EXHIBIT 10.3

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of March 24
2006 by and among (i) EP MedSystems, Inc., a New Jersey corporation (the
“Company”), (ii) each purchaser of Common Stock (as defined below) pursuant to
the Stock Purchase Agreement (as defined below) (collectively, the “Investors”
and each individually, an “Investor”), and (iii) each person or entity that
subsequently becomes a party to this Agreement pursuant to, and in accordance
with, the provisions of Section 12 hereof (each an “Investor Permitted
Transferee” and collectively, the “Investor Permitted Transferees”);

WHEREAS, the Company has agreed to issue and sell to the Investors, and the
Investors have agreed to purchase from the Company up to an aggregate of
4,444,500 shares (the “Purchased Shares”) of the Company’s common stock, no par
value, $0.001 stated value per share (the “Common Stock”), all upon the terms
and conditions set forth in that certain Common Stock Purchase Agreement, dated
of even date herewith, between the Company and the Investors (the “Stock
Purchase Agreement”); and

WHEREAS, the terms of the Stock Purchase Agreement provide that it shall be a
condition precedent to the closing of the transactions thereunder, for the
Company and the Investors to execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:

1. Definitions. The following terms shall have the meanings provided therefor
below or elsewhere in this Agreement as described below:

“Affiliate” of a party means any other Person controlling, controlled by or
under common control with the specified Person. For the purposes of this
definition, “control” means the power to direct the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.

“Board” shall mean the board of directors of the Company.

“Closing” shall have the meaning ascribed to such term in the Stock Purchase
Agreement.

“Closing Date” shall have the meaning ascribed to such term in the Stock
Purchase Agreement.

“Effectiveness Deadline” shall be the earlier of (i) five business days after
the SEC shall have communicated to the Company in writing that Registration
Statement will not be reviewed or is no longer subject to further review and
comments and (ii) ninety (90) days after the Closing Date or, in the event of a
review of the Registration Statement by the SEC, one hundred twenty (120) days
after the Closing Date.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
all of the rules and regulations promulgated thereunder.

--------------------------------------------------------------------------------

“Filing Date Deadline” shall be thirty (30) days after the Closing Date.

“Investors” shall mean, collectively, the Investors and the Investor Permitted
Transferees; provided, however, that the term “Investors” shall not include any
of the Investors or any of the Investor Permitted Transferees that ceases to own
or hold any Purchased Shares.

“Majority Holders” shall mean, at the relevant time of reference thereto, those
Investors holding more than sixty six and two-thirds (66 2/3%) of the
Registrable Shares held by all of the Investors.

“NASD” shall mean the National Association of Securities Dealers, Inc.

“Person” shall mean an individual, corporation, company, partnership, firm,
association, joint venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other entity.

“Qualifying Holder” shall have the meaning ascribed thereto in Section 12
hereof.

“Registrable Shares” shall mean (i) the Purchased Shares, (ii) any shares of
Common Stock issued pursuant to Section 3(e) or Section 3(f) hereof and
(iii) any shares of Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend
or other distribution (including a stock split or reverse stock split) with
respect to, or in exchange for, or in replacement of, the shares of Common Stock
referred to in clause (i) or (ii) of this definition.

“Rule 144” shall mean Rule 144 promulgated under the Securities Act and any
successor or substitute rule, law or provision.

“SEC” shall mean the Securities and Exchange Commission.

“Securities Act” shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder.

2. Effectiveness; Termination. This Agreement shall become effective and legally
binding only if the Closing occurs. This Agreement shall terminate and be of no
further force or effect, automatically and without any action being required of
any party hereto, upon the termination of the Stock Purchase Agreement pursuant
to Section 7 thereof. Nothing contained herein or in any agreement or document
relating to this transaction, and no action taken by any Investor, shall be
deemed to constitute the Investors as, or to create any presumption that the
Investors are in any way acting in concert or as, a group with respect to the
obligations or transaction hereunder. Each Investor shall be entitled to
independently protect and enforce its rights hereunder.

3. Registration.

(a) As soon as practicable, but in no event later than the Filing Date Deadline,
the Company shall prepare and file with the SEC a registration statement on Form
S-3 for the

 

2

--------------------------------------------------------------------------------

purpose of registering under the Securities Act all of the Registrable Shares
for resale by, and for the account of, the Investors as selling stockholders
thereunder (the “Registration Statement”, which term, for purposes of Section 5
hereof, shall include each Piggyback Registration Statement (as defined below)).
The Registration Statement shall permit the Investors to offer and sell, on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, any
or all of the Registrable Shares. The Company shall use all commercially
reasonable efforts to cause the Registration Statement to be declared effective
after 5:00 p.m. as promptly as possible after filing, but in no event later than
the Effectiveness Deadline, and shall be required to keep the Registration
Statement effective until such date that is the earlier of (i) the second
anniversary of the effective date of such Registration Statement; and (ii) the
date on which the Shares can be sold by non-affiliates of the Company without
registration under Rule 144(k) promulgated under the Securities Act (the
“Mandatory Registration Termination Date”). Thereafter, the Company shall be
entitled to withdraw the Registration Statement and the Investors shall have no
further right to offer or sell any of the Registrable Shares pursuant to the
Registration Statement (or any Prospectus relating thereto). The Company will
timely file a Form D in accordance with the provisions of Regulation D
promulgated by the SEC under the Securities Act with respect to the transactions
contemplated by Stock Purchase Agreement and this Agreement.

(b) Unless otherwise agreed to by the Company and the Investors, the offer and
sale of the Registrable Shares pursuant to the Registration Statement shall not
be underwritten.

(c) The Company represents and warrants that, as of the date of this Agreement,
it meets the requirements for the use of Form S-3 for registration of the resale
by the Investors of the Registrable Shares, and it will use its commercially
reasonable efforts to continue to meet such requirements during the period in
which it takes to have the Registration Statement declared effective.

(d) The Company shall cause all of the Registrable Shares to be listed on the
Nasdaq Capital Market.

(e) This Section 3(e) shall apply to the Company’s obligation under Section 3(a)
hereof to file the Registration Statement with the SEC and to cause such
Registration Statement to become effective. Subject to the provisions below, the
Company and Investors agree that the Investors will suffer damages if the
Registration Statement is not declared effective by the SEC, subject to receipt
of the necessary information from the Investors, on or prior to the
Effectiveness Deadline. The Company and the Investors further agree that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
Filing Date Deadline; or (ii) the Registration Statement is not declared
effective prior to the Effectiveness Deadline (unless, in each case, an Event
results, directly or indirectly, from any act of war or terrorism) (each of the
events listed in (i)-(ii) above being referred to as an “Event”), then the
Company shall pay to each Investor as liquidated damages for any such failure
and not as a penalty an amount equal to 1.0% of the purchase price for the
Shares purchased by such Investor pursuant to the Stock Purchase Agreement for
each full thirty (30) day period (or pro rata for any portion thereof) following
an Event until such Event has been cured. Such Liquidated Damages (as defined
below) shall be

 

3

--------------------------------------------------------------------------------

payable monthly, at the election of the Company, in (x) cash by wire transfer of
immediately available funds or (y) that number of shares of Common Stock equal
to (A) the amount owed to such Investor in Liquidated Damages pursuant to this
Section 3(f) divided by (B) $2.25 (rounding down to the nearest whole share). If
the Company is required to issue any additional shares of Common Stock pursuant
to the foregoing, the Company shall include those shares in the Registration
Statement; provided, however, that the Company shall not have the right to issue
shares of Common Stock in payment of Liquidated Damages if the number of shares
issuable on account of the occurrence of Events and/or a lapse in the
effectiveness of the Registration Statement as provided herein, plus the shares
issued to Investors pursuant to the Stock Purchase Agreement, would exceed
19.99% of the Company’s issued and outstanding stock as of the date hereof.

(f) Subject to the provisions below, and except for time periods during which
the effectiveness of the Registration Statement may be suspended as provided in
Section 11 hereof, should the effectiveness of the Registration Statement or the
Prospectus included therein (the “Prospectus”) lapse for any reason while the
Company has any obligation to maintain such Registration Statement and
Prospectus or the Registration Statement or Prospectus ceases to be usable for
any reason, and the Company does not cure such lapse in effectiveness or other
reason, within fifteen (15) business days (the “Cure Period”) by a
post-effective amendment to the Registration Statement, a supplement to the
Prospectus or a report filed pursuant to the Exchange Act that cures such lapse,
the Company shall pay each Investor damages from the period from and including
the first day following the expiration of the Cure Period until, but excluding,
the earlier of (1) the date in which such failure is cured and (2) the date
which is fifteen (15) months following the Closing Date, at a rate equal to
1% per annum (pro rata on a 360 day basis) of the total purchase price for the
Purchased Shares purchased by each Investor pursuant to the Stock Purchase
Agreement. Such Liquidated Damages (as defined below) shall be payable monthly,
at the election of the Company, in (x) cash by wire transfer of immediately
available funds or (y) that number of shares of Common Stock equal to (A) the
amount owed to such Investor in Liquidated Damages pursuant to this Section 3(f)
divided by (B) $2.25 (rounding down to the nearest whole share).

(g) For purposes of Section 3(e) and Section 3(f), the amounts payable by the
Company under this Agreement are referred to collectively herein as “Liquidated
Damages”. In any event, no Liquidated Damages shall accrue after the twenty four
(24) month anniversary of the Closing Date. The parties agree that the
Liquidated Damages represent a reasonable estimate on the part of the parties,
as of the date of this Agreement, of the amount of damages that may be incurred
by the Investors if the Registration Statement is not filed on or prior to the
Filing Date Deadline or has not been declared effective by the SEC on or prior
to the Effectiveness Deadline or if there is a lapse in the effectiveness of the
Registration Statement or Prospectus or if the Registration Statement or
Prospectus ceases to be usable.

4. “Piggyback” Registration Rights.

(a) If, at any time after the Mandatory Registration Termination Date, the
Company proposes to register any of its Common Stock under the Securities Act,
whether as a result of a primary or secondary offering of Common Stock or
pursuant to registration rights granted to holders of other securities of the
Company (but excluding in all cases any registrations

 

4

--------------------------------------------------------------------------------

to be effected on Forms S-4 or S-8 or other applicable successor forms), the
Company shall, each such time, give to the Investors holding Registrable Shares
written notice of its intent to do so. Upon the written request of any such
Investor given within 20 days after the giving of any such notice by the
Company, the Company shall use reasonable efforts to cause to be included in
such registration the Registrable Shares of such Investor, to the extent
requested to be registered; provided that (1) the number of Registrable Shares
proposed to be sold by such Investor is equal to at least twenty-five percent
(25%) of the total number of Registrable Shares then held by such participating
Investor, (ii) such Investor agrees to sell those of its Registrable Shares to
be included in such registration in the same manner and on the same terms and
conditions as the other shares of Common Stock which the Company proposes to
register and (iii) if the registration is to include shares of Common Stock to
be sold for the account of the Company or any party exercising demand
registration rights pursuant to any other agreement with the Company in an
underwritten offering, the proposed managing underwriter does not advise the
Company that in its opinion the inclusion of such Investor’s Registrable Shares
(without any reduction in the number of shares to be sold for the account of the
Company or such party exercising demand registration rights) is likely to
materially and adversely affect the success of the offering or the price that
would be received for any shares of Common Stock offered, in which case the
rights of such Investor shall be as provided in Section 4(b) hereof.

(b) If a registration pursuant to Section 4(a) hereof involves an underwritten
offering and the managing underwriter shall advise the Company in writing that,
in its opinion, the number of shares of Common Stock requested by the Investors
to be included in such registration is likely to materially and adversely affect
the success of the offering or the price that would be received for any shares
of Common Stock offered in such offering, then, notwithstanding anything in
Section 4(a) to the contrary, the Company shall only be required to include in
such registration, to the extent of the number of shares of Common Stock which
the Company is so advised can be sold in such offering, (i) first, the number of
shares of Common Stock proposed to be included in such registration for the
account of the Company and/or any stockholders of the Company (other than the
Investors) that have exercised demand registration rights, in accordance with
the priorities, if any, then existing among the Company and/or such stockholders
of the Company with registration rights (other than the Investors), and
(ii) second, the shares of Common Stock requested to be included in such
registration by all other stockholders of the Company who have piggyback
registration rights (including, without limitation, the Investors), pro rata
among such other stockholders (including, without limitation, the Investors) on
the basis of the number of shares of Common Stock that each of them requested to
be included in such registration.

(c) In connection with any offering involving an underwriting of shares under
this Section 4, the Company shall not be required under this Section 4 or
otherwise to include the Registrable Shares of any Investor therein unless such
Investor accepts and agrees to the terms of the underwriting, which shall be
reasonable and customary, as agreed upon between the Company and the
underwriters selected by the Company.

 

5

--------------------------------------------------------------------------------

5. Obligations of the Company. In connection with the Company’s obligation under
Sections 3 and 4, the Company shall, as expeditiously as reasonably possible:

(a) Prepare and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by the Registration Statement; provided, however,
that before filing a registration statement or Prospectus or any amendments or
supplements thereto, or comparable statements under securities or blue sky laws
of any jurisdiction, the Company will furnish to one counsel to be designated by
Investors participating in the planned offering and/or to one additional counsel
designated by each Investor (each, a “Designated Counsel”), copies of the
“Selling Securityholder” and “Plan of Distribution” sections of such filings,
or, at the request of an Investor, of all such documents proposed to be filed
(including all exhibits thereto), which documents will be subject to the
reasonable review and reasonable comment of such counsel.

(b) Furnish to the Investors such number of copies of the Prospectus, including
a preliminary Prospectus, in conformity with the requirements of the Securities
Act, and such other documents (including, without limitation, Prospectus
amendments and supplements as are prepared by the Company in accordance with
Section 5(a) above) as the Investors may reasonably request in order to
facilitate the disposition of such Investors’ Registrable Shares.

(c) Promptly notify the Investors, at any time when the Prospectus relating to
the Registration Statement is required to be delivered under the Securities Act,
of the happening of any event (without disclosing the nature or substance of
such event) as a result of which the Prospectus included in or relating to the
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and, thereafter, the Company will
promptly prepare (and, when completed, give notice to each Investor) a
supplement or amendment to such Prospectus so that, as thereafter delivered to
the purchasers of such Registrable Shares pursuant to the Registration
Statement, such Prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided
that upon such notification by the Company of the foregoing and instructing each
Investor to cease to offer and sell Registrable Shares, each Investor will use
commercially reasonable efforts to cease its offer and sale of Registrable
Shares until the Company has notified the Investors that it has prepared a
supplement or amendment to such Prospectus and delivered copies of such
supplement or amendment to the Investors (it being understood and agreed by the
Company that the foregoing proviso shall in no way diminish or otherwise impair
the Company’s obligation to promptly prepare a Prospectus amendment or
supplement as above provided in this Section 5(c) and deliver copies of same as
above provided in Section 5(b) hereof).

(d) Use commercially reasonable efforts to register and qualify the Registrable
Shares covered by the Registration Statement under such other securities or blue
sky laws of such jurisdictions as shall be reasonably appropriate in the opinion
of the Company and the managing underwriters, if any, or if reasonably requested
by the Investors; provided that, or unless requested by an Investor and
consented to by the Company (which consent shall not be unreasonably withheld),
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; and provided further that
(notwithstanding anything in this

 

6

--------------------------------------------------------------------------------

Agreement to the contrary with respect to the bearing of expenses) if any
jurisdiction in which any of such Registrable Shares shall be qualified shall
require that expenses incurred in connection with the qualification therein of
any such Registrable Shares be borne by the Investors, then the Investors shall,
to the extent required by such jurisdiction, pay their pro rata share of such
qualification expenses.

(e) Promptly notify (i) each Investor (A) any time when the Registration
Statement, the Prospectus or any Prospectus supplement related thereto or post
effective amendment has been filed, and with respect to the Registration
Statement or any post-effective amendment, when the same has become effective,
and with respect to the Registration Statement, provide each Investor who has
provided its current e-mail address to Counsel to the Company, a copy of the
Prospectus by electronic mail prior to the opening of trading of the Company’s
Common Stock on the first business day following the date on which the
Registration Statement has become effective, (B) of the issuance of any stop
order by the SEC suspending the effectiveness of such Registration Statement or
the initiation of any proceedings by any person to such effect, and promptly use
all commercially reasonable efforts to obtain the release of such suspension,
(C) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Shares for sale under the
securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose, (D) when a Prospectus relating to the registration
of the Registrable Shares is required to be delivered under the Securities Act,
or (E) of the happening of any event as a result of which the Prospectus
included, as then in effect, includes any 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; and (ii) Designated Counsel of any request by the SEC for
amendments or supplements to the Registration Statement or Prospectus or for
additional information. If the notification relates to an event described in
Section 5(c), the Company shall in accordance with Section 5(a), promptly
prepare and furnish to each Investor, if any, selling Registrable Shares covered
by such registration statement, a reasonable number of copies of a Prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Shares, such Prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein in the light of the
circumstances under which they were made not misleading.

(f) Cause all such Registrable Shares registered pursuant to this Agreement to
be listed on each securities exchange on which similar securities issued by the
Company are then listed, if the listing of such Registrable Shares is then
permitted under the rules of such exchange, or if no similar securities are then
so listed, to either cause all such Registrable Shares to be listed on a
national securities exchange or to secure designation of all such Registrable
Shares as a NASDAQ “national market system security” within the meaning of Rule
11Aa2-1 of the Exchange Act, or failing that, secure NASDAQ authorization for
such Registrable Shares.

(g) Provide a transfer agent and registrar for all Registrable Shares registered
pursuant to this Agreement and a CUSIP number for all such Registrable Shares,
in each case not later than the effective date of registration and, at the time
of the sale of the Registrable Shares pursuant to an effective Registration
Statement or in accordance with Section 6.3 of the Stock Purchase Agreement, use
commercially reasonable efforts to cause the transfer agent to remove
restrictive legends on the securities covered by such Registration Statement.

 

7

--------------------------------------------------------------------------------

(h) Promptly deliver to Designated Counsel copies of all correspondence between
the SEC and the Company, its counsel or auditors and all memoranda relating to
discussions with the SEC or its staff with respect to the registration
statement, other than those portions of any such memoranda that contain
information subject to attorney client privilege with respect to the Company,
and, upon receipt of such confidentiality agreements as the Company may
reasonably request, make reasonably available for inspection by Designated
Counsel participating in any disposition to be effected pursuant to the
Registration Statement, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause all of the
Company’s officers, directors and employees to supply all information reasonably
requested by Designated Counsel in connection with such Registration Statement.

(i) Use commercially reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement.

(j) Upon written request, furnish to each Investor participating in the
offering, without charge, at least one (1) conformed copy of the Registration
Statement and any post-effective amendments thereto, including financial
statements, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference).

(k) Comply with all applicable rules and regulations of the SEC, and make
generally available to its security holders, as soon as reasonably practicable
after the effective date of the Registration Statement (and in any event within
sixteen (16) months thereafter), an earnings statement (which need not be
audited) covering the period of at least twelve (12) consecutive months
beginning with the first day of the Company’s first calendar quarter after the
effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.

(l) The Company will notify each Investor that the Registration Statement has
been declared effective by 8:30 a.m. on the first business day following the
date on which the Registration Statement is declared effective by the SEC.

6. Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement (including, without
limitation, to maintain the accuracy of any information previously furnished by
Investors for use in the Registration Statement) that the Investors shall
furnish to the Company such information regarding them and the securities held
by them as the Company shall reasonably request and as shall be required by
applicable securities laws in order to effect any registration by the Company
pursuant to this Agreement.

7. Expenses of Registration. All of the expenses incurred by the Company in
connection with the registration of the Registrable Shares pursuant to this
Agreement (excluding underwriting, brokerage and other selling commissions and
discounts), including without limitation, all registration, qualification and
filing fees, printing fees and fees and disbursements of its counsel and one
counsel to the Investors, shall be borne by the Company, whether or not such
Registration Statement becomes effective or remains effective for the period
contemplated hereby.

 

8

--------------------------------------------------------------------------------

8. Delay of Registration. No Investor shall take any action to restrain, enjoin
or otherwise delay any registration as the result of any controversy which might
arise with respect to the interpretation or implementation of this Agreement.

9. Indemnification. For the purposes of this Section 9 and Section 11, the term
“Registration Statement” shall include any preliminary or final Prospectus,
exhibit, supplement or amendment included in or relating to, as the case may be,
the Registration Statement referred to in Section 3(a).

(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Investor, its directors, officers, employees, fiduciaries, members,
managers, or general or limited partners (and the directors, officers, employees
and stockholders thereof), any broker/dealer acting on behalf of any Investor
and each officer and director of such Investor or broker/dealer and each Person,
if any, who controls such Investor or broker/dealer within the meaning of the
Securities Act (each, an “Investor Indemnified Person”), against any losses,
claims, damages or liabilities, joint or several, and expenses (including
reasonable counsel fees and disbursements, any amounts paid in any settlement
effected with the Company’s prior written consent) to which they may become
subject under the Securities Act, the Exchange Act, state securities laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement or in any amendments or supplements to the Registration Statement or
any registration statement pursuant to which Registrable Shares are registered
pursuant to Section 4 hereof (including any preliminary prospectus or final
prospectus relating thereto, any amendments or supplements thereto and any
exhibits thereto, a “Piggyback Registration Statement”) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein in
light of the circumstance under which they were made not misleading or any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, state securities laws or any rule or regulation promulgated under
the Securities Act, the Exchange Act, state securities laws or NASDAQ or
(ii) any failure of the Company to fulfill any undertaking included in the
Registration Statement, or any Piggyback Registration Statement; and will
reimburse such Investor Indemnified Person for any expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action (including reasonable expenses of legal counsel);
provided, however, that the indemnity agreement contained in this Section 9(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, damage, liability or
action to the extent that it arises out of or is based upon an untrue statement
or alleged untrue statement or omission made in connection with the Registration
Statement or any Piggyback Registration Statement in reliance upon and in
conformity with written information furnished expressly for use in connection
with the Registration Statement or any Piggyback Registration Statement by the
Investors. Such indemnity and reimbursement of expenses shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Investor Indemnified Person and shall survive the sale of such Registrable
Shares by such Investor.

 

9

--------------------------------------------------------------------------------

(b) To the extent permitted by law, each Investor will severally, and not
jointly, indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the Registration Statement, or any Piggyback
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, or any broker/dealer acting on behalf of the
Company (a “Company Indemnified Person”) against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person, or broker/dealer may become subject to, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement or any
Piggyback Registration Statement or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent and only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration Statement
or any Piggyback Registration Statement, in reliance upon and in conformity with
written information furnished by such Investor expressly for use in connection
with the Registration Statement or any Piggyback Registration Statement; and
such Investor will reimburse any expenses reasonably incurred by a Company
Indemnified Person in connection with investigating or defending any such loss,
claim, damage, liability or action (including reasonable counsel fees and
disbursements); provided, however, that the liability of each Investor hereunder
shall be limited to the proceeds (net of underwriting discounts and commissions,
if any) received by such Investor from the sale of Registrable Shares covered by
the Registration Statement or Piggyback Registration Statement; as the case may
be; and provided, further, however, that the indemnity agreement contained in
this Section 9(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 those Investor(s) against which the request for indemnity is
being made (which consent shall not be unreasonably withheld). Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such Company Indemnified Person
and, as relevant, shall survive the sale of such Registrable Shares by any
Investor.

(c) Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other indemnifying party
similarly noticed, to assume at its expense the defense thereof with counsel
mutually satisfactory to the indemnifying parties with the consent of the
indemnified party (which consent will not be unreasonably withheld, conditioned
or delayed). In the event that the indemnifying party assumes any such defense,
the indemnified party may participate in such defense with its own counsel and
at its own expense; provided, however, that the counsel for the indemnifying
party shall act as lead counsel in all matters pertaining to such defense or
settlement of such claim and the indemnifying party shall only pay for such
indemnified party’s expenses for the period prior to the date of its
participation on such defense.

(d) If the indemnification provided for in this Section 9 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, claim,

 

10

--------------------------------------------------------------------------------

damage, liability 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,
claim, 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, claim, damage, liability 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. If, however, the allocation provided in the first
sentence of this paragraph is not permitted by applicable law, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 9(d) were to be determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 9(d). The
amount paid or payable in respect of any claim shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending such loss, claim, damage or
liability. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything in this Section 9(d) to the contrary, no Investor shall
be required pursuant to this Section 9(d) to contribute any amount in excess of
the net proceeds received by such Investor from the sale of Registrable Shares
in the offering to which the loss, claims, damage or liability relates, less the
amount of any indemnification payment previously made by such indemnifying party
pursuant to Section 9(b).

(e) The obligations of the Company and the Investors under this Section 9 shall
survive the completion of any offering of Registrable Shares pursuant to a
Registration Statement or any Piggyback Registration Statement.

(f) Notwithstanding anything to the contrary herein, the indemnifying party
shall not be entitled to settle any claim, suit or proceeding unless in
connection with such settlement the indemnified party receives an unconditional
release with respect to the subject matter of such claim, suit or proceeding and
such settlement does not contain any admission of fault by the indemnified
party.

10. Reports under the Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit the Investors to sell the Purchased Shares to the
public without registration, the Company agrees to use commercially reasonable
efforts: (i) to make and keep public information available, as those terms are
understood and defined in the General Instructions to Form S-3, or any successor
or substitute form, and in Rule 144; (ii) to file with the SEC in a timely
manner all reports and other documents required to be filed by an issuer of
securities registered under the

 

11

--------------------------------------------------------------------------------

Securities Act or the Exchange Act; (iii) as long as any Investor owns any
Purchased Shares, to furnish in writing upon such Investor’s request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act, and to furnish to such
Investor a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents so filed by the Company as may be
reasonably requested in availing such Investor of any rule or regulation of the
SEC permitting the selling of any such Purchased Shares without registration;
and (iv) undertake any additional actions reasonably necessary to maintain the
availability of the Registration Statement or the use of Rule 144.

11. Deferral and Lock-up. Notwithstanding anything in this Agreement to the
contrary, if the Company shall furnish to the Investors a certificate signed by
the President or Chief Executive Officer of the Company stating that the Board
of Directors of the Company has made the good faith determination (i) that
continued use by the Investors of the Registration Statement, or any Piggyback
Registration Statement, for purposes of effecting offers or sales of Registrable
Shares pursuant thereto would require, under the Securities Act, premature
disclosure in the Registration Statement, or any Piggyback Registration
Statement of material, nonpublic information concerning the Company, its
business or prospects or any proposed material transaction involving the
Company, (ii) that such premature disclosure would be materially adverse to the
Company, its business or prospects or any such proposed material transaction or
would make the successful consummation by the Company of any such material
transaction significantly less likely and (iii) that it is therefore essential
to suspend the use by the Investors of such Registration Statement, or any
Piggyback Registration Statement for purposes of effecting offers or sales of
Registrable Shares pursuant thereto, then the right of the Investors to use the
Registration Statement, or any Piggyback Registration Statement for purposes of
effecting offers or sales of Registrable Shares pursuant thereto shall be
suspended for not more than thirty (30) days at one time and on no more than two
occasions in the aggregate (the “Suspension Period(s)”) after delivery by the
Company of the certificate referred to above in this Section 11. Such 30-day
periods shall be at least two business days apart. In no event, however, will
any suspension be any longer than is reasonably necessary to avoid the adverse
effect. During any Suspension Period, none of the Investors shall offer or sell
any Registrable Shares publicly pursuant to or in reliance upon the Registration
Statement, or the Prospectus, or any Piggyback Registration Statement (or the
prospectus relating thereto).

12. Transfer of Registration Rights. None of the rights of any Investor under
this Agreement shall be transferred or assigned to any person unless (i) such
person is a Qualifying Holder (as defined below), and (ii) such person agrees to
become a party to, and bound by, all of the terms and conditions of, this
Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit B hereto. For purposes of this
Section 12, the term “Qualifying Holder” shall mean, with respect to any
Investor, (i) any Affiliate of an Investor, or (ii) any other direct transferee
of Purchaser Shares of an Investor. None of the rights of any Investor under
this Agreement shall be transferred or assigned to any person (including,
without limitation, a Qualifying Holder) that acquires Registrable Shares in the
event that and to the extent that such person is eligible to resell such
Registrable Shares pursuant to Rule 144(k) of the Securities Act or may
otherwise resell such Registrable Shares pursuant to an exemption from the
registration provisions of the Securities Act.

 

12

--------------------------------------------------------------------------------

13. Limitations on Subsequent Registration Rights. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
Majority Holders, enter into any agreement with any holder or prospective holder
of any securities of the Company that would allow such holder or prospective
holder to include such securities in any Piggyback Registration Statement unless
under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of the securities of such holder or prospective holder will not reduce the
amount of the Registrable Shares which the Investors wish to include in such
Registration Statement.

14. No Required Sale. Nothing in this Agreement shall be deemed to create an
independent obligation on the part of any Investor to sell any Registrable
Shares pursuant to any effective registration statement.

15. Nominees for Beneficial Owners. If Registrable Shares are held by a nominee
for the beneficial owner thereof, the beneficial owner thereof may, at its
option, be treated as the holder of such Registrable Shares for purposes of any
request or other action by any Investor pursuant to this Agreement (or any
determination of any number or percentage of shares constituting Registrable
Shares held by any Investor contemplated by this Agreement); provided that the
Company shall have received assurances reasonably satisfactory to it of such
beneficial ownership.

16. Entire Agreement. This Agreement and exhibits attached hereto and
incorporated herewith constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes any and all prior negotiations, correspondence, agreements or
understandings with respect to the subject matter hereof and supercedes all
prior agreements, negotiations, understandings, representations and statements
respecting the subject matter hereof, whether oral or written.

17. Agreement with Respect to Sales of Common Stock. Each Investor will not, and
will cause each of its affiliates and any person acting on its or their behalf
not to, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take
a pledge of) any of the shares of Common Stock, except in compliance with the
Securities Act, applicable state securities laws and the respective rules and
regulations promulgated thereunder.

18. Miscellaneous.

(a) Amendment. No amendment, modification, alteration, waiver or change in any
of the terms of this Agreement shall be valid or binding upon the parties hereto
unless made in writing and duly executed by the Company and the holders of at
least 66 2/3% of the Registrable Shares held by all of the Investors; provided,
however, that in each case, no such amendment shall increase the obligations of
any Investor without such Investor’s written consent.

(b) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to any conflicts of laws concepts that would apply the laws of another
jurisdiction.

 

13

--------------------------------------------------------------------------------

(c) Assignment. The rights and obligations of the parties hereto shall inure to
the benefit of, and shall be binding upon the authorized successors and
permitted assigns of each party; provided that the terms and conditions of
Section 12 hereof are satisfied. This Agreement shall also be binding upon and
inure to the benefit of any transferee ‘of any of the Purchased Shares; provided
the terms and conditions of Section 12 hereof are satisfied. Notwithstanding
anything in this Agreement to the contrary, if at any time any Investor shall
cease to own any Registrable Shares, all of such Investor’s rights under this
Agreement shall immediately terminate; provided, however, that if such Investor
ceases to own Registrable Shares because all or a portion of such shares were
sold pursuant to the Registration Statement or a Piggyback Registration
Statement, then such Investor shall continue to have the rights and obligations
set forth in Section 9 hereof, as provided in Section 9(e) hereof. In the event
of any assignment by an Investor in accordance with the terms of this Agreement,
the assignee shall specifically assume and be bound by the provisions of the
Agreement by executing the Instrument of Adherence attached hereto as Exhibit B.

(d) Specific Performance. Each of the parties hereto acknowledges and agrees
that damages will not be an adequate remedy for any material breach or violation
of this Agreement if such material breach or violation would cause immediate and
irreparable harm (an “Irreparable Breach”). Accordingly, in the event of a
threatened or ongoing Irreparable Breach, each party hereto shall be entitled to
seek, in any state or federal court in the State of New York, equitable relief
of a kind appropriate in light of the nature of the ongoing or threatened
Irreparable Breach, which relief may include, without limitation, specific
performance or injunctive relief; provided, however, that if the party bringing
such action is unsuccessful in obtaining the relief sought, the moving party
shall pay the non-moving party’s costs, including actual attorney’s fees,
incurred in connection with defending such action. Such remedies shall not be
the parties’ exclusive remedies, but shall be in addition to all other remedies
provided in this Agreement.

(e) Notice. Any notices, reports or other correspondence (hereinafter
collectively referred to as “Correspondence”) required or permitted to be given
hereunder shall be sent by courier (overnight or same day) or facsimile or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.

(i) All Correspondence to the Company shall be addressed as follows:

EP MedSystems, Inc.

575 Route 73 North

Building D

West Berlin, New Jersey 08091-9293

Attention: President and Chief Executive Officer

Facsimile: (856) 753-8544

 

14

--------------------------------------------------------------------------------

with a copy to:

Mayer, Brown, Rowe & Maw LLP

1675 Broadway

New York, NY 10019

Attention: Thomas M. Vitale, Esq.

Facsimile: (212) 262-1910

(ii) All Correspondence to any Investor shall be sent to such Investor at the
address set forth in Exhibit A.

(iii) Any Person may change the address to which correspondence to it is to be
addressed by notification as provided for herein.

(f) Waiver. No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or be construed as, a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement.

(g) 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.

(The remainder of this page has been intentionally left blank; signature page
follows)

 

15

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement as of the date and year first above written.

 

EP MEDSYSTEMS, INC. By:   /s/ Matthew C. Hill  

Name:

 

Matthew C. Hill

 

Title:

 

Chief Financial Officer

THE INVESTOR’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED EVEN DATE HEREWITH
SHALL CONSTITUTE THE INVESTOR’S SIGNATURE TO THIS REGISTRATION RIGHTS AGREEMENT.

 

16

--------------------------------------------------------------------------------

Exhibit A

Investors

 

INVESTOR

  

ADDRESS

  

NUMBER

OF SHARES
PURCHASED

SRB Greenway Capital QP, L.P.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   468,000 SRB Greenway Offshore Operating Fund, L.P.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   28,000 SRB Greenway Capital, L.P.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   59,555 Walker Smith Capital (Q.P.), L.P.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   171,200 Walker Smith Capital, L.P.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   20,000 Walker Smith International Fund, Ltd.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   258,055 HHMI Investments, L.P.   

300 Crescent Court, Suite 1111

Dallas, Texas 75201

   96,300 SF Capital Partners Ltd.   

3600 South Lake Drive

St. Francis, WI 53235

   1,000,000 Shea Ventures, LLC   

655 Brea Canyon Road

Walnut, CA 91789

   666,667 Pat L. Gordon   

2009 Sharon Lane

Austin, Texas 78703

   466,667 CE Unterberg Towbin Capital Partners I, L.P.   

350 Madison Avenue

New York, NY 10017

   121,112 Thomas I. Unterberg Trustee, Ellen U. Celli Family Trust U/A/ 3/25/93
  

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   22,222 Ellen U. Celli   

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   22,222 Emily U. Satloff   

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   22,222 NFS/FMTC IRA FBO Thomas I. Unterberg   

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   22,222 Thomas I. Unterberg   

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   66,666 Marjorie & Clarence E. Unterberg Foundation Inc.   

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   44,444 Declaration of Trust by Thomas I. Unterberg U/A 8/7/96   

c/o CE Unterberg Towbin

350 Madison Avenue

New York, NY 10017

   22,222 2001 Candice N. Pell Trust   

40 Ramland Road South, Suite 10

Orangeburg, NY 10962

   100,000 2001 Jessica N. Pell Trust   

40 Ramland Road South, Suite 10

Orangeburg, NY 10962

   100,000 FatBoy Capital, L.P.   

9611 North U.S. Highway 1, Box 390

Sebastan, FL 32958

   617,284

 

17

--------------------------------------------------------------------------------

Exhibit B

Instrument of Adherence

Reference is hereby made to that certain Registration Rights Agreement, dated as
of March 24, 2006, among EP MedSystems, Inc., a New Jersey corporation (the
“Company”), the Investors and the Investor Permitted Transferees, as amended and
in effect from time to time (the “Registration Rights Agreement”). Capitalized
terms used herein without definition shall have the respective meanings ascribed
thereto in the Registration Rights Agreement.

The undersigned, in order to become the owner or holder of                     
shares of Company common stock, no par value, $0.001 stated value per share (the
“Common Stock”), hereby agrees that, from and after the date hereof, the
undersigned has become a party to the Registration Rights Agreement in the
capacity of an Investor Permitted Transferee, and is entitled to all of the
benefits under, and is subject to all of the obligations, restrictions and
limitations set forth in, the Registration Rights Agreement that are applicable
to Investor Permitted Transferees. This Instrument of Adherence shall take
effect and shall become a part of the Registration Rights Agreement immediately
upon execution.

Executed under seal as of the date set forth below under the laws of the State
of New York.

 

Signature: 

      

Name:

      

Title:

    

 

Accepted:

EP MedSystems, Inc.

By:

      

Name:

      

Title:

    

Date:

    

 

18

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

           Page

1.

  

Definitions

   1

2.

  

Effectiveness; Termination

   2

3.

  

Registration

   2

4.

  

“Piggyback” Registration Rights

   4

5.

  

Obligations of the Company

   6

6.

  

Furnish Information

   8

7.

  

Expenses of Registration

   8

8.

  

Delay of Registration

   9

9.

  

Indemnification

   9

10.

  

Reports under the Exchange Act

   11

11.

  

Deferral and Lock-up

   12

12.

  

Transfer of Registration Rights

   12

13.

  

Limitations on Subsequent Registration Rights

   13

14.

  

No Required Sale

   13

15.

  

Nominees for Beneficial Owners

   13

16.

  

Entire Agreement

   13

17.

  

Agreement with Respect to Sales of Common Stock

   13

18.

  

Miscellaneous

   13

Exhibit A

   17

Exhibit B

   18

 

-i-