Exhibit 10.3
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
CONFIDENTIAL
COPY ONE OF TWO
September 10, 2002
Cambridge Heart, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Ladies & Gentlemen:
This letter agreement (the "Agreement") will confirm our understanding of the
terms and conditions under which ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc. (together with its
affiliates, control persons, directors, officers, employees and agents, "AH&H")
is engaged by Cambridge Heart, Inc. ("Cambridge Heart") to provide certain
investment banking and financial advisory services to Cambridge Heart with
respect to consummating one or several possible business combinations, through
purchase, sale, merger, joint venture or otherwise and whether in one or more
transactions through the purchase of an organization's equity, debt securities
or assets, or by means of a merger, consolidation, reorganization, spin-off,
joint venture, partnership, tender offer, exchange offer, purchase, lease,
licensing, arrangement, strategic alliance, or any other transaction of a like
nature, regardless of form (a "Transaction") with another organization
(individually, together with each such organization's respective subsidiaries
and affiliates, the "Target").
1. SERVICES. Cambridge Heart hereby engages AH&H to act as its financial
advisor and participate and assist in negotiations with respect to
exploring, negotiating and consummating a Transaction. As financial
advisor, AH&H shall perform such financial advisory and investment
banking services as Cambridge Heart may reasonably request and that
AH&H deems necessary or appropriate in connection with the Transaction.
In conjunction with this role, if so requested by the Cambridge Heart
Board of Directors (the "Board"), AH&H will deliver a written opinion
(the "Opinion") to the Board as to the fairness, from a financial point
of view, to the shareholders of Cambridge Heart of the consideration to
be paid or the exchange ratio to be employed, as the case may be, in
connection with a Transaction. The Opinion
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Cambridge Heart, Inc.
September 5, 2002
Page 2
shall be in such form, have such scope and substance and contain such
assumptions (financial or otherwise), detail, information,
limitations, qualifications and provisions as AH&H shall determine in
its sole discretion. The nature and scope of the investigation AH&H
would conduct to be able to render the Opinion will be such as AH&H
considers appropriate and consistent with the generally accepted
standards of practice in the investment banking industry for such
opinions. The Opinion may be included in any disclosure document filed
by Cambridge Heart with the Securities and Exchange Commission with
respect to a proposed Transaction, provided that it is reproduced in
full, and that any description of or reference to AH&H or summary of
the Opinion in the disclosure document is in a form reasonably
acceptable to AH&H and its counsel. It is understood and agreed that
the Opinion will be addressed to, and be prepared solely for the use
and benefit of the Board, or a committee thereof, if applicable, and
may not be relied upon by any other person, and, except as provided
herein, the Opinion will not be reproduced, summarized or referred to
in any public document or given to any other person without the prior
written consent of AH&H.
Cambridge Heart will furnish and will request the Target to furnish
AH&H such information as AH&H reasonably requests in connection with
the performance of its services hereunder (all such information so
furnished is referred to herein as the "Information"). Cambridge Heart
understands and agrees that AH&H, in performing its services
hereunder, will use and rely upon the Information as well as publicly
available information regarding Cambridge Heart and the Target and
that AH&H does not assume responsibility for independent verification
of any information, whether publicly available or otherwise furnished
to it, including without limitation any financial information,
forecasts or projections considered by AH&H in connection with the
rendering of its services. Accordingly, AH&H shall be entitled to
assume and rely upon the accuracy and completeness of all such
information and is not required to conduct a physical inspection of
any of the properties or assets, or to prepare or obtain any
independent evaluation or appraisal of any of the assets or
liabilities of Cambridge Heart or the Target. With respect to any
financial forecasts and projections made available to AH&H by
Cambridge Heart or the Target and used by AH&H in its analysis, AH&H
shall be entitled to assume that such forecasts and projections have
been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Cambridge Heart
or the Target, as the case may be, as to the matters covered thereby.
AH&H agrees that any non-public information relating to Cambridge
Heart or the Target received by AH&H from or at the direction of
Cambridge Heart will be used by AH&H solely for the purpose of
performing its Services and that AH&H
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Cambridge Heart, Inc.
September 5, 2002
Page 3
will maintain the confidentiality thereof except to the extent (a)
such information is or becomes otherwise publicly available; (b)
disclosure thereof is required by law or requested by any governmental
agency or body (including through a subpoena or other valid legal
process); or (c) AH&H discloses such information to a party that is
bound by a confidentiality agreement acceptable to Cambridge Heart.
2. FEES. In consideration for its services hereunder, Cambridge Heart
shall pay AH&H, by wire transfer of immediately available funds at the
time due, the following fees:
(a) $[**] payable on October 1, 2002
(b) $[**] payable upon delivery to the Board of the Opinion (for a
specific Transaction involving a specific Target) and $[**]upon
delivery of each formal affirmation of such Opinion thereof as
requested by Cambridge Heart;
(c) in the event the Board requests, subsequent to the delivery of
the Opinion described immediately above in subsection (b), an
opinion associated with a different Transaction involving a
different Target (the "New Opinion"), $[**] payable upon delivery
to the Board of the New Opinion and $[**] upon delivery of each
formal affirmation of the New Opinion thereof as requested by
Cambridge Heart;
(d) upon the Closing of a Transaction, a "Success Fee", which shall
be payable by wire transfer of immediately available funds equal
to:
[**]% of Aggregate Consideration in the case that Aggregate
Consideration is, when calculated on a per-share basis, less than
or equal to [**]% of the average closing bid price for Cambridge
Heart stock for the ten trading days prior to the public
announcement of a Transaction, or
[**]% of Aggregate Consideration in the case that Aggregate
Consideration is, when calculated on a per-share basis, greater
than [**]% of the average closing market price for Cambridge
Heart stock for the 15 trading days prior to the public
announcement of a Transaction; less any amounts previously paid
specific to that transaction under 2(a), 2(b), and 2(c) above.
(e) in the event that funds, identified through ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇
Inc. and derived from investors others than company directors,
are raised through a debt or equity financing with or without a
concomitant Transaction, a
CONFIDENTIAL COPY ONE OF TWO
Cambridge Heart, Inc.
September 5, 2002
Page 4
"Financing Fee" of [**]% of the total gross amount of such debt
or equity financing.
Under no circumstances will the Success Fee be less than $[**].
For purposes of this Agreement, "Closing" shall refer to that date at
which the final legal transfer of ownership, as set forth in the
executed definitive asset purchase, stock purchase, merger agreement,
joint venture, partnership or similar definitive agreement associated
with the Transaction (the "Definitive Agreement") occurs.
For purposes of this Agreement, "Aggregate Consideration" shall mean
the cumulative value of the Transaction, representing the total value
of Cambridge Heart or the Target, as the case may be, implied by the
sum of all cash paid or payable and the fair market value of all
property or securities transferred or transferable directly or
indirectly, in connection with a Transaction, including (i) cash
amounts paid or securities issued (or otherwise exchanged or
transferred) to holders of any warrants, options or stock appreciation
rights, whether or not vested, or other securities convertible or
exchangeable for any shares of capital stock; (ii) the total amount of
indebtedness for borrowed money or similar non-trade liabilities or
obligations (including pension liabilities, guarantees, capitalized
leases and the like) repaid, retired, extinguished or assumed in
connection with a Transaction; and (iii) the fair market value of any
assets distributed to stockholders or affiliates, at any time after
the execution of the Definitive Agreement; provided, however, that
this clause (iii) shall not include or apply to any distribution of
assets made to stockholders to satisfy tax obligations or liabilities.
Aggregate Consideration also shall include, in the case of a joint
venture or similar collaborative undertaking, the total amount of cash
and fair market value (on the date of Closing) of all property
contributed by third parties to the joint venture.
For purposes of calculating Aggregate Consideration: (i) all shares
will be deemed transferred when a Transaction is effected at Closing
by the transfer of shares, (A) constituting [**]% or more of the then
outstanding equity securities of, or equity interest in, the Target or
Cambridge Heart, as the case may be, or (B) possessing [**]% or more
of the then outstanding voting power of the outstanding equity
securities of or equity interest in the Target or Cambridge Heart, as
the case may be; (ii) the value of any security (as that term is
defined in the Securities Act of 1933, as amended) issuable in
connection with a Transaction will be determined, if a publicly-traded
security, on the basis of the average of the closing prices for the 20
trading days prior to the Closing, or, if the security is not freely
tradable (or having no established public market) on the basis of the
fair market value of such security at Closing as determined in good
faith by AH&H; and (iii)
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Cambridge Heart, Inc.
September 5, 2002
Page 5
the value of any property transferred in connection with a Transaction
will be determined on the basis of the fair market value of such
property at Closing as determined in good faith by AH&H.
In the event the terms of a Transaction provide for escrowed,
contingent or installment payments, AH&H and Cambridge Heart shall
determine the present value of such payments (discounted at a discount
rate acceptable to both AH&H and Cambridge Heart) based upon financial
projections developed in connection with the proposed Transaction, and
that portion of AH&H's fees payable in respect of such escrowed,
contingent or installment payments shall be calculated based upon this
calculated present value of such future payments and shall be paid at
the Closing. Under no circumstances will any portion of the Success
Fee be deferred or otherwise not paid in its entirety at Closing.
While during the course of the engagement contemplated herein, AH&H
may estimate, for whatever reason, including development of financial
models for use in negotiations with Target, the amount of the Success
Fee, the actual amount of the Success Fee will be calculated only at
Closing and only using the methodology set forth in this Section 2.
If, in connection with a Transaction that is not completed, Cambridge
Heart receives a break-up fee, topping fee or other termination fee
(collectively, a "Termination Fee"), Cambridge Heart will pay AH&H a
fee equal to [**]% of such Termination Fee at the time such
Termination Fee is received by Cambridge Heart.
3. EXPENSES. In addition to any fees that may be payable to AH&H
hereunder and regardless of whether any Transaction is proposed or
closed, Cambridge Heart hereby agrees, from time to time upon request,
to reimburse AH&H for: (a) all reasonable fees and disbursements of
independent counsel retained by AH&H up to $[**]. Fees greater than
$[**] may be incurred after prior approval by Cambridge Heart; (b) all
of AH&H's reasonable travel and related expenses arising out of AH&H's
engagement hereunder; and (c) all of AH&H's reasonable out-of-pocket
expenses incurred in connection with any actual or proposed
Transaction or otherwise arising out of AH&H's engagement hereunder.
Such expenses are to be paid on a current basis within 30 days of
receipt of a statement therefore from AH&H.
4. SCOPE OF RESPONSIBILITY. AH&H shall not be liable to Cambridge Heart
or to any other person claiming through Cambridge Heart for any claim,
loss, damage, liability, cost or expense suffered by Cambridge Heart
or any such other person arising out of or related to AH&H's
engagement hereunder except for any claim, loss or expense that arises
primarily out of, or is based primarily upon, any action
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Cambridge Heart, Inc.
September 5, 2002
Page 6
or failure to act by AH&H that constitutes bad faith, willful
misconduct or gross negligence on the part of AH&H, other than any
action or failure to act undertaken at the request, or with the
consent, of Cambridge Heart. Under no circumstances shall this
paragraph be modified or amended.
5. INDEMNIFICATION; CONTRIBUTION. Cambridge Heart agrees to indemnify and
hold harmless AH&H (together with its affiliates and their respective
control persons, directors, officers, employees and agents,
"Indemnified Persons") to the full extent lawful against any and all
claims, losses, damages, liabilities, costs and expenses as incurred
(including all reasonable fees and disbursements of counsel and all
reasonable travel and other out-of-pocket expenses reasonably incurred
in connection with the investigation of, preparation for and defense
of any pending or threatened claim, action, proceeding or
investigation and any litigation or other proceeding arising
therefrom, to which an Indemnified Person may become subject)
(collectively, "Damages") arising out of or related to any actual or
proposed Transaction or AH&H's engagement hereunder; provided,
however, that there shall be excluded from such indemnification any
such portion of such Damages as are found in a final judgment by a
court of competent jurisdiction to have resulted from the willful
misconduct or gross negligence on the part of the Indemnified Person,
other than any action undertaken at the request or with the consent of
Cambridge Heart. The foregoing indemnification obligation is in
addition to, and not in limitation of, any other rights AH&H may have,
including but not limited to any right of contribution. In the event
that the foregoing indemnity is unavailable or insufficient to hold
harmless an Indemnified Person, then Cambridge Heart shall contribute
to amounts paid or payable by an Indemnified Person in respect of such
Damages in such proportion as appropriately reflects the relative
benefits received by it on the one hand and AH&H on the other. If
applicable law does not permit allocation solely on the basis of
benefits, then such contribution shall be made in such proportion as
appropriately reflects both the relative benefits and relative fault
of the parties and other relevant equitable considerations. The
foregoing is subject to the limitation that in no event shall AH&H's
aggregate contributions in respect of Damages exceed the amount of
fees actually received by AH&H pursuant to this Agreement. For
purposes hereof, relative benefits to Cambridge Heart and AH&H of the
Transaction or other similar transaction shall be deemed to be in the
same proportion that the total value paid or received or contemplated
to be paid or received by Cambridge Heart and/or its security holders
in connection with the Transaction or other similar transaction bears
to the fees paid to AH&H pursuant to its engagement in respect of such
Transaction. AH&H shall promptly notify Cambridge Heart of any claim
or threatened claim being asserted against AH&H which would give rise
to an indemnification hereunder, and agrees that Cambridge Heart shall
have the right to participate in the defense of any such
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Cambridge Heart, Inc.
September 5, 2002
Page 7
claim and, to the extent that Cambridge Heart shall wish, to assume
the defense thereof and shall pay as incurred the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, AH&H shall have the right to retain its own counsel at
Cambridge Heart's expense. Cambridge Heart will not enter into any
waiver, release or settlement with respect to any threatened or
pending claim, action, proceeding or investigation or settle any
litigation arising therefrom in respect of which indemnification
hereunder may be sought (whether or not Indemnified Persons are a
formal party thereto) without the prior written consent of AH&H (which
consent shall not be unreasonably withheld or delayed), unless such
waiver, release or settlement includes an unconditional release of
AH&H from any and all liability arising out of such threatened or
pending claim, action, proceeding, investigation or litigation. Under
no circumstances shall this paragraph be modified or amended.
6. TERM; TERMINATION OF ENGAGEMENT. The term of this engagement shall be
for a period of 12 months from the date of this letter, but if at the
end of such period negotiations or discussions are in progress
regarding a Transaction, then this engagement shall be automatically
extended until such time as all negotiations or discussions cease.
Notwithstanding the foregoing, AH&H's engagement hereunder may be
terminated by either Cambridge Heart or AH&H at any time, with or
without cause, upon written notice to that effect to the other party;
provided, however, that if terminated without Cause:
(a) AH&H will be entitled to its full fee under Section 2 hereof in
the event that (i) at any time prior to the expiration of 12
months after such termination by Cambridge Heart, a Transaction
is consummated with a third party identified by AH&H during the
term of this agreement; or (ii) Cambridge Heart enters into an
agreement during the term of this Agreement or during such
subsequent 12 month period contemplating a Transaction with a
third party identified by AH&H during the term of this agreement
and such Transaction is ultimately consummated; and
(b) the provisions of this Section 6 and of Sections 3, 4 and 5
hereof shall survive such termination.
"Cause" shall mean a material breach of this Agreement on the part of
AH&H, which breach shall not have been cured within a reasonable
period following written notice to AH&H thereof by Cambridge Heart.
7. RIGHT OF FIRST REFUSAL. In consideration of AH&H's entering into this
agreement, Cambridge Heart hereby grants AH&H a right of first refusal
under which AH&H shall have right of first refusal to provide all
financial advisory and investment banking services to Cambridge Heart
during the term of this Agreement and,
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Cambridge Heart, Inc.
September 5, 2002
Page 8
provided that the agreement has not been terminated by either AH&H or
Cambridge Heart pursuant to Section 6, for an eight month period
hereafter, which services shall include but not be limited to: (i)
acting as financial advisor in connection with any mergers,
acquisitions, divestitures, spin-offs, and other transactions commonly
known as mergers and acquisitions transactions; (ii) acting as lead
underwriter of any public offerings of any form of security relating
to Cambridge Heart alone and acting as co-lead or co-managing
underwriter of any public offerings of any form of security relating
to a successor or merged entity which includes Cambridge Heart Inc.,
resulting from a Transaction, under economic terms no less favorable
than any other co-lead or managing underwriter; (iii) acting as
financial advisor for any private placements of any form of security;
(iv) delivering fairness opinions and valuations; (v) acting as
financial advisor for any other extraordinary corporate transactions
for which Cambridge Heart may engage a financial advisor, such as
licensing agreements or joint ventures; and (vi) providing other
general financial advisory and investment banking services as may be
required by Cambridge Heart during such period. As used herein, a
right of first refusal shall mean, prior to offering any party other
than AH&H the right to provide financial advisory and investment
banking services to Cambridge Heart during the period provided above,
Cambridge Heart shall be obligated to make an offer to AH&H under
which AH&H would provide such services, which offer shall clearly
identify its terms and conditions, and AH&H shall have ten (10)
business days to accept such offer. If AH&H does not accept such
offer, then Cambridge Heart shall be free to negotiate and contract
with any other party with respect to such rights on any terms and
conditions that are no less favorable to Cambridge Heart than those
offered to and rejected by AH&H. If Cambridge Heart does not
consummate an agreement on such terms and conditions as were
previously offered to AH&H or terms and conditions that are more
favorable to Cambridge Heart, then the preceding sentence shall again
apply to any subsequent offer. Any engagement of AH&H to provide
financial advisory or investment banking services arising from any
such circumstances is subject to the negotiation and execution by AH&H
and Cambridge Heart of a separate letter agreement setting forth the
terms and conditions with respect to AH&H's engagement for that
transaction. However, unless specifically covered by a separate
agreement setting forth such arrangement, the
Indemnification/Assignment Provisions shall apply to each such
engagement.
8. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts without regard to the conflicts of law provisions
thereof. Any right to trial by jury with respect to any claim, action,
suit or proceeding arising out of this Agreement or any of the matters
contemplated hereby is waived by Cambridge Heart and AH&H. Cambridge
Heart hereby submits to the non-exclusive jurisdiction of the
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Cambridge Heart, Inc.
September 5, 2002
Page 9
Federal and State courts located in Boston, Massachusetts, in
connection with any dispute related to this Agreement or any of the
matters contemplated hereby.
9. RELIANCE ON OTHERS. Cambridge Heart confirms that it will rely on its
own independent counsel and independent accountants for legal, tax and
accounting advice.
10. NO RIGHTS IN SHAREHOLDERS, ETC. Cambridge Heart recognizes that AH&H
has been engaged only by Cambridge Heart, and that this engagement of
AH&H is not deemed to be on behalf of and is not intended to confer
rights upon any shareholder, partner or other owner of Cambridge Heart
or any other person not a party hereto as against AH&H. Unless
otherwise expressly agreed, no one other than Cambridge Heart is
authorized to rely upon this engagement of AH&H or to rely upon any
statements, advice, opinions or conduct by AH&H. Without limiting the
foregoing, any opinions or advice rendered to the Board or Cambridge
Heart's management in the course of this engagement of AH&H hereunder
are for the purpose of assisting the Board or Cambridge Heart's
management, as the case may be, in evaluating the Transaction
contemplated hereby and such opinions or advice do not constitute a
recommendation to any shareholder of Cambridge Heart concerning action
that such shareholder might or should take in connection with the
Transaction contemplated hereby. AH&H's role herein is that of an
independent contractor and nothing contained herein is intended to
create or shall be construed as creating a fiduciary relationship
between Cambridge Heart and AH&H.
11. ATTORNEY FEES. In the event of any dispute or litigation or other
proceeding between the parties with respect to any provision of this
Agreement or arising from the engagement contemplated under this
Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party any and all of the reasonable fees and
disbursements of the prevailing party's attorney to the extent that
they relate to such dispute, litigation, or other proceeding.
12. MISCELLANEOUS. Nothing in this Agreement is intended to obligate or
commit AH&H to provide any services other than as set forth above.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but which together shall be considered a single
instrument. This Agreement constitutes the entire agreement between
the parties hereto, and supersedes all prior agreements and
understandings (both written and oral) of the parties hereto with
respect to the subject matter hereof, and cannot be amended or
otherwise modified except in writing executed by the parties hereto.
The provisions hereof shall inure to the benefit of and be binding
upon the successors and assigns of Cambridge Heart and AH&H. AH&H may
refer to the Transaction, after it is public knowledge, in traditional
"tombstone" announcements or any of its other
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Cambridge Heart, Inc.
September 5, 2002
Page 10
professional promotional materials. If requested by AH&H, Cambridge
Heart shall include a mutually acceptable reference to AH&H in any
press release or other public announcement made by Cambridge Heart
regarding the Transaction.
If you are in agreement with the foregoing, please sign both copies, retain Copy
One for your records and return Copy Two, whereupon the Agreement shall become
effective as of the date hereof.
Sincerely,
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
Principal, Group Head - Biomedical Devices and Technology
ACCEPTED AND AGREED:
CAMBRIDGE HEART, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
President, Chief Executive Officer and Chief Operating Officer