JOINT VENTURE AND STRATEGIC INVESTMENT AGREEMENT
Exhibit
10.1
This
Joint Venture and Strategic Investment Agreement ("Agreement")
is
made and entered into this 13th day of November, 2007 (the "Effective
Date"),
by
and between Cyberkinetics Neurotechnology Systems, Inc., a Delaware corporation
with its principal offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
("CYKN")
and
NEUROMetrix, Inc., a Delaware corporation with its principal offices at ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ 02451("NURO").
Preliminary
Statement
This
Agreement sets forth the agreements which have been reached between the parties
hereto with respect to (a) a summary of the principal terms and conditions
of a joint venture relationship to be established by CYKN and NURO, (b) the
terms and conditions of NURO's strategic purchase of (i) shares of common
stock, par value of $0.001 per share, of CYKN ("Common
Stock")
and
(ii) a warrant to purchase Common Stock, and (c) certain other related
matters.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, CYKN and NURO hereby agree as follows:
1. Joint
Venture.
(a) Establishment
of Joint Venture.
Immediately after the execution and delivery of this Agreement, CYKN and NURO
each agree to cause its respective representatives to enter into good faith
negotiations regarding the establishment of a joint venture (the “Joint
Venture”).
The
Joint Venture will be created by the parties hereto by organizing a new entity
under the laws of the State of Delaware which will be jointly owned by them
(“Newco”),
with
each of CYKN and NURO owning 50% of the equity interests in Newco. The purpose
of the Joint Venture will be to develop and commercialize products for the
treatment of peripheral nerve injury and disease (the “New
Products”)
based
on CYKN’s intellectual property related to CYKN’s Oscillating Field Stimulator™
device (the “OFS™
Device”)
and
such other intellectual property as may be contributed to, or acquired or
developed by, Newco. As consideration for their equity interests in the Joint
Venture, (i) CYKN will contribute to Newco exclusive rights to the intellectual
property related to the OFS™ Device for the treatment of peripheral nerve injury
and disease and (ii) NURO will contribute to Newco over a two-year period an
aggregate of up to Two Million Dollars ($2,000,000) in cash and/or personnel,
resources or other value for the initial development efforts of Newco (the
“Initial
Contributions”).
All
capital and other resources required by Newco after the Initial Contributions
will be contributed by CYKN and NURO on an equal basis and all expenditures
of
Newco will be made in a manner consistent with an annual budget mutually agreed
upon by CYKN and NURO. The rights, benefits, obligations and liabilities of
CYKN, NURO and Newco will be governed by the terms and conditions of a written
agreement to be mutually agreed upon by the parties hereto (the “JV
Agreement”),
which
the parties intend to enter into no later than ninety (90) days after the date
of this Agreement. Under the JV Agreement, among other things, Newco shall
be
responsible for satisfying any royalty obligations of CYKN to any third party
arising out of the activities of Newco.
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(b) Distribution
Right of First Negotiation.
Commencing on the earlier of (i) December 31, 2009 or (ii) the date upon which
the first New Product of Newco is available for commercial distribution, and
for
the 90-day period immediately thereafter, the parties shall enter into good
faith negotiations regarding the terms of, and the definitive agreements
required to consummate, a mutually agreed upon exclusive arrangement for NURO
to
commercialize and distribute anywhere in North America, and if mutually agreed
upon in other parts of the world, any or all New Products.
2. Right
of First Negotiation - the OFS™ Device.
In the
event that prior to December 31, 2008 (a) CYKN receives approval from the United
States Food & Drug Administration for the use of the OFS™ Device in the
treatment of spinal cord injuries under the Humanitarian Device Exemption;
(b)
CYKN desires to grant distribution rights with respect to the OFS™ Device used
for treatment of spinal cord injuries or the assets related to such OFS™ Device
to another party or (c) CYKN desires to transfer some or all of its rights,
title or interest in the OFS™ Device used for treatment of spinal cord injuries
or the assets related to such OFS™ Device to another party (each, an
“OFS
Trigger Event”),
CYKN
shall, within five (5) days of the occurrence of such OFS Trigger Event, provide
a written notice describing the occurrence of such OFS Trigger Event and, in
the
case of an OFS Trigger Event described in (b) or (c) above, the rights
(including rights to any tangible or intangible property) it desires to grant
or
transfer (an “OFS
Negotiation Notice”).
Upon
receipt of an OFS Negotiation Notice, NURO shall have a ten (10) day period
in
which to determine whether it desires to negotiate for, in the case of an OFS
Trigger Event described in clause (a) or (b) of such term, the exclusive right
to commercialize and distribute the OFS™ Device anywhere in North America or, in
the case of an OFS Trigger Event described in clause (c) of such term, the
acquisition of the rights described in the OFS Negotiation Notice (in either
case, the “OFS
Assets”),
and
to deliver to CYKN a non-binding term sheet (the “OFS
Term Sheet”)
proposing the terms on which NURO would be willing to enter into such a
transaction. In the event that NURO delivers an OFS Term Sheet, the parties
shall enter into good faith negotiations regarding the terms of, and the
definitive documents required to consummate, the transaction described in the
OFS Term Sheet. In the event that the parties are unable to enter into a
definitive agreement for a transaction within ninety (90) days of the date
on
which CYKN delivers the OFS Negotiation Notice to NURO, then CYKN shall be
free
to transfer the OFS Assets to a third party on terms, in the aggregate, no
more
favorable to the third party than those set forth on the OFS Term Sheet during
its negotiations with CYKN or subsequently offered by NURO during its
negotiations with CYKN. In the event that NURO does not timely provide an OFS
Term Sheet to CYKN, then CYKN shall be free to license or transfer the OFS
Assets to a third party on any terms acceptable to CYKN. All rights of NURO
under this Section
2
shall
expire on December 31, 2008 if no OFS Trigger Event shall occur prior to such
date. If any OFS Trigger Event shall occur prior to December 31, 2008, the
parties shall remain obligated to fulfill their obligations hereunder with
respect to such OFS Trigger Event even if the ninety (90) day period described
above shall extend beyond December 31, 2008.
3. Right
of First Negotiation Regarding a Change of Control Transaction.
In the
event that prior to December 31, 2008 the Board of Directors of CYKN determines
that it is in the best interests of CYKN to initiate any process (a
"COC
Trigger Event")
to
sell all or substantially all of the assets of CYKN, whether by way or merger
or
consolidation, stock purchase, asset sale or otherwise, or otherwise engage
in
any transaction (other than any transaction involving the offer or sale of
securities of CYKN for the purpose of raising capital for CYKN) in which holders
of CYKN's voting securities immediately prior to such transaction will not,
directly or indirectly, continue to hold as least a majority of the outstanding
voting securities of CYKN (each of the events described in this subsection,
a
"Change
of Control Transaction"),
CYKN
shall, within five (5) days of the occurrence of such COC Trigger Event, provide
a written notice describing the occurrence of such COC Trigger Event (a
"COC
Negotiation Notice").
Upon
receipt of COC Negotiation Notice, NURO shall have a ten (10) day period in
which to determine whether it desires to negotiate a Change of Control
Transaction with CYKN, and to deliver to CYKN a non binding term sheet (the
"COC
Term Sheet")
proposing the terms on which NURO would be willing to consummate the Change
of
Control Transaction. In the event that NURO delivers a COC Term Sheet, the
parties shall enter into good faith negotiations regarding the terms of, and
the
definitive documents required to consummate, a Change of Control Transaction.
In
the event that the parties are unable to enter into a definitive agreement
for a
Change of Control Transaction within thirty (30) days of the date on which
CYKN
delivers the COC Negotiation Notice to NURO, then CYKN shall be free to enter
into a Change of Control Transaction with a third party on terms, in the
aggregate, no more favorable to the third party than those set forth on the
COC
Term Sheet or subsequently offered by NURO during its negotiations with CYKN.
In
the event that NURO does not timely provide a COC Term Sheet to CYKN, then
CYKN
shall be free to enter into a Change of Control Transaction with a third party
on any terms acceptable to CYKN. All rights of NURO under this Section
3
shall
expire on December 31, 2008 if no COC Trigger Event shall occur prior to such
date. If a COC Trigger Event shall occur prior to December 31, 2008, the parties
shall remain obligated to fulfill their obligations hereunder with respect
to
such COC Trigger Event even if the thirty (30) day period described above shall
extend beyond December 31, 2008.
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4. NURO
Investment.
(a) Purchase
of Common Stock.
Simultaneously with the execution and delivery of this Agreement, NURO hereby
purchases from CYKN and CYKN hereby issues and sells to NURO, 5,434,783 shares
of Common Stock (collectively, the "CYKN
Shares")
for an
aggregate purchase price of Two Million Four Hundred Ninety-Five Thousand
Dollars ($2,495,000) (the "CYKN
Shares Consideration").
(b) Purchase
of Warrant.
Simultaneously with the execution and delivery of this Agreement, NURO hereby
purchases from CYKN and CYKN hereby issues and sells to NURO a Warrant to
Purchase Common Stock, a copy of which is attached hereto and incorporated
herein as Exhibit
A
(the
"Warrant"),
whereby NURO has the right to purchase, at $.46 per share, 2,717,391 shares
of
Common Stock (collectively,
the "Warrant
Shares")
for an
aggregate purchase price of Five Thousand Dollars ($5,000) (the "Warrant
Consideration";
and
together with the CYKN Shares Consideration the "Original
Investment Amount").
No
party shall take an inconsistent position in any tax filing with respect to
the
allocation of the Original Investment Amount with respect to the CYKN shares
and
the Warrant as provided for herein. NURO shall, at its option, be entitled
to
exercise the Warrant at any time (in whole or in part) commencing on the date
of
this Agreement and continuing thereafter until the fifth anniversary of the
date
of this Agreement (the "Warrant
Exercise Period");
provided, however, in the event that CYKN receives approval from the United
States Food & Drug Administration for the use and sale of the OFS™ Device
under the Humanitarian Device Exemption at any time during the Warrant Exercise
Period, NURO shall be obligated to exercise the Warrant in full within ten
(10)
days after receipt of written notice from CYKN of the receipt of such
approval.
5. Representations
and Warranties of CYKN.
CYKN
hereby makes the representations and warranties set forth below to
NURO:
(a) Subsidiaries.
CYKN
owns, directly or indirectly, all of the capital stock or other equity interests
of each subsidiary of CYKN free and clear of any liens (other than the lien
in
favor of General Electric Capital Corporation in connection with financial
accommodations provided by it to CYKN), and all the issued and outstanding
shares of capital stock of each subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe
for
or purchase securities. For purposes of this Agreement, this Agreement, the
Warrant, the Registration Rights Agreement (as hereinafter defined) and any
other documents or agreements executed in connection with the transactions
contemplated hereunder are collectively referred to herein as the "Transaction
Documents".
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(b) Organization
and Qualification.
CYKN
and each subsidiary of CYKN is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its businesses currently conducted. Neither CYKN nor any subsidiary
of
CYKN is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. CYKN and each subsidiary of CYKN is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be
so qualified or in good standing, as the case may be, would not result in (i)
a
material adverse effect on the legality, validity or enforceability of any
Transaction Documents, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of CYKN and
the
subsidiaries of CYKN, taken as a whole, or (iii) a material adverse effect
on
CYKN's ability to perform in any material respect on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii) or (iii),
a
"Material
Adverse Effect")
and no
proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
CYKN
has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations thereunder. The execution and delivery of each
of
the Transaction Documents by CYKN and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of CYKN and no further action is required by CYKN in connection
therewith other than in connection with the Required Approvals (as hereinafter
defined). Each of the Transaction Documents has been (or upon delivery will
have
been) duly executed by CYKN and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of CYKN enforceable
against CYKN in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by CYKN, the
issuance and sale of the CYKN Shares and the Warrant and the consummation by
CYKN of the other transactions contemplated thereby do not and will not
(i) conflict with or violate any provision of CYKN or any CYKN subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result
in the creation of any lien upon any of the properties or assets of CYKN or
any
subsidiary of CYKN, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a company
or subsidiary debt or otherwise) or other understanding to which CYKN or any
subsidiary of CYKN is a party or by which any property or asset of CYKN or
any
subsidiary of CYKN is bound or affected, or (iii) subject to the required
approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which CYKN or any subsidiary of CYKN is subject
(including federal and state securities laws and regulations), or by which
any
property or asset of CYKN or any subsidiary of CYKN is bound or affected; except
in the case of each of clauses (ii) and (iii), such as would not result in
a
Material Adverse Effect.
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(e) Filings,
Consents and Approvals.
CYKN is
not required to obtain any consent, waiver, authorization or order of, give
any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other person in connection
with
the execution, delivery and performance by CYKN of the Transaction Documents,
other than consents and approvals already obtained by CYKN and the filing of
Form D with the United States Securities and Exchange Commission (the
"Commission")
and
such other filings as are required to be made under applicable state securities
laws (collectively, the "Required
Approvals").
(f) Issuance
of the Securities.
The
CYKN Shares, the Warrant and the Warrant Shares (collectively, the "Securities")
are
duly authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens imposed by CYKN other than restrictions on transfer
provided for in the Transaction Documents (or as required under federal or
applicable state securities laws). CYKN has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable to NURO
pursuant to this Agreement and the Warrant.
(g) Capitalization.
The
authorized capital stock of CYKN consists of 100,000,000 shares of common stock,
$0.001 par value per share, and 50,000,000 shares of undesignated preferred
stock. As of the date hereof, there were 37,566,908 shares of common stock
outstanding and no shares of preferred stock outstanding. In addition, there
were outstanding options and warrants to purchase 14,779,815 shares of Common
Stock. All of the outstanding shares of capital stock of CYKN are validly
issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe
for
or purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of CYKN or others is required for the issuance and sale
of the CYKN Shares or the Warrant. There are no stockholders agreements, voting
agreements or other similar agreements with respect to CYKN's capital stock
to
which CYKN is a party or, to the knowledge of CYKN, between or among any of
CYKN's stockholders. No anti-dilution or other similar rights will be triggered
by the issuance of the Securities pursuant to this Agreement and the
Warrant.
(h) Material
Changes.
Since
June 30, 2007, (i) CYKN has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Financial Statements (as defined below)
pursuant to GAAP, (ii) CYKN has not altered its method of accounting, and (iii)
CYKN has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements
to
purchase or redeem any shares or its capital stock.
(i) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of CYKN, threatened against or affecting CYKN,
any
subsidiary of CYKN or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action")
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Common Stock or (ii) could, if there
were an unfavorable decision, result in a Material Adverse Effect. Neither
CYKN
nor any subsidiary of CYKN, nor any current director or officer thereof, is
or
has been the subject of any action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of CYKN, there's not
pending or contemplated, any investigation by the Commission involving CYKN
or
any current director or officer of CYKN.
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(j) Permits.
CYKN
and each subsidiary of CYKN possess all certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses, except where
the
failure to possess such permits would not result in a Material Adverse Effect
("Material
Permits"),
and
neither CYKN nor any subsidiary of CYKN has received any written notice of
proceedings relating to the revocation or modification of any Material
Permit.
(k) Patents
and Trademarks.
CYKN
and each Subsidiary of CYKN have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for use
in
connection with their respective businesses and which the failure to so have
would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights").
Neither CYKN nor any subsidiary of CYKN has received a written notice that
the
Intellectual Property Rights used by CYKN or any subsidiary of CYKN violates
or
infringes upon the rights of any other individual, partnership corporation,
limited liability company or other entity ("Person").
To
the knowledge of CYKN, all such Intellectual Property Rights are enforceable
and
there is no existing infringement by any other Person of any of the Intellectual
Property Rights. There is no claim, action or proceeding pending, or to the
knowledge of CYKN threatened, against CYKN or any subsidiary of CYKN regarding
its Intellectual Property Rights.
CYKN
is
unaware of any facts or circumstances that would give rise to such foregoing
infringements, claims, actions or proceedings. CYKN and each subsidiary of
CYKN
has taken reasonable security measures to protect the secrecy and
confidentiality of their Intellectual Property Rights.
(l) Certain
Fees.
No
brokerage or finder's fees or commissions are or will be payable by CYKN to
any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other person with respect to the transactions contemplated
by
this Agreement except as previously disclosed to NURO in writing. Assuming
NURO
has not incurred any obligation as a result of its own independent actions,
NURO
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other persons for fees of a type contemplated in this
section that may be due in connection with the transactions contemplated by
this
Agreement.
(m) Private
Placement.
Assuming
the accuracy of NURO's representations and warranties set forth in subsections
(d), (e) and (f) of Section
6
hereof,
no registration under the Securities Act of 1933, as amended (the "Securities
Act")
is
required for the offer and sale of the CYKN Shares or the Warrant by CYKN to
NURO as contemplated hereby.
(n) Investment
Company.
CYKN is
not, and is not an affiliate of, and immediately after receipt of payment for
the CYKN Shares and the Warrant, will not be or be an affiliate of, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. CYKN shall conduct its business in manner so that it will not become
subject to the Investment Company Act of 1940.
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(o) Registration
Rights.
Other
than as contemplated hereby, registrations that CYKN was required to effectuate
and keep effective in connection with the PIPE transactions that CYKN entered
into in 2004, 2005 and 2006, and piggy-back registration rights granted to
certain holders of warrants issued by CYKN, no person has any right to cause
CYKN to effect the registration under the Securities Act of any securities
of
CYKN.
(p) Financial
Statements.
CYKN
has made available to NURO its (a) audited balance sheets as at December 31,
2005 and 2006 and related statements of operations, changes in stockholders
equity and cash flows for the years ended December 31, 2005 and 2006, and (b)
unaudited balance sheets as at June 30, 2007 and the related statement of
operations, changes in stockholders equity and cash flows for the six months
ended June 30, 2007 (collectively, the "Financial
Statements").
The
Financial Statements (i) fairly present the financial position and results
of
operations of CYKN as of the dates indicated, and (ii) were prepared in
accordance with United States generally accepted accounting principles
("U.S.
GAAP")
in
effect as of the dates indicated (except that (x) unaudited financial statements
may not be in accordance with U.S. GAAP because of the absence of footnotes
normally contained therein, and (y) interim (unaudited) financials are subject
to normal year-end audit adjustments).
(q) SEC
Documents.
For a
period of two years prior to the date hereof, CYKN has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with
the SEC pursuant to the reporting requirements of the Securities Exchange Act
of
1934, as amended (the "1934
Act")
(all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the
"SEC
Documents").
CYKN
has made available to NURO or their respective representatives true, correct
and
complete copies of the SEC Documents not available on the ▇▇▇▇▇ system, if
any.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations
of
the SEC promulgated thereunder applicable to the SEC Documents, and none of
the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(r) Internal
Accounting and Disclosure Controls.
CYKN
and each subsidiary of CYKN maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with U.S. GAAP and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management's general or specific authorization and
(iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any difference. Neither CYKN nor any of its
subsidiaries have received any written notice from any accountant identifying
a
material weakness in any part of the system of internal accounting controls
of
CYKN or any of its subsidiaries that is not specified in CYKN's Annual Report
on
Form 10-KSB for the fiscal year ended December 31, 2006.
(s) Disclosure.
All
disclosure provided to NURO regarding CYKN, its business and the transactions
contemplated hereby, furnished by or on behalf of CYKN is true and correct
in
all material reports and does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were
made, not misleading.
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6. Representations
and Warranties of NURO.
NURO
hereby represents and warrants as of the date hereof to CYKN as
follows:
(a) Organization.
NURO is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with full right, corporate power and
authority to carry on its business as currently conducted.
(b) Authorization;
Enforcement.
NURO
has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations thereunder. The execution and delivery of each
of
the Transaction Documents by NURO and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of NURO and no further action is required by NURO in connection therewith.
Each of the Transaction Documents has been (or upon delivery will have been)
duly executed by NURO and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of NURO enforceable against
NURO in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(c) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by NURO and
the
consummation by NURO of the other transactions contemplated thereby do not
and
will not (i) conflict with or violate any provision of NURO's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that
with
notice or lapse of time or both would become a default) under, result in the
creation of any lien upon any of the properties or assets of NURO or any
subsidiary of NURO, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a company
or subsidiary debt or otherwise) or other understanding to which NURO or any
subsidiary of NURO is a party or by which any property or asset of NURO or
any
subsidiary of NURO is bound or affected, or (iii) conflict with or result in
a
violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which NURO or any
subsidiary of NURO is subject (including federal and state securities laws
and
regulations), or by which any property or asset of NURO or any subsidiary of
NURO is bound or affected; except in the case of each of clauses (ii) and (iii),
such as would not result in a Material Adverse Effect.
(d) Investment
Intent.
NURO
understands that the Securities are "restricted securities" and have not been
registered under the Securities Act or any applicable state securities law
and
NURO is acquiring the CYKN Shares and the Warrant as principal for its own
account and not with a view to or for distributing or reselling any CYKN Shares
or the Warrant, or any part thereof, has no present intention of distributing
any CYKN Shares or the Warrant and has no arrangement or understanding with
any
other persons regarding the distribution of any CYKN Shares or the
Warrant.
(e) Purchaser
Status.
At the
time NURO was offered the CYKN Shares, it was, and at the date hereof it is,
an
"accredited investor" as defined in Regulation D under the Securities
Act.
8
(f) Experience
of NURO.
NURO,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in
the
CYKN Shares and the Warrant, and has so evaluated the merits and risks of such
investment. NURO is able to bear the economic risk of an investment in the
CYKN
Shares and the Warrant and, at the present time, is able to afford a complete
loss of such investment.
(g) Transfer
Legends and Restrictions.
NURO is
aware that all certificates and instruments representing the Securities shall
be
imprinted with a conspicuous legend in substantially the following form:
[THIS
COMMON STOCK] [THIS WARRANT] HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS, ANY MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR ASSIGNED EXCEPT (i) PURSUANT TO REGISTRATION
UNDER
APPLICABLE FEDERAL AND STATE SECURITIES LAWS, OR (ii) IF, IN THE OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THE PROPOSED TRANSFER MAY BE
EFFECTED IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS WITHOUT
REGISTRATION.
(h) Information.
NURO
and its advisors have been afforded the opportunity to ask questions of, and
receive answers from, CYKN concerning CYKN and the Securities.
7. Closing;
Deliveries.
(a) Closing.
The
closing of the transactions provided for in Section
2
hereof
(the "Closing")
is
being held simultaneously with the execution and delivery of this Agreement
at
the principal offices of CYKN in Foxborough, Massachusetts on the Effective
Date
(the "Closing
Date").
All
of the agreements, documents, certificates, and instruments delivered by each
party at the Closing are hereby deemed and acknowledged by the parties to be
delivered simultaneously.
(i) Deliveries
of CYKN.
At the
Closing (or on the Closing Date in the case of item (A) below), CYKN is
delivering to NURO the following duly executed agreements, documents,
certificates, instruments, and other items:
(A) A
certificate for the CYKN Shares issued in the name of NURO;
(B) A
counterpart to this Agreement, duly executed by CYKN;
(C) A
counterpart to the Warrant, duly executed by CYKN; and
(D) A
counterpart to the Registration Rights Agreement (as defined in Section
13
below),
duly executed by CYKN.
(ii) Deliveries
of NURO.
At the
Closing, NURO is delivering to CYKN the following duly executed agreements,
documents, certificates, instruments, and other items (and is making the
following payments):
9
(A) The
Original Investment Amount, payable by NURO to CYKN by wire transfer of
immediately available federal funds to an account designated in writing by
CYKN
on or prior to the Effective Date;
(B) A
counterpart to this Agreement, duly executed by NURO;
(C) A
counterpart to the Warrant, duly executed by NURO; and
(D) A
counterpart to the Registration Rights Agreement (as defined in Section
13
below),
duly executed by NURO.
8. Board
Seat.
Upon
the Effective Date, the Board of Directors of CYKN will appoint one (1)
representative designated by NURO (the "NURO
Director"),
who
shall initially be ▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D., Ph.D., to serve on the Board of
Directors of CYKN (the "Board")
until
the later of the next annual meeting of stockholders of CYKN or the date on
which his successor is duly elected and qualified, or his earlier resignation.
Commencing on the Effective Date and until the date on which NURO ceases to
own
at least five percent (5%) of the then issued and outstanding shares of Common
Stock, CYKN shall nominate and recommend that its stockholders elect, and
otherwise use reasonable efforts to insure the election of, the NURO Director
to
the Board at each meeting of stockholders of CYKN at which directors are
elected, unless such NURO Director's term does not expire at such meeting.
In
the event of the death, resignation or removal of the NURO Director, NURO shall
be entitled to designate a successor who will be appointed to the Board upon
the
later of the date of such death, resignation or removal or two (2) business
days
following NURO's designation of such successor. CYKN shall indemnify the NURO
Director to the fullest extent permitted by applicable law. CYKN will indemnify
and advance expenses to, and enter into agreements regarding the same with,
each
NURO Director in such manner as to provide such NURO Directors the same rights
and benefits as are accorded to the most favorably covered of CYKN's officers
and directors during the same period of service. For so long as a NURO Director
shall remain a director of CYKN and with respect to any such prior service
by
any NURO Director, in all policies of director and officer liability insurance,
all such NURO Directors shall be named as an insured in such a manner as to
provide such NURO Directors the same rights and benefits as are accorded to
the
most favorably insured of CYKN's officers and directors during the same period
of service.
9. Market
Stand-Off Agreement.
NURO hereby
agrees that it will not offer, sell, contract to sell or otherwise dispose
of
any shares of Common Stock of CYKN or any securities convertible into or
exercisable or exchangeable for such Common Stock of CYKN, including, but not
limited to the Warrant, during the period beginning from the Closing Date and
continuing thereafter until the first anniversary of the Closing Date
("Market
Standoff Period"),
provided, that the foregoing shall not be interpreted to prevent exercise of
the
Warrant. CYKN may impose stop-transfer instructions to CYKN's transfer agent,
subject to the foregoing restrictions until the end of such Market Standoff
Period.
10. Confidentiality.
Each of
the parties hereto agrees that the terms and conditions of that certain
Confidentiality Agreement, dated on or about August 30, 2007, previously entered
into by and between the parties hereto (the "Confidentiality
Agreement")
are
hereby incorporated into this Agreement and the parties shall remain bound
by
the restrictions set forth therein.
11. Right
of Participation.
(a) Participation.
CYKN
shall, prior to any proposed issuance of securities by CYKN (including, without
limitation, options, warrants or rights carrying any rights to purchase or
receive any securities of CYKN), offer to NURO by written notice the right,
for
a period of ten (10) days, to purchase for cash at a price equal to the price
or
other consideration for which such securities are to be issued, a number of
such
securities so that, after giving effect to such issuance (and the conversion,
exercise and exchange into or for (whether directly or indirectly) shares of
Common Stock of all such securities that are so convertible, exercisable or
exchangeable), NURO will continue to maintain its same proportionate equity
ownership in CYKN as of the date of such notice (treating NURO, for the purpose
of such computation, as the holder of the number of shares of Common Stock
which
would be issuable to it upon conversion, exercise and exchange of all securities
(including but not limited to the Warrant) held by it on the date such offer
is
made, that are convertible, exercisable or exchangeable into or for (whether
directly or indirectly) shares of Common Stock and assuming the like conversion,
exercise and exchange of all such other securities held by other persons)
(“Pro
Rata Share”);
provided, however, that the participation rights of NURO pursuant to this
Section
11
shall
not apply to securities issued:
10
(i) upon
conversion or exercise of any securities of CYKN;
(ii) as
a
stock dividend or upon any subdivision of shares of Common Stock, provided
that
the securities issued pursuant to such stock dividend or subdivision are limited
to additional shares of Common Stock;
(iii) solely
in
consideration for the acquisition (whether by merger or otherwise) by CYKN
or
any of its subsidiaries of the stock (or other equity interests) or assets
of
any other entity;
(iv) in
connection with any offering of securities to be sold in an underwritten
offering registered under the Securities Act;
(v) in
connection with any offer or sale of debt securities (including debt securities
convertible into Common Stock and debt securities issued together with warrants
to acquire Common Stock) in an aggregate amount of no more than $15,000,000
in
principal amount, but only if a definitive agreement for the sale and purchase
of such securities is entered into on or before February 12, 2008; or
(vi) as
the
grant or issuance to directors, officers, employees or consultants of CYKN
or
any subsidiary pursuant to any equity compensation plan approved by the Board
of
Directors of CYKN.
(b) Mechanics.
NURO
may
accept CYKN's offer as to the full Pro Rata Share of the securities required
to
be offered to it pursuant to this Section
11
or any
lesser number, by written notice thereof given by it to CYKN prior to the
expiration of the aforesaid ten (10) day period, in which event CYKN shall
sell
and NURO shall buy, upon the terms specified, not later than the time such
securities are sold to third parties as contemplated by CYKN's offer, the number
of securities agreed to be purchased by NURO.
(c) Termination.
The
rights of NURO under this Section
11
shall
terminate and be of no further force or effect as of the date on which NURO
ceases to own at least five percent (5%) of the then issued and outstanding
shares of Common Stock.
12. Public
Announcements.
The
parties will not issue or make any reports, statements or releases to the public
with respect to this Agreement or the transactions contemplated hereby without
the consent of the other, which consent shall not be unreasonably withheld
or
delayed. If either party is unable to obtain the approval of its public report,
statement or release from the other party and such report, statement or release
is, in the opinion of legal counsel to such party, required by law in order
to
discharge such party's disclosure obligations, then such party may make or
issue
the legally required report, statement or release and promptly furnish the
other
party with a copy thereof.
11
13. Registration
Rights.
Simultaneously with the execution and delivery of this Agreement, the parties
have entered into a Registration Rights Agreement providing for certain
registration rights with respect to the CYKN Shares and Warrant Shares, a copy
of which is attached hereto and incorporated herein as Exhibit
B
(the
"Registration
Rights Agreement").
14. Indemnification.
CYKN
will indemnify and hold NURO and its directors, officers, shareholders,
partners, employees and agents (each, a “NURO
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such NURO Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by CYKN in this Agreement or in the Warrant or (b) any
action instituted against NURO by any stockholder of CYKN who is not an
affiliate of NURO, with respect to any of the transactions contemplated hereby
(unless such action is based upon a breach of NURO’s representations, warranties
or covenants under this Agreement or in any of the other Transaction Documents
or based upon agreements NURO may have with any such stockholder or any
violations or alleged violation by NURO of state or federal securities laws
or
any conduct by NURO which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any NURO
Party in respect of which indemnity may be sought pursuant to this Agreement,
such NURO Party shall promptly notify the Company in writing, and CYKN shall
have the right to assume the defense thereof with counsel of its own choosing.
Any NURO Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such
counsel shall be at the expense of such NURO Party except to the extent that
(i) the employment thereof and CYKN’s payment of such fees and expenses has
been specifically authorized by CYKN in writing, (ii) CYKN has failed after
a reasonable period of time to assume such defense and to employ counsel or
(iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of
CYKN
and the position of such NURO Party. CYKN will not be liable to any NURO Party
under this Agreement (i) for any settlement by a NURO Party effected
without CYKN’s prior written consent, which shall not be unreasonably withheld
or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to NURO’s breach of any of the
representations, warranties, covenants or agreements made by NURO in this
Agreement or in the other Transaction Documents.
15. Miscellaneous.
(a) Further
Acts.
Each of
the parties hereto acknowledge and agree that it is the intention of the parties
to prepare, execute and deliver definitive and/or amended agreements and
instruments giving effect to the transactions described in this Agreement.
Upon
execution hereof by the parties hereto, each of the parties hereto hereby agrees
to cooperate and engage in good faith negotiations pertaining to the drafting,
execution and delivery of and all documents necessary to effect the terms of
this Agreement.
(b) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws (and not the law of conflicts) of the Commonwealth of
Massachusetts.
(c) Entire
Agreement.
This
Agreement, the Warrant, the Confidentiality Agreement, the Registration Rights
Agreement and the other agreements referenced herein constitute the entire
agreement between the parties with respect to the subject matter contained
herein.
12
(d) Expenses.
Each of
the parties hereto will each bear their own respective costs and expenses
incurred in connection with the transactions contemplated herein, including
accountants' and attorneys' fees.
(e) Amendment.
This
Agreement may be amended or modified only by a written agreement executed by
both
of
the parties hereto.
(f) Benefit
of Parties; Assignability.
All of
the terms and conditions of this Agreement shall be binding upon and inure
to
the benefit of the parties and their respective successors and assigns;
provided, however, neither of the parties hereto may delegate its respective
responsibilities or assign its rights under this Agreement without the prior
written consent of the other party, except that each party is expressly
permitted to make an assignment of the Agreement in its entirety without the
other party’s consent to affiliates of such party or to any entity that acquires
all or substantially all of the assets of such party, whether in a merger,
consolidation, reorganization, acquisition, sale or otherwise.
(g) Cooperation.
The
parties agree that after the Closing they will from time to time, upon the
request of the other party and without further consideration, execute,
acknowledge, and deliver in proper form any further instruments and take such
other action as any other party may reasonably require to carry out effectively
the transactions contemplated by this Agreement.
(h) Counterparts.
This
Agreement may be executed simultaneously in counterparts, each of which shall
be
deemed an original, but both of which together shall constitute one and the
same
instrument.
(i) Survival.
The
representations and warranties of the parties in this Agreement shall
indefinitely survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
Each
party may rely upon the representations and warranties of the other party in
this Agreement notwithstanding any review or investigation carried out by or
on
behalf of such party.
[Remainder
of Page Left Blank]
13
IN
THE
WITNESS WHEREOF, CYKN and NURO have executed and delivered this Agreement as
of
the Effective Date.
| CYBERKINETICS NEUROTECHNOLOGY SYSTEMS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
|
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President and CEO |
||
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
| NEUROMETRIX, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
|
▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO |
||
Address: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
14
Exhibit
A
Warrant
to Purchase Common Stock
15
Exhibit
B
Registration
Rights Agreement
16