iv) Common Stock issued or issuable in
connection with a merger or consolidation as a result of which the
holders of the Company's outstanding securities immediately prior
to the consummation of such transaction hold securities in excess
of fifty percent (50%) of the voting power of the surviving or
resulting entity; or
(V) Common Stock issued in a registered
public offering.
(e) The participation right set forth in this
Section 2.3 may not be assigned or transferred, except to a
Permitted Transferee.
No holder shall be entitled to exercise any participation
right provided for in this Section 2.3 after the earlier of
(i) the effective date of a Qualified Public Offering or (ii) such
date as the Investors, together with any Related Mutual Funds,
hold fewer than 746,000 shares (adjusted for stock splits, stock
dividends, combinations, reclassifications and similar events) of
Series B Preferred Stock (and/or Common Stock issued on conversion
thereof).
2.4 Positive Covenants. So long as any shares of the
------------------
Series B Preferred Stock are outstanding, the Company agrees as
follows:
(a) The Company will retain independent public
accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In
the event the services of the independent public accountants so
selected, or any firm of independent public accountants hereafter
employed by the Company are terminated, the Company will promptly
thereafter notify the Investors and will request the firm of
independent public accountants whose services are terminated to
deliver to the Investors a letter from such firm setting forth the
reasons for the termination of their services. In the event of
such termination, the Company will promptly thereafter engage
another firm of independent public accountants of recognized
national standing. In its notice to the Investors the Company
shall state whether the change of accountants was recommended or
approved by the Board of Directors of the Company or any committee
thereof.
(b) The Company will cause senior management
(except for Marlene Krauss, Chairman of the Board) personnel and
-19-
<PAGE>
key employees now or hereafter employed by it or any subsidiary to
enter into a proprietary information and inventions agreement,
which agreement shall include a provision with respect to
noncompetition.
(c) The Company shall, promptly following the date
of this Agreement, obtain, and thereafter maintain in full force
and effect, fire, casualty, workmen's compensation and liability
insurance policies, with extended coverage, in such amounts and
with such coverage as are carried by companies in a position
similar to that of the Company.
(d) The Company shall use its best efforts to
maintain (i) a key person life insurance policy in the amount of
$2.0 million on Dr. Richard J. Cohen, M.D. and (ii) a key person
life insurance policy in the amount of $1.0 million on Jeffrey M.
Arnold, with the Company listed as the beneficiary on both
policies.
(e) The Company's Board of Directors shall meet at
least once every fiscal quarter.
(f) The Company shall conduct all transactions
with affiliates on an arm's-length basis; provided, however, that
nothing contained herein shall be deemed to prohibit the Company
from performing its obligations under any existing agreements
between the Company and any of its affiliates as in effect on the
date hereof but not any supplements, amendments, modifications,
waivers, renewals or extensions thereof.
(g) The Company shall exercise in full its
purchase rights under the Restricted Stock Agreement dated of even
date herewith between the Company and Dr. Richard J. Cohen, M.D.
(the "Restricted Stock Agreement") and shall refrain from
amending, altering or agreeing to waive any of its purchase rights
under the Restricted Stock Agreement. The Company shall comply in
all material respects with its obligations under the Consulting
and Technology Agreement dated as of February 8, 1993 between the
Company and Dr. Cohen.
2.5 Termination of Certain Covenants. The covenants
--------------------------------
set forth in Section 2.4 shall terminate and be of no further
force or effect upon the consummation of a Qualified Public
Offering.
2.6 Public Offerings. The Company hereby covenants and
----------------
agrees that, without the prior written consent of the Investors,
prior to January 1, 1996, the Company will not register any shares
of its capital stock under the Act in connection with a public
offering of such securities.
-20-
<PAGE>
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise
----------------------
provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective
successors and assigns of the parties (excluding transferees,
other than Permitted Transferees as defined in Section 1.13
hereof, of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors
and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 Governing Law. This Agreement shall be governed by
-------------
and construed under the laws of the State of New York,
disregarding New York principles of conflicts of laws which would
otherwise provide for the application of the substantive laws of
another jurisdiction.
3.3 Counterparts. This Agreement may be executed in
------------
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
3.4 Titles and Subtitles. The titles and subtitles
--------------------
used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice
-------
required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given upon personal
delivery to the party to be notified or four (4) days after
deposit with the United States Post Office or air courier in the
case of non-U.S. Investors, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or
at such other address as such party may designate by ten (10)
days' advance written notice to the other parties with a copy for
the Company to Golenbock, Eiseman, Assor & Bell, 437 Madison
Avenue, New York, New York 10022, attention Lawrence M. Bell.
3.6 Expenses. If any action at law or in equity is
--------
necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees,
costs and necessary disbursements in addition to any other relief
to which such party may be entitled.
-21-
<PAGE>
3.7 Amendments and Waivers. Any term of this Agreement
----------------------
may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written
consent of the Company and the holders of fifty one percent (51%)
of the Registrable Securities then outstanding, except that the
observance of any term of this Agreement which benefits only the
Investors and Permitted Transferees may be waived by the Investors
or the Permitted Transferees, as applicable. Any amendment or
waiver effected in accordance with this Section 3.7 shall be
binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable
Securities, and the Company.
3.8 Severability. If one or more provisions of this
------------
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of
the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
3.9 Entire Agreement. This Agreement constitutes the
----------------
full and entire understanding and agreement between the parties
with regard to the subjects hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
CAMBRIDGE HEART, INC.
By:/s/ Jeffrey M. Arnold
--------------------------------
Jeffrey M. Arnold
President
Address: 645 Madison Avenue
New York, New York 10169
Attention: Marlene R. Krauss, M.D.
Chairman of the Board
-22-
<PAGE>
INVESTORS:
MORGAN STANLEY VENTURE CAPITAL
FUND II, L.P.
By: /s/ Guy L. de Chazal
-------------------------------
Name: Guy L. de Chazal
-----------------------------
Title: President
----------------------------
Address: 1221 Avenue of the Americas
----------------------------------
New York, NY 10020
----------------------------------
----------------------------------
----------------------------------
MORGAN STANLEY VENTURE CAPITAL
FUND II, C.V.
By: /s/ Guy L. de Chazal
-------------------------------
Name: Guy L. de Chazal
-----------------------------
Title: President
----------------------------
Address: 1221 Avenue of the Americas
----------------------------------
New York, NY 10020
----------------------------------
----------------------------------
----------------------------------
MORGAN STANLEY VENTURE
INVESTORS, L.P.
By: /s/ Guy L. de Chazal
-------------------------------
Name: Guy L. de Chazal
-----------------------------
Title: President
----------------------------
Address: 1221 Avenue of the Americas
----------------------------------
New York, NY 10020
----------------------------------
----------------------------------
----------------------------------
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<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE Of
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR SUCH
LAWS AND THE RULES AND REGULATIONS THEREUNDER.
C-1 December 29, 1993
WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF CAMBRIDGE HEART, INC.
This certifies that Dr. Richard J. Cohen (the "Holder"), for
value received is entitled, subject to the adjustment and to the
other terms set forth below, to purchase from CAMBRIDGE HEART,
INC., a Delaware corporation (the "Company"), 219,269 shares of
fully paid and nonassessable shares of the Company's $.001 par
value Common Stock (the "Stock") at $1.00 per share of Stock (the
"Stock Purchase Price") at any time on or after September 24, 1993
(the "Commencement Date") but not later than 5:00 p.m. (New York
Time) on September 24, 1998 (the "Expiration Date"), upon
surrender to the Company at its principal office, Corporate
Place 1, 99 South Bedford Street, Suite 204, Burlington, MA 01803,
Attention: Chief Executive Officer (or at such other location as
the Company may advise Holder in writing) of this Warrant properly
endorsed with the form of Subscription Agreement attached hereto
duly filled in and signed and, unless the Conversion Right set
forth in Section 1.2 is exercised, upon payment in cash or
cashier's check of the aggregate Stock Purchase Price for the
number of shares of Stock for which this Warrant is being
exercised determined in accordance with the provisions hereof.
The Stock Purchase Price and, in some cases, the number of
shares of Stock purchasable hereunder are subject to adjustment as
provided in Section 3 of this Warrant. This Warrant and all
rights hereunder, to the extent not exercised in the manner set
forth herein shall terminate and become null and void on the
Expiration Date.
This Warrant is subject to the following terms and
conditions:
1. Exercise; Issuance of Certificates; Payment for Shares;
-------------------------------------------------------
Conversion Right.
----------------
1.1 Duration of Exercise of Warrant. This Warrant is
-------------------------------
exercisable at the option of the Holder at any time or from time
to time but not earlier than on the Commencement Date or later
than 5:00 p.m. (New York Time) on the Expiration Date for all or
portion of the shares of Stock which may be purchased hereunder.
The Company agrees that the shares of Stock purchased under this
Warrant shall be and are deemed to be issued to Holder as the
record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment
made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Stock so purchased, together with
any other securities or property to which Holder is entitled upon
<PAGE>
such exercise, shall be delivered to Holder by the Company's
transfer agent at the Company's expense within a reasonable time
after the rights represented by this Warrant have been exercised.
Each stock certificate so delivered shall be in such denominations
of Stock as may be requested by Holder and shall be registered in
the name of Holder or such other name as shall be designated by
Holder, subject to the limitations contained in Section 2. If,
upon exercise of this Warrant, fewer than all of the shares of
Stock evidenced by this Warrant are purchased prior to the
Expiration Date of this Warrant, one or more new warrants
substantially in the form of, and on the terms in, this Warrant
will be issued for the remaining number of shares of Stock not
purchased upon exercise of this Warrant.
1.2 Conversion Right. In lieu of the payment of the
----------------
Stock Purchase Price, the Holder shall have the right (but not the
obligation), to require the Company to convert this Warrant, in
whole or in part, into shares of Stock (the "Conversion Right") as
provided for in this Section 1.2. Upon exercise of the Conversion
Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Stock Purchase Price) that number of
shares of Stock equal to the quotient obtained by dividing (x) the
value of the Warrant at the time the Conversion Right is exercised
(determined by subtracting the aggregate Stock Purchase Price in
effect immediately prior to the exercise of the Conversion Right
from the aggregate Market Price (as hereinafter defined) for the
shares of Stock issuable upon exercise of the Warrant immediately
prior to the exercise of the Conversion Right) by (y) the Market
Price of one share of Stock immediately prior to the exercise of
the Conversion Right. "Market Price" shall mean the Stock Price
(as defined below) obtained by taking the average over a period of
thirty consecutive trading days ending on the second trading day
prior to the date of determination. As used in this paragraph,
the term Stock Price shall mean (A) the mean, on each such trading
day, between the high and low sale price of a share of Stock or if
no such sale takes place on any such trading day, the mean of the
closing bid and lowest closing asked prices therefor on any such
trading day, in each case as officially reported on all national
securities exchanges on which the Stock is then listed or admitted
to trading, or (B) if the Stock is not then listed or admitted to
trading on any national securities exchange, the closing price of
the Stock on such date, or (C) if no closing price is available on
any such trading day, the mean between the highest and lowest
closing bid prices thereof on any such trading date, in the
over-the-counter market as reported by NASDAQ, (D) if the Stock is
not then quoted in such system, the mean between the highest and
lowest bid prices reported by the market makers and dealers for
the Stock listed as such by the National Quotation Bureau,
Incorporated or any similar successor organization, or (E) the
higher of the last bona fide sale made by the Company and the fair
market value of the Stock as determined by the Board of Directors
in its good faith judgment.
1.3 Exercise of Conversion Right. The conversion
----------------------------
rights provided under Section 1.2 hereof may be exercised in whole
or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to the Company, at its
offices, this Warrant certificate accompanied by a duly completed
Notice of Conversion in the form attached hereto as Exhibit A.
The presentation and surrender shall be deemed a waiver of the
Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the shares of Stock issuable upon
-2-
<PAGE>
exercise of this Warrant. This Warrant certificate (or so much
thereof as shall have been surrendered for conversion) shall be
deemed to have been converted immediately prior to the close of
business on the day of surrender of such Warrant certificate for
conversion in accordance with the foregoing provisions. As
promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to the Holder (i) a
certificate or certificates representing the largest number of
whole shares of Stock to which the Holder shall be entitled as a
result of the conversion, and (ii) if the Warrant certificate is
being converted in part only, a new certificate in principal
amount equal to the unconverted portion of the Warrant
certificate. If this Warrant is executed in whole, in lieu of any
fractional shares of Stock to which the Holder shall be entitled,
the Company shall pay to the Holder cash in accordance with the
provisions of Section 12 hereof.
2. Shares to Be Fully Paid; Reservation of Shares. The
----------------------------------------------
Company covenants and agrees that all shares of Stock which may be
issued upon the exercise of this Warrant (the "Warrant Shares")
and all shares of common stock issuable upon conversion of the
Warrants (the "Conversion Shares") will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free
from all preemptive rights of any stockholder and free of all
taxes, liens and charges with respect to the issue thereof. The
Company covenants that it will reserve and keep available a
sufficient number of shares of its authorized but unissued Stock
for such exercise and/or conversion, as the case may be. The
Company will take all such reasonable action as may be necessary
to assure that such shares of Stock may be issued as provided
herein without violation of any applicable law or regulation, or
of any requirements of any domestic securities exchange or
automated quotation system upon which the Stock may be listed.
3. Adjustment of Stock Purchase Price and Number of Shares.
-------------------------------------------------------
The Stock Purchase Price and, in some cases, the number of shares
purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events
described in this Section 3.
3.1 Subdivision or Combination of Stock and Stock
---------------------------------------------
Dividend. In case the Company shall at any time subdivide its
--------
outstanding shares of Stock into a greater number of shares or
declare a dividend upon its Stock payable solely in shares of
Stock, the Stock Purchase Price in effect immediately prior to
such subdivision or declaration shall be proportionately reduced,
and the number of shares issuable upon exercise of the Warrant
shall be proportionately increased. Conversely, in case the
outstanding shares of Stock of the Company shall be combined into
a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately
increased, and the number of shares issuable upon exercise of the
Warrant shall be proportionately reduced.
3.2 Intentionally Omitted.
3.3 Notice of Adjustment. Promptly after adjustment of
--------------------
the Stock Purchase Price or any increase or decrease in the number
of shares purchasable upon the exercise of this Warrant, the
Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the
Company. The notice shall be signed by the Company's chief
-3-
<PAGE>
financial officer and shall state the effective date of the
adjustment and the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of this
Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.4 Other Notices. If at any time:
-------------
(a) the Company shall declare any cash dividend
upon its Stock;
(b) the Company shall declare any dividend upon
its Stock payable in stock (other than a dividend payable solely
in shares of Stock) or make any special dividend or other
distribution to the holders of its Stock;
(c) there shall be any consolidation or merger of
the Company with another corporation, or a sale of all or
substantially all of the Company's assets to another corporation;
or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by
certified or registered mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as
shown on the books of the Company, (i) at least 30 days' prior
written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in
respect of any such dissolution, liquidation or winding-up; (ii)
at least 10 days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for
determining rights to vote in respect of any such reorganization,
reclassification, consideration, merger or sale, and (iii) in the
case of any such reorganization, reclassification, consolidation;
merger, sale, dissolution, liquidation or winding-up, at least 30
days' written notice of the date when the same shall take place.
Any notice given in accordance with clause (i) above shall also
specify, in the case of any such dividend, distribution or option
rights, the date on which the holders of Stock shall be entitled
thereto. Any notice given in accordance with clause (iii) above
shall also specify the date on which the holders of Stock shall be
entitled to exchange their Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. If the Holder of the Warrant does
not exercise this Warrant prior to the occurrence of an event
described above, except as provided in Sections 3.1 and 3.5, the
Holder shall not be entitled to receive the benefits accruing to
existing holders of the Stock in such event.
3.5 Changes in Stock. In case at any time following
----------------
the date hereof, the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of
all or substantially all of the Company's assets or
recapitalization of the Stock) in which the previously outstanding
Stock shall be changed into or exchanged for different securities
of the Company or common stock or other securities of another
corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the
-4-
<PAGE>
foregoing (each such transaction being herein called the
"Transaction" and the date of consummation of the Transaction
being herein called the "Consummation Date"), then, as a condition
of the consummation of the Transaction, lawful and adequate
provisions shall be made so that each Holder, upon the exercise
hereof at any time on or after the Consummation Date, shall be
entitled to receive; and this Warrant shall thereafter represent
the right to receive, in lieu of the Stock issuable upon such
exercise prior to the Consummation Date, the highest amount of
securities or other property to which such Holder would actually
have been entitled as a stockholder upon the consummation of the
Transaction if such Holder had exercised such Warrant immediately
prior thereto. The provisions of this Section 3.5 shall similarly
apply to successive Transactions.
4. Issue Tax. The issuance of certificates for shares of
---------
Stock upon the exercise of the Warrant shall be made without
charge to the holder of the Warrant for any issue tax in respect
thereof; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name
other than that of the then holder of the Warrant being exercised.
5. No Voting or Dividend Rights; Limitation of Liability.
-----------------------------------------------------
Nothing contained in this Warrant shall be construed as conferring
upon the holder hereof the right to vote or to consent or to
receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the
Company. Except for the adjustment to the Stock Purchase Price
pursuant to Section 3.1 in the event of a dividend on the Stock
payable in shares of Stock, no dividends or interest shall be
payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant shall have been exercised.
No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise
to any liability of such holder for the Stock Purchase Price or as
a stockholder of the Company whether such liability is asserted by
the Company or by its creditors.
6. Restrictions on Transferability of Securities;
---------------------------------------------
Compliance With Securities Act.
------------------------------
6.1 Restrictions on Transferability. This Warrant and
-------------------------------
the Warrant Shares and the Conversion Shares (collectively, the
"Securities"), shall not be transferable in the absence of
Registration under the Act (as defined below) or an exemption
therefrom under said Act.
6.2 Restrictive Legend. Each certificate representing
------------------
the Securities or any other securities issued in respect of the
Securities upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under applicable state
securities laws):
-5-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR
SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER.
7. Registration Rights.
-------------------
7.1 Certain Definitions.
-------------------
As used in this Section 7, the following terms shall have the
following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
----------
Commission or any other federal agency at the time administering
the Securities Act.
(b) "Form S-3" shall mean Form S-3 issued by the
--------
Commission or any substantially similar form then in effect.
(c) "Holder" shall mean any holder of outstanding
------
Registrable Securities but only if such holder is a Purchaser or
an assignee or transferee of registration rights as permitted by
Section 7.9.
(d) The terms "Register," "Registered" and
-------- ----------
"Registration" refer to a registration effected by preparing and
------------
filing a registration statement in compliance with the Securities
Act ("Registration Statement"), and the declaration or ordering by
the Commission of the effectiveness of such Registration
Statement.
(e) "Registrable Securities" shall mean the Warrants,
----------------------
the Warrant Shares and the Conversion Shares, so long as
certificates representing the same are required to bear the
restrictive legend set forth in Section 6.2.
(f) "Registration Expenses" shall mean all expenses
---------------------
incurred by the Company in complying with Section 7, including,
without limitation, all federal and state registration,
qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or
required by any such Registration.
(g) "Restriction Termination Date" shall mean, with
----------------------------
respect to any Registrable Securities, the date on which the
Company shall have notified the Holder of such Registrable
Securities in writing that it has determined that such Registrable
Securities may be sold pursuant to Rule 144 (or any successor
provision) without restriction under Rule 144(e) thereof, and,
based upon such determination, the legend shall have been removed.
(h) "Selling Expenses" shall mean all underwriting
----------------
discounts and selling commissions applicable to the sale of
Registrable Securities pursuant to this Agreement.
-6-
<PAGE>
7.2 Company Registration. If (but without any
--------------------
obligation to do so) the Company proposes to Register at any time
prior to the Restriction Termination Date (including for this
purpose a Registration effected by the Company for stockholders
other than the Holder) any of its stock or other securities under
the Act in connection with the underwritten public offering of
such securities solely for cash (other than a Registration of
securities in connection with mergers, acquisitions, exchange
offers, distributions to the Company's stockholders, or stock
option or other employee benefit plans or a Registration in any
form which does not include substantially the same information as
would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company
shall, at each such time, promptly give Holder written notice of
such Registration. Upon the written request of Holder given
within 15 days after mailing of such notice by the Company, the
Company shall, subject to the following provisions, use all
reasonable efforts to cause to be included in such Registration
all of the Registrable Securities that Holder has requested to be
included.
The Company shall not be required under this Section 7.2 to
include any of the Holder's securities in an underwritten offering
of the Company's securities unless such Holder accepts the terms
of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as
will not, in the opinion of the managing underwriters, interfere
with the successful marketing of the offering by the Company.
Notwithstanding the foregoing, the Company shall have no
obligation to comply with the foregoing provisions of this Section
7.2 if, in the opinion of counsel to the Company reasonably
acceptable to the person or persons from whom such written request
has been received, registration under the Securities Act is not
required for the transfer of the Registrable Securities in the
amount and manner proposed by such person or persons.
7.3 Blue Sky. In the event of any Registration pursuant to
--------
this Section 7, the Company will exercise its best efforts to
Register and qualify the Registrable Securities covered by the
Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the
Holders for the distribution of such securities; provided,
however, that the Company shall not be required to qualify to do
business, to file a general consent to service of process or to
subject itself to taxation in any state or jurisdiction in which
it is not now qualified. The Company will furnish to the Holder
written advice of its counsel with respect to registration or
exemption of such Registrable Securities in such jurisdictions.
7.4 Expenses of Registration. All Registration
------------------------
Expenses incurred in connection with a Registration pursuant to
Section 7.2 shall be borne by the Company. All Selling Expenses
shall be borne by the Holder.
7.5 Registration Procedures.
-----------------------
7.5.1 Advice by Company. The Company will keep
-----------------
the Holder advised as to the initiation and completion of such
Registration. At its expense the Company will (i) use its best
efforts to keep such Registration effective until the earlier of
the date on which the Holder has completed the distribution
described in the Registration Statement or the Restriction
-7-
<PAGE>
Termination Date with respect to such Securities; and (ii) furnish
such number of prospectuses (including preliminary prospectuses)
and other documents as the Holder from time to time may reasonably
request.
7.5.2 Amendments. The Company will promptly
----------
prepare and file with the Commission such amendments and
prospectus supplements, including post-effective amendments, to
the Registration Statement as the Company determines may be
necessary or appropriate, and use its best efforts to have such
post-effective amendments declared effective as promptly as
practicable; cause the related prospectus to be supplemented by
any prospectus supplement, and as so supplemented, to be filed
with the Commission; and notify the Holder of any securities
included in such Registration Statement and the underwriter
thereof, if any, promptly when a prospectus, any prospectus
supplement or post-effective amendment must be filed or has been
filed and, with respect to any post-effective amendment, when the
same has become effective.
7.5.3 Underwritten Offerings. At the request of the
----------------------
Holder requesting Registration of Registrable Securities pursuant
to this Section 7, on the date that such Registrable Securities
are delivered to the underwriters for sale pursuant to such
Registration in an underwritten offering pursuant to Section 7.2,
the Company will (a) furnish (i) an opinion, dated as of such
date, of the independent counsel representing the Company for the
purposes of such Registration, addressed to the underwriter, in a
customary form and covering matters of the type customarily
covered in such legal opinions; and (ii) a comfort letter dated as
of such date, from the independent certified public accountants of
the Company addressed to the underwriter in a customary form and
covering matters of the type customarily covered by such comfort
letters; such opinion of counsel shall additionally cover such
other legal matters with respect to the Registration in respect of
which such opinion is being given as such underwriter may
reasonably request and such letter from the independent certified
public accountants shall additionally cover such other financial
matters (including information as to the period ending not more
than five business days prior to the date of such letter) with
respect to the Registration in respect of which such letter is
being given as such underwriter may reasonably request; and (b)
with such Holder, enter into customary agreements (including an
underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities.
7.6 Information Furnished by Holder. It shall be a
-------------------------------
condition precedent to the Company's obligations under this
Agreement that the Holder furnish to the Company in writing such
information regarding such Holder and the distribution proposed by
such Holder as the Company may reasonably request.
7.7 Indemnification.
---------------
7.7.1 Company's Indemnification of Holder. The
-----------------------------------
Company will indemnify Holder, each of its officers, directors and
partners, and each person controlling such Holder, with respect to
which Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Agreement, and each
underwriter, if any, and each of its officers, directors,
constituent partners, and each person who controls any underwriter
against all claims, losses, damages or liabilities (or actions in
-8-
<PAGE>
respect thereof) to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement
(or alleged untrue statement) of a material fact contained in any
prospectus or any related Registration Statement incident to any
such Registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company
in connection with any such Registration; and the Company will
reimburse Holder, each such underwriter and each person who
controls such Holder or underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action;
provided, however, that the indemnity contained in this Section
7.7.1 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if settlement is effected
without the consent of the Company (which consent shall not
unreasonably be withheld or delayed); and provided, further, that
the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of
or is based upon any untrue statement or omission based upon
written information furnished to the Company by Holder,
underwriter or controlling person for use in connection with the
offering of securities of the Company. Notwithstanding the above,
the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement; alleged
untrue statement, omission or alleged omission made in a
preliminary prospectus, such indemnity agreement shall not inure
to the benefit of any underwriter or Holder, if there is no
underwriter, if a copy of the final prospectus was not furnished
to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act if
the final prospectus corrected the untrue statement or omission or
alleged untrue statement or omission.
7.7.2 Holders' Indemnification of Company. Holder
-----------------------------------
will, if Registrable Securities held by Holder are included in the
Securities as to which a Registration is being effected pursuant
to this Agreement, indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of
the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement or
related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse
the Company, such directors, officers, partners, persons,
underwriters or control persons for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement or prospectus in
reliance upon and in conformity with written information furnished
to the Company by Holder and stated to be specifically for use in
connection with the offering of Securities of the Company.
-9-
<PAGE>
7.7.3 Indemnification Procedure. Promptly after
-------------------------
receipt by an indemnified party under this Section 7.7 of notice
of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying
party under this Section 7.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim, and shall
be entitled to select counsel for the defense of such claim with
the approval of any parties entitled to indemnification, which
approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the
right to employ separate counsel (reasonably satisfactory to the
indemnifying party) to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of such
indemnified parties unless the named parties to such action or
proceedings include both the indemnifying party and the
indemnified parties and the indemnifying party or such indemnified
parties shall have been advised by counsel that there are one or
more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which
case, if the indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the
reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such
action or proceeding on behalf of the indemnified party, as the
case may be, it being understood, however, that the indemnifying
party shall not, in connection with any such action or proceeding
or separate or substantially similar or related action or
proceeding in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate counsel at any time
for the indemnifying party and all indemnified parties, which
counsel shall be designated in writing by the Holders of a
majority of the Registrable Securities). If the indemnifying
party withholds consent to a settlement or proposed settlement by
the indemnified party, it shall acknowledge to the indemnified
party its indemnification obligations hereunder.
7.7.4 Contribution. If the indemnification
------------
provided for in this Section 7.7 from an indemnifying party is
unavailable to an indemnified party hereunder in respect to any
losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the statements or
omissions which result in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by such indemnifying
party or indemnified party and the parties' relative intent,
knowledge, access to information supplied by such indemnifying
party or indemnified party and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and
expenses referred to above shall deemed to include any legal or
other fees or expenses reasonably incurred by such party in
-10-
<PAGE>
connection with investigating or defending any action, suit,
proceeding or claim.
7.8 Transfer of Rights. As defined herein, the term
------------------
Transfer shall mean any sale, hypothecation, transfer or other
disposition of Registrable Securities or any interest therein
other than a sale registered under a Registration Statement. The
right to cause the Company to Register Registrable Securities
granted by the Company to Holder under this Section 7 may be
assigned by Holder.
7.9 No-Action Letter or Opinion of Counsel in Lieu of
-------------------------------------------------
Registration. Notwithstanding anything else in this Agreement, if
------------
the Company shall have obtained from the Commission a "no-action"
letter in which the Commission has indicated that it will take no
action if, without Registration under the Securities Act, the
Holder disposes of Registrable Securities covered by any request
for Registration made under this Section in the specific manner in
which the Holder proposes to dispose of the Registrable Securities
included in such request (including, without limitation, inclusion
of such Registrable Securities in an underwriting initiated by
either the Company or the Holder), or if in the opinion of counsel
for the Company concurred in by counsel for the Holder, which
concurrence shall not be unreasonably withheld, no Registration
under the Securities Act is required in connection wit such
disposition, the Registrable Securities included in such request
shall not be eligible for Registration under this Agreement;
provided, however, that any Registrable Securities not so disposed
of shall be eligible for Registration in accordance with the terms
of this Agreement with respect to other proposed dispositions to
which this Section 7.9 does not apply. In addition, the
obligation of the Company to file or maintain the effectiveness of
any Registration Statement under this Section 7 shall be suspended
with respect to any Securities held by the Holder at any time
following the Restriction Termination Date with respect to such
Securities.
8. Modification and Waiver. This Warrant and any provision
-----------------------
hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which
enforcement of the same is sought.
9. Notices. Any notice, request or other document required
-------
or permitted to be given or delivered to the holder hereof or the
Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this
Warrant.
10. Descriptive Headings and Governing Law. The descriptive
--------------------------------------
headings of the several sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of
this Warrant. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York.
11. Lost Warrants or Stock Certificates. The Company
-----------------------------------
represents and warrants to Holder that upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant or stock certificate and,
in the case of any such loss, theft or destruction, upon receipt
-11-
<PAGE>
of an indemnity and, if requested, bond reasonably satisfactory to
the Company, or in the case of any such mutilation, upon surrender
and cancellation of such Warrant or stock certificate, the Company
at its expense will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant or stock certificate.
12. Fractional Shares. No fractional shares shall be issued
-----------------
upon exercise of this Warrant. The Company shall, in lieu of
issuing any fractional share pay the holder entitled to such
fraction a sum in cash equal to the fair market value of any such
fractional interest as it shall appear on the public market, or if
there is no public market for such shares, then as shall be
reasonably determined by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer, thereunto duly authorized as of the 29th
day of December, 1993.
CAMBRIDGE HEART, INC.
By:/s/Jeffrey M. Arnold
-----------------------
Jeffrey M. Arnold
President
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<PAGE>
FORM OF SUBSCRIPTION AGREEMENT
(To be signed and delivered
upon exercise of Warrant)
CAMBRIDGE HEART, INC.
_________________________
_________________________
Attention: ______________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, ________________
_______ shares of Common Stock, par value $.01 per share (the
"Stock"), of CAMBRIDGE HEART, INC. (the "Company") and subject to
the following paragraph, herewith makes payment of
__________________ __________________________ Dollars
($__________) therefor and requests that the certificates for such
shares be issued in the name of, and delivered to, ______________
____________________________________________ whose address is
___________________________________________.
The undersigned does/does not (circle one) request the
exercise of the within Warrant pursuant to the cashless exercise
right set forth in Section 1(b) of the Warrant.
If the exercise of this Warrant is not covered by a
registration statement effective under the Securities Act of 1933,
as amended (the "Securities Act"), the undersigned represents that
(i) the undersigned is acquiring such Stock for
investment for his own account, not as nominee or agent, and not
with a view to the distribution thereof and the undersigned has
not signed or otherwise arranged for the selling, granting any
participation in, or otherwise distributing the same,
(ii) the undersigned has such knowledge and experience
in financial and business matters as to be capable of evaluating
the merits and risks of the undersigned's investment in the Stock,
(iii) the undersigned has received all of the information
the undersigned has requested from the Company and considers
necessary or appropriate for deciding whether to purchase the
shares of Stock,
(iv) the undersigned has the ability to bear the
economic risks of his prospective investment,
(v) the undersigned is able, without materially
impairing his financial condition, to hold the shares of Stock for
an indefinite period of time and to suffer complete loss on his
investment,
(vi) the undersigned understands and agrees that (A) he
may be unable to readily liquidate his investment in the shares of
Stock and that the shares must be held indefinitely unless a
-13-
<PAGE>
subsequent disposition thereof is registered or qualified under
the Securities Act and applicable state securities or Blue Sky
laws or is exempt from such registration or qualification, and
that the Company is not required to register the same or to take
any action or make such an exemption available except to the
extent provided in the within Warrant and (B) the exemption from
registration under the Securities Act afforded by Rule 144
promulgated by the Securities and Exchange Commission ("Rule 144")
depends upon the satisfaction of various conditions by the
undersigned and the Company and that, if applicable, Rule 144
affords the basis for sales under certain circumstances in limited
amounts, and that if such exemption is utilized by the
undersigned, such conditions must be fully complied with by the
undersigned and the Company, as required by Rule 144,
(vii) the undersigned either (A) is familiar with the
definition of and the undersigned is an "accredited investor"
within the meaning of such term under Rule 501 of Regulation D
promulgated under the Securities Act, or (B) is providing
representations and warranties reasonably satisfactory to the
Company and its counsel, to the effect that the sale and issuance
of Stock upon exercise of such Warrant may be made without
registration under the Securities Act or any applicable state
securities and Blue Sky laws, and
(viii) the address set forth below is the true and correct
address of the undersigned's residence.
DATED: _________________
_______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
_______________________________
_______________________________
(Address)
-14-
<PAGE>
EXHIBIT A
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 1.3)
The undersigned hereby irrevocably elects to surrender its
Warrant for such shares of Stock pursuant to the cashless exercise
provisions of the within Warrant, as provided for in Section 1 of
such Warrant.
Please issue a certificate or certificates for such Stock in
the name of, and pay cash for fractional shares pursuant to
Section 11 of the Warrant.
Name___________________________
(Please Print Name, Address and
Social Security No.)
Address________________________
_______________________________
_______________________________
Social_________________________
Security No.
Signature______________________
NOTE: The above signature should
correspond exactly with
the name on the first page
of this Warrant or with
the name of the assignee
appearing in the assignment
form below
And of said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new
Warrant is to be issued in the name of the undersigned for the
balance remaining of the shares purchasable thereunder.
-15-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE Of SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT OR SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER.
K-2A September 29, 1993
WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF CAMBRIDGE HEART, INC.
This certifies that KBL Healthcare, Inc. (the "Holder"), for
value received is entitled, subject to the adjustment and to the
other terms set forth below, to purchase from CAMBRIDGE HEART,
INC., a Delaware corporation (the "Company"), Ten Thousand
(10,000) fully paid and nonassessable shares of the Company's
$.001 par value Common Stock (the "Stock") at a price of $1.00 per
share (the "Stock Purchase Price") at any time on or after
September 29, 1993 (the "Commencement Date") but not later than
5:00 p.m. (New York Time) on the Expiration Date (as defined
below), upon surrender to the Company at its principal office,
645 Madison Avenue, New York, New York 10022, Attention: Chief
Executive Officer (or at such other location as the Company may
advise Holder in writing) of this Warrant properly endorsed with
the form of Subscription Agreement attached hereto duly filled in
and signed and, unless the Conversion Right set forth in
Section 1.2 is exercised, upon payment in cash or cashier's check
of the aggregate Stock Purchase Price for the number of shares for
which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and, in some
cases, the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. This Warrant
and all rights hereunder, to the extent not exercised in the
manner set forth herein shall terminate and become null and void
on the Expiration Date. "Expiration Date" means the fifth
anniversary of the Commencement Date. This Warrant is issued
pursuant to Section 4(b) of the Sales Agency Agreement, dated as
of May 3, 1993, as amended, among the Company and KBL Healthcare,
Inc. (the "Sales Agency Agreement") relating to the offering of a
minimum of 3,000,000 and a maximum of 6,000,000 shares of Stock.
This Warrant is subject to the following terms and
conditions:
1. Exercise; Issuance of Certificates; Payment for Shares;
------------------------------------------------------
Conversion Right.
----------------
1.1 Duration of Exercise of Warrant. This Warrant is
-------------------------------
exercisable at the option of the Holder at any time or from time
to time but not earlier than on the Commencement Date or later
than 5:00 p.m. (New York Time) on the Expiration Date for all or a
portion of the shares of Stock which may be purchased hereunder.
The Company agrees that the shares of Stock purchased under this
Warrant shall be and are deemed to be issued to Holder as the
record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment
made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Stock so purchased, together with
any other securities or property to which Holder is entitled upon
such exercise, shall be delivered to Holder by the Company's
transfer agent at the Company's expense within a reasonable time
after the rights represented by this Warrant have been exercised.
Each stock certificate so delivered shall be in such denominations
<PAGE>
of Stock as may be requested by Holder and shall be registered in
the name of Holder or such other name as shall be designated by
Holder, subject to the limitations contained in Section 2. If,
upon exercise of this Warrant, fewer than all of the shares of
Stock evidenced by this Warrant are purchased prior to the
Expiration Date of this Warrant, one or more new warrants
substantially in the form of, and on the terms in, this Warrant
will be issued for the remaining number of shares of Stock not
purchased upon exercise of this Warrant.
1.2 Conversion Right. In lieu of the payment of the
----------------
Stock Purchase Price, the Holder shall have the right (but not the
obligation), to require the Company to convert this Warrant, in
whole or in part, into shares of Stock (the "Conversion Right") as
provided for in this Section 1.2. Upon exercise of the Conversion
Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Stock Purchase Price) that number of
shares of Stock equal to the quotient obtained by dividing (x) the
value of the Warrant at the time the Conversion Right is exercised
(determined by subtracting the aggregate Stock Purchase Price in
effect immediately prior to the exercise of the Conversion Right
from the aggregate Market Price (as hereinafter defined) for the
shares of Stock issuable upon exercise of the Warrant immediately
prior to the exercise of the Conversion Right) by (y) the Market
Price of one share of Stock immediately prior to the exercise of
the Conversion Right. "Market Price" shall mean the Stock Price
(as defined below) obtained by taking the average over a period of
thirty consecutive trading days ending on the second trading day
prior to the date of determination. As used in this paragraph,
the term Stock Price shall mean (A) the mean, on each such trading
day, between the high and low sale price of a share of Stock or if
no such sale takes place on any such trading day, the mean of the
closing bid and lowest closing asked prices therefor on any such
trading day, in each case as officially reported on all national
securities exchanges on which the Stock is then listed or admitted
to trading, or (B) if the Stock is not then listed or admitted to
trading on any national securities exchange, the closing price of
the Stock on such date, or (C) if no closing price is available on
any such trading day, the mean between the highest and lowest
closing bid prices thereof on any such trading date, in the
over-the-counter market as reported by NASDAQ, (D) if the Stock is
not then quoted in such system, the mean between the highest and
lowest bid prices reported by the market makers and dealers for
the Stock listed as such by the National Quotation Bureau,
Incorporated or any similar successor organization, or (E) the
higher of the last bona fide sale made by the Company and the fair
market value of the Stock as determined by the Board of Directors
in its good faith judgement.
1.3 Exercise of Conversion Right. The conversion
----------------------------
rights provided under Section 1.2 hereof may be exercised in whole
or in part and at any time and from time to time while any
Warrants remain outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to the Company, at its
offices, this Warrant certificate accompanied by a duly completed
Notice of Conversion in the form attached hereto as Exhibit A.
The presentation and surrender shall be deemed a waiver of the
Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the shares of Stock issuable upon
exercise of this Warrant. This Warrant certificate (or so much
thereof as shall have been surrendered for conversion) shall be
deemed to have been converted immediately prior to the close of
business on the day of surrender of such Warrant certificate for
conversion in accordance with the foregoing provisions. As
promptly as practicable on or after the conversion date, the
-2-
<PAGE>
Company shall issue and shall deliver to the Holder (i) a
certificate or certificates representing the largest number of
whole shares of Stock to which the Holder shall be entitled as a
result of the conversion, and (ii) if the Warrant certificate is
being converted in part only, a new certificate in principal
amount equal to the unconverted portion of the Warrant
certificate. If this Warrant is executed in whole, in lieu of any
fractional shares of Stock to which the Holder shall be entitled,
the Company shall pay to the Holder cash in accordance with the
provisions of Section 12 hereof.
2. Shares to Be Fully Paid; Reservation of Shares. The
----------------------------------------------
Company covenants and agrees that all shares of Stock which may be
issued upon the exercise of this Warrant (the "Warrant Shares")
and all shares of common stock issuable upon conversion of the
Warrants (the "Conversion Shares") will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free
from all preemptive rights of any stockholder and free of all
taxes, liens and charges with respect to the issue thereof. The
Company covenants that it will reserve and keep available a
sufficient number of shares of its authorized but unissued Stock
for such exercise and/or conversion, as the case may be. The
Company will take all such reasonable action as may be necessary
to assure that such shares of Stock may be issued as provided
herein without violation of any applicable law or regulation, or
of any requirements of any domestic securities exchange or
automated quotation system upon which the Stock may be listed.
3. Adjustment of Stock Purchase Price and Number of Shares.
-------------------------------------------------------
The Stock Purchase Price and, in some cases, the number of shares
purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events
described in this Section 3.
3.1 Subdivision or Combination of Stock and Stock
---------------------------------------------
Dividend. In case the Company shall at any time subdivide its
--------
outstanding shares of Stock into a greater number of shares or
declare a dividend upon its Stock payable solely in shares of
Stock, the Stock Purchase Price in effect immediately prior to
such subdivision or declaration shall be proportionately reduced,
and the number of shares issuable upon exercise of the Warrant
shall be proportionately increased. Conversely, in case the
outstanding shares of Stock of the Company shall be combined into
a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately
increased, and the number of shares issuable upon exercise of the
Warrant shall be proportionately reduced.
3.2 Intentionally Omitted.
---------------------
3.3 Notice of Adjustment. Promptly after adjustment of
--------------------
the Stock Purchase Price or any increase or decrease in the number
of shares purchasable upon the exercise of this Warrant, the
Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the
Company. The notice shall be signed by the Company's chief
financial officer and shall state the effective date of the
adjustment and the Stock Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of this
Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
-3-
<PAGE>
3.4 Other Notices. If at any time:
-------------
(a) the Company shall declare any cash dividend
upon its Stock;
(b) the Company shall declare any dividend upon
its Stock payable in stock (other than a dividend payable solely
in shares of Stock) or make any special dividend or other
distribution to the holders of its Stock;
(c) there shall be any consolidation or merger of
the Company with another corporation, or a sale of all or
substantially all of the Company's assets to another corporation;
or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by
certified or registered mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as
shown on the books of the Company, (i) at least 30 days' prior
written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in
respect of any such dissolution, liquidation or winding-up;
(ii) at least 10 days' prior written notice of the date on which
the books of the Company shall close or a record shall be taken
for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger or sale,
and (iii) in the case of any such reorganization,
reclassification, consolidation; merger, sale, dissolution,
liquidation or winding-up, at least 30 days' written notice of the
date when the same shall take place. Any notice given in
accordance with clause (i) above shall also specify, in the case
of any such dividend, distribution or option rights, the date on
which the holders of Stock shall be entitled thereto. Any notice
given in accordance with clause (iii) above shall also specify the
date on which the holders of Stock shall be entitled to exchange
their Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, as the case may be. If
the Holder of the Warrant does not exercise this Warrant prior to
the occurrence of an event described above, except as provided in
Sections 3.1 and 3.5, the Holder shall not be entitled to receive
the benefits accruing to existing holders of the Stock in such
event.
3.5 Changes in Stock. In case at any time following
----------------
the date hereof, the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of
all or substantially all of the Company's assets or
recapitalization of the Stock) in which the previously outstanding
Stock shall be changed into or exchanged for different securities
of the Company or common stock or other securities of another
corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the
foregoing (each such transaction being herein called the
"Transaction" and the date of consummation of the Transaction
being herein called the "Consummation Date"), then, as a condition
of the consummation of the Transaction, lawful and adequate
provisions shall be made so that each Holder, upon the exercise
hereof at any time on or after the Consummation Date, shall be
entitled to receive; and this Warrant shall thereafter represent
the right to receive, in lieu of the Stock issuable upon such
exercise prior to the Consummation Date, the highest amount of
securities or other property to which such Holder would actually
-4-
<PAGE>
have been entitled as a stockholder upon the consummation of the
Transaction if such Holder had exercised such Warrant immediately
prior thereto. The provisions of this Section 3.5 shall similarly
apply to successive Transactions.
4. Issue Tax. The issuance of certificates for shares of
---------
Stock upon the exercise of the Warrant shall be made without
charge to the holder of the Warrant for any issue tax in respect
thereof; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name
other than that of the then holder of the Warrant being exercised.
5. No Voting or Dividend Rights; Limitation of Liability.
-----------------------------------------------------
Nothing contained in this Warrant shall be construed as conferring
upon the holder hereof the right to vote or to consent or to
receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the
Company. Except for the adjustment to the Stock Purchase Price
pursuant to Section 3.1 in the event of a dividend on the Stock
payable in shares of Stock, no dividends or interest shall be
payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and
only to the extent that, this Warrant shall have been exercised.
No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise
to any liability of such holder for the Stock Purchase Price or as
a stockholder of the Company whether such liability is asserted by
the Company or by its creditors.
6. Restrictions on Transferability of Securities:
----------------------------------------------
Compliance With Securities Act.
------------------------------
6.1 Restrictions on Transferability. This Warrant and
-------------------------------
the Warrant Shares and the Conversion Shares (collectively, the
"Securities"), shall not be transferable in the absence of
Registration under the Act (as defined below) or an exemption
therefrom under said Act.
6.2 Restrictive Legend. Each certificate representing
------------------
the Securities or any other securities issued in respect of the
Securities upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR
ANY INTEREST THEREIN MY BE TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT OR SUCH LAWS AND THE
RULES AND REGULATIONS THEREUNDER.
-5-
<PAGE>
7. Registration Rights.
-------------------
7.1 Certain Definitions.
-------------------
As used in this Section 7, the following terms shall have the
following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
----------
Commission or any other federal agency at the time administering
the Securities Act.
(b) "Form S-3" shall mean Form S-3 issued by the
--------
Commission or any substantially similar form then in effect.
(c) "Holder" shall mean any holder of outstanding
------
Registrable Securities but only if such holder is a Purchaser or
an assignee or transferee of registration rights as permitted by
Section 7.9.
(d) The terms "Register," "Registered" and
-------- ----------
"Registration" refer to a registration effected by preparing and
------------
filing a registration statement in compliance with the Securities
Act ("Registration Statement"), and the declaration or ordering by
the Commission of the effectiveness of such Registration
Statement.
(e) "Registrable Securities" shall mean the Warrants,
----------------------
the Warrant Shares and the Conversion Shares, so long as
certificates representing the same are required to bear the
restrictive legend set forth in Section 6.2.
(f) "Registration Expenses" shall mean all expenses
---------------------
incurred by the Company in complying with Section 7, including,
without limitation, all federal and state registration,
qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or
required by any such Registration.
(g) "Restriction Termination Date" shall mean, with
----------------------------
respect to any Registrable Securities, the date on which the
Company shall have notified the Holder of such Registrable
Securities in writing that it has determined that such Registrable
Securities may be sold pursuant to Rule 144 (or any successor
provision) without restriction under Rule 144(e) thereof, and,
based upon such determination, the legend shall have been removed.
(h) "Selling Expenses" shall mean all underwriting
----------------
discounts and selling commissions applicable to the sale of
Registrable Securities pursuant to this Agreement.
7.2 Request for Registration.
------------------------
7.2.1 Request and Filing. If the Company shall
------------------
receive a written request from KBL Healthcare, Inc., as the holder
of Registrable Securities or on behalf of other holders of
Registrable Securities, to register all or part of the Registrable
Securities, the Company shall, as promptly as practicable, prepare
and file with the Commission a Registration Statement sufficient
to permit the public offering and sale of such Registrable
Securities and will use its best efforts through its officers,
directors, auditors and counsel to cause such Registration
Statement to become effective as promptly as practicable and to
-6-
<PAGE>
maintain the effectiveness thereof for at least nine months;
provided, however, that the Company shall not be obligated to file
-------- -------
such a Registration Statement covering the Registrable Securities
until twelve months following the completion of its initial public
offering and, provided, further, that the Company shall only be
-------- -------
obligated to file three Registration Statements for which all
expenses incurred in connection with such Registration (other than
the fees and disbursements of counsel for holders of Registrable
Securities and underwriting discounts, if any, payable in respect
of the Registrable Securities sold by such holders) shall be borne
by the Company. In addition to the foregoing, at such time as it
becomes eligible to do so the Company shall file a Registration
Statement covering all of the Registrable Securities eligible to
be registered on such Form on Form S-3, and shall use its best
efforts to cause such Registration Statement to become effective
as promptly as practicable and to maintain the effectiveness
thereof until the Restriction Termination Date. Notwithstanding
the foregoing, the Company shall have no obligation to comply with
the foregoing provisions of this Section 7.2 if, in the opinion of
counsel to the Company reasonably acceptable to the person or
persons from whom, or on whose behalf, such written request has
been received, registration under the Securities Act is not
required for the transfer of the Registrable Securities in the
amount and manner proposed by such person or persons. The rights
of KBL Healthcare, Inc. to request the registration of the
Registrable Securities pursuant to this Section 7.2 shall inure to
the benefit of KBL Healthcare, Inc., its successors and assigns;
provided, however, that such rights shall not be deemed to have
been assigned by virtue of any assignment of this Warrant, in
whole or in part, unless such assignment specifically provides for
an assignment of the rights of KBL Healthcare, Inc. under this
Section 7.2.
7.2.2 Underwritten Offering. KBL Healthcare,
---------------------
Inc., as the holder of Registrable Securities or on behalf of
other holders of Registrable Securities, on three occasions may
request that its Registrable Securities be sold by means of an
underwritten public offering. KBL Healthcare, Inc., as the holder
of Registrable Securities or on behalf of other holders of
Registrable Securities, shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriters
selected for such underwriting, which underwriter must also be
reasonably acceptable to the Company.
7.3 Company Registration. If (but without any
--------------------
obligation to do so) the Company proposes to Register at any time
prior to the Restriction Termination Date (including for this
purpose a Registration effected by the Company for stockholders
other than the Holder) any of its stock or other securities under
the Act in connection with the underwritten public offering of
such securities solely for cash (other than a Registration of
securities in connection with mergers, acquisitions, exchange
offers, distributions to the Company's stockholders, or stock
option or other employee benefit plans or a Registration in any
form which does not include substantially the same information as
would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company
shall, at each such time, promptly give Holder written notice of
such Registration. Upon the written request of Holder given
within 15 days after mailing of such notice by the Company, the
Company shall, subject to the following provisions, use all
reasonable efforts to cause to be included in such Registration
all of the Registrable Securities that Holder has requested to be
included.
-7-
<PAGE>
The Company shall not be required under this Section 7.3 to
include any of the Holder's securities in an underwritten offering
of the Company's securities unless such Holder accepts the terms
of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as
will not, in the opinion of the managing underwriters, interfere
with the successful marketing of the offering by the Company.
7.4 Blue Sky. In the event of any Registration
--------
pursuant to this Section 7, the Company will exercise its best
efforts to Register and qualify the Registrable Securities covered
by the Registration Statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by
the Holders for the distribution of such securities; provided,
however, that the Company shall not be required to qualify to do
business, to file a general consent to service of process or to
subject itself to taxation in any state or jurisdiction in which
it is not now qualified. The Company will furnish to the Holder
written advice of its counsel with respect to registration or
exemption of such Registrable Securities in such jurisdictions.
7.5 Expenses of Registration. All Registration
------------------------
Expenses incurred in connection with a Registration pursuant to
Section 7.2 shall be borne by the Company. All Selling Expenses
shall be borne by the Holder.
7.6 Registration Procedures.
-----------------------
7.6.1 Advice by Company. The Company will keep
-----------------
the Holder advised as to the initiation and completion of such
Registration. At its expense the Company will (i) use its best
efforts to keep such Registration effective until the earlier of
the date on which the Holder has completed the distribution
described in the Registration Statement or the Restriction
Termination Date with respect to such Securities; and (ii) furnish
such number of prospectuses (including preliminary prospectuses)
and other documents as the Holder from time to time may reasonably
request.
7.6.2 Amendments. The Company will promptly
----------
prepare and file with the Commission such amendments and
prospectus supplements, including post-effective amendments, to
the Registration Statement as the Company determines may be
necessary or appropriate, and use its best efforts to have such
post-effective amendments declared effective as promptly as
practicable; cause the related prospectus to be supplemented by
any prospectus supplement, and as so supplemented, to be filed
with the Commission; and notify the Holder of any securities
included in such Registration Statement and the underwriter
thereof, if any, promptly when a prospectus, any prospectus
supplement or post-effective amendment must be filed or has been
filed and, with respect to any post-effective amendment, when the
same has become effective.
7.6.3 Underwritten Offerings. At the request of
----------------------
the Holder requesting Registration of Registrable Securities
pursuant to this Section 7, on the date that such Registrable
Securities are delivered to the underwriters for sale pursuant to
such Registration in an underwritten offering pursuant to
Section 7.2, the Company will (a) furnish (i) an opinion, dated as
of such date, of the independent counsel representing the Company
for the purposes of such Registration, addressed to the
underwriter, in a customary form and covering matters of the type
customarily covered in such legal opinions; and (ii) a comfort
letter dated as of such date, from the independent certified public
accountants of the Company addressed to the underwriter in
-8-
<PAGE>
a customary form and covering matters of the type customarily
covered by such comfort letters; such opinion of counsel shall
additionally cover such other legal matters with respect to the
Registration in respect of which such opinion is being given as
such underwriter may reasonably request and such letter from the
independent certified public accountants shall additionally cover
such other financial matters (including information as to the
period ending not more than five business days prior to the date
of such letter) with respect to the Registration in respect of
which such letter is being given as such underwriter may
reasonably request; and (b) with such Holder, enter into customary
agreements (including an underwriting agreement in customary form)
and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable
Securities.
7.7 Information Furnished by Holder. It shall be a
-------------------------------
condition precedent to the Company's obligations under this
Agreement that the Holder furnish to the Company in writing such
information regarding such Holder and the distribution proposed by
such Holder as the Company may reasonably request.
7.8 Indemnification.
---------------
7.8.1 Company's Indemnification of Holder. The
-----------------------------------
Company will indemnify Holder, each of its officers, directors and
partners, and each person controlling such Holder, with respect to
which Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Agreement, and each
underwriter, if any, and each of its officers, directors,
constituent partners, and each person who controls any underwriter
against all claims, losses, damages or liabilities (or actions in
respect thereof) to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement
(or alleged untrue statement) of a material fact contained in any
prospectus or any related Registration Statement incident to any
such Registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company
in connection with any such Registration; and the Company will
reimburse Holder, each such underwriter and each person who
controls such Holder or underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action;
provided, however, that the indemnity contained in this
Section 7.8.1 shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if settlement is
effected without the consent of the Company (which consent shall
not unreasonably be withheld or delayed); and provided, further,
that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out
of or is based upon any untrue statement or omission based upon
written information furnished to the Company by Holder,
underwriter or controlling person for use in connection with the
offering of securities of the Company. Notwithstanding the above,
the foregoing indemnity agreement is subject to the condition
that, insofar as it relates to any such untrue statement; alleged
untrue statement, omission or alleged omission made in a
preliminary prospectus, such indemnity agreement shall not inure
to the benefit of any underwriter or Holder, if there is no
underwriter, if a copy of the final prospectus was not furnished
to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act if
-9-
<PAGE>
the final prospectus corrected the untrue statement or omission or
alleged untrue statement or omission.
7.8.2 Holders' Indemnification of Company. Holder
-----------------------------------
will, if Registrable Securities held by Holder are included in the
Securities as to which a Registration is being effected pursuant
to this Agreement, indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of
the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement or
related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse
the Company, such directors, officers, partners, persons,
underwriters or control persons for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement or prospectus in
reliance upon and in conformity with written information furnished
to the Company by Holder and stated to be specifically for use in
connection with the offering of Securities of the Company.
7.8.3 Indemnification Procedure. Promptly after
-------------------------
receipt by an indemnified party under this Section 7.8 of notice
of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying
party under this Section 7.8, notify the indemnifying party in
writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim, and shall
be entitled to select counsel for the defense of such claim with
the approval of any parties entitled to indemnification, which
approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the
right to employ separate counsel (reasonably satisfactory to the
indemnifying party) to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of such
indemnified parties unless the named parties to such action or
proceedings include both the indemnifying party and the
indemnified parties and the indemnifying party or such indemnified
parties shall have been advised by counsel that there are one or
more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which
case, if the indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the
reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such
action or proceeding on behalf of the indemnified party, as the
case may be, it being understood, however, that the indemnifying
party shall not, in connection with any such action or proceeding
or separate or substantially similar or related action or
proceeding in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate counsel at any time
for the indemnifying party and all indemnified parties, which
counsel shall be designated in writing by the Holders of a
majority of the Registrable Securities). If the indemnifying
party withholds consent to a settlement or proposed settlement by
-10-
<PAGE>
the indemnified party, it shall acknowledge to the indemnified
party its indemnification obligations hereunder.
7.8.4 Contribution. If the indemnification
------------
provided for in this Section 7.8 from an indemnifying party is
unavailable to an indemnified party hereunder in respect to any
losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the statements or
omissions which result in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by such indemnifying
party or indemnified party and the parties' relative intent,
knowledge, access to information supplied by such indemnifying
party or indemnified party and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and
expenses referred to above shall deemed to include any legal or
other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action, suit,
proceeding or claim.
7.9 Transfer of Rights. As defined herein, the term
------------------
Transfer shall mean any sale, hypothecation, transfer or other
disposition of Registrable Securities or any interest therein
other than a sale registered under a Registration Statement. The
right to cause the Company to Register Registrable Securities
granted by the Company to Holder under this Section 7 may be
assigned by Holder.
7.10 No-Action Letter or Opinion of Counsel in Lieu of
-------------------------------------------------
Registration. Notwithstanding anything else in this Agreement, if
------------
the Company shall have obtained from the Commission a "no-action"
letter in which the Commission has indicated that it will take no
action if, without Registration under the Securities Act, the
Holder disposes of Registrable Securities covered by any request
for Registration made under this Section in the specific manner in
which the Holder proposes to dispose of the Registrable Securities
included in such request (including, without limitation, inclusion
of such Registrable Securities in an underwriting initiated by
either the Company or the Holder), or if in the opinion of counsel
for the Company concurred in by counsel for the Holder, which
concurrence shall not be unreasonably withheld, no Registration
under the Securities Act is required in connection with such
disposition, the Registrable Securities included in such request
shall not be eligible for Registration under this Agreement;
provided, however, that any Registrable Securities not so disposed
of shall be eligible for Registration in accordance with the terms
of this Agreement with respect to other proposed dispositions to
which this Section 7.10 does not apply. In addition, the
obligation of the Company to file or maintain the effectiveness of
any Registration Statement under this Section 7 shall be suspended
with respect to any Securities held by the Holder at any time
following the Restriction Termination Date with respect to such
Securities.
-11-
<PAGE>
8. Modification and Waiver. This Warrant and any provision
-----------------------
hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which
enforcement of the same is sought.
9. Notices. Any notice, request or other document required
-------
or permitted to be given or delivered to the holder hereof or the
Company shall be delivered or shall be sent by certified or
registered mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this
Warrant.
10. Descriptive Headings and Governing Law. The descriptive
--------------------------------------
headings of the several sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of
this Warrant. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York.
11. Lost Warrants or Stock Certificates. The Company
-----------------------------------
represents and warrants to Holder that upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Warrant or stock certificate and,
in the case of any such loss, theft or destruction, upon receipt
of an indemnity and, if requested, bond reasonably satisfactory to
the Company, or in the case of any such mutilation, upon surrender
and cancellation of such Warrant or stock certificate, the Company
at its expense will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant or stock certificate.
12. Fractional Shares. No fractional shares shall be issued
-----------------
upon exercise of this Warrant. The Company shall, in lieu of
issuing any fractional share pay the holder entitled to such
fraction a sum in cash equal to the fair market value of any such
fractional interest as it shall appear on the public market, or if
there is no public market for such shares, then as shall be
reasonably determined by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer, thereunto duly authorized as of this
29th day of September, 1993.
CAMBRIDGE HEART, INC.
By: /s/
_________________________
-12-
<PAGE>
FORM OF SUBSCRIPTION AGREEMENT
(To be signed and delivered
upon exercise of Warrant)
CAMBRIDGE HEART, INC.
_________________________
_________________________
Attention: _____________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, ________________
_______ shares of Common Stock, par value $.001 per share (the
"Stock"), of CAMBRIDGE HEART, INC. (the "Company") and subject to
the following paragraph, herewith makes payment of _______________
_________________________ Dollars ($__________) therefor and
requests that the certificates for such shares be issued in the
name of, and delivered to, ________________________ whose address
is ________________________________________________.
The undersigned does/does not (circle one) request the
exercise of the within Warrant pursuant to the cashless exercise
right set forth in Section 1(b) of the Warrant.
If the exercise of this Warrant is not covered by a
registration statement effective under the Securities Act of 1933,
as amended (the "Securities Act"), the undersigned represents that
(i) the undersigned is acquiring such Stock for
investment for his own account, not as nominee or agent, and not
with a view to the distribution thereof and the undersigned has
not signed or otherwise arranged for the selling, granting any
participation in, or otherwise distributing the same,
(ii) the undersigned has such knowledge and experience
in financial and business matters as to be capable of evaluating
the merits and risks of the undersigned's investment in the Stock,
(iii) the undersigned has received all of the information
the undersigned has requested from the Company and considers
necessary or appropriate for deciding whether to purchase the
shares of Stock,
(iv) the undersigned has the ability to bear the
economic risks of his prospective investment,
(v) the undersigned is able, without materially
impairing his financial condition, to hold the shares of Stock for
an indefinite period of time and to suffer complete loss on his
investment,
(vi) the undersigned understands and agrees that (A) he
may be unable to readily liquidate his investment in the shares of
Stock and that the shares must be held indefinitely unless a
subsequent disposition thereof is registered or qualified under
the Securities Act and applicable state securities or Blue Sky
-13-
<PAGE>
laws or is exempt from such registration or qualification, and
that the Company is not required to register the same or to take
any action or make such an exemption available except to the
extent provided in the within Warrant and (B) the exemption from
registration under the Securities Act afforded by Rule 144
promulgated by the Securities and Exchange Commission ("Rule 144")
depends upon the satisfaction of various conditions by the
undersigned and the Company and that, if applicable, Rule 144
affords the basis for sales under certain circumstances in limited
amounts, and that if such exemption is utilized by the
undersigned, such conditions must be fully complied with by the
undersigned and the Company, as required by Rule 144,
(vii) the undersigned either (A) is familiar with the
definition of and the undersigned is an "accredited investor"
within the meaning of such term under Rule 501 of Regulation D
promulgated under the Securities Act, or (B) is providing
representations and warranties reasonably satisfactory to the
Company and its counsel, to the effect that the sale and issuance
of Stock upon exercise of such Warrant may be made without
registration under the Securities Act or any applicable state
securities and Blue Sky laws, and
(viii) the address set forth below is the true and correct
address of the undersigned's residence.
DATED: ________________
______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
______________________________
______________________________
(Address)
-14-
<PAGE>
EXHIBIT A
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 1.3)
The undersigned hereby irrevocably elects to surrender its
Warrant for such shares of Stock pursuant to the cashless exercise
provisions of the within Warrant, as provided for in Section 1 of
such Warrant.
Please issue a certificate or certificates for such Stock in
the name of, and pay cash for fractional shares pursuant to
Section 11 of the Warrant.
Name___________________________
(Please Print Name, Address and
Social Security No.)
Address________________________
_______________________________
_______________________________
Social ________________________
Security No.
Signature _____________________
NOTE: The above signature
should correspond
exactly with the name
on the first page of
this Warrant or with
the name of the
assignee appearing in
the assignment form
below
And of said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new
Warrant is to be issued in the name of the undersigned for the
balance remaining of the shares purchasable thereunder.
-15-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Agreement dated the 29th day of March, 1993, by and between
CAMBRIDGE HEART, INC., a Delaware corporation with offices at 645
Madison Avenue, New York, N.Y. 10022 (the "Company"), and KBL
Healthcare, Inc., located at 645 Madison Avenue, New York, N.Y.
10022 (the "Holder").
WHEREAS, Holder is a substantial holder of common stock, par value
$.001 per share, of the Company ("Common Stock"); and
WHEREAS, Holder desires to have certain registration rights under
the securities laws, and the Company desires that Holder have such
registration rights.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the
parties hereby agree as follows:
1. Registration Rights
-------------------
1.1 Certain Definitions.
-------------------
As used in this Agreement, the following terms shall
have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
----------
Commission or any other federal agency at the time administering
the Securities Act.
(b) The terms "Register", "Registered" and
-------- ----------
"Registration" refer to a registration effected by preparing and
------------
filing a registration statement in compliance with the Securities
Act ("Registration Statement"), and the declaration or ordering by
the Commission of the effectiveness of such Registration
Statement.
(c) "Registrable Securities" shall mean the shares of
----------------------
Common Stock listed on Schedule A hereto (and any securities of
the Company issued in exchange therefore) issued to the holders
listed thereon.
(d) "Registration Expenses" shall mean all expenses
---------------------
incurred by the Company in complying with this Section 1,
including, without limitations, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees
and expenses, and the expense of any special audits incident to or
required by any such Registration.
(e) "Restriction Termination Date" shall mean, with
----------------------------
respect to any Registrable Securities, the date on which the
Company shall have notified the Holder of such Registrable
Securities in writing that it has determined that such Registrable
Securities may be sold pursuant to Rule 144 (or any successor
provision) without restriction under Rule 144(e) thereof, and,
based upon such determination, the legend shall have been removed.
(f) "Selling Expenses" shall mean all underwriting
----------------
discounts and selling commissions applicable to the sale of
Registrable Securities pursuant to this Agreement.
<PAGE>
1.2 Request for Registration
------------------------
1.2.1 Request and Filing. If the Company shall
------------------
receive a written request from holders holding a majority of the
then outstanding Registrable Securities, to register all or part
of the outstanding Registrable Securities, the Company shall, as
promptly as practicable, prepare and file with the Commission a
Registration Statement sufficient to permit the public offering
and sale of such Registrable Securities and the Registrable
Securities of any other holders desiring to have all or part of
the Registrable Securities held by them so registered, and will
use its best efforts through its officers, directors, auditors and
counsel to cause such Registrable Statement to become effective as
promptly as practicable and to maintian the effectiveness thereof
for at least nine months; provided, however, that the Company
-------- -------
shall not be obligated to file such Registration Statement
covering the Registrable Securities until twelve months following
the completion of its initial public offering and, provided,
--------
further, that the Company shall only be obligated to file two
-------
Registration Statements for which all expense incurred in
connection with such Registration (other that the fees and
disbursements of counsel for holders of Registrable Securities and
underwriting discounts, if any, payable in respect of the
Registrable Securities sold by such holders) shall be borne by the
Company. Notwithstanding the foregoing, the Company shall have no
obligation to comply with the foregoing provisions of this Section
1.2 if, in the opinion of counsel to the Company reasonably
acceptable to the person or person from whom, or on whose behalf,
such written request has been received, registration under the
Securities Act is not required for the transfer of the Registrable
Securities in the amount and manner proposed by such person or
persons.
1.3 Blue Sky. In the event of any Registration
--------
pursuant to this Section 1, the Company will exercise its best
efforts to Register and qualify the Registrable Securities covered
by the Registration Statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonable requested by
the Holders for the distribution of such securities; provided,
however, that the Company shall not be required to qualify to do
business, to file a general consent to service of process or to
subject itself to taxation in any state or jurisdiction in which
it is not now qualified. The Company will furnish to the Holder
written advice of its counsel with respect to registration or
exemption of such Registrable Securities in such jurisdictions.
1.4 Expenses of Registration. All Registration
------------------------
Expenses incurred in connection with a Registration pursuant to
Section 1.2 shall be borne by the Company. All Selling Expenses
shall be borne by the Holder.
1.5 Registration Procedures.
-----------------------
1.5.1 Advice by Company. The Company will keep
-----------------
the Holder advised as to the initiation and completion of such
Registration. At its expense the Company will (i) use its best
efforts to keep such Registration effective until the earlier of
the date on which the Holder has completed the distribution
described in the Registration Statement or the Restriction
Termination Date with respect to such Securities; and (ii) furnish
such number of prospectuses (including preliminary prospectuses)
and other documents as the Holder from time to time may reasonably
request.
-2-
<PAGE>
1.5.2 Amendments. The Company will promptly
----------
prepare and file with the Commission such amendments and
prospectus supplements, including post-effective amendments
declared effective as promptly as practicable; cause the related
prospectus to be supplemented by any prospectus supplement, and as
so supplemented, to be filed with the Commission; and notify the
Holder of any securities included in such Registration Statement
and the underwriter thereof, if any, promptly when a prospectus,
any prospectus supplement or post-effective amendment must be
filed or has been filed and, with respect to any post-effective
amendment, when the same has become effective.
1.5.3 Underwritten Offerings. At the request of
----------------------
the Holder requesting Registration of Registrable Securities
pursuant to this Section 1, on the date that such Registrable
Securities are delivered to the underwriters for sale pursuant to
such Registration in an underwritten offering pursuant to Section
1.2, the Company with (a) furnish (i) an opinion, dated as of such
date, of the independent counsel representing the Company for the
purposes of such Registration, addressed to the underwriter, in a
customary form and covering matters of the type customarily
covered in such legal opinions; and (ii) a comfort letter dated as
of such date, form the independent certified public accountants of
the Company addressed to the underwriter in a customary form and
covering matters of the type customarily covered by such comfort
letters; such opinion of counsel shall additionally cover such
other legal matters with respect to the Registration in respect of
which such opinion is being given as such underwriter may
reasonably request and such letter from the independent certified
public accountants shall additionally cover such other financial
matters (including information as to the period ending not more
than five business days prior to the date of such letter) with
respect to the Registration in respect of which such letter is
being given as such underwriter may reasonably request; and (b)
with such Holder, enter into customary agreements (including an
underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities.
1.6 Information Furnished by Holder. It shall be a
-------------------------------
condition precedent to the Company's obligations under this
Agreement that the Holder furnish to the Company in writing such
information regarding such Holder and the distribution proposed
by such Holder as the Company may reasonably request.
1.7 Indemnification.
---------------
1.7.1 Company's Indemnification of Holder. The Company
-----------------------------------
will indemnify Holder, each of its officers, directors and
partners, and each person controlling such Holder, with respect to
which Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Agreement, and each
underwriter, if any, and each of its officers, directors,
constituent partners, and each person who controls any underwriter
against all claims, losses, damages or liabilities arise out of or
are based upon ay untrue statement (or alleged untrue statement)
of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration,
qualification or compliance, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by the Company of any rule or regulation promulgated
under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any
-3-
<PAGE>
such Registration; and the Company will reimburse Holder, each
such underwriter and each person who controls such Holder or
underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that
the indemnity contained in this Section 1.7.1 shall not apply to
amounts paid in settlement of any such claim, loss, damage,
liability or action if settlement is effected without the consent
of the Company (which consent shall not unreasonably be withheld
or delayed); and provided, further, that the Company will not be
liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based upon any
untrue statement or omission based upon written information
furnished to the Company by Holder, underwriter or controlling
person for use in connection with the offering of securities of
the Company. Notwithstanding the above, the foregoing indemnity
agreement is subject to the condition that, insofar as it relates
to any such untrue statement; alleged untrue statement, omission
or alleged omission made in a preliminary prospectus, such
indemnity agreement shall not inure to the benefit of any
underwriter or Holder, if there is no underwriter, if a copy of
the final prospectus was not furnished to the person asserting the
loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act if the final prospectus
corrected the untrue statement or omission or alleged untrue
statement or omission.
1.7.2 Holders' Indemnification of Company. Holder
-----------------------------------
will, if Registrable Securities held by Holder are included in the
Securities as to which a Registration is being effected pursuant
to this Agreement, indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's
securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of
the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any such Registration Statement or
related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; and will reimburse
the Company, such directors, officers, partners, persons,
underwriters or control persons for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement or prospectus in
reliance upon and in conformity with written information furnished
to the Company by Holder and stated to be specifically for use in
connection with the offering of Securities of the Company.
1.7.3 Indemnification Procedure. Promptly after
-------------------------
receipt by an indemnified party under this Section 1.7 of notice
of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying
party under this Section 1.7, notify the indemnifying party in
writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim, and shall
be entitled to select counsel for the defense of such claim with
the approval of any parties entitled to indemnification, which
approval shall not be unreasonably withheld. Notwithstanding the
foregoing, the parties entitled to indemnification shall have the
right to employ separate counsel (reasonably satisfactory to the
indemnifying party) to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of such
indemnified parties unless the named parties to such action or
-4-
<PAGE>
proceedings include both the indemnifying party and the
indemnified parties and the indemnifying party or such indemnified
parties shall have been advised by counsel that there are one or
more legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which
case, if the indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the
reasonable expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such
action or proceeding on behalf of the indemnified party, as the
case may be, it being understood, however, that the indemnifying
party shall not, in connection with any such action or proceeding
or separate or substantially similar or related action or
proceeding in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate counsel at anytime for
the indemnifying party and all indemnified parties, which counsel
shall be designated in writing by the Holders of a majority of the
Registrable Securities). If the indemnifying party withholds
consent to a settlement or proposed settlement by the indemnified
party, it shall acknowledge to the indemnified party its
indemnification obligations hereunder.
1.7.4 Contribution. If the indemnification
------------
provided for in this Section 1.7 from an indemnifying party is
unavailable to an indemnified party hereunder in respect to any
losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the statements or
omissions which result in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determine by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or the alleged omission to state a
material fact relates to information supplied by such indemnifying
party or indemnified party and the parties' relative intent,
knowledge, access to information supplied by such indemnifying
party or indemnified party and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and
expenses referred to above shall deemed to include any legal or
other fees or expenses reasonably incurred by such party in
connection with investigation or defending any action, suit,
proceeding or claim.
1.8 Transfer of Rights. As defined herein, the term
------------------
Transfer shall mean any sale, hypothecation, transfer or other
disposition of Registrable Securities or any interest therein
other than a sale registered under a Registration Statement. The
right to cause the Company to Register Registrable Securities
granted by the Company to Holder under this Section 1 may be
assigned by Holder in connection with any sale or transfer of such
Registrable Securities.
2. This Agreement may only be amended with the written
consent of holders of 51% of the Registrable Securities then
outstanding. Any amendment effected in accordance with this
Section 2 shall be binding upon each holder of any Registrable
Securities then outstanding each future holder of all such
Registrable Securities and the Company. The Company shall send
notice of any such amendment to all holders of Registrable
Securities.
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<PAGE>
3. This Agreement shall be binding upon the Company, its
successors and assigns, and shall inure to the benefit of the
Holder, his heirs, executors, administrators and assigns.
4. All notices, requested, demand and other communications
hereunder must be in writing and shall be deemed to have been
given if delivered by hand, facsimile or mailed by certified mail,
return receipt requested, postage prepaid, and addressed to the
respective parties hereto at their addresses as follows or at such
other address as a party hereto may specify by notice in the
manner provided herein to the other parties:
If to the Corporation:
Cambridge Heart, Inc.
645 Madison Avenue
New York, NY 10022
with a copy to:
Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin
551 Fifth Avenue
New York, NY 10176
Attention: Kenneth R. Koch, Esq.
If to Holder:
To the Address of the Holder set forth above.
5. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
contracts made and to be performed therein.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
CAMBRIDGE HEART, INC.
By: /s/
_____________________________
KBL HEALTHCARE, INC.
By: /s/
-----------------------------
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<PAGE>
SCHEDULE A TO REGISTRATION
--------------------------
RIGHTS AGREEMENT
----------------
Number of Shares
Name of Holder of Common Stock
-------------- ----------------
Richard Cohen, M.D., Ph. D. 2,500,000
Marlene R. Krauss, M.D. 1,007,116
Laurence Blumberg, M.D. 628,000
Zachary C. Berk 615,452
Daniel D. Lubin 311,646
Jordan Davis 125,910
Amy Galbut 12,820
KBL Healthcare, Inc. 439,056
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