Exhibit 10.4

ESCROW AGREEMENT

This Agreement is dated as of the 17th day of January, 2012 among Cambridge
Heart, Inc., a Delaware corporation (the “Company”), the subscribers listed on
Schedule 1 hereto (“Subscribers”), and Grushko & Mittman, P.C. (the “Escrow
Agent”):

W I T N E S S E T H:

WHEREAS, the Company and Subscribers have entered into a Subscription Agreement
calling for the sale by the Company to the Subscribers of secured convertible
Notes and Warrants for an aggregate purchase price of up to $4,000,000; and

WHEREAS, the parties hereto require the Company to deliver the Notes and
Warrants against payment therefor, with such Notes and the Escrowed Funds to be
delivered to the Escrow Agent, along with the other documents, instruments and
payments hereinafter described, to be held in escrow and released by the Escrow
Agent in accordance with the terms and conditions of this Agreement; and

WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to the
terms and conditions of this Agreement;

NOW THEREFORE, the parties agree as follows:

ARTICLE I

INTERPRETATION

1.1. Definitions. Capitalized terms used and not otherwise defined herein that
are defined in the Subscription Agreement shall have the meanings given to such
terms in the Subscription Agreement. Whenever used in this Agreement, the
following terms shall have the following respective meanings:

 

  •  

“Additional Investment Rights” shall have the meaning set forth in Section 2(c)
of the Subscription Agreement;

 

  •  

“Agreement” means this Agreement and all amendments made hereto and thereto by
written agreement between the parties;

 

  •  

“Broker” shall mean Dawson James Securities Inc.;

 

  •  

“Broker’s Fees” shall have the meaning set forth in Section 8(a) and on Schedule
8(a) to the Subscription Agreement;

 

  •  

“Collateral Agent” shall mean Collateral Agents, LLC;

 

  •  

“Collateral Agent Fee” shall mean the set-up fee payable to the Collateral Agent
described in Section 19(n) of the Security Agreement;

 

  •  

“Closing Date” shall have the meaning set forth in Section 1 of the Subscription
Agreement;

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  •  

“Escrow Documents” shall mean the Company Documents and Subscriber Documents;

 

  •  

“Legal Opinion” means the original signed legal opinion referred to in Section 6
of the Subscription Agreement;

 

  •  

“Lockup Agreement” shall have the meaning set forth in Section 9(x) of the
Subscription Agreement;

 

  •  

“Note” shall have the meaning set forth in the second recital to the
Subscription Agreement;

 

  •  

“Principal Amount” shall mean an aggregate of up to $4,000,000;

 

  •  

“Security Agreement” shall have the meaning set forth in Section 3 of the
Subscription Agreement and shall include the deliveries required to be made
therewith at the time of execution;

 

  •  

“Subscriber Legal Fees” shall have the meaning set forth in Section 8(b) of the
Subscription Agreement;

 

  •  

“Subscription Agreement” means the Subscription Agreement (and the exhibits and
schedules thereto) entered into or to be entered into by the Company and
Subscribers in reference to the sale and purchase of the Notes and Warrants;

 

  •  

“Warrants” shall have the meaning set forth in Section 2(b) of the Subscription
Agreement;

 

  •  

Collectively, the Additional Investment Rights, Legal Opinion, Lockup
Agreements, Notes, Security Agreement, Warrants, and Subscription Agreement
signed and executed by all signators thereto other than the Subscribers,
Broker’s Fees, Collateral Agent Fee and Subscriber Legal Fees are referred to as
“Company Documents”; and

 

  •  

Collectively, the Escrowed Payment, the Collateral Agent executed Security
Agreement, and the Subscribers executed Subscription Agreement and Security
Agreement are referred to as “Subscriber Documents.”

1.2. Entire Agreement. This Agreement along with the Company Documents and the
Subscriber Documents to which the Subscriber and the Company or Subsidiary are a
party constitute the entire agreement between the parties hereto pertaining to
the Company Documents and Subscriber Documents and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. There are no warranties, representations and other
agreements made by the parties in connection with the subject matter hereof,
except as specifically set forth in this Agreement, the Company Documents and
the Subscriber Documents.

1.3. Extended Meanings. In this Agreement words importing the singular number
include the plural and vice versa; words importing the masculine gender include
the feminine and neuter genders. The word “person” includes an individual, body
corporate, partnership, trustee or trust or unincorporated association,
executor, administrator or legal representative.

1.4. Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in the
case of a waiver, by the party waiving compliance. Except as

 

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expressly stated herein, no delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder
preclude any other or future exercise of any other right, power or privilege
hereunder.

1.5. Headings. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.

1.6. Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of laws principles that would result in the application of the
substantive laws of another jurisdiction. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state of New York. Both parties and the individuals executing
this Agreement and other agreements on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
(which shall be the party which receives an award most closely resembling the
remedy or action sought) shall be entitled to recover from the other party its
reasonable attorney’s fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.

1.7. Specific Enforcement, Consent to Jurisdiction. The Company and Subscribers
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity. Subject to
Section 1.6 hereof, each of the Company and Subscribers hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Nothing in this Section shall affect
or limit any right to serve process in any other manner permitted by law.

ARTICLE II

DELIVERIES TO THE ESCROW AGENT

2.1. Company Deliveries. On or before the Closing Date, the Company shall
execute and deliver the Company Documents to the Escrow Agent.

2.2. Subscriber Deliveries. On or before the Closing Date, Subscribers shall
execute and deliver the Subscription Agreements and Security Agreement, shall
cause the Collateral Agent to execute and deliver the Security Agreement, and
shall deliver the Escrowed Payment in cash, to the Escrow Agent. The Escrowed
Payment will be delivered pursuant to the following wire transfer instructions:

Citibank, N.A.

1155 6th Avenue

New York, NY 10036

ABA Number: 0210-00089

For Credit to: Grushko & Mittman, IOLA Trust Account

Account Number: 9997242837

 

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2.3. Intention to Create Escrow Over Company Documents and Subscriber Documents.
The Subscribers and Company intend that the Company Documents and Subscriber
Documents shall be held in escrow by the Escrow Agent pursuant to this Agreement
for their benefit as set forth herein.

2.4. Escrow Agent to Deliver Company Documents and Subscriber Documents. The
Escrow Agent shall hold and release the Company Documents and Subscriber
Documents only in accordance with the terms and conditions of this Agreement.

ARTICLE III

RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

3.1. Release of Escrow. Subject to the provisions of Section 4.2, the Escrow
Agent shall release the Company Documents and Subscriber Documents as follows:

(a) On the Closing Date, the Escrow Agent will simultaneously release the
Company Documents to the Subscribers and release the Subscriber Documents to the
Company, except that:

(i) Broker’s Fees will be released directly to the Broker;

(ii) Subscriber Legal Fees will be released directly to the Subscriber’s
attorneys,

(iii) the Collateral Agent Fee will be disbursed to the Collateral Agent; and

(iv) the Security Agreement will be released to the Collateral Agent.

(b) Notwithstanding the above, upon receipt by the Escrow Agent of joint written
instructions (“Joint Instructions”) signed by the Company and the Subscribers,
it shall deliver the Company Documents and Subscriber Documents in accordance
with the terms of the Joint Instructions.

(c) Anything herein to the contrary notwithstanding, upon receipt by the Escrow
Agent of a final and non-appealable judgment, order, decree or award of a court
of competent jurisdiction (a “Court Order”), the Escrow Agent shall deliver the
Company Documents and Subscriber Documents in accordance with the Court Order.
Any Court Order shall be accompanied by an opinion of counsel for the party
presenting the Court Order to the Escrow Agent (which opinion shall be
satisfactory to the Escrow Agent) to the effect that the court issuing the Court
Order has competent jurisdiction and that the Court Order is final and
non-appealable.

3.2. A Closing may take place on or before February 15, 2012. After February 15,
2012, the Escrow Agent will promptly return the applicable Company Documents to
the Company and return the Subscriber Documents to the Subscriber.

3.3. Acknowledgement of Company and Subscriber; Disputes. The Company and the
Subscribers acknowledge that the only terms and conditions upon which the
Company Documents and Subscriber Documents are to be released are set forth in
Sections 3 and 4 of this Agreement. The Company and the Subscribers reaffirm
their agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and Subscriber
Documents shall be resolved pursuant to Section 4.2 or by agreement between the
Company and Subscribers.

 

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ARTICLE IV

CONCERNING THE ESCROW AGENT

4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent’s duties
and responsibilities shall be subject to the following terms and conditions:

(a) The Subscribers and Company acknowledge and agree that the Escrow Agent
(i) shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscribers or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to any other agreement
or otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement;
(iii) may rely on and shall be protected in acting or refraining from acting
upon any written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by the Escrow Agent in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any fact
stated therein or the propriety or validity or the service thereof; (iv) may
assume that any person believed by the Escrow Agent in good faith to be
authorized to give notice or make any statement or execute any document in
connection with the provisions hereof is so authorized; (v) shall not be under
any duty to give the property held by Escrow Agent hereunder any greater degree
of care than Escrow Agent gives its own similar property; and (vi) may consult
counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by Escrow Agent hereunder in good faith and in accordance with the
opinion of such counsel.

(b) The Subscribers and Company acknowledge that the Escrow Agent is acting
solely as a stakeholder at their request and that the Escrow Agent shall not be
liable for any action taken by Escrow Agent in good faith and believed by Escrow
Agent to be authorized or within the rights or powers conferred upon Escrow
Agent by this Agreement. The Subscribers and Company, jointly and severally,
agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent’s
partners, employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the fees of
outside counsel and other costs and expenses of defending itself against any
claim or liability under this Agreement, except in the case of gross negligence
or willful misconduct on Escrow Agent’s part committed in its capacity as Escrow
Agent under this Agreement. The Escrow Agent shall owe a duty only to the
Subscribers and Company under this Agreement and to no other person.

(c) The Subscribers and Company jointly and severally agree to reimburse the
Escrow Agent for outside counsel fees, to the extent authorized hereunder and
incurred in connection with the performance of its duties and responsibilities
hereunder.

(d) The Escrow Agent may at any time resign as Escrow Agent hereunder by giving
five (5) days prior written notice of resignation to the Subscribers and the
Company. Prior to the effective date of the resignation as specified in such
notice, the Subscribers and Company will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Company Documents and Subscriber
Documents to a substitute Escrow Agent selected by the Subscribers and Company.
If no successor Escrow Agent is named by the Subscribers and Company, the Escrow
Agent may apply to a court of competent jurisdiction in the State of New York
for appointment of a successor Escrow Agent, and to deposit the Company
Documents and Subscriber Documents with the clerk of any such court.

(e) Other than in connection with the Subscriber Legal Fees, the Escrow Agent
does not have and will not have any interest in the Company Documents and
Subscriber Documents, but is serving only as escrow agent, having only
possession thereof. The Escrow Agent shall not be liable for any loss resulting
from the making or retention of any investment in accordance with this Escrow
Agreement.

 

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(f) This Agreement sets forth exclusively the duties of the Escrow Agent with
respect to any and all matters pertinent thereto and no implied duties or
obligations shall be read into this Agreement.

(g) The Escrow Agent shall be permitted to act as counsel for the Subscribers in
any dispute as to the disposition of the Company Documents and Subscriber
Documents, in any other dispute between the Subscribers and Company, whether or
not the Escrow Agent is then holding the Company Documents and Subscriber
Documents and continues to act as the Escrow Agent hereunder.

(h) The provisions of this Section 4.1 shall survive the resignation of the
Escrow Agent or the termination of this Agreement.

4.2. Dispute Resolution: Judgments. Resolution of disputes arising under this
Agreement shall be subject to the following terms and conditions:

(a) If any dispute shall arise with respect to the delivery, ownership, right of
possession or disposition of the Company Documents and Subscriber Documents, or
if the Escrow Agent shall in good faith be uncertain as to its duties or rights
hereunder, the Escrow Agent shall be authorized, without liability to anyone, to
(i) refrain from taking any action other than to continue to hold the Company
Documents and Subscriber Documents pending receipt of a Joint Instruction from
the Subscribers and Company, or (ii) deposit the Company Documents and
Subscriber Documents with any court of competent jurisdiction in the State of
New York, in which event the Escrow Agent shall give written notice thereof to
the Subscribers and the Company and shall thereupon be relieved and discharged
from all further obligations pursuant to this Agreement. The Escrow Agent may,
but shall be under no duty to, institute or defend any legal proceedings which
relate to the Company Documents and Subscriber Documents. The Escrow Agent shall
have the right to retain counsel if it becomes involved in any disagreement,
dispute or litigation on account of this Agreement or otherwise determines that
it is necessary to consult counsel.

(b) The Escrow Agent is hereby expressly authorized to comply with and obey any
Court Order. In case the Escrow Agent obeys or complies with a Court Order, the
Escrow Agent shall not be liable to the Subscribers and Company or to any other
person, firm, corporation or entity by reason of such compliance.

ARTICLE V

GENERAL MATTERS

5.1. Termination. This escrow shall terminate upon the release of all of the
Company Documents and Subscriber Documents or at any time upon the agreement in
writing of the Subscribers and Company.

5.2. Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number

 

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designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:

 

(a) If to the Company, to:

Cambridge Heart, Inc.

100 Ames Pond Drive

Tewksbury, MA 01876

Attn: Vincenzo LiCausi, Chief Financial Officer

Fax: (978) 654-4501

With a copy by fax only to (which shall not constitute notice):

Nutter, McClennen & Fish LLP

155 Seaport Blvd.

Boston, MA 02210

Attn: Michelle L. Basil, Esq.

Fax (617) 310-9477

 

(b) If to the Subscribers: to the addresses set forth on Schedule 1

With a copy by facsimile only to (which shall not constitute notice):

Grushko & Mittman, P.C.

515 Rockaway Avenue

Valley Stream, New York 11581

Fax: (212) 697-3575

 

(c) If to Collateral Agent, to:

Collateral Agent LLC

122 East 57th Street, 3rd Floor

New York, New York 10022

Attn: General Counsel

Fax: (212) 245-9101

 

(d) If to the Escrow Agent, to:

Grushko & Mittman, P.C.

515 Rockaway Avenue

Valley Stream, New York 11581

Fax: (212) 697-3575

or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

 

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5.3. Interest. The Escrowed Payment shall not be held in an interest bearing
account nor will interest be payable in connection therewith. In the event the
Escrowed Payment is deposited in an interest bearing account, any interest
earned on the Escrowed Payment will be paid in the New York State Client
Protection Fund or for a similar purpose.

5.4. Assignment; Binding Agreement. Neither this Agreement nor any right or
obligation hereunder shall be assignable by any party without the prior written
consent of the other parties hereto. This Agreement shall ensure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.

5.5. Invalidity. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal, or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.

5.6. Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by different signatories hereto on separate counterparts, each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile transmission and delivered by facsimile
transmission.

5.7. Agreement. Each of the undersigned states that he has read the foregoing
Escrow Agreement and understands and agrees to it.

 

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Escrow
Agreement, as of the date first written above.

 

COMPANY:

CAMBRIDGE HEART, INC.

a Delaware corporation

By:  

    /s/ Vincenzo LiCausi

  Name: Vincenzo LiCausi   Title: Chief Financial Officer

 

ESCROW AGENT: GRUSHKO & MITTMAN, P.C. By:  

    /s/ Barbara Mittman

  Name: Barbara Mittman

 

    SUBSCRIBERS: Name of Subscriber: Roderick de Greef By:  

    /s/ Roderick de Greef

 

Luis Martins By:  

    /s/ Luis Martins

 

Alpha Capital Anstalt By:  

    /s/ Konrad Ackerman

  Name: Konrad Ackerman   Title: Director

 

Osiris Investment Partners, L.P. By:  

    /s/ Paul Stuka

  Name: Paul Stuka   Title: Principal and Managing Member

 

Cranshire Capital Master Fund, Ltd. By:  

    /s/ Keith A. Goodman

  Name: Keith A. Goodman   Title: Authorized Signatory

 

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SCHEDULE 1

(SUBSCRIBERS)

 

SUBSCRIBERS AND ADDRESSES

   PURCHASE
PRICE AND  NOTE
PRINCIPAL     WARRANTS  

Roderick de Greef

c/o Cambridge Heart, Inc.

100 Ames Pond Drive

Tewksbury, MA 01876

   $ 250,000 *      2,272,727 ** 

Luis Martins

1886 Beacon Street

Waban/Newton, MA, 02468

   $ 350,000 *      3,181,818 ** 

Alpha Capital Anstalt

Pradafant 7, 9490

Furstentums, Vaduz

Liechtenstein

   $ 500,000        4,545,454   

Cranshire Capital Master Fund, Ltd.

3100 Dundee Road, Suite 703

Northbrook, IL 60062

   $ 50,000        454,545   

Osiris Investment Partners, L.P.

1 Liberty Square, 5th Floor

Boston, MA 02110

   $ 170,000        1,545,454   

 

* Represents the principal amount of Notes issuable upon cancellation at the
Closing of the Senior Unsecured Convertible Promissory Note issued by the
Company in favor of such Subscriber on November 14, 2011.

** Represents the number of share of common stock to be covered by the Warrant
issuable to such Subscriber upon cancellation at the Closing of the Senior
Unsecured Convertible Promissory Note issued by the Company in favor of such
Subscriber on November 14, 2011.

 

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