Document:

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of May 12, 2003, by
and among Cambridge Heart, Inc.,
a corporation organized under the laws of the State of Delaware (the “Company”),
and the undersigned (together with their affiliates, the “Initial Investors”).

 

WHEREAS:

 

A.                                   In connection with
the Securities Purchase Agreement of even date herewith by and between the
Company and the Initial Investors (the “Securities
Purchase Agreement”), the Company has agreed, upon the terms and
subject to the conditions contained therein, to issue and sell to the Initial
Investors (i) shares of the Company’s Series A Convertible Preferred Stock, par
value $.001 per share (the “Series A Preferred”),
and (ii) warrants (the “Warrants”)
to acquire shares of Series A Preferred.

 

B.                                     To induce the
Initial Investors to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “Securities
Act”), and applicable state securities laws.

 

NOW, THEREFORE,
in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Initial Investors hereby agree as
follows:

 

1.                                       DEFINITIONS.

 

(a)                                  As
used in this Agreement, the following terms shall have the following meanings:

 

(i)            “Investors”
means the Initial Investors and any transferees or assignees who agree to
become bound by the provisions of this Agreement in accordance with Section 9
hereof.

 

(ii)           “register,”
“registered,” and “registration” refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on a
continuous basis (“Rule 415”), and
the declaration or ordering of effectiveness of such Registration Statement by
the United States Securities and Exchange Commission (the “SEC”).

 

(iii)          “Registrable
Securities” means (A) the Company’s Common Stock, par value $.001
per share (the “Common Stock”)
issuable upon conversion of the Series A Preferred purchased by the Initial
Investors or their assignees at the Closing (as defined in the Securities
Purchase Agreement), (B) the Common Stock issuable upon conversion of the
Series 

 

 

A Preferred issuable upon exercise of or otherwise pursuant to the
Warrants, or (C) any shares of capital stock issued or issuable, from time to
time (with any adjustments), as a distribution on or in exchange for or
otherwise with respect to any of the foregoing.

 

(iv)          “Registration
Statement” means a registration statement of the Company under the
Securities Act.

 

(b)                                 Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement.

 

2.                                       REGISTRATION.

 

(a)           Mandatory
Registration.  The Company shall
prepare promptly and file with the SEC as soon as practicable, but in no event
later than thirty (30) days from the date hereof (the “Filing Date”) a Registration Statement on
Form S-2 (or, if Form S-2 is not then available, on such form of
Registration Statement as is then available to effect a registration of all of
the Registrable Securities, subject to the consent, not to be unreasonably
withheld, of the Investors) covering the resale of the Registrable
Securities.  The Registration Statement
filed hereunder, to the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable to prevent dilution resulting from stock splits,
stock dividends or similar transactions. 
The Registrable Securities included in the Registration Statement shall
be allocated to the Investors as set forth in Section 11(k) hereof.  The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to the Investors and their counsel
prior to its filing or other submission.

 

(b)           Underwritten
Offering.  If any offering pursuant
to the Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Investors who hold a majority in interest of the
Registrable Securities subject to such underwritten offering, with the consent
of the Initial Investors if they are still holding Registrable Securities,
shall have the right to select one legal counsel to represent the Investors and
an investment banker or bankers and manager or managers to administer the
offering, which investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company. 
Notwithstanding the foregoing, if the offering does not involve an
underwritten offer, the Investors shall not be entitled to require that the
offering be underwritten.

 

(c)           Registration
Statement Filing.  The Company shall
use its best efforts to cause the Registration Statement required to be filed
pursuant to Section 2(a) hereof to become effective as soon as reasonably
practicable. At the time of effectiveness, the Company shall ensure such
Registration Statement covers all of the Registrable Securities.  The Company shall use its best efforts (i)
to cause such Registration Statement covering all of the Registrable Securities
to be declared effective by the SEC on or before the one hundred twentieth
(120th) day following the Closing Date (the “Registration
Deadline”), (ii) after such Registration Statement has been declared
effective by the SEC, to prevent the suspension of sales of any of the
Registrable Securities required to be covered by such Registration Statement
(by reason of a stop order and/or because the Registration Statement contains
misstatements or omissions due to

 

2

 

the Company’s failure to update the Registration Statement or because
of any other reason outside the control of the Investors) and (iii) to cause
the Common Stock to be listed or included for quotation on the Nasdaq National
Market (“NNM”), the Nasdaq SmallCap
Market (“SmallCap”), the OTC
Bulletin Board or successor entity (e.g., BBX Market) (“OTCBB”), the New York Stock Exchange (the “NYSE”) or the American Stock Exchange (the
“AMEX”) at all times after the
Registration Deadline hereunder.  In the
event the Investors fail to provide, within five (5) business days following
the Company’s request, information reasonably requested by the Company for
inclusion in the Registration Statement or to provide their comments to the
Registration Statement (or any amendment or supplement thereto), there shall be
a day-for-day extension of any period within which the Company is required to
act hereunder.

 

(d)           Registration
Delays.  The expiration date of each
of the Warrants issued to the Investors pursuant to Section 1(b) of the
Securities Purchase Agreement shall be extended for one day for (i) each day
after the Filing Date that a Registration Statement covering the resale of the
Registrable Securities has not been filed with the SEC, and (ii) each day after
the Registration Deadline that a Registration Statement covering the resale of
the Registrable Securities has not been declared effective by the SEC.  In addition, the expiration date of each of
the Warrants issued to the Investors pursuant to Section 1(c), Section 1(f) and
Section 1(g) of the Securities Purchase Agreement shall be extended for sixty
(60) days for (i) each thirty (30) day period (or portion thereof) after the
Filing Date that a Registration Statement covering the resale of the
Registrable Securities has not been filed with the SEC, (ii) each thirty (30)
day period (or portion thereof) after the Registration Deadline that a
Registration Statement covering the resale of the Registrable Securities has
not been declared effective by the SEC, and (iii) each thirty (30) day period
(or portion thereof) during which sales of Registrable Securities cannot be
made pursuant to any such Registration Statement (by reason of a stop order
and/or because the Registration Statement contains misstatements or omissions due
to the Company’s failure to update the Registration Statement or because of any
other reason outside the control of the Investors) after such Registration
Statement has been declared effective by the SEC or the Common Stock is not
listed or included for quotation on the NNM, SmallCap, OTCBB, the NYSE or the
AMEX.

 

(e)           Intentionally
omitted.

 

(f)            Rule 416.  The Company and the Investors each
acknowledge that an indeterminate number of Registrable Securities shall be
registered pursuant to Rule 416 under the Securities Act so as to include in
such Registration Statement any and all Registrable Securities which may become
issuable to prevent dilution resulting from stock splits, stock dividends or
similar transactions (collectively, the “Rule
416 Securities”).  In this
regard, the Company agrees to take all steps necessary to ensure that all Rule
416 Securities are registered pursuant to Rule 416 under the Securities Act in
the Registration Statement and, absent guidance from the SEC or other
definitive authority to the contrary, the Company shall affirmatively support
and not take any action adverse to the position that the Registration
Statements filed hereunder cover all of the Rule 416 Securities.  If the Company determines that the
Registration Statement(s) filed hereunder do not cover all of the Rule 416
Securities, the Company shall immediately provide to each Investor written
notice (a “Rule 416 Notice”)
setting forth the basis for the Company’s position and the authority therefor.

 

3

 

3.                                       OBLIGATIONS
OF THE COMPANY.

 

In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:

 

(a)           The Company shall
prepare and file with the SEC the Registration Statement required by Section
2(a) as soon as reasonably practicable (but in no event later than the Filing
Date), and use its best efforts to cause such Registration Statement relating
to Registrable Securities to become effective as soon as practicable after such
filing but in no event later than the Registration Deadline), and keep such
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which all of the Registrable
Securities (in the reasonable opinion of counsel to the Initial Investors,
which shall be sought upon the reasonable request of the Company) may be
immediately sold to the public without registration or restriction pursuant to
Rule 144(k) under the Securities Act or any successor provision (the “Registration Period”), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) shall
not contain any 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
not misleading, and (iii) shall comply in all material respects with the
requirements of the Securities Act and the rules and regulations of the SEC
promulgated thereunder.  The financial
statements of the Company included in the Registration Statement or
incorporated by reference therein will comply as to form in all material
respects with the applicable accounting requirements and the published rules
and regulations of the SEC applicable with respect thereto.  Such financial statements will be prepared
in accordance with U.S. generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes or
may be condensed on summary statements and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end adjustments).

 

(b)           The Company shall
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during such period, comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until the earlier of (i) such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as
set forth in the Registration Statement or (ii) the expiration of the
Registration Period.

 

(c)           The Company shall
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration 

 

4

 

Statement referred to in Section 2(a), each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC (including, without limitation, any request to accelerate the effectiveness
of the Registration Statement or amendment thereto), and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
the Registration Statement (other than any portion, if any, thereof which
contains information for which the Company has sought confidential treatment),
(ii) on the date of effectiveness of the Registration Statement or any
amendment thereto, a notice stating that the Registration Statement or amendment
has been declared effective, and (iii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor.

 

(d)           The Company shall
use best efforts to (i) register and qualify the Registrable Securities covered
by the Registration Statement under such other securities or “blue sky” laws of
such jurisdictions in the United States as each Investor who holds Registrable
Securities being offered reasonably requests, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a
condition thereto to (A) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (B)
subject itself to general taxation in any such jurisdiction, (C) file a general
consent to service of process in any such jurisdiction, (D) provide any
undertakings that cause the Company undue expense or burden, or (E) make any
change in its charter or bylaws, which in each case the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders.

 

(e)           Intentionally
omitted.

 

(f)            Subject to Section
4(f) hereof, as promptly as practicable after becoming aware of such event, the
Company shall notify each Investor by telephone and facsimile of the happening
of any event, of which the Company has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and, use best efforts promptly to prepare a supplement or amendment
to the Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request.

 

(g)           The Company shall
use best efforts (i) to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, and, if such an order
is issued, to obtain the withdrawal of such order at the earliest practicable
moment (including in each case by amending or supplementing such Registration
Statement) and (ii) to notify each Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution thereof (and if
such 

 

5

 

Registration Statement is supplemented or
amended, deliver such number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request).

 

(h)           The Company shall
permit a single firm of counsel designated by Medtronic, Inc. and a single firm
of counsel designated by the rest of the Initial Investors to review the
Registration Statement and all amendments and supplements thereto a reasonable
period of time prior to its filing with the SEC, and not file any document in a
form to which such counsel reasonably objects.

 

(i)            The Company shall
make generally available to its security holders as soon as practical, but not
later than ninety (90) days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 under the
Securities Act) covering a twelve-month period beginning not later than the
first day of the Company’s fiscal quarter next following the effective date of
the Registration Statement.

 

(j)            At the request of
any Investor in the case of an underwritten public offering, the Company shall
furnish, on the date of effectiveness of the Registration Statement (i) an
opinion, dated as of such date, from counsel representing the Company addressed
to the Investors and in form, scope and substance as is customarily given in an
underwritten public offering and (ii) a letter, dated such date, from the
Company’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.

 

(k)           Intentionally
omitted.

 

(l)            The Company shall
hold in confidence and not make any disclosure of information concerning an
Investor provided to the Company unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction, (iv) such information has been made generally available
to the public other than by disclosure in violation of this or any other
agreement, or (v) such Investor consents to the form and content of any such disclosure.  The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt notice to such Investor prior to making such
disclosure, and allow the Investor, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information.

 

(m)          The Company shall use
best efforts to promptly cause all of the Registrable Securities covered by the
Registration Statement to be listed on the NNM, the SmallCap, the OTCBB, the
NYSE or the AMEX or another national securities exchange and on each additional
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, and,
without limiting the generality of the foregoing, 

 

6

 

to arrange for or maintain at least two
market makers to register with the National Association of Securities Dealers,
Inc. as such with respect to such Registrable Securities.

 

(n)           The Company shall
provide a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration
Statement.

 

(o)           The Company shall
cooperate with the Investors who hold Registrable Securities being offered and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates  representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may be, as the managing underwriter or underwriters, if any, or the Investors
may reasonably request and registered in such names as the managing underwriter
or underwriters, if any, or the Investors may request, and, within three (3)
business days after the Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement), an opinion
of such counsel in the form attached hereto as Exhibit 1.

 

(p)           At the request of
any Investor, the Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.

 

(q)           The Company shall
comply with all applicable laws related to a Registration Statement and
offering and sale of securities and all applicable rules and regulations of
governmental authorities in connection therewith (including, without
limitation, the Securities Act and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and
the rules and regulations promulgated by the SEC.)

 

(r)            From and after the
date of this Agreement, the Company shall not, and shall not agree to, allow
the holders of any securities of the Company to include any of their securities
which are not Registrable Securities in the Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority in interest of the
Registrable Securities other than as identified on Schedule 3(r) hereto.

 

4.             OBLIGATIONS OF THE INVESTORS.

 

In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:

 

(a)           It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it as shall be reasonably required to effect the registration of such

 

7

 

Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request.  At least five (5) trading days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor of the information the Company reasonably
requires from each such Investor.

 

(b)           Each Investor, by
such Investor’s acceptance of the Registrable Securities, agrees to cooperate
with the Company as reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from such Registration
Statement.  The Company shall not be
required to include in any Registration Statement the Registrable Securities of
any Investor who fails to cooperate with the Company as reasonably requested in
connection with the preparation and filing of the Registration Statement.

 

(c)           Intentionally
omitted.

 

(d)           Each Investor agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Sections 3(f) or 3(g), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor’s receipt of
the copies of the supplemented or amended prospectus contemplated by Sections
3(f) or 3(g) and, if so directed by the Company, such Investor shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor’s possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice.

 

(e)           No Investor may
participate in any underwritten distribution hereunder unless such Investor (i)
agrees to sell such Investor’s Registrable Securities on the basis provided in
any underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, (iii) agrees to pay its pro
rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5 below, and (iv)
complies with all applicable laws in connection therewith.  Notwithstanding anything in this Section
4(e) to the contrary, this Section 4(e) is not intended to limit an Investor’s
rights under Sections 2(a) or 3(b) hereof.

 

(f)            In the event that
in the reasonable judgment of the Company, it is advisable to suspend the use
of a Prospectus included in the Registration Statement due to pending material
developments or other events which have not yet been publicly disclosed and as
to which the Company reasonably believes public disclosure would be detrimental
to the Company, the Company shall notify each Investor to such effect, and,
upon receipt of such notice, each Investor shall immediately discontinue any
sales of Registerable Securities pursuant to the Registration Statement until
the Investors receive copies of a supplemental or amended Prospectus or until
such Investors are advised in writing by the Company that the then current
Prospectus may be used and have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus.  In the event that
any

 

8

 

such black-out occurs during the period which
the Company is required to cause a Registration Statement to remain effective
under Section 3 above, such a period shall be extended for the number of days
equal to the duration of such black-out. 
Notwithstanding anything to the contrary herein, the Company shall not
exercise its rights under this Section 4(f) to suspend sales of Registerable
Securities for more than a total of 60 days in any 365-day period or for more
than 15 consecutive days.

 

5.             EXPENSES OF REGISTRATION.  All reasonable expenses incurred by the
Company or the Investors in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3 above, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, the fees and disbursements of counsel for the Company and the
reasonably incurred fees and disbursements of one counsel selected by the
Investors (not to exceed $5,000) but excluding any underwriting discounts and
selling commissions, shall be borne by the Company.  The Company’s obligations pursuant to this Section 5 shall be in
addition to the Company’s obligations pursuant to Section 4(f) of the
Securities Purchase Agreement.  In
addition, the Company shall pay the reasonable costs and expenses (including
legal fees) of the Investors incurred in connection with the enforcement of the
Investors’ rights under Section 2 and Section 3 of this Agreement.

 

6.             INDEMNIFICATION.  In the event any Registrable Securities are
included in a Registration Statement under this Agreement:

 

(a)           To the extent
permitted by law, the Company will indemnify, hold harmless and defend (i) each
Investor who holds such Registrable Securities, and (ii) the directors,
officers, partners, members, employees and agents of such Investor and each
person who controls any Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, if any, (each, an “Indemnified Person”), against any joint or
several losses, claims, damages, liabilities or expenses  (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, “Claims”) to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement under which Registrable Securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective
date of such Registration Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, “Violations”).  The Company shall reimburse the Investors
and each other Indemnified Person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not

 

9

 

apply to a Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for
use in the Registration Statement or any such amendment thereof or supplement
thereto.  Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9 hereof.

 

(b)           In connection with
any Registration Statement in which an Investor is participating, each such
Investor agrees severally and not jointly to indemnify, hold harmless and
defend, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, its employees, agents and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each underwriter (if any) and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder within
the meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an “Indemnified
Party”), against any Claim to which any of them may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs solely in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject
to Section 6(c) such Investor will reimburse any legal or other expenses
(promptly as such expenses are incurred and are due and payable) reasonably
incurred by them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Agreement (including this Section
6(b) and Section 7) for only that amount as does not exceed the net proceeds
actually received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. 
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9 hereof.  Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if such Investor timely notifies the Company
of the untrue statement or omission of material fact contained in the
preliminary prospectus.

 

(c)           Promptly after
receipt by an Indemnified Person or Indemnified Party under this Section 6 of
notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to made against any indemnifying party under this Section 6, 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 control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however,
that such indemnifying party shall not be entitled to assume such defense and
an Indemnified Person or Indemnified Party shall have the right to

 

10

 

retain its own counsel with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified
Party and the indemnifying party and any such Indemnified Person or Indemnified
Party reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party. 
The indemnifying party shall pay for only one separate legal counsel for
the Indemnified Person or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the  Registrable Securities included in
the Registration Statement to which the Claim relates (with the approval of the
Initial Investor if it holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable.  The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is actually
prejudiced in its ability to defend such action.  The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.

 

7.                                       CONTRIBUTION.  To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 6 to the fullest extent permitted by
law as is appropriate to reflect the relative fault of the indemnifying party,
on the one hand, and the Indemnified Person or Indemnified Party, as the case
may be, on the other hand, with respect to the Violation giving rise to the
applicable Claim; provided, however, that (i) no contribution
shall be made under circumstances where the party would not have been liable for
indemnification under the fault standards set forth in Section 6, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.

 

8.                                       REPORTS
UNDER THE EXCHANGE ACT.  With a view
to making available to the Investors the benefits of Rule 144 promulgated under
the Securities Act or any other similar rule or regulation of the SEC that may
at any time permit the Investors to sell securities of the Company to the
public without registration (“Rule 144”),
the Company agrees to:

 

(a)           file with the SEC in
a timely manner and make and keep available all reports and other documents
required of the Company under the Securities Act and the Exchange Act so long
as the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company’s obligations under Section 4(c) of the
Securities 

 

11

 

Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and

 

(b)           furnish to each
Investor so long as such Investor owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(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 to permit the Investors to sell such
securities under Rule 144 without registration.

 

9.                                       ASSIGNMENT
OF REGISTRATION RIGHTS.  The rights
of the Investors hereunder, including the right to have the Company register
Registrable Securities pursuant to this Agreement, shall be automatically
assignable by each Investor to any transferee of at least 10,000 shares of
Registrable Securities or any assignee of the Securities Purchase Agreement if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after
such assignment, (ii) the Company is furnished with written notice of (A) the
name and address of such transferee or assignee, and (B) the securities with
respect to which such registration rights are being transferred or assigned,
and (iii) the transferee or assignee agrees in writing for the benefit of the
Company to be bound by all of the provisions contained herein.  In addition, and notwithstanding anything to
the contrary contained in this Agreement, the Registrable Securities may be
pledged, and all rights of the Investors under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor’s margin or brokerage account, subject to compliance
with all applicable laws, rules and regulations including all applicable
securities laws.

 

10.                                 AMENDMENT
OF REGISTRATION RIGHTS.  Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company and Investors who hold
a majority in interest of the Registrable Securities or, in the case of a
waiver, with the written consent of the party charged with the enforcement of
any such provision; provided, however, that no consideration
shall be paid to an Investor by the Company in connection with an amendment
hereto unless each Investor similarly affected by such amendment receives a
pro-rata amount of consideration from the Company.  Unless an Investor otherwise agrees, each amendment hereto must
similarly affect each Investor.  Any
amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.

 

11.                                 MISCELLANEOUS.

 

(a)           A person or entity
is deemed to be a holder of Registrable Securities whenever such person or
entity owns of record such Registrable Securities.  If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

 

12

 

(b)           Any notices required
or permitted to be given under the terms of this Agreement shall be sent by
certified or registered mail (return receipt requested) or delivered personally
or by courier or by confirmed telecopy, and shall be effective five (5) days
after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by courier or confirmed telecopy, in each
case addressed to a party.  The
addresses for such communications shall be:

 

If to the Company:

 

Cambridge Heart, Inc.

1 Oak Park Drive

Bedford, Massachusetts  01730

Telephone:  (781) 271-1200

Facsimile:  (781) 276-7924

Attn:  President

 

with a copy simultaneously transmitted by
like means to:

 

Hale and Dorr LLP

60 State Street

Boston, Massachusetts  02109

Telephone:  (617) 526-6000

Facsimile:  (617) 526-5000

Attn:  John A. Burgess, Esquire

 

and if to any Investor, at such address as
such Investor shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in accordance with this
Section 11(b).

 

(c)           Failure of any party
to exercise any right or remedy under this Agreement or otherwise, or delay by
a party in exercising such right or remedy, shall not operate as a waiver
thereof.

 

(d)           This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware applicable to contracts made and to be performed in the State of
Delaware.  The Company and each Investor
irrevocably consents to the jurisdiction of the United States federal courts
and the state courts located in the State of Delaware in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company and each Investor irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding.  The parties further agree that service of process upon the other
party, mailed by first class mail shall be deemed in every respect effective service
of process upon such party in any such suit or proceeding.  Nothing herein shall affect the parties’
right to serve process in any other manner permitted by law.  Each party agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.

 

13

 

(e)           This Agreement and
the Securities Purchase Agreement (including all schedules and exhibits
thereto) constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. 
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This Agreement and the Securities Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.

 

(f)            Subject to the
requirements of Section 9 hereof, this Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto.

 

(g)           The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

 

(h)           This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.

 

(i)            Each party shall do
and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

 

(j)            All consents,
approvals and other determinations to be made by the Investors pursuant to this
Agreement shall be made by the Investors holding a majority in interest of the
Registrable Securities held by all Investors.

 

(k)           The initial number
of Registrable Securities included on any Registration Statement and each
increase to the number of Registrable Securities included thereon shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time of such establishment or increase,
as the case may be.  In the event an
Investor shall sell or otherwise transfer any of such holder’s Registrable
Securities, each transferee shall be allocated a pro rata portion of the number
of Registrable Securities included on a Registration Statement for such
transferor.  Any shares of Common Stock
included on a Registration Statement and which remain allocated to any person
or entity which does not hold any Registrable Securities shall be allocated to
the remaining Investors pro rata based on the number of shares of Registrable
Securities then held by such Investors.

 

(l)            Each party to this
Agreement has participated in the negotiation and drafting of this
Agreement.  As such, the language used
herein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement.

 

(m)          For purposes of this
Agreement, the term “business day” means any day other than a Saturday or Sunday
or a day on which banking institutions in the State of New York are authorized
or obligated by law, regulation or executive order to close, and the term
“trading 

 

14

 

day” means any day on which NNM or, if the
Common Stock is not then traded on NNM, the principal securities exchange or
trading market where the Common Stock is then listed or traded, is open for
trading.

 

[SIGNATURE PAGES FOLLOW]

 

15

 

IN WITNESS WHEREOF,
the parties have caused this Agreement to be duly executed as of the date first
above written.

 

	
  CAMBRIDGE HEART, INC.

  
	
   

  
	
   

  
	
  By:

  	
    /s/ David A.
  Chazanovitz

  	
   

  
	
   

  	
  Name: David A. Chazanovitz

  
	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
  PURCHASERS:

  	
   

  
	
   

  	
   

  	
   

  
	
  AFB FUND LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Louis Blumberg

  	
   

  
	
   

  	
  Name: Louis Blumberg

  
	
   

  	
  Title: Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BLUMBERG LIFE SCIENCES FUND LTD.

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Laurence Blumberg

  	
   

  
	
   

  	
  Name: Lawrence Blumberg

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BLUMBERG LIFE SCIENCES FUND L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Laurence Blumberg

  	
   

  
	
   

  	
  Name: Laurence Blumberg

  
	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   /s/ Eric Hecht

  	
   

  
	
  Eric Hecht

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   /s/ J. Leighton Read, M.D.

  	
   

  
	
  J. Leighton Read, M.D.

  
	
   

  
	
   

  
	
   /s/ David C. Poole

  	
   

  
	
  David C. Poole

  	
   

  
					

 

[Signature page to Registration Rights
Agreement]

 

16

 

IN WITNESS WHEREOF,
the parties have caused this Agreement to be duly executed as of the date first
above written.

 

	
  PURCHASERS:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   /s/ Brian Trumbore

  	
   

  	
   

  
	
  Brian Trumbore

  	
   

  
	
   

  	
   

  
	
  T-WAVE INVESTORS, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/ Mark Shapiro

  	
   

  
	
   

  	
   

  	
  Name: Mark Shapiro

  	
   

  
	
   

  	
   

  	
  Title: General Partner

  	
   

  
	
   

  	
   

  
	
  LEAF OFFSHORE INVESTMENT FUND LTD

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Seymour L. Goldblatt

  	
   

  
	
   

  	
   

  	
  Name: Seymour L. Goldblatt

  	
   

  
	
   

  	
   

  	
  Title: President, S Squared Technology

  
	
   

  	
   

  
	
  PROMED PARTNERS, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David B. Musket

  	
   

  
	
   

  	
   

  	
  Name: David B. Musket

  	
   

  
	
   

  	
   

  	
  Title: Managing Member

  	
   

  
	
   

  	
   

  
	
  PROMED OFFSHORE FUND, LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David B. Musket

  	
   

  
	
   

  	
   

  	
  Name: David B. Musket

  	
   

  
	
   

  	
   

  	
  Title: Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   /s/ David B. Musket

  	
   

  	
   

  
	
  David B. Musket

  	
   

  
							

 

[Signature page to Registration Rights
Agreement]

 

17

 

IN WITNESS WHEREOF,
the parties have caused this Agreement to be duly executed as of the date first
above written.

 

	
  PURCHASERS:

  
	
   

  
	
   

  
	
   /s/ Robert P. Khederian

  	
   

  
	
  Robert P. Khederian

  
	
   

  
	
   

  
	
  MEDTRONIC, INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
    /s/ Michael D. Ellwein

  	
   

  
	
   

  	
   

  	
  Name: Michael D. Ellwein

  	
   

  
	
   

  	
   

  	
  Title: Vice President and Chief Development
  Officer

  
	
   

  
	
   

  
	
  THE TAIL WIND FUND LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  TAIL WIND ADVISORY AND

  
	
   

  	
  MANAGEMENT LTD.,

  
	
   

  	
  as investment manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David Crook

  	
   

  
	
   

  	
  Name: David Crook

  
	
   

  	
  Title:

  
							

 

[Signature page to Registration Rights
Agreement]

 

18Exhibit 10.3

Form of Short-Term Warrant

VOID

AFTER 5:00 P.M., NEW YORK CITY

TIME,

ON THE EXPIRATION DATE (AS DEFINED BELOW)

 

 

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE

NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE

“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR

ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED,

SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR

THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR

TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION

REQUIREMENTS OF THOSE LAWS.

 

Right to Purchase

             Shares

of

Series A Convertible Preferred Stock,

par value $.001 per share

 

Date:  May 12, 2003

 

CAMBRIDGE

HEART, INC.

STOCK

PURCHASE WARRANT

 

THIS CERTIFIES

THAT, for value received,

                 

or its registered assigns, is entitled to purchase from Cambridge Heart, Inc.,

a corporation organized under the laws of the State of Delaware (the “Company”),

at any time or from time to time during the period specified in Section 2

hereof

                 fully

paid and nonassessable shares of the Company’s Series A Convertible Preferred

Stock, par value $.001 per share (the “Series A Preferred Stock”), at an exercise

price per share (the “Exercise Price”) equal to the lower of (i)

$4.42 or (ii) 13 times the average of the closing prices of the Company’s

common stock for a period of twenty (20) trading days ending on the date that

is two trading days prior to but not including the Expiration Date (as defined

below).  The number of shares of Series

A Preferred Stock purchasable hereunder shall be defined herein as “Warrant

Shares.”  The Exercise Price

is subject to adjustment as provided in Section 4 hereof.  The term “Warrants” means this Warrant

and the other warrants of the Company issued pursuant to that certain

Securities Purchase Agreement, dated as of May 12, 2003, by and among the

Company and the other signatories thereto 

(the “Securities Purchase Agreement”).

 

This Warrant

is subject to the following terms, provisions and conditions:

 

 

1.             Manner

of Exercise; Issuance of Certificates; Payment for Shares.  Subject to the provisions hereof, including,

without limitation, the limitations contained in Section 7 hereof, this Warrant

may be exercised by the holder hereof, in whole or in part, by the surrender of

this Warrant, together with a completed exercise agreement in the form attached

hereto (the “Exercise Agreement”),

to the Company during normal business hours on any business day at the

Company’s principal executive offices (or such other office or agency of the

Company as it may designate by written notice to the holder hereof), and upon

payment to the Company in cash, by certified or official bank check or by wire

transfer for the account of the Company, of the Exercise Price for the Warrant

Shares specified in the Exercise Agreement. 

The Warrant Shares so purchased shall be deemed to be issued to the

holder hereof or such holder’s designee, as the record owner of such shares, as

of the close of business on the date on which this Warrant shall have been

surrendered, the completed Exercise Agreement shall have been delivered, and

payment shall have been made for such shares as set forth above or, if such

date is not a business date, on the next succeeding business date.  The Warrant Shares so purchased,

representing the aggregate number of shares specified in the Exercise Agreement,

shall be delivered to the holder hereof within a reasonable time, not exceeding

three (3) business days, after this Warrant shall have been so exercised (the “Delivery Period”).  The Company shall deliver to the holder

physical certificates representing the Warrant Shares so purchased.  Any certificates so delivered shall be in

such denominations as may be reasonably requested by the holder hereof, shall

be registered in the name of such holder or such other name as shall be

designated by such holder and, following the date on which the Warrant Shares

may be sold by the holder pursuant to Rule 144(k) promulgated under the

Securities Act (or a successor rule), shall not bear any restrictive

legend.  If this Warrant shall have been

exercised only in part, then the Company shall, at its expense, at the time of

delivery of such certificates, deliver to the holder a new Warrant representing

the number of shares with respect to which this Warrant shall not then have

been exercised.

 

2.             Period

of Exercise.  This Warrant is

immediately exercisable, at any time or from time to time on or after May 12,

2003 (the “Issue Date”) and before

5:00 p.m., New York City time, on

                    ,

subject to adjustment (as adjusted, the “Expiration

Date”) as provided in Section 1(b) of the Securities Purchase

Agreement and/or Section 2(d) of the Registration Rights Agreement, dated as of

May 12, 2003, by and among the Company and the other signatories thereto (the “Registration Rights Agreement”)  (such period being the “Exercise

Period”).

 

3.             Certain

Agreements of the Company.  The

Company hereby covenants and agrees as follows:

 

(a)           Shares to be Fully Paid.  All Warrant Shares, upon issuance in

accordance with the terms of this Warrant, and the shares of Common Stock

issuable upon conversion of the Warrant Shares, will be validly issued, fully

paid and nonassessable and free from all liens, claims and encumbrances.

 

2

 

(b)           Reservation of Shares.  During the Exercise Period, the Company

shall at all times have authorized, and reserved for the purpose of issuance

upon exercise of this Warrant, a sufficient number of shares of Series A

Preferred Stock to provide for the exercise in full of the shares of Series A

Preferred Stock listed on the face of this Warrant and for the purpose of

issuance upon conversion of the Warrant Shares, a sufficient number of shares

of Common Stock to provide for conversion of all the Warrant Shares.

 

(c)           Certain Actions Prohibited.  The Company will not, by amendment of its

charter or through any reorganization, transfer of assets, consolidation,

merger, dissolution, issue or sale of securities, or any other voluntary

action, avoid or seek to avoid the observance or performance of any of the

terms to be observed or performed by it hereunder, but will at all times in

good faith assist in the carrying out of all the provisions of this Warrant and

in the taking of all such action as may reasonably be requested by the holder

of this Warrant in order to protect the economic benefit inuring to the holder

hereof and the exercise privilege of the holder of this Warrant against

dilution or other impairment, consistent with the tenor and purpose of this

Warrant.  Without limiting the

generality of the foregoing, the Company (i) will not increase the par value of

any shares of Series A Preferred Stock receivable upon the exercise of this

Warrant above the Exercise Price then in effect, and (ii) will take all such

actions as may be necessary or appropriate in order that the Company may

validly and legally issue fully paid and nonassessable shares of Series A

Preferred Stock upon the exercise of this Warrant.

 

(d)           Successors and Assigns.  This Warrant will be binding upon any entity

succeeding to the Company by merger, consolidation, or acquisition of all or

substantially all of the Company’s assets.

 

(e)           ­Blue Sky Laws.  The Company shall, on or before the date of

issuance of any Warrant Shares, take such actions as the Company shall

reasonably determine are necessary to qualify the Warrant Shares for, or obtain

exemption for the Warrant Shares for, sale to the holder of this Warrant upon

the exercise hereof under applicable securities or “blue sky” laws of the

states of the United States, and shall provide evidence of any such action so

taken to the holder of this Warrant prior to such date; provided, however, that

the Company shall not be required in connection therewith or as a condition

thereto to (i) qualify to do business in any jurisdiction where it would not

otherwise be required to qualify but for this Section 3(e), (ii) subject itself

to general taxation in any such jurisdiction or (iii) file a general consent to

service of process in any such jurisdiction.

 

4.             Adjustment

Provisions.  During the Exercise

Period, the Exercise Price hereunder shall be subject to adjustment from time

to time as provided in this Section 4.

 

(a)           Subdivision or Combination of

Series A Preferred Stock.  If the

Company, at any time during the Exercise Period, subdivides (by any stock

split, stock dividend, recapitalization, reorganization, reclassification or

otherwise) its shares of Series A Preferred Stock into a greater number

of shares, then, after the date of record for effecting such subdivision, the

Exercise Price in effect immediately prior to such subdivision will be 

 

3

 

proportionately

reduced.  If the Company, at any time

during the Exercise Period, combines (by reverse stock split, recapitalization,

reorganization, reclassification or otherwise) its shares of Series A

Preferred Stock into a smaller number of shares, then, after the date of

record for effecting such combination, the Exercise Price in effect immediately

prior to such combination will be proportionately increased.

 

(b)           Adjustment in Number of Shares.  Upon each adjustment of the Exercise Price

pursuant to the provisions of Section 4(a), the number of shares of Common

Stock issuable upon exercise of this Warrant at each such Exercise Price shall

be adjusted by multiplying a number equal to the Exercise Price in effect

immediately prior to such adjustment by the number of shares of Common Stock

issuable upon exercise of this Warrant at such Exercise Price immediately prior

to such adjustment and dividing the product so obtained by the adjusted Exercise

Price.

 

(c)           Consolidation, Merger or Sale.  In case of any consolidation of the Company

with, or merger of the Company into, any other corporation, or in case of any

sale or conveyance of all or substantially all of the assets of the Company

other than in connection with a plan of complete liquidation of the Company at

any time during the Exercise Period, then as a condition of such consolidation,

merger or sale or conveyance, adequate provision will be made whereby the

holder hereof will have the right to acquire and receive upon exercise of this

Warrant in lieu of the shares of Series A Preferred Stock immediately

theretofore acquirable upon the exercise of this Warrant, such shares of stock,

securities, cash or assets as may be issued or payable with respect to or in

exchange for the number of shares of Series A Preferred Stock immediately

theretofore acquirable and receivable upon exercise of this Warrant had such

consolidation, merger or sale or conveyance not taken place.  In any such case, the Company will make

appropriate provision to insure that the provisions of this Section 4 hereof

will thereafter be applicable as nearly as may be in relation to any shares of

stock or securities thereafter deliverable upon the exercise of this Warrant.  The Company will not effect any

consolidation, merger or sale or conveyance unless prior to the consummation

thereof, the successor corporation (if other than the Company) assumes by

written instrument the obligations under this Warrant and the obligations to

deliver to the holder hereof such shares of stock, securities or assets as, in

accordance with the foregoing provisions, the holder may be entitled to

acquire.  Notwithstanding the foregoing,

in the event of any consolidation of the Company with, or merger of the Company

into, any other corporation, or the sale or conveyance of all or substantially

all of the assets of the Company, at any time during the Exercise Period, where

the consideration consists solely of cash, the holder hereof shall receive, in

connection with such transaction, cash consideration equal to the fair market

value of this Warrant as determined in accordance with customary valuation

methodology used in the investment banking industry.

 

(d)           Distribution of Assets.  In case the Company shall declare or make

any distribution of its assets (or rights to acquire its assets) to holders of

Series A Preferred Stock as a partial liquidating dividend, stock repurchase by

way of return of capital or otherwise (including any dividend or distribution

to the Company’s stockholders of cash or shares (or rights to acquire 

 

4

 

shares) of

capital stock of a subsidiary) (a “Distribution”),

at any time during the Exercise Period, then the holder hereof shall be entitled

upon exercise of this Warrant for the purchase of any or all of the shares of

Series A Preferred Stock subject hereto, to receive the amount of such assets

(or rights) which would have been payable to the holder had such holder been

the holder of such shares of Series A Preferred Stock on the record date for

the determination of shareholders entitled to such Distribution.  If the Company distributes rights, warrants,

options or any other form of convertible securities and the right to exercise

or convert such securities would expire in accordance with their terms prior to

the expiration of the Exercise Period, then the terms of such securities shall

provide that such exercise or convertibility right shall remain in effect until

thirty (30) days after the date the holder hereof receives such securities

pursuant to the exercise hereof.

 

(e)           Notice of Adjustment.  Upon the occurrence of any event which

requires any adjustment of the Exercise Price, then, and in each such case, the

Company shall give notice thereof to the holder hereof, which notice shall

state the Exercise Price resulting from such adjustment and the increase or

decrease in the number of Warrant Shares purchasable at such price upon

exercise, setting forth in reasonable detail the method of calculation and the

facts upon which such calculation is based. 

Such calculation shall be certified by the chief financial officer of

the Company.

 

(f)            Minimum Adjustment of Exercise

Price.  No adjustment of the

Exercise Price shall be made in an amount of less than $.01, but any such

lesser adjustment shall be carried forward and shall be made at the time and

together with the next subsequent adjustment which, together with any

adjustments so carried forward, shall amount to not less than $.01.

 

(g)           No Fractional Shares.  No fractional shares of Series A Preferred

Stock are to be issued upon the exercise of this Warrant, but the Company shall

pay a cash adjustment in respect of any fractional share which would otherwise

be issuable in an amount equal (i) the same fraction of the Market Price of a

share of Common Stock on the date of such exercise, multiplied by (ii) an

amount equal to (A) $4.42 divided by (B) the Series A Conversion Price (as

defined in the Certificate of Designations of the Preferred Stock of Cambridge

Heart, Inc. to be Designated Series A Convertible Preferred Stock) then in

effect.

 

(h)           Other Notices.  In case at any time:

 

(i)            the Company shall declare any

dividend upon the Series A Preferred Stock payable in shares of stock of any

class or make any other distribution (other than dividends or distributions

payable in cash out of retained earnings consistent with the Company’s past

practices with respect to declaring dividends and making distributions) to the

holders of the Series A Preferred Stock;

 

(ii)           the Company shall offer for

subscription pro rata to the holders of the Series A Preferred Stock any

additional shares of stock of any class or other rights;

 

5

 

(iii)          there shall be any capital

reorganization of the Company, or reclassification of the Series A Preferred

Stock, or consolidation or merger of the Company with or into, or sale of all

or substantially all of its assets to, another corporation or entity; or

 

(iv)          there shall be a voluntary or

involuntary dissolution, liquidation or winding up of the Company; then, in

each such case, the Company shall give to the holder of this Warrant (A) notice

of the date or estimated date on which the books of the Company shall close or

a record shall be taken for determining the holders of Series A Preferred Stock

entitled to receive any such dividend, distribution, or subscription rights or

for determining the holders of Series A Preferred Stock entitled to vote in

respect of any such reorganization, reclassification, consolidation, merger,

sale, dissolution, liquidation or winding-up and (B) in the case of any such

reorganization, reclassification, consolidation, merger, sale, dissolution,

liquidation or winding-up, notice of the date (or, if not then known, a

reasonable estimate thereof by the Company) when the same shall take

place.  Such notice shall also specify

the date on which the holders of Series A Preferred Stock shall be entitled to

receive such dividend, distribution, or subscription rights or to exchange

their Series A Preferred Stock for stock or other securities or property

deliverable upon such reorganization, reclassification, consolidation, merger,

sale, dissolution, liquidation, or winding-up, as the case may be.  Such notice shall be given at least fifteen

(15) days prior to the record date or the date on which the Company’s books are

closed in respect thereto.  Failure to

give any such notice or any defect therein shall not affect the validity of the

proceedings referred to in clauses (i), (ii), (iii) and (iv) above.  Notwithstanding the foregoing, the Company

shall publicly disclose the substance of any notice delivered hereunder prior

to delivery of such notice to the holder hereof.

 

(i)            Certain Events.  If, at any time during the Exercise Period,

any event occurs of the type contemplated by the adjustment provisions of this

Section 4 but not expressly provided for by such provisions, the Company will

give notice of such event as provided in Section 4(e) hereof, and the Company’s

Board of Directors will make an appropriate adjustment in the Exercise Price

and the number of shares of Series A Preferred Stock acquirable upon exercise

of this Warrant at each such Exercise Price so that the rights of the holder

shall be neither enhanced nor diminished by such event.

 

(j)            Definition of Market Price.  “Market

Price,” as of any date, means, with respect to the Common Stock, (i)

the average of the last sales prices for the shares of Common Stock as reported

on the Nasdaq SmallCap Market by Bloomberg Financial Markets (“Bloomberg”) for the ten (10) consecutive

Business Days immediately preceding such date, or (ii) if the Nasdaq SmallCap

Market is not the principal trading market for the shares of Common Stock, the

average of the reported last sales prices reported by Bloomberg on the

principal trading market for the Common Stock during the same period, or (iii)

if the foregoing do not apply, the last sale price of such security in the

over-the-counter market on the pink sheets or bulletin board for such security

as reported by Bloomberg, or if no sale price is so reported for 

 

6

 

such security,

the last bid price of such security as reported by Bloomberg, or (iv) if market

value cannot be calculated as of such date on any of the foregoing bases, the

Market Price shall be the average fair market value as reasonably determined by

an investment banking firm selected by the Company and reasonably acceptable to

the holder, with the costs of the appraisal to be borne by the Company.

 

5.             Issue

Tax.  The issuance of certificates

for Warrant Shares upon the exercise of this Warrant shall be made without

charge to the holder of this Warrant or such shares for any issuance tax or

other costs in respect thereof, provided 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 the holder of

this Warrant.

 

6.             No

Rights or Liabilities as a Stockholder. 

This Warrant shall not entitle the holder hereof to any voting rights or

other rights as a stockholder of the Company. 

No provision of this Warrant, in the absence of affirmative action by

the holder hereof to purchase Warrant Shares, 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 Exercise Price or as a stockholder of the Company,

whether such liability is asserted by the Company or by creditors of the

Company.

 

7.             Transfer,

Exchange, Redemption and Replacement of Warrant.

 

(a)           Restriction on Transfer.  This Warrant and the rights granted to the

holder hereof may not be transferred, in whole or in part, except for (a) any

sale or transfer to another Purchaser, as defined in and listed on Schedule I

to the Securities Purchase Agreement, or (b) any sale or transfer by the holder

hereof to its “affiliate” (as defined in Rule 144 of the Securities Act).  Subject to the foregoing, this Warrant and

the rights granted to the holder hereof are transferable, in whole or in part,

upon surrender of this Warrant, together with a properly executed assignment in

the form attached hereto, at the office or agency of the Company referred to in

Section 7(e) below, provided, however,

that any transfer or assignment shall be subject to the conditions set forth in

Sections 7(f) hereof and to the provisions of Sections 2(f) and 2(g) of the

Securities Purchase Agreement.  Until

due presentment for registration of transfer on the books of the Company, the

Company may treat the registered holder hereof as the owner and holder hereof

for all purposes, and the Company shall not be affected by any notice to the

contrary.  Notwithstanding anything to

the contrary contained herein, the registration rights described in Section 8

hereof are assignable only in accordance with the provisions of the

Registration Rights Agreement.

 

(b)           Warrant Exchangeable for Different

Denominations.  This Warrant is

exchangeable, upon the surrender hereof by the holder hereof at the office or

agency of the Company referred to in Section 7(e) below, for new Warrants of

like tenor of different denominations representing in the aggregate the right

to purchase the number of shares of Series A Preferred Stock which may be

purchased hereunder, each of such new Warrants to represent the right to

purchase such number of shares (at the Exercise Price therefor) as shall be

designated by the holder hereof at the time of such surrender.

 

7

 

(c)           Replacement of Warrant.  Upon receipt of evidence reasonably

satisfactory to the Company of the loss, theft, destruction, or mutilation of

this Warrant and, in the case of any such loss, theft, or destruction, upon

delivery of an indemnity agreement reasonably satisfactory in form and amount

to the Company, or, in the case of any such mutilation, upon surrender and

cancellation of this Warrant, the Company, at its expense, will execute and

deliver, in lieu thereof, a new Warrant of like tenor.

 

(d)           Cancellation; Payment of Expenses.  Upon the surrender of this Warrant in

connection with any transfer, exchange, or replacement as provided in this

Section 7, this Warrant shall be promptly canceled by the Company.  The Company shall pay all taxes (other than

securities transfer taxes) and other expenses (other than legal expenses, if

any, incurred by the Holder or transferees) and charges payable in connection

with the preparation, execution, and delivery of Warrants pursuant to this Section

7.  The Company shall indemnify and

reimburse the holder of this Warrant for all losses and damages arising as a

result of or related to any breach of the terms of this Warrant, including

costs and expenses (including legal fees) incurred by such holder in connection

with the enforcement of its rights hereunder.

 

(e)           Warrant Register.  The Company shall maintain, at its principal

executive offices (or such other office or agency of the Company as it may

designate by notice to the holder hereof), a register for this Warrant, in

which the Company shall record the name and address of the person in whose name

this Warrant has been issued, as well as the name and address of each

transferee and each prior owner of this Warrant.

 

(f)            Transfer or Exchange Without

Registration.  If, at the time of

the surrender of this Warrant in connection with any transfer or exchange of

this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares

issuable hereunder, or in the case of any conversion of the Warrant Shares, the

shares of Common Stock issuable upon such conversion) shall not be registered

under the Securities Act and under applicable state securities or blue sky

laws, the Company may require, as a condition of allowing such transfer or

exchange, (i) that the holder or transferee of this Warrant, as the case may

be, furnish to the Company a written opinion of counsel (which opinion shall be

in form, substance and scope customary for opinions of counsel in comparable

transactions) to the effect that such transfer or exchange may be made without

registration under the Securities Act and under applicable state securities or

blue sky laws, (ii) that the holder or transferee execute and deliver to the

Company an investment letter in form and substance acceptable to the Company

and (iii) that the transferee be an “accredited

investor” as defined in Rule 501(a) promulgated under the Securities

Act; provided that no such

opinion, letter, or status as an “accredited investor” shall be required in

connection with a transfer pursuant to Rule 144 under the Securities Act; and provided further that no such opinion or

letter shall be required in connection with a transfer to an affiliate of a

holder who agrees to sell or otherwise transfer the Warrant (or, in the case of

any exercise, the Warrant Shares issuable hereunder) only in accordance with

the provisions of this Section 7(f) and who is an “accredited investor.”

 

8

 

8.             Registration

Rights.  The initial holder of this

Warrant (and certain assignees thereof) is entitled to the benefit of such

registration rights in respect of the shares of Common Stock issuable upon

conversion of the Warrant Shares as are set forth in the Registration Rights

Agreement, including the right to assign such rights to certain assignees, as

set forth therein.

 

9.             Notices.  Any notices required or permitted to be

given under the terms of this Warrant shall be sent by certified or registered

mail (return receipt requested) or delivered personally or by courier or by

confirmed telecopy, and shall be effective five days after being placed in the

mail, if mailed, or upon receipt or refusal of receipt, if delivered personally

or by courier, or by confirmed telecopy, in each case addressed to a party.  The addresses for such communications shall

be:

 

	

   

  	

  If to the Company:

  
	

   

  	

   

  
	

   

  	

  Cambridge Heart, Inc.

  
	

   

  	

  1 Oak Park Drive

  
	

   

  	

  Bedford, Massachusetts  01730

  
	

   

  	

  Telephone:  (781) 271-1200

  
	

   

  	

  Facsimile:  (781) 275-8431

  
	

   

  	

  Attn.:  President

  
	

   

  	

   

  
	

   

  	

  with a copy simultaneously transmitted by like means to:

  
	

   

  	

   

  
	

   

  	

  Hale and Dorr LLP

  
	

   

  	

  60 State Street

  
	

   

  	

  Boston, Massachusetts  02109

  
	

   

  	

  Telephone:  (617) 526-6000

  
	

   

  	

  Facsimile:  (617) 526-5000

  
	

   

  	

  Attn:  John A. Burgess, Esq.

  

 

If to the holder, at such address as such

holder shall have provided in writing to the Company, or at such other address

as such holder furnishes by notice given in accordance with this Section 9;

 

10.           Governing

Law; Jurisdiction.  This Warrant

shall be governed by and construed in accordance with the laws of the State of

Delaware.  The Company irrevocably

consents to the jurisdiction of the United States federal courts and state

courts located in the State of Delaware in any suit or proceeding based on or

arising under this Warrant and irrevocably agrees that all claims in respect of

such suit or proceeding may be determined in such courts. The Company

irrevocably waives any objection to the laying of venue and the defense of an

inconvenient forum to the maintenance of such suit or proceeding. The Company

further agrees that service of process upon the Company mailed by certified or

registered mail shall be deemed in every 

 

9

 

respect effective service of

process upon the Company in any such suit or proceeding.  Nothing herein shall affect the holder’s

right to serve process in any other manner permitted by law.  The Company agrees that a final

non-appealable judgment in any such suit or proceeding shall be conclusive and

may be enforced in other jurisdictions by suit on such judgment or in any other

lawful manner.

 

11.           Miscellaneous.

 

(a)           Amendments.  This Warrant and any provision hereof may

only be amended by an instrument in writing signed by the Company and the

holder hereof.

 

(b)           Descriptive Headings.  The descriptive headings of the several

Sections of this Warrant are inserted for purposes of reference only, and shall

not affect the meaning or construction of any of the provisions hereof.

 

(c)           Business Day.  For purposes of this Warrant, the term “Business Day”  means any day, other than a Saturday or Sunday or a day on

which banking institutions in the State of New York are authorized or obligated

by law, regulation or executive order to close.

 

10

 

IN WITNESS WHEREOF,

the Company has caused this Warrant to be signed by its duly authorized

officer.

 

 

	

   

  	

  CAMBRIDGE HEART, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Title:

  	

   

  	

   

  

 

11

 

FORM OF EXERCISE

AGREEMENT

 

(To be Executed by

the Holder in order to Exercise the Warrant)

 

	

  To:

  	

   

  	

  Cambridge Heart, Inc.

  
	

   

  	

   

  	

  1 Oak Park Drive

  
	

   

  	

   

  	

  Bedford, Massachusetts  01730

  
	

   

  	

   

  	

  Telephone:  (781) 271-1200

  
	

   

  	

   

  	

  Facsimile:  (781) 275-8431

  
	

   

  	

   

  	

  Attn:  Chief Executive Officer

  

 

The

undersigned hereby irrevocably exercises the right to purchase

                          

shares of the Series A Preferred Stock of Cambridge Heart, Inc., a corporation

organized under the laws of the State of Delaware (the “Company”), evidenced by the

attached Warrant, and herewith makes payment of the Exercise Price with respect

to such shares in full, all in accordance with the conditions and provisions of

said Warrant.

 

The

undersigned agrees not to offer, sell, transfer or otherwise dispose of any

Series A Preferred Stock obtained on exercise of the Warrant, except under

circumstances that will not result in a violation of the Securities Act of

1933, as amended, or any state securities laws.

 

The

undersigned requests that a Warrant representing any unexercised portion hereof

be issued, pursuant to the Warrant, in the name of the Holder and delivered to

the undersigned at the address set forth below:

 

 

	

  Dated:

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Signature of Holder

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  Name of Holder (Print)

  
	

   

  	

  Address:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

12

 

FORM OF ASSIGNMENT

 

FOR VALUE

RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights

of the undersigned under the within Warrant, with respect to the number of

shares of Series A Preferred Stock covered thereby set forth hereinbelow, to:

 

	

  Name of Assignee

  	

   

  	

  Address

  	

   

  	

  No. of Shares

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  

 

, and hereby irrevocably constitutes and

appoints

                                                                      as

agent and attorney-in-fact to transfer said Warrant on the books of the

within-named corporation, with full power of substitution in the premises.

 

 

	

  Dated:

                                         ,      

  	

   

  
	

   

  	

   

  
	

  In the presence of

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	 

	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Signature:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Title of Signing Officer or Agent (if any):

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	 

	

   

  	

   

  	 

	

   

  	

  Address:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Note:

  	

  The above signature should correspond

  exactly with the name on the face of the

  within Warrant.

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