SETTLEMENT AGREEMENT
Exhibit
99.1
This
SETTLEMENT AGREEMENT (the “Agreement”)
is
made and entered into as of May 19, 2008, by and between Cambridge Heart, a
Delaware corporation (“Cambridge
Heart”),
AFB
Fund, LLC, a New Jersey limited liability company (“AFB”),
Xxxxx
Xxxxxxxx, a resident of the State of New York and the manager of AFB
(“Xxxxx
Xxxxxxxx”),
and
Xxxxxxxx Xxxxxxxx, a resident of the State of New York and a member of AFB
(“Xxxxxxxx
Xxxxxxxx”).
RECITALS
WHEREAS,
AFB has nominated Xxxxx Xxxxxxxx (the “AFB
Nominee”)
to
serve as a member of Cambridge Heart’s board of directors (the “Board”);
WHEREAS,
in connection with Cambridge Heart’s 2008 annual meeting of stockholders (the
“2008
Annual Meeting”),
AFB
intends to solicit proxies from Cambridge Heart’s stockholders (the
“Solicitation”)
to
elect Xxxxx Xxxxxxxx as a member of the Board in lieu of a nominee recommended
by the Board;
WHEREAS,
AFB has submitted a stockholder proposal to be considered at the 2008 Annual
Meeting and included in Cambridge Heart’s proxy statement pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
which
proposal seeks stockholder approval of a recommendation to the Board that the
Amended and Restated Certificate of Incorporation of Cambridge Heart (the
“Certificate
of Incorporation”)
be
amended to eliminate those provisions of the Certificate of Incorporation that
provide for a staggered Board of Directors and to impose four-year term limits
upon director service on the Board of Directors (the “Stockholder
Proposal”);
WHEREAS,
the Board of Cambridge Heart has determined that it is in the best interests
of
Cambridge Heart and its stockholders to (1) increase the size of the Board
and
to add Xxxxx Xxxxxxxx to the Board, in order to avoid the expense and disruption
of the Solicitation, and (2) to eliminate the provisions of the Certificate
of
Incorporation that provide for a staggered Board of Directors as provided
herein; and
WHEREAS,
concurrently with the execution of this Agreement by Cambridge Heart and AFB
and
as a condition to AFB’s execution of this Agreement, AFB and Xxxxxx Xxxxxxxxx
(“Xx.
Xxxxxxxxx”),
acting individually and not in his capacity as Chairman of the Board of
Cambridge Heart, have entered into an agreement (the “Voting
Agreement”)
with
respect to (1) the nomination by AFB and Xx. Xxxxxxxxx of an individual to
be
elected by the holders of Series A Convertible Preferred Stock (the
“Series
A Preferred”)
to
serve as a director of Cambridge Heart, and (2) the election by Xx. Xxxxxxxxx,
as the majority holder of Series A Preferred, of such individual.
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
I
AGREEMENTS
Section
1.1. Board Composition Matters; Nominations at 2008 Stockholder
Meeting.
(a)
Cambridge Heart shall as promptly as practicable, and in any event within five
business days after the date hereof, take all action necessary (including the
calling of a special meeting of the Board to approve such actions):
(i)
to
expand the size of the Board so as to create one new directorship on the Board
in accordance with Article Eleventh of the Certificate of Incorporation and
Article 2 of its Amended and Restated By-Laws, and
(ii)
to
appoint the AFB Nominee as a Class II director to fill such newly-created
directorship.
(b)
Effective upon the appointment of Xxxxx Xxxxxxxx to the Board pursuant to
Section 1.1(a) hereof, AFB hereby irrevocably withdraws its nomination of the
AFB Nominee.
Section
1.2. Amendment to Certificate of Incorporation; Board
Recommendation.
(a)
Cambridge Heart shall submit a proposal to its stockholders at the 2009 annual
meeting of stockholders (the “2009
Annual Meeting”)
to
amend Sections 2, 4, 5, 8 and 10 of Article Eleventh, as well as any other
section or sections the amendment of which is necessary in order to eliminate
the staggered Board of Directors, of the Certificate of Incorporation in order
to eliminate the staggered Board of Directors (the “Charter
Amendment”).
The
Board shall recommend in its proxy statement for the 2009 Annual Meeting that
stockholders of Cambridge Heart vote to approve the Charter Amendment and
Cambridge Heart shall use commercially reasonable efforts to solicit proxies
to
be voted at the 2009 Annual Meeting in favor of the Charter Amendment.
(b)
If
the Charter Amendment is approved at the 2009 Annual Meeting by the requisite
vote of the stockholders of Cambridge Heart, Cambridge Heart agrees to use
all
reasonable efforts, including the adjournment of the 2009 Annual Meeting in
order to allow for the filing of the Charter Amendment with the Delaware
Secretary of State, to permit the election of all directors nominated for
election at the 2009 Annual Meeting for terms commencing at the 2009 Annual
Meeting and expiring at the 2010 annual meeting of stockholders and until their
successors are elected and qualified.
(c)
If
the Charter Amendment is approved at the 2009 Annual Meeting by the requisite
vote of the stockholders of Cambridge Heart, the Board shall take all action
necessary
to amend Sections 2.3, 2.4, 2.5 and 2.6 of Article 2 and Section 6.3 of Article
6, as well as any other section or sections the amendment of which is necessary
in order to eliminate the staggered Board of Directors, of Cambridge Heart’s
Amended and Restated By-laws to eliminate the staggered Board of Directors.
Section
1.3. Termination of Solicitation and Stockholder Proposal.
(a)
From
the date hereof through the completion of the 2008 Annual Meeting, none of
AFB,
Xxxxx Xxxxxxxx, Xxxxxxxx Xxxxxxxx or any of their Affiliates will, directly
or
indirectly, (i) solicit proxies or consents for the voting of any voting or
other securities of Cambridge Heart or otherwise become a “participant,”
directly or indirectly, in any “solicitation” of “proxies” or consents to vote,
or become a “participant” in any “election contest” involving Cambridge Heart or
Cambridge Heart’s securities (all terms used herein and defined in Regulation
14A under the Exchange Act having the meanings assigned to them therein), (ii)
seek to advise or influence any person with respect to the voting of any
securities of Cambridge Heart, (iii) initiate, propose or otherwise “solicit”
Cambridge Heart stockholders for the approval of shareholder proposals, (iv)
otherwise communicate with Cambridge Heart’s stockholders or others pursuant to
Rule 14a-1(l)(2)(iv) under the Exchange Act, (v) otherwise engage in any course
of conduct with the purpose of causing stockholders of Cambridge Heart to vote
contrary to the recommendation of the Board on any matter presented to Cambridge
Heart’s stockholders for their vote or challenging the policies of Cambridge
Heart or (vi) otherwise act, directly or indirectly, alone or in concert with
others, to seek to control or influence the management, the Board, policies
or
affairs of Cambridge Heart, other than through Xxxxx Xxxxxxxx, in his capacity
as a member of the Board. For purposes of this Agreement, “Affiliate”
means,
with respect to any person, any other person or entity that directly, or
indirectly through one or more intermediaries, controls, is controlled by,
or is
under common control with, such first person and any employees, officers,
members and managers of AFB.
(b)
AFB
hereby irrevocably withdraws the Stockholder Proposal and consents to the
exclusion of the Stockholder Proposal from Cambridge Heart’s proxy statement for
the 2008 Annual Meeting.
Section
1.4. Voting Agreement.Until
the
completion of the 2008 Annual Meeting, AFB, Xxxxx Xxxxxxxx and Xxxxxxxx Xxxxxxxx
shall, and shall cause each of their Affiliates to cause all voting securities
of Cambridge Heart beneficially owned by each of them to be present at the
2008
Annual Meeting for the purpose of establishing a quorum and to be voted at
the
2008 Annual Meeting (i) for the director nominees recommended by the Board,
(ii)
for Proposals 2 and 3 set forth in Cambridge Heart’s preliminary proxy statement
for the 2008 Annual Meeting filed with the Securities and Exchange Commission
on
May 5, 2008, and (iii) in accordance with the recommendation of the Board on
any
proposals of any other stockholder of Cambridge Heart, including with regard
to
any nomination of one or more nominees for election as director in opposition
to
the nominees of the Board at any such meeting. No later than five business
days
prior to the 2008 Annual Meeting, each of AFB, Xxxxx Xxxxxxxx and Xxxxxxxx
Xxxxxxxx shall, and shall cause each of its Affiliates to, vote in accordance
with this
Section
1.4. AFB, Xxxxx Xxxxxxxx and Xxxxxxxx Xxxxxxxx shall not, and shall cause each
of their Affiliates not to, revoke or change any vote in connection with any
such meeting of stockholders unless such revocation or change is required or
permitted in accordance with the first sentence of this Section 1.4.
Section
1.5 Nomination and Election of Series A Director.AFB
and
Xxxxx Xxxxxxxx hereby acknowledge and agree that the nomination by AFB and
Xx.
Xxxxxxxxx of an individual to be elected by the Series A Preferred to serve
as a
director of Cambridge Heart pursuant to the Voting Agreement shall be subject
to
the reasonable approval of at least 50% of the members of the Board of Directors
of Cambridge Heart (excluding Xx. Xxxxxxxxx and Xxxxx Xxxxxxxx).
Section
1.6 Release of Claims.
(a)
AFB,
Xxxxx Xxxxxxxx and Xxxxxxxx Xxxxxxxx hereby acknowledge and agree that this
Agreement is intended to be a complete and final settlement of any and all
causes of action or claims that any of them has had, now has or may now have,
whether known or unknown, against Cambridge Heart or any of the persons or
entities specified below. AFB, Xxxxx Xxxxxxxx and Xxxxxxxx Xxxxxxxx hereby,
on
behalf of themselves and anyone else claiming by, through or under any of them,
hereby waives, releases, covenants not to xxx and forever discharges Cambridge
Heart and its successors and each and all of their present and former officers,
directors, agents and attorneys (hereinafter “CAMH
Releasees”),
and
each and all of them of, from and with respect to any and all debts, demands,
actions, causes of action, suits, covenants, contracts, agreements, promises,
torts, damages, claims, demands and liabilities whatsoever of any name and
nature, both in law and in equity (hereinafter “Claims”)
that
AFB, Xxxxx Xxxxxxxx and/or Xxxxxxxx Xxxxxxxx now has, may now have or ever
had
against each or any of the CAMH Releasees by reason of any matter, cause or
thing whatsoever from the beginning of the world to the date hereof, including,
but not limited to, any Claims that may exist under federal, state or local
laws.
(b)
Cambridge Heart hereby acknowledges and agrees that this Agreement is intended
to be a complete and final settlement of any and all causes of action or claims
that Cambridge Heart has had, now has or may now have, whether known or unknown,
against AFB, Xxxxx Xxxxxxxx and Xxxxxxxx Xxxxxxxx or any of the persons or
entities specified below. Cambridge Heart hereby, on behalf of Cambridge Heart
and anyone else claiming by, through or under Cambridge Heart, hereby waives,
releases, covenants not to xxx and forever discharges AFB, Xxxxx Xxxxxxxx and
Xxxxxxxx Xxxxxxxx, and their successors and each and all of their present and
former officers, directors, agents and attorneys (hereinafter “AFB
Releasees”),
and
each and all of them of, from and with respect to any and all Claims that
Cambridge Heart now has, may now have or ever had against each or any of the
AFB
Releasees by reason of any matter, cause or thing whatsoever from the beginning
of the world to the date hereof, including, but not limited to, any Claims
that
may exist under federal, state or local laws.
ARTICLE
II
MISCELLANEOUS
PROVISIONS
Section
2.1 Representations and Warranties.
(a)
Each
of the parties hereto represents and warrants to the other parties that:
(i)
such
party has all requisite authority and power to execute and deliver this
Agreement and to consummate the transactions contemplated hereby;
(ii)
the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
required action on the part of such party and no other proceedings on the part
of such party are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby;
(iii)
the
Agreement has been duly and validly executed and delivered by such party and
constitutes the valid and binding obligation of such party enforceable against
such party in accordance with their respective terms, and
(iv)
this
Agreement will not result in a violation of any terms or provisions of any
agreements to which such person is a party or by which such party may otherwise
be bound or of any law, rule, license, regulation, judgment, order or decree
governing or affecting such party.
(b)
The
parties hereto acknowledge, warrant and represent that they have carefully
read
this Agreement, understand it, have consulted with and received the advice
of
counsel regarding this Agreement, agree with its terms, are duly authorized
to
execute it and freely, voluntarily and knowingly execute it.
Section
2.2 General.
(a)
This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto and the respective successors, personal representatives
and assigns of the parties hereto.
(b)
This
Agreement contains the entire agreement between the parties with respect to
the
subject matter hereof and thereof and supersedes all prior and contemplated
arrangements and understandings with respect thereto.
(c)
This
Agreement may be signed in counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same Agreement.
(d)
All
notices and other communications required or permitted hereunder shall be
effective upon receipt and shall be in writing and may be delivered in person,
by telecopy, electronic mail, express delivery service or U.S. mail, in which
event it may be mailed by first-class, certified or registered, postage prepaid,
addressed to the party to be notified at the respective addresses set forth
below, or at such other addresses which may hereinafter be designated in
writing:
If
to
Cambridge Heart
Cambridge
Heart, Inc.
000
Xxxx
Xxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xx. Xxx Xxxxxxxx-Mood
Fax
No.:
(000) 000-0000
with
a
copy to:
Xxxxxx,
XxXxxxxxx & Fish LLP
World
Trade Center West
000
Xxxxxxx Xxxxxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Attention:
Xxxxxxxx X. Xxxxx
Fax
No.:
(000) 000-0000
If
to AFB
or Xxxxx Xxxxxxxx:
AFB
Fund,
LLC
0000
Xxxxxx Xxxxxx
Xxxx
Xxx,
XX 00000
Attention:
Xxxxx Xxxxxxxx
Fax
No.:
(000) 000-0000
with
a
copy to:
XxXxxxxx
and English , LLP
Four
Gateway Center
000
Xxxxxxxx Xxxxxx
Xxxxxx,
Xxx Xxxxxx 00000-0000
Attention:
Xxxxx X. Xxxxxx
Fax
.:
(000) 000-0000
If
to
Xxxxxxxx Xxxxxxxx:
000
X.
00xx
Xx.
Xxx
0X
Xxx
Xxxx,
XX 00000
(e)
This
Agreement and the legal relations hereunder between the parties hereto shall
be
governed by and construed in accordance with the laws of the State of Delaware
applicable to contracts made and performed therein, without giving effect to
the
principles of conflicts of law thereof.
(f)
Whenever possible, each provision of this Agreement shall be interpreted in
such
manner as to be effective and valid, but if any provision of this Agreement
is
held to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not render invalid or unenforceable any other provision
of this Agreement.
(g)
It is
hereby agreed and acknowledged that it will be impossible to measure in money
the damages that would be suffered if the parties fail to comply with any of
the
obligations herein imposed on them and that in the event of any such failure,
an
aggrieved person will be irreparably damaged and will not have an adequate
remedy at law. Any such person, therefore, shall be entitled to injunctive
relief, including specific performance, to enforce such obligations, without
the
posting of any bond, and, if any action should be brought in equity to enforce
any of the provisions of this Agreement, none of the parties hereto shall raise
the defense that there is an adequate remedy at law.
(h)
Each
party hereto 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 any other party hereto reasonably
may
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
(i)
Each
of the parties hereto hereby irrevocably and unconditionally consents to submit
to the exclusive jurisdiction of the courts of the State of Delaware and of
the
United States of America, in each case located in the County of New Castle,
for
any action, proceeding or investigation in any court or before any governmental
authority arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any action, proceeding or
investigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by registered mail to its
respective address set forth in this Agreement shall be effective service of
process for any action, proceeding or investigation brought against it in any
such court. Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any action, proceeding or
investigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Delaware or the United States of America,
in each case located in the County of New Castle, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, proceeding or investigation brought in any such court
has
been brought in an inconvenient forum.
[Remainder
of page intentionally left blank.]
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first written above.
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CAMBRIDGE
HEART, INC.
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By:
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/s/Xxx
Xxxxxxxx-Mood
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Name:
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Xxx Xxxxxxxx-Mood |
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Title:
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President
and Chief Executive Officer
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AFB
FUND, LLC
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By:
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/s/
Xxxxx Xxxxxxxx
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Name:
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Xxxxx Xxxxxxxx |
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Title:
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Manager
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/s/
Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx |
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/s/
Xxxxxxxx Xxxxxxxx
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Xxxxxxxx Xxxxxxxx |
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