CAMBRIDGE HEART, INC.
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SUBSCRIPTION AGREEMENT
A minimum of 1,428,571 Shares (the "Minimum Offering") and
A maximum of 2,142,857 Shares (the "Maximum Offering")
To: Cambridge Heart, Inc.
0 Xxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxxx, President
Ladies and Gentlemen:
1. Subscription. Cambridge Heart, Inc., a Delaware corporation (the
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"Company"), is offering shares of its common stock, $.001 par value per share
(the "Common Stock") in a private placement (the "Offering"), solely to
"Accredited Investors" (as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933, as amended (the "Act")), pursuant to the Term
Sheet, attached hereto as Exhibit A (the "Term Sheet"). Sunrise Securities
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Corp., a Delaware corporation ("Sunrise"), is acting as placement agent for the
Offering. The undersigned hereby subscribes to purchase in the Offering the
number of shares of Common Stock indicated on the signature page to this
Subscription Agreement (the "Shares") for a purchase price of $3.50 per Share
(the "Share Price"). The undersigned will also receive a warrant in the form
attached hereto as Exhibit B, to purchase a number of shares of Common Stock
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equal to 20% of the number of Shares purchased by it hereunder at an exercise
price equal to $3.50 per share of Common Stock (the "Investor Warrant" and
together with the Shares, the "Securities"). The cost of the Investor Warrant
shall be $0.10 per underlying share, which cost shall be an allocated cost
included in the $3.50 Share Price. The Offering shall, unless extended by
mutual consent of the Company and Sunrise, terminate on October 15, 1999 (the
"Termination Date"). Prior to the acceptance of this Subscription Agreement by
the Company and the occurrence of a Closing (as defined herein) in connection
therewith, the undersigned's execution of this Subscription Agreement will not
constitute an agreement between the undersigned and the Company.
2. Delivery of Funds. On the date hereof, payment of a sum equal to the
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product obtained by multiplying $3.50 by the number of Shares subscribed for
hereunder (the "Purchase Price") is being made by electronic wire transfer in
accordance with the following instructions:
Bank Name: The Chase Manhattan Bank
ABA #: 000000000
Credit: United States Trust Co. of NY
Account #: 000-0-000000
Further Credit: Sunrise/Cambridge Heart, Inc.
Account # 00000000
Attention: Xxxxx Xxxxx
or by delivery of a bank check or certified check made payable to "Cambridge
Heart, Inc. - Escrow Account." All checks should be delivered together with an
executed copy of this Subscription Agreement, to Sunrise, as follows:
Sunrise Securities Corp.
000 Xxxx 00xx Xxxxxx
00xx xxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxxx Xxxxxxx
3. Closings. The initial closing of the Offering (the "Initial Closing")
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shall take place, on or prior to the Termination Date, at the offices of
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 ("RSPAB") on or about the third (3rd) business day
after Sunrise receives notice from the Company that the Company has accepted
subscriptions for a number of Shares equal to or greater than the Minimum
Offering (such date, the "Initial Closing Date"). Subsequent closings of the
Offering (each a "Subsequent Closing") shall take place, subsequent to the
Initial Closing Date and prior to the Termination Date, at the offices of RSPAB
on or about the third (3rd) business day after Sunrise receives notice from the
Company that the Company has accepted additional subscriptions for a number of
Shares up to the Maximum Offering (each such date, an "Additional Closing
Date"). The Initial Closing and any Additional Closing are sometimes
collectively referred to as a "Closing." The Initial Closing Date and any
Additional Closing Date are sometimes collectively referred to as a "Closing
Date."
Promptly after the Initial Closing Date (if this Subscription
Agreement is delivered and accepted after the Initial Closing Date, then after
the Subsequent Closing Date), the Company will deliver to the undersigned
certificates evidencing the Securities to be purchased by the undersigned,
registered in its name. As of the Initial Closing Date (if this Subscription
Agreement is delivered and accepted after the Initial Closing Date, then as of
the Subsequent Closing Date), the undersigned shall be entitled to vote all of
the Shares, to receive dividends, if any, and to obtain all of the rights
otherwise granted to the Company's stockholders. The name of each undersigned
shall be registered on the transfer books of the Company as the record owner of
the Securities purchased. If the Company has not received and accepted
subscriptions for a number of Shares equal to the Minimum Offering on or prior
to the Termination Date, no Securities
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will be sold pursuant to this Subscription Agreement and the Purchase Price paid
by the undersigned will be returned to the undersigned without interest promptly
after the Termination Date.
4. Representations and Warranties of the Company. To induce the
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undersigned to enter into this Agreement and to purchase the Securities, the
Company hereby represents and warrants to the undersigned the following:
(a) Organization, Standing, Etc. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own or lease its
properties and to carry on its business as it is now being conducted. The
Company has the requisite corporate power and authority to issue the Securities
and to perform its obligations under this Subscription Agreement.
(b) Valid Issuance. The Securities, when issued and delivered
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against payment therefor pursuant to terms of this Subscription Agreement, will
be duly authorized, validly issued, fully paid and nonassessable. The shares of
Common Stock issuable upon exercise of the Investor Warrant (the "Investor
Warrant Shares" and together with the Shares, the "Underlying Shares"), when
issued upon exercise of the Investor Warrant, will be duly authorized, validly
issued, fully paid and nonassessable.
(c) Corporate Acts and Proceedings. This Subscription Agreement and
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the Offering have been duly authorized by all necessary corporate action on
behalf the Company. This Subscription Agreement has been duly executed and
delivered by an authorized officer of the Company, is a valid and binding
agreement on the part of the Company and is enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally. All corporate actions
necessary to effect the Offering and authorize, create, issue and deliver the
Securities have been taken by the Company.
(d) Compliance with Applicable Laws and Other Instruments. Neither
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the execution or delivery of, nor the performance of or compliance with this
Subscription Agreement, the issuance of the Securities nor the consummation of
the transactions contemplated hereby will, with or without the giving of notice
or passage of time, result in any material breach of, or constitute a material
default under, or result in the imposition of any material lien or encumbrance
upon any asset or property of the Company pursuant to, any material agreement or
other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Company's Certificate of Incorporation or Bylaws.
(e) Securities Laws. Based in part upon the representations of the
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undersigned in Section 6 hereof, no consent, authorization, approval, permit or
order of or filing with any governmental or regulatory authority is required
under current laws and regulations in connection with the execution and delivery
of this Agreement or the offer, issuance, sale or delivery of the Securities,
other than (i) the filing
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of a Form D pursuant to Regulation D under the Act with the Securities and
Exchange Commission (the "Commission"), (ii) the filing, if required, of any
notice with any state whose laws require such filing, (iii) the qualification
thereof, if required, under other applicable state laws, which qualification has
been or will be effected as a condition of the Offering and (iv) the listing of
the Underlying Shares on the Nasdaq National Market. Under the circumstances
contemplated by this Subscription Agreement, the offer, issuance, sale and
delivery of the Securities will not, under current laws and regulations, require
compliance with the prospectus delivery or registration requirements in the Act.
(f) Capital Stock. The authorized and issued capital stock of the
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Company as of the Initial Closing Date is correctly set forth in the Term Sheet.
There are no outstanding subscriptions, options, warrants, calls, contracts,
demands, commitments, convertible securities or other agreements or arrangements
of any character or nature whatever, other than in connection with the Offering,
pursuant to which the Company is obligated to issue any securities of any kind
representing an ownership interest in the Company. Except as disclosed in the
SEC Filings (as defined herein) and the Term Sheet, neither the offer nor the
issuance or sale of the Securities constitutes an event under any anti-dilution
provisions of any securities issued (or issuable pursuant to outstanding rights,
warrants or options) by the Company or any agreements with respect to the
issuance of securities by the Company, which will either increase the number of
securities issuable pursuant to such provisions or decrease the consideration
per share to be received by the Company pursuant to such provisions. As of the
date hereof, except as disclosed in the SEC Filings, no holder of any securities
of the Company is entitled to any preemptive or similar rights to purchase any
securities of the Company in connection with the Offering.
(g) Investor Package. The Company has furnished to the undersigned
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an investor package (the "Investor Package") consisting, among other things, of
the Company's (i) Form 10-K for the fiscal year ended December 31, 1998, (ii)
1998 Annual Report, (iii) quarterly report on Form 10-Q for the quarter ended
March 31, 1999 and (iv) quarterly report on Form 10-Q for the quarter ended June
30, 1999 (together with any and all other filings effectuated by the Company
with the Commission in 1999, collectively, the "SEC filings") and a copy of the
Term Sheet. The SEC Filings are also available to the undersigned through the
XXXXX Internet web site of the Commission. As of their respective filing dates,
the SEC Filings complied in all material respects with the applicable
requirements of the Exchange Act of 1934, as amended (the "Exchange Act"). The
Investor Package and the SEC Filings do not as of their respective dates contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(h) Representations. The Company certifies that the representations
---------------
set forth herein concerning the Company are true, correct and complete as of the
date hereof, shall be true and accurate as of the date of the acceptance hereof
by the Company and shall survive thereafter (other than representations and
warranties which relate to a specific date, which representations and warranties
shall be true as of such date).
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5. Transfer Restrictions.
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(a) The undersigned realizes that the Underlying Shares are not
registered under the Act or any foreign or state securities laws. The
undersigned agrees that the Underlying Shares will not be sold, offered for
sale, pledged, hypothecated or otherwise transferred (collectively, "Transfer"),
except in compliance with the Act and applicable foreign and state securities
laws. The undersigned understands that he can only Transfer the Underlying
Shares pursuant to registration under the Act or pursuant to an exemption
therefrom. The undersigned understands that Transfer of the Underlying Shares
may require in certain jurisdictions specific approval by the appropriate
governmental agency or commission in such jurisdiction. The undersigned has
been advised that, except as set forth in Section 7 hereof, the Company has no
obligation, and does not intend, to cause the Underlying Shares to be registered
under the Act or the securities law of any other jurisdiction or to comply with
the requirements for any resale exemption under the Act, including but not
limited to, those provided by Rule 144 and Rule 144A promulgated under the Act,
or under the securities law of any other jurisdiction.
(b) To enable the Company to enforce the transfer restrictions
contained in Section 5(a) hereof, the undersigned hereby consents to the placing
of the following legend upon, and stop-transfer orders with the transfer agent
of the Common Stock with respect to, the Underlying Shares:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended or any state securities laws
and neither the securities nor any interest therein may be offered,
sold, transferred, pledged or otherwise disposed of except pursuant to
an effective registration statement under such Act or pursuant to an
available exemption from, or in a transaction not subject to, the
registration requirements of the securities act and in accordance with
applicable state securities laws."
6. Representations and Warranties of the Undersigned. To induce the
-------------------------------------------------
Company to accept the undersigned's subscription, the undersigned hereby
represents and warrants to the Company that:
(a) the undersigned, if an individual, has reached the age of
majority in the jurisdiction in which he resides, is a bona fide resident of the
jurisdiction contained in the address set forth on the signature page of this
Subscription Agreement, is legally competent to execute this Subscription
Agreement, does not intend to change residence to another jurisdiction;
(b) the undersigned, if an entity, is duly authorized to execute this
Subscription Agreement and this Subscription Agreement, when executed and
delivered by the undersigned, will constitute a legal, valid and binding
obligation enforceable against the undersigned in accordance with its terms; and
the execution, delivery and performance of this Subscription Agreement and the
consummation
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of the transactions contemplated hereby have been duly authorized by all
requisite corporate or other necessary action on the part of the undersigned;
(c) the Securities subscribed for hereby are being acquired by the
undersigned for investment purposes only, for the account of the undersigned and
not with the view to any resale or distribution thereof except as permitted
under Section 7 hereof, and the undersigned is not participating, directly or
indirectly, in a distribution of such Securities and will not take, or cause to
be taken, any action that would cause the undersigned to be deemed an
"underwriter" of such Securities as defined in Section 2(11) of the Act;
(d) the undersigned has had access to all materials, books, records,
documents and information relating to the Company which the undersigned has
requested, including the SEC Filings and the Term Sheet and has been able to
verify the accuracy of the information contained therein;
(e) the undersigned acknowledges and understands that investment in
the Securities involves a high degree of risk, including, without limitation,
the risks set forth in the SEC Filings under the captions "Certain Factors That
May Affect Future Operating Results," "Factors Which May Affect Future Results"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations;"
(f) the undersigned acknowledges that the undersigned has been
offered an opportunity to ask questions of, and receive answers from, officers
of the Company concerning all material aspects of the Company and its business
and the Offering, and that any request for such information has been fully
complied with to the extent the Company possesses such information or can
acquire it without unreasonable effort or expense;
(g) the undersigned has such knowledge and experience in financial
and business matters that the undersigned is capable of evaluating the merits
and risks of an investment in the Company and can afford a complete loss of its
investment in the Company;
(h) the undersigned has, in connection with its decision to purchase
the Securities, relied solely upon the SEC Filings and the Term Sheet. The
undersigned has not relied upon any representations or other information
(whether oral or written) from the Company, Sunrise or any of their respective
agents other than as set forth herein and no oral or written representations
have been made or oral or written information furnished to the undersigned or
its advisors, if any, in connection with the offering of the Securities which
were in any way inconsistent with the SEC Filings and the Term Sheet;
(i) the undersigned represents and warrants to and covenants with the
Company that the undersigned has not engaged and will not engage in any sales of
the Underlying Shares, including a short sale covered by the Underlying Shares,
prior to the effectiveness of the Resale Registration Statement (as defined in
Section 7), except to the extent that any such short sale is fully covered by
shares of Common Stock of the Company other than the Underlying Shares;
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(j) the undersigned recognizes that neither the Commission nor any
federal, state or foreign governmental agency has passed upon or endorsed the
merits of the issuance of the Securities or made any finding or determination as
to the fairness of this Offering;
(k) if the undersigned is purchasing the Securities subscribed for
hereby in a representative or fiduciary capacity, the representations and
warranties contained herein shall be deemed to have been made on behalf of the
person or persons for whom such Securities are being purchased;
(l) the undersigned has not entered into any agreement to pay
commissions to any persons with respect to the purchase or sale of the
Securities;
(m) the undersigned acknowledges that, with respect to the sale of
the Securities by the Company to the undersigned, the Company will pay to
Sunrise (i) a commission of 7.0% of the Purchase Price paid by the undersigned,
at the option of Sunrise, in cash or shares of Common Stock valued at the Share
Price less 7% (such shares of Common Stock, the "Sunrise Shares"), (ii) an
expense allowance of 1.15% of the Purchase Price paid by the undersigned and
(iii) five-year warrants to purchase, at an exercise price equal to $4.20, that
number of shares of Common Stock equal to 7% of the number of Shares being
purchased by the undersigned hereunder including any Sunrise Shares (such shares
of Common Stock, the "Sunrise Warrant Shares" and together with the Investor
Warrant Shares, the "Warrant Shares");
(n) all information which the undersigned has provided to the Company
concerning its financial position is true, correct and complete as the date set
forth below, and if there should be any change in such information prior to the
undersigned's acceptance as a security holder of the Company, the undersigned
will immediately provide such information to the Company and will promptly send
confirmation of such information to the Company and Sunrise;
(o) the undersigned is not subscribing for the Securities as a result
of or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting to which the public
was invited;
(p) the undersigned is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the Act. Specifically
the undersigned is (check appropriate item(s)):
[_] (i) a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of the Exchange Act; an
insurance company as defined in Section 2(13) of the Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of
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that Act; a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) of (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000, an employee benefit plan within the meaning of
the Employment Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance company, or
registered investment advisor, or if the employee benefit plan has total assets
in excess of $5,000,000, or if a self-directed plan, with investment decisions
made solely by persons that are Accredited Investors;
[_] (ii) a private business development company as defined in
Section 202(a)(22) of the investment Advisers Act of 1940;
[_] (iii) an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of acquiring
Shares, with total assets in excess of $5,000,000 ;
[_] (iv) a director or executive officer of the Company;
[_] (v) a natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his or her purchase exceeds
$1,000,000;
[_] (vi) a natural person who had an individual income (not
including his or her spouse's income) in excess of $200,000 in 1997 and 1998 or
joint income with his or her spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching such income level in 1999;
[_] (vii) a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring Shares, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii); or
[_] (viii) an entity in which all of the equity owners are Accredited
Investors. (If this alternative is checked, the undersigned must identify each
equity owner and provide statements signed by each demonstrating how each is
qualified as an Accredited Investor.)
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(q) the undersigned certifies that the representations set forth
herein concerning the undersigned are true, correct and complete as of the date
hereof, shall be true and accurate as of the date of the acceptance hereof by
the Company and shall survive thereafter.
(r) the undersigned understands that this subscription may be
accepted or rejected, in whole or in part, either by the Company or Sunrise in
consultation with the Company.
7. Registration of Shares under the Act.
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(a) By accepting this subscription, the Company agrees that it shall
(i) not later than 30 business days after the final Closing Date, file a
registration statement or amend an existing effective registration statement (in
either case, the "Resale Registration Statement") with the Commission to
register under the Act the resale by the undersigned, all other purchasers of
the Securities in the Offering and Sunrise, with respect to the Sunrise Warrant
Shares and the Sunrise Shares issued to it pursuant to Section 6(m)
(collectively, the "Holders"), of (A) the Shares, (B) the Warrant Shares and (C)
the Sunrise Shares (the items in (A)-(C) are sometimes collectively referred to
as the "Registrable Securities"), (ii) use its reasonable best efforts to cause
the Resale Registration Statement to become effective under the Act as promptly
as practicable, (iii) after the Resale Registration Statement is declared
effective under the Act, furnish the undersigned with such number of copies of
the final prospectus included in the Resale Registration Statement (the
"Prospectus") as the Holders may reasonably request to facilitate the resale of
Underlying Shares, and (iv) use its reasonable best efforts to cause such Resale
Registration Statement to remain effective and current until such time as the
undersigned becomes eligible to resell the Underlying Shares pursuant to Rule
144(k) promulgated under the Act.
(b) The Company will (i) prepare and file with the Commission such
amendments and Prospectus supplements, including post-effective amendments to
the Resale Registration Statement, as may be necessary or appropriate, and use
its reasonable best efforts to have such post-effective amendments declared
effective as promptly as practicable, (ii) cause the Prospectus to be
supplemented by any Prospectus supplement, and as so supplemented, to be filed
with the Commission, and (iii) promptly notify the Holders when a Prospectus and
any Prospectus supplement or post-effective amendment must be filed or has been
filed and, with respect to any post-effective amendment, when the same has
become effective.
(c) In connection with the Resale Registration Statement, the
undersigned shall furnish the Company such information relating to the
undersigned's ownership of Securities as the Company shall reasonably request.
(d) In connection with the Resale Registration Statement, the Company
shall cause the Underlying Shares to be registered or qualified for sale under
the securities or "blue sky" laws of such jurisdictions as the holders of at
least a majority of all such registered Underlying Shares and/or as Sunrise may
reasonably request, provided, that the Company shall not be required in
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connection therewith to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified other than as to matters
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and transactions related to the Prospectus, the Resale Registration Statement,
any preliminary prospectus or the offering or sale of the Underlying Shares, in
any jurisdiction in which it is not now so subject.
(e) The Company shall notify the Holders, at any time when a
prospectus relating to any such Registrable Securities covered by the Resale
Registration Statement is required to be delivered under the Act, of the
Company's becoming aware that the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and, subject to the provisions of Section 7(f) below, promptly
prepare and furnish to the Holders a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(f) For a period not exceeding either (i) ten (10) consecutive
trading days in any twelve (12) month period or (ii) an aggregate of twenty
(20) trading days in any twelve (12) month period (each, a "Delay Period"), the
Company may delay the filing with the Commission, pursuant to Section 7(e)
hereof, of an amendment or supplement to a prospectus containing material non-
public information concerning the Company, the disclosure of which, at such
time, would, in the good faith opinion of the Board of Directors of the Company,
materially interfere with any material financing, corporate reorganization or
other material transaction involving the Company (a "Permitted Delay"),
provided, that, upon the occurrence of each Permitted Delay, the Company shall
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promptly (a) notify each Holder in writing of the existence of (but in no event,
without the prior written consent of such Holder, shall the Company disclose to
such Holder any of the facts or circumstances regarding) material non-public
information giving rise to a Permitted Delay, (b) advise each Holder in writing
to cease all sales of Registrable Securities under the Resale Registration
Statement until the end of the Permitted Delay, and (c) take any and all actions
necessary to enable each Holder to resume sales of the Registrable Securities
under the Resale Registration Statement immediately upon the end of the
applicable Delay Period.
(g) The Company shall pay all Registration Expenses (as defined
below) incurred in connection with a registration of Registrable Securities,
whether or not such registration statement shall become effective, provided,
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that the Holders shall pay all commissions and transfer taxes, and its own
counsel and accounting fees, if any, relating to the sale or disposition of its
Registrable Securities pursuant to a registration statement. As used herein,
"Registration Expenses" means any and all reasonable and customary expenses
incident to performance of or compliance with the registration rights set forth
herein, including, without limitation, (i) all SEC and stock exchange filing
fees, (ii) all fees and expenses of complying with state securities or blue sky
laws, (iii) all printing, messenger and delivery expenses, and (iv) the fees and
disbursements of counsel for the Company and the Company's independent public
accountants.
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(h) The Company acknowledges that there is no adequate remedy at law
for failure by it to comply with the provisions of this Paragraph 6 and that
such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Paragraph 6 may be specifically
enforced. In the event that the Company shall fail to file the Resale
Registration Statement when required pursuant to Paragraph 6(a) above or to keep
such Resale Registration Statement effective as provided in this Paragraph or
otherwise fails to comply with its obligations and agreements in this Paragraph
6, then, in addition to any other rights or remedies Sellers may have at law or
in equity, including without limitation, the right of rescission, the Company
shall indemnify and hold harmless the Holders from and against any and all
manner or loss which they may incur as a result of such failure. In addition,
the Company shall also reimburse the Holders for any and all reasonable legal
fees and expenses incurred by them in enforcing their rights pursuant to this
Paragraph 6, regardless of whether any litigation was commenced, provided, that
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the Company shall not be liable for the fees and expenses of more than one law
firm, which firm shall be designated by Sunrise and shall be reasonably
acceptable to the Company.
(i) In the event that the Company shall fail to cause the Resale
Registration Statement to be declared effective within 90 days after the final
Closing Date (the "Record Date"), the Company shall pay to the holders of the
Shares, as liquidated damages (and not as a penalty) therefor, on the Record
Date and each monthly anniversary thereof until the Resale Registration
Statement is declared effective, a cash payment equal to (i) 1% of the product
obtained by multiplying the Share Price and the Shares held by such holder for
each 30 days or part thereof that effectiveness is delayed beyond the Record
Date and up to and including the 150th day after the final Closing Date and (ii)
2% of the product obtained by multiplying the Share Price and the Shares held
by such holder for each 30 days or part thereof that effectiveness is delayed
beyond 150 days after the final Closing Date. If the Company fails to pay any
cash payment due hereunder in full pursuant to this Section, the Company will
pay interest thereon at a rate of 15% per annum or such lesser maximum amount
that is permitted to be paid by applicable law, accruing daily from the date due
until such amount, plus all such interest thereon, is paid in full.
(j) In the event that the Company shall fail to cause the Resale
Registration Statement to be declared effective on or prior to the Record Date,
the Company shall pay to the holders of the Sunrise Shares, as liquidated
damages (and not as a penalty) therefor, on the Record Date and each monthly
anniversary thereof until the Resale Registration Statement is declared
effective, a cash payment equal to (i) 1% of the product obtained by
multiplying 3.26 and the Sunrise Shares held by such holder for each 30 days or
part thereof that effectiveness is delayed beyond the Record Date and up to and
including the 150th day after the final Closing Date and (ii) 2% of the product
obtained by multiplying 3.26 and the Sunrise Shares held by such holder for
each 30 days or part thereof that effectiveness is delayed beyond 150 days after
the final Closing Date. If the Company fails to pay any cash payment due
hereunder in full pursuant to this Section, the Company will pay interest
thereon at a rate of 15% per annum or such lesser maximum amount that is
permitted to be paid by applicable law, accruing daily from the date due until
such amount, plus all such interest thereon, is paid in full.
8. Indemnification.
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(a) The undersigned understands the meaning and legal consequences of
the representations and warranties made by the undersigned in this Subscription
Agreement, and agrees to indemnify and hold harmless the Company and each of the
Company's directors, officers, stockholders, employees, counsel, agents,
successors and assignees from and against any and all loss, damage, liability or
expenses (including, without limitation, attorneys' fees), as and when incurred,
due to or arising out of (in such case in whole or in part) any breach of any
representation or warranty made by the undersigned set forth herein or in any
other agreement or other document furnished by the undersigned to any of the
foregoing in connection with the Offering, any failure by the undersigned to
fulfill any of its covenants or agreements set forth herein, or arising out of
the resale or distribution by the undersigned of the Underlying Shares or any
portion thereof in violation of the Act or any applicable foreign or state
securities or "blue sky" law.
(b) The Company understands the meaning and legal consequences of the
representations and warranties made by it in this Subscription Agreement, and
agrees to indemnify and hold harmless the undersigned and each of the
undersigned's directors, officers, stockholders, employees, counsel, agents,
successors and assigns from and against any and all loss, damage, liability or
expense (including, without imitation, attorneys' fees), as and when incurred,
due to or arising out of (in each case in whole or in part) any breach of any
representation or warranty made by the Company set forth herein, or any failure
by the Company to fulfill any of its covenants or agreements set forth herein.
(c) To the maximum extent permitted by law, the Company will
indemnify and hold harmless each Holder, the directors, if any, of such Holder,
the officers, if any, of such Holder, and each person, if any, who controls such
Holder within the meaning of the Act or the Exchange Act, against any losses,
claims, damages, expenses or liabilities to which any of them may become
subject, under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
of the following statements, omissions or violation (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in the Resale Registration Statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or (iii) any violation or alleged violation by the Company of the Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Act, the Exchange Act or any state securities law; and the Company
will reimburse the Holders and each such controlling person, promptly as such
expenses are incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding.
(d) To the maximum extent permitted by law, each Holder, severally
and not jointly, will indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 8(c), the Company, each of its directors and
officers who have signed the Resale Registration Statement, and each person, if
any, who controls the Company within the meaning of the Act or the Exchange Act,
against any
-12-
losses, claims, damages or liabilities to which any of them may become subject,
under the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened in respect thereof) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with the Resale Registration Statement;
and such Holder will reimburse such persons for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action.
(e) With respect to the indemnification set forth in Sections 7(c) or
(d) above, 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 said Sections 7(c) or (d) to the extent permitted by law; provided that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in said
Sections 7(c) or (d),(ii) no party guilty of fraudulent misrepresentation
(within the meaning of Section 11 of the Act) shall be entitled to contribution
from any party who was not guilty of such fraudulent misrepresentation, and
(iii) contribution from any Holder shall be limited in amount to the net amount
of proceeds received by such Holder from the sale of Shares under the Resale
Registration Statement.
9. Certain Adjustments. During the period from the date hereof until the
-------------------
earlier to occur of (i) one (1) year from the date the Resale Registration
Statement is declared effective and (ii) the date by which the Company will have
consummated, in one or more transactions, sales of shares of Common Stock (in
addition to all shares of Common Stock sold pursuant to the Offering), resulting
in net proceeds to the Company in amount equal to or in excess of $4,000,000, if
the Company shall, in any capital raising transaction, issue shares of Common
Stock or rights, warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock ("Common Stock
Equivalents"), entitling any person or entity to acquire shares of Common Stock
at a price per share less than the Share Price (such lesser price, the "Discount
Price") (if the holder of the Common Stock or Common Stock Equivalent so issued
shall, at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights issued in connection with such issuance at a
price less than the Share Price, such issuance shall be deemed to have occurred
for less than such Share Price), then, within three (3) days of such issuance or
sale, the Company shall issue to the undersigned a number of shares of Common
Stock equal to the difference between (A) the quotient obtained by dividing (i)
the Purchase Price by (ii) the Discount Price and (B) the Shares. Any shares of
Common Stock issued pursuant to this Section shall be entitled to identical
registration rights granted by the Company pursuant to Section 7 hereof and
shall be included within the definition of "Registrable Securities."
10. Further Documents. The undersigned agrees that it will execute such
-----------------
other documents as may be necessary in connection with the transactions
contemplated hereby.
-13-
11. Modification. Neither this Subscription Agreement nor any provisions
------------
hereof shall be waived, modified, discharged or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge or termination is sought.
12. Notices. Any notice or other communication required or permitted to
-------
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service and delivered against receipt to the
party to whom it is to be given, (i) if to the Company, at the address set forth
on the first page hereof, with a copy to Xxxxxx Xxxxxxxx, Esq. at Xxxx and Xxxx
XXX, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000, (ii) if to the undersigned, at its
address set forth on the signature page hereto, or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 12. Notice to the estate of any party shall be
sufficient if addressed to the party as provided in Section 12. Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 12 shall be deemed given at the time of receipt
thereof.
13. Counterparts. This Subscription Agreement may be executed through the
------------
execution of separate signature pages or in any number of counterparts, and each
such counterpart shall, for all purposes, constitute one agreement binding on
all parties, notwithstanding that all parties are not signatories to the same
counterpart.
14. Entire Agreement. This Subscription Agreement contains the entire
----------------
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants or other agreements except as stated or referred
to herein.
15. Severability. Each provision of this Subscription Agreements is
------------
intended to be severable from every other provision, and the invalidity or
illegality of any portion hereof shall not affect the validity or legality of
the remainder hereof.
16. Assignability. This Subscription Agreement is not transferable or
-------------
assignable by the undersigned.
17. Applicable Law. This Subscription Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of Delaware, without giving
effect to conflict of laws.
18. Choice of Jurisdiction. Any action or proceeding arising directly,
----------------------
indirectly or otherwise, in connection with, out of or from this Subscription
Agreement, any breach hereof or any transaction covered hereby shall be resolved
within New York, New York. Accordingly, the parties consent and submit to the
jurisdiction of the United States federal and state courts located within New
York, New York.
-14-
19. Taxpayer Identification Number. The undersigned verifies under
------------------------------
penalties of perjury that any Taxpayer Identification Number or Social Security
Number shown on the signature page hereto is true, correct and complete.
20. Pronouns. Any personal pronoun shall be considered to mean the
--------
corresponding masculine, feminine or neuter personal pronoun, as the context
requires.
21. No Representations and Warranties by Sunrise. The undersigned and the
---------------------------------------------
Company agree and acknowledge that Sunrise is not making any representations or
warranties on behalf of any of the parties hereto.
-15-
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this __ day of ____________ 1999.
Amount of Shares Purchased: __________________
INDIVIDUAL SUBSCRIBER: ENTITY SUBSCRIBER:
______________________________________ ____________________________________
(Signature of Subscriber) (Print Name of Subscriber)
______________________________________ By:____________________________________
(Typed or Printed Name) Name:__________________________________
Title:_________________________________
______________________________________ _______________________________________
(Residence Address) (Address)
______________________________________ _______________________________________
(City, State and Zip Code) (City, State and Zip Code)
______________________________________ _______________________________________
(Telephone Number) (Telephone Number)
______________________________________ _______________________________________
(Telecopier Number) (Telecopier Number)
______________________________________ _______________________________________
(Tax I.D. or Social Security Number) (Tax I.D. or Social Security Number)
ACCEPTED:
CAMBRIDGE HEART, INC. For entities desiring that certificates
for Shares be delivered to an address
By:_______________________________ other than that set forth above, set
Name:_____________________________ for the delivery address:
Title:____________________________
Dated:____________________________ _______________________________________
(Address)
_______________________________________
(City, State and Zip Code)
-16-
Exhibit A
---------
Cambridge Heart, Inc.
August 1999 Private Placement
Second Amended Term Sheet
October 5, 1999
Private placement This offering (the "Offering") is being made
exclusively to institutions and high-net worth
individuals that meet the definition of "Accredited
Investor" as set forth in Rule 501(a) of Regulation
D under the Securities Act of 1933, as amended (the
"Act").
Amount of financing $5,000,000 to $7,500,000.
-17-
Securities offered 1,428,571 to 2,142,857 shares (the "Shares") of
common stock, $.001 par value (the "Common Stock"),
of Cambridge Heart, Inc. (the "Company").
Each investor will also receive, a warrant to
purchase, for a period of five years from the
issuance date thereof, a number of shares of Common
Stock equal to 20% of the number of Shares purchased
by it in the Offering at an exercise price equal to
$3.50 per share of Common Stock (collectively, the
"Investor Warrants"). The cost of the Investor
Warrant shall be $0.10 per underlying share, which
cost shall be an allocated cost included in the $3.50
Sales Price described below. The Investor Warrants
shall contain customary anti-dilution provisions.
During the period from the applicable closing until
the earlier to occur of (i) one (1) year from the
date the Registration Statement (as defined herein)
is declared effective and (ii) the date by which the
Company will have consummated, in one or more
transactions, sales of shares of Common Stock (in
addition to all shares of Common Stock sold pursuant
to the Offering), resulting in net proceeds to the
Company in amount equal to or in excess of
$4,000,000, if the Company shall, in any capital-
raising transaction, issue or sell securities at a
price less than the Sales Price (the "Discount
Price"), then the investors shall be entitled to a
number of receive additional shares of Common Stock
equal to the difference between (A) the quotient
obtained by dividing (i) the purchase price paid by
the investors by (ii) the Discount Price and (B) the
Shares sold in the Offering.
Price per Share $3.50 (the "Sales Price").
Pre-Offering - Shares of 11,866,258 shares of Common Stock.
Common Stock outstanding
Pre-Offering - Warrants 1,381,500 shares of Common Stock underlying stock
and Options outstanding options.
120,238 shares of Common Stock underlying warrants.
Escrow Prior to closing, funds shall remain in a non-
interest bearing escrow account at US Trust Company.
Risk factors Investment in the Shares involves a high degree of
risk including, but not limited to, those risks set
forth in the Company's Quarterly Report on Form 10-Q
for the quarterly
-18-
period ended June 30, 1999. The Shares have not been
registered under the Act or any foreign or state
securities laws. The Shares may not be sold until
registered under the Act in accordance with the
registration rights described below or pursuant to an
exemption from registration. Accordingly, the Shares
will be restricted securities which an investor may
be required to hold for an indeterminable period of
time.
Placement agent Sunrise Securities Corp. ("Sunrise") is acting as
exclusive placement agent. Sunrise shall be paid a
commission of 7% of the gross sales price of the
Shares sold. Sunrise may elect to receive all or any
part of its commission in shares of Common Stock (the
"Commission Shares") valued at the Sales Price less
the 7% commission mentioned above (the "Sunrise
Price"). In addition, Sunrise shall be issued
warrants to purchase a number of shares of Common
Stock equal to 7% of the Shares sold inclusive of any
Commission Shares (the "Sunrise Warrants" and
together with the Investor Warrants, the "Warrants").
The term of the Sunrise Warrants is five years from
the issuance thereof and the exercise price per share
is $4.20. Employees of the Placement Agent who are
"Accredited Investors" may purchase Shares for their
own personal account on the same terms and conditions
as other investors in the Offering. Any such
purchases shall count towards the minimum and maximum
offerings, respectively.
Expenses Sunrise shall also receive an expense allowance of
1.15% of the gross sales price of the Shares sold to
cover expenses incurred by Sunrise in connection with
the Offering.
Registration rights The Company shall, at its expense, (i) not later than
30 business days after the final closing of the
Offering (the "Filing Deadline") file a registration
statement (the "Registration Statement") with the
Securities and Exchange Commission ("Commission") to
register under the Act the resale of the Shares and
shares of Common Stock underlying the Warrants and
Commission Shares, if any (collectively, "Registrable
Shares"), by the holders thereof, (ii) use its
reasonable best efforts to cause the Registration
Statement to become effective under the Act as
promptly as practicable after the filing thereof,
(iii) after the Registration Statement is declared
effective under the Act, furnish subscribers with
such number of copies of the prospectus included in
the Registration Statement as the holders may
reasonably request to facilitate the resale of the
Registrable Shares, and (iv) use its reasonable best
efforts to cause such
-19-
Registration Statement to remain effective, subject
to customary black-out periods, until such time as
the subscribers become eligible to resell the
Registrable Shares pursuant to Rule 144(k) under the
Act. In the event that the Company shall fail to
cause the Registration Statement to be declared
effective within 90 days after the final closing of
the Offering, the Company shall pay to the holders of
the Shares and Commission Shares, as compensation
therefor, a cash payment equal to (i) 1% of the
product obtained by multiplying (A) in the case of
the Shares, the Sales Price and the Shares held by
such holder, or (B) in the case of the Commission
Shares, the Sunrise Price and the Commission Shares
held by such holder, in both cases, for each 30 days
or part thereof that effectiveness is delayed beyond
90 days after the final closing of the Offering and
up to 150 days after the final closing of the
Offering and (ii) 2% of the product obtained by
multiplying (A) in the case of the Shares, the Sales
Price and the Shares held by such holder, or (B) in
the case of the Commission Shares, the Sunrise Price
and the Commission Shares held by such holder, in
both cases, for each 30 days or part thereof
effectiveness is delayed beyond 150 days after the
final closing of the Offering.
Lock-up For a period of 270 days following the final closing
of Offering, the Company shall not sell or offer to
sell any of its securities, except pursuant to the
Company's stock option plan, without the written
consent of Sunrise, which consent shall not be
unreasonably withheld. All of the Company's officers
and directors shall agree to not sell or transfer
their shares of Common Stock for a period of 180 days
following the final closing of the Offering, subject
to an earlier release for any former director who is
no longer an affiliate of the Company.
Rights of certain Pursuant to the terms of a previous sale of the
previous investors Company's securities to a group of investors led by
the Tail Wind Fund (the "Previous Investors"), upon a
consummation of the minimum Offering hereunder, the
Previous Investors shall be entitled to (i) receive
an aggregate of 512,221 shares of Common Stock, (ii)
a repricing of the exercise price of certain warrants
issued to the Previous Investors and (iii) the
extension for a period of six months of the term of
certain anti-dilution rights granted to the Previous
Investors.
Issues relating to a The Company recently discovered the existence of U.S.
Company Patent Patent No. 5,921,940 issued by the Patent and
Trademark Office on July 13, 1999 and assigned to
Georgetown University (the
-20-
"940 Patent"). The 940 Patent includes claims which
are similar or identical to claims of the Company's
U.S. Patent No. 5,570,696. The Company has received
an opinion of its patent counsel, Fish & Xxxxxxxxxx,
PC, that the 940 Patent is invalid and should not
have been issued by the Patent and Trademark Office.
Closings The first closing will occur following the completion
of financing for $5,000,000 and one or more closings
may occur on identical terms until the earlier of the
completion of financing for an aggregate of
$7,500,000 or the Termination Date. The Placement
Agent reserves the right to reject or reduce any
subscription for the purchase of Shares in order to
ensure compliance with the limitation on the issuance
of securities at a price below the market value of
the stock to 20% of the outstanding stock pursuant to
Rule 4460(i)(1) of the Nasdaq Stock Market.
Termination of Offering The Offering will terminate on October 15, 1999
unless extended by mutual agreement of the Company
and Sunrise (the "Termination Date"). On the
Termination Date, any funds remaining in escrow that
have not been closed upon shall be promptly returned
to subscribers, without interest thereon.
-21-
Exhibit B
---------
Warrant No. ____
Warrant to Purchase ______ Shares
COMMON STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock (par value $0.001 per share)
of
CAMBRIDGE HEART, INC.
(Delaware corporation)
Expires October __, 2004
-22-
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
VOID AFTER 8:00 P.M. NEW YORK TIME, ON OCTOBER [ ], 2004
CAMBRIDGE HEART, INC.
Warrant to Purchase Shares of Common Stock
THIS CERTIFIES that, for good and valuable consideration received, [ ]
(the "Holder"), is entitled to subscribe for and purchase from CAMBRIDGE HEART,
------
INC., a Delaware corporation (the "Company"), upon the terms and conditions set
-------
forth herein, at any time or from time to time after October __, 1999, until
5:00 P.M. New York City time on October __, 2004 (the "Expiration Date"), all or
---------------
any portion of [ ] shares (the "Warrant Shares") of common stock of the Company,
--------------
par value $0.001 per share (the "Common Stock"), subject to adjustment as
provided herein, at a price of $3.50 per share, subject to adjustment as
provided herein (the "Exercise Price"). This Warrant shall not be redeemable by
--------------
the Company. This Warrant may be sold, transferred, assigned or hypothecated
at any time and the term the "Holder" as used herein shall include any
------
transferee to whom this Warrant has been transferred.
1. Registration of Warrant. The Company shall register this Warrant,
-----------------------
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
---------------------------------------
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Section 3(b). Upon any such registration
or transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion
of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if
any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance of such
transferee of all of the rights and obligations of a holder of a Warrant.
-23-
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
---------------------------------
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 8:00 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 8:00 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 9 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 14
and upon payment of the Exercise Price multiplied by the number of Warrant
Shares that the Holder intends to purchase hereunder, in the manner provided
hereunder, all as specified by the Holder in the Form of Election to Purchase,
the Company shall promptly (but in no event later than three (3) business days
after the Date of Exercise (as defined herein)) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become holder of record of such Warrant
Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
4. Reservation of Shares. The Company covenants that it will at all
---------------------
times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 5). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable
5. Certain Exercise Price Adjustments. Subject to the provisions of
----------------------------------
this Section 5, the Exercise Price in effect from time to time shall be subject
to adjustment, as follows:
-24-
(a) In case the Company shall at any time after the date hereof
(i) declare a dividend or make a distribution on the outstanding shares of
Common Stock payable in shares of its capital stock or securities convertible
into or exchangeable for capital stock, (ii) subdivide the outstanding shares of
Common Stock into a smaller number of shares, (iii) combine the outstanding
shares of Common Stock into a larger number of shares, or (iv) issue any shares
by reclassification of the shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value),
then, in each case, the Exercise Price in effect, and the number of Warrant
----
Shares issuable hereunder at the time of the record date for such dividend or at
the effective date of such subdivision, combination or reclassification, shall
be proportionately adjusted so that the Holder, after such time, shall be
entitled to receive upon exercise of this Warrant the aggregate number and kind
of shares which, if this Warrant had been exercised immediately prior to such
time, the Holder would have owned upon such exercise and immediately thereafter
been entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall distribute to all holders of
shares of Common Stock (including any such distribution made to the stockholders
of the Company in connection with a consolidation or merger in which the Company
is the surviving or continuing corporation) evidences of its indebtedness, cash,
or assets (other than distributions and dividends payable as contemplated by
Section 5(a) above), or rights, options, or warrants to subscribe for or
purchase shares of Common Stock or securities convertible into or exchangeable
for shares of Common Stock, then, in each case, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such
distribution by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 5(e) hereof) per share of Common Stock
on such record date, less the fair market value (as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or assets
so to be distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one share,
and the denominator of which shall be such Current Market Price per share of
Common Stock. Such adjustment shall become effective at the close of business on
such record date.
(c) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable hereunder and the exercise price thereof after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or other shares of the Company upon the exercise of this
Warrant. If any fraction of a share would be issuable upon the exercise of this
Warrant (or specified portions thereof), the Company may issue a whole share in
lieu of such fraction or the Company may purchase such fraction for an amount in
cash equal to the same fraction of the Current Market Price of such shares of
Common Stock on the date of exercise of this Warrant.
-25-
(e) The Current Market Price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices for the five
(5) consecutive trading days immediately preceding the date in question. The
closing price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or a similar organization
if NASDAQ is no longer reporting such information. If on any such date the
Common Stock is not listed or admitted to trading on any national securities
exchange and is not quoted by NASDAQ or any similar organization, the fair value
of a share of Common Stock on such date, as determined in good faith by the
Board of Directors of the Company, whose determination shall be conclusive
absent manifest error, shall be used.
(f) No adjustment in the Exercise Price shall be required if
such adjustment is less than $0.01, provided, that any adjustments which by
--------
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest thousandth of a
share, as the case may be.
(g) Upon each adjustment of the Exercise Price as a result of
the calculations made in this Section 5, this Warrant shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares of
Common Stock (calculated to the nearest hundredth) obtained by dividing (i) the
product obtained by multiplying (A) the number of shares of Common Stock
purchasable upon exercise of this Warrant prior to adjustment of the Exercise
Price by (B) the Exercise Price in effect prior to adjustment of the Exercise
Price by (ii) the Exercise Price in effect after such adjustment of the Exercise
Price.
6. Consolidations and Mergers. In case of any (1) merger or
--------------------------
consolidation of the Company with or into another person, or (2) sale by the
Company of more than one-half of the assets of the Company (on a book value
basis) in one or a series of related transactions, or (3) tender or other offer
or exchange (whether by the Company or another person) pursuant to which holders
of Common Stock are permitted to tender or exchange their shares for other
securities, stock, cash or property of the Company or another person; then the
Holder shall have the right thereafter to (A) exercise this Warrant for the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such merger,
consolidation or sale, and the Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property
as the Common Stock for which this Warrant could have been exercised immediately
prior to such merger, consolidation or sales would have been entitled, (B) in
the case of a merger or consolidation, (x) require the surviving entity to issue
to the Holder a warrant entitling the Holder to acquire shares of such entity's
common stock, which warrant shall have terms identical (including with respect
to exercise) to the terms of this Warrant and shall be entitled to all of the
rights and privileges set forth herein and the agreements pursuant to which this
Warrant was issued (including, without limitation, as such rights relate to the
acquisition, transferability, registration and listing of such shares of stock
other securities issuable upon exercise thereof), or (C) in the event of an
exchange or tender offer or other transaction contemplated by clause (3) of this
Section, tender or exchange this Warrant for such securities, stock, cash and
other property receivable upon or deemed to be held by holders of Common Stock
that have tendered or exchanged their shares of Common Stock following such
tender or exchange, and the Holder shall be entitled upon such exchange or
tender to receive such amount of securities, cash and property as the shares
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of Common Stock for which this Warrant could have been exercised immediately
prior to such tender or exchange would have been entitled as would have been
issued. In the case of clause (B), the exercise price applicable for the newly
issued warrant shall be based upon the amount of securities, cash and property
that each shares of Common Stock would receive in such transaction and the
Exercise Price immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale, consolidation, tender or
exchange shall include such terms so as continue to give the Holder the right to
receive the securities, cash and property set forth in this Section upon any
conversion or redemption following such event. This provision shall similarly
apply to successive such events.
7. Notice of Certain Events. In case at any time any of the
------------------------
following occur:
(a) The Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its shares of
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) The Company shall take any action to effect any
reclassification or change of outstanding shares of Common Stock or any
consolidation, merger, sale, lease or conveyance of property, described in
Section 6; or
(d) The Company shall take any action to effect any liquidation,
dissolution or winding-up of the Company or a sale of all or substantially all
of its property, assets and business;
then, and in any one or more of such cases, the Company shall give written
----
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) days prior to (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants or other securities are to be determined, (ii)
the date on which any such offer to holders of shares of Common Stock is made,
or (iii) the date on which any such reclassification, change of outstanding
shares of Common Stock, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution or winding-up is expected to become effective
and the date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange their shares for securities or other
property, if any, deliverable upon such reclassification, change of outstanding
shares, consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up. Nothing herein shall allow a Holder to delay or
prevent any of the foregoing actions.
8. Registration Rights. The Warrant Shares issuable upon the
-------------------
exercise of this Warrant shall be entitled to the identical registration rights
granted to investors in the Company's August 1999 Private Placement pursuant to
Section 7 of each of those certain Subscription Agreement, accepted by the
Company on the date hereof, between the Company and such investors (the
"Subscription Agreement"). The Warrant Shares shall be included within the
definition of "Registrable Securities" under the Subscription Agreement and the
Holder be included within the definition of "Holder" under the Subscription
Agreement.
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9. Payment of Exercise Price. The Holder shall pay the Exercise
-------------------------
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately
-------------
available funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant
-----------------
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Taxes. The issuance of any shares or other securities upon the
-----
exercise of this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to the
Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder (except for any tax that is payable in respect of
any such transfer and any related exercise of this Warrant and that would be
payable pursuant to the first sentence of this Section 10 were such certificate
to be issued in the name of the Holder).
11. Legend. In the event that either a registration statement
------
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder is not then effective or the Warrant Shares are not
freely transferable without volume restrictions pursuant to Rule 144(k)
promulgated under the Act, the certificate or certificates evidencing the
Warrant Shares, shall bear the following legend:
"The securities represented hereby have not
been registered under the Securities Act of 1933,
as amended or any state securities laws and
neither the securities nor any interest therein
may be offered, sold, transferred, pledged or
otherwise disposed of except pursuant to an
effective registration statement under such Act or
pursuant to an available exemption from, or in a
transaction not subject to,
-28-
the registration requirements of the securities
act and in accordance with applicable state
securities laws."
12. Replacement of Warrants. Upon receipt of evidence satisfactory
-----------------------
to the Company of the loss, theft, destruction or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses and execution of a reasonable lost
security indemnification agreement, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor and denomination.
13. No Rights as Stockholder. The Holder of any Warrant shall not
------------------------
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Warrant.
14. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of this Warrant, to the address
of such Holder as it shall appear in the Warrant Register; or
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may designate by
notice to the Holder.
15. Successors. All the covenants, agreements, representations and
----------
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
16. Headings. The Article and Section headings in this Warrant are
--------
inserted for purposes of convenience only and shall have no substantive effect.
17. Governing Law. This Warrant shall be construed in accordance
-------------
with the laws of the State of Delaware, without regard to principles of
conflicts of law.
18. Modification of Agreement. This Warrant shall not otherwise be
-------------------------
modified, supplemented or amended in any respect unless such modification,
supplement or amendment is in writing and signed by the Company and the Holder
of this Warrant and Holders of any portion of the Warrant subsequently assigned
or transferred in accordance with the terms of this Warrant.
19. Consent to Jurisdiction. The Company and the Holder irrevocably
-----------------------
consent to the non-exclusive jurisdiction of the courts of the State of New York
and of any federal court located in such State in connection with any action or
proceeding arising out of or relating to this Warrant, any document or
instrument delivered pursuant to, in connection with or simultaneously with this
Warrant, or a breach of this Warrant or any such document or instrument. In any
such action or proceeding, the Company waives personal service of any summons,
complaint or other process and agrees that service thereof may be made in
accordance with Section 14 hereof.
-29-
20. Warrant Agent. The Company shall serve as warrant agent under
-------------
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.
21. Miscellaneous.
-------------
(a) This Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns. This Warrant may
be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 21(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
-30-
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
the date set forth below by its duly authorized officer.
Dated: October [ ], 1999 CAMBRIDGE HEART, INC.
By:____________________________
Name:
Title:
-31-
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Cambridge Heart, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.001 par value per share, of Cambridge Heart, Inc. (the
"Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
_________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
Dated: __________, ___ Name of Holder:
(Print)_________________________________
By:
Name:
Title:
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the attached Warrant.)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _________________, having an address at
___________________________ _______________________, the attached Warrant to the
extent of the right to purchase ____________ shares of Common Stock, $0.001 par
value per share, of CAMBRIDGE HEART, INC. (the "Company"), together with all
-------
right, title, and interest therein, and does hereby irrevocably constitute and
appoint _________________ as attorney to transfer such Warrant on the books of
the Company, with full power of substitution.
Dated: _______________, _____
_________________________________
Print name of holder of Warrant
By:__________________________________
Name:
Title:
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
