Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
September 26, 2005, among Cyberkinetics Neurotechnology Systems, Inc., a
Delaware corporation (the "Company"), on the one hand, and each purchaser
identified on the signature pages hereto (each, including its successors and
assigns, a "Purchaser" and collectively the "Purchasers") on the other hand;
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company Units ("Units"), each Unit consisting of (i) one share of
Common Stock ("Common Shares") and (ii) a warrant in the form attached hereto as
Exhibit A ("Warrant") to purchase .5 Common Shares ("Warrant Shares").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(i).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 144.
With respect to a Purchaser, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as such
Purchaser will be deemed to be an Affiliate of such Purchaser.
"Closing" means the closing of the purchase and sale of the Units
pursuant to Section 2.1.
"Closing Date" means the date when all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers' obligations to pay the Subscription
Amount and (ii) the Company's obligations to deliver the Shares have been
satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.001 per share, and any securities into which such common stock may hereafter
be reclassified.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered concurrently herewith.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Excepted Purchasers" means (a) existing stockholders of the
Company, and (b) Purchasers introduced to the Company by Xxxxxx & Xxxxxxx, LLC
or Seven Hills Partners LLC.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Issuance" means the issuance of (a) shares of Common Stock
or options to employees, officers or directors of the Company pursuant to any
stock or option plan duly adopted by a majority of the non-employee members of
the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise of or conversion of any securities issued hereunder, or
convertible securities, options or warrants issued and outstanding on the date
of this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities, (c) securities
issued pursuant to strategic transactions with an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds or pursuant to
acquisitions, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities; and (d) securities issued to
consultants for services rendered to the Company in non-capital raising
transactions in an amount per individual issuance not to exceed 30,000 shares
for particular services rendered.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Hunter" means Hunter World Markets, Inc.
"Intellectual Property Rights" shall have the meaning ascribed to
such term in Section 3.1(k).
"Legend Removal Date" shall have the meaning ascribed to such term
in Section 4.1(c).
"Liens" means a lien, charge, security interest, encumbrance, right
of first refusal, preemptive right or other restriction.
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"Material Adverse Effect" shall have the meaning ascribed to such
term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(i).
"Per Unit Purchase Price" equals $1.20, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the date of this
Agreement.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Placement Agent Agreement" means that certain Placement Agent
Agreement between the Company and Hunter World Markets, Inc.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and each
Purchaser, providing for the registration of the Shares in the form of Exhibit B
attached hereto.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchasers of the Shares.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Subscription Amount" means, as to each Purchaser, the amounts set
forth below such Purchaser's signature block on the signature page hereto, in
United States dollars and in immediately available funds.
"Subsidiary" shall mean the subsidiaries of the Company, if any, set
forth on Schedule 3.1(a).
"Trading Day" means a day on which the Common Stock is traded on a
Trading Market.
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"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. On the Closing Date, each Purchaser shall purchase from the
Company, severally and not jointly with the other Purchasers, and the Company
shall issue and sell to each Purchaser, a number of Units equal to the
Subscription Amount divided by the Per Unit Purchase Price. Units sold hereunder
shall be up to $15,000,000. Upon satisfaction of the conditions set forth in
Section 2.3, the Closing shall occur at the offices of Xxxx & Xxxxx, located at
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or such other
location as the parties shall mutually agree. Notwithstanding the foregoing, the
payment of the aggregate Subscription Amounts and disbursement of funds shall be
through an escrow with Xxxxx Fargo Bank, Los Angeles, California or such other
escrow agent as Hunter approves (the "Escrow Agent").
2.2 Deliveries.
(a) On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser or Hunter, as the case may be the following:
(i) this Agreement duly executed by the Company;
(ii) a copy of the irrevocable instructions to the Company's
transfer agent instructing the transfer agent to deliver, on an expedited basis,
a certificate evidencing a number of Common Shares equal to such Purchaser's
Subscription Amount divided by the Per Unit Purchase Price, registered in the
name of such Purchaser; and
(iii) the Warrants;
(iv) the Registration Rights Agreement duly executed by the
Company.
(b) On the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer of
same day funds to the account as specified in writing by the Escrow Agent; and
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(iii) the Registration Rights Agreement duly executed by such
Purchaser.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Purchasers contained
herein;
(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date shall have
been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained herein;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have been
performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement; and
(iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof.
(v) the Company shall have in force a Lock-Up Agreement in the
form attached hereto as Annex B from certain existing stockholders or holders of
derivative securities set forth on Annex B, who received such Common Stock or
derivative securities upon the conversion of Series A Preferred Stock in the
Company's predecessor, Cyberkinetics, Inc. ("Predecessor"), into Predecessor
Common Stock, which was itself converted to Common Stock in 2004.
(vi) a minimum of $8,000,000 shall have been received by the
Escrow Agent.
(vii) The Purchasers shall have received an opinion of counsel
to the Company in form and substance reasonably satisfactory to the Purchasers.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company, if any, are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, 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. If the Company has no subsidiaries, then references in
the Transaction Documents to the Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries 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 business
as currently conducted. Neither the Company nor any Subsidiary 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. Each of the
Company and the Subsidiaries 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, could not have or reasonably be expected to 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 the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
the Company's ability to perform in any material respect on a timely basis its
obligations under any 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. The Company 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 the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith other than in connection with the Required Approvals. Each
of the Transaction Documents has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company 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
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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 the Company, the issuance and sale of the Units and the
consummation by the Company of the other transactions contemplated thereby do
not and will not (i) conflict with or violate any provision of the Company's or
any 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 the Company or any Subsidiary, 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 the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary 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 the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. The Company 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 the Company of the Transaction Documents,
other than (i) filings required pursuant to Section 4.4 of this Agreement, (ii)
the filing with the Commission of the Registration Statement, (iii)
application(s) to each applicable Trading Market for the listing of the Common
Shares for trading thereon in the time and manner required thereby, and (iv) the
filing of Form D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Shares, the Warrants 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 the Company other than restrictions on transfer provided for in the
Transaction Documents. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement.
(g) Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of common stock, $.001 par value per share, and
no shares of preferred stock. As of the date hereof, there were 15,856,484
shares of common stock outstanding and 1,300,000 shares held in escrow and no
shares of preferred stock outstanding. In addition, there were outstanding
options and warrants to purchase 4,225,881 shares of common stock. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and
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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 the Company or others is required for the issuance and sale of the Units.
There are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company's
stockholders.
(h) Material Changes. Since June 30, 2005, (i) the Company 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) the Company has not altered
its method of accounting, and (iii) the Company 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 of
its capital stock.
(i) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary 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 Shares or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, 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 the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current director or officer of the Company.
(j) Permits. The Company and the Subsidiaries 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 could
not have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit.
(k) Patents and Trademarks. The Company and the Subsidiaries 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 could have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights of others.
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(l) Certain Fees. Except for Units sold to the Excepted Purchasers
and placement agent fees to Hunter, no brokerage or finder's fees or commissions
are or will be payable by the Company 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. The Purchasers
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 the Purchasers'
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Units by the
Company to the Purchasers as contemplated hereby. Neither the Company nor any
person acting on behalf of the Company has offered or sold any of the Shares by
any form of general solicitation or general advertising. The Company has offered
the Shares for sale only to the Purchasers and certain other "accredited
investors" within the meaning of Rule 501 under the Securities Act.
(n) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Shares, will not be or be
an Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
(o) Registration Rights. No Person has any right to cause the
Company to effect the registration under the Securities Act of any securities of
the Company.
(p) Financial Statements. The Company has made available to the
Purchasers its (a) audited balance sheets as at December 31, 2003 and 2004 and
related statements of operations, changes in stockholders equity and cash flows
for the years ended December 31, 2004 and 2003, and (b) unaudited balance sheets
as at June 30, 2005 and the related statement of operations, changes in
stockholders equity and cash flows for the six months ended June 30, 2005
(collectively, the "Financial Statements"). The Financial Statements (i) were in
accordance with the books and records of the Company, (ii) are correct and
complete, (iii) fairly present the financial position and results of operations
of the Company as of the dates indicated, and (iv) are prepared in accordance
with U.S. GAAP (except that (x) unaudited financial statements may not be in
accordance with GAAP because of the absence of footnotes normally contained
therein, and (y) interim (unaudited) financials are subject to normal year-end
audit adjustments that in the aggregate will not have a material adverse effect
on the Company or its business, financial conditions or results of operations).
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its
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obligations thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each of the Transaction Documents to which it is a party has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except (i) as limited by general equitable principles and 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.
(b) Investment Intent. Such Purchaser understands that the Shares
and Warrants are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Shares and Warrants as principal for its own account and not with a view to or
for distributing or reselling such Shares or any part thereof, has no present
intention of distributing any of such Shares and Warrants and has no arrangement
or understanding with any other persons regarding the distribution of such
Shares and Warrants (this representation and warranty not limiting such
Purchaser's right to sell the Shares and Warrant Shares pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Shares and Warrants
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Shares or Warrants.
(c) Purchaser Status. At the time such Purchaser was offered the
Units, it was, and at the date hereof it is, (i) an "accredited investor" as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under
the Securities Act. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, 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 Units, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Shares and, at the present time,
is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the Units
as a result of any advertisement, article, notice or other communication
regarding the Units published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement or Rule 144, to the
Company or to an affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Shares, the Warrants and the
Warrant Shares in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a) UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or
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secured parties. Such a pledge or transfer would not be subject to approval of
the Company and no legal opinion of legal counsel of the pledgee, secured party
or pledgor shall be required in connection therewith. Further, no notice shall
be required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to
registration pursuant to the Registration Rights Agreement, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing the Common Shares and Warrant Shares
shall not contain any legend (including the legend set forth in Section 4.1(b)),
(i) while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities Act
provided that at the time a Purchaser requests a removal of the legend on any
certificate evidencing all or any portion of any of the Common Shares and
Warrant Shares, such Purchaser (or a broker acting on such Purchaser's behalf)
provides to the Company (or to the transfer agent on the Company's behalf), a
representation that any of the Common Shares and Warrant Shares, sold or to be
sold by such Purchaser have been, or will be, sold in accordance with the plan
of distribution set forth in the Prospectus and in compliance with the
prospectus delivery requirements under the Securities Act, or (ii) following any
sale of such Shares pursuant to Rule 144, or (iii) if such Common Shares and
Warrant Shares are eligible for sale under Rule 144(k), or (iv) if such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 4.1(c), it will, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing Common
Shares and Warrant Shares issued with a restrictive legend (such date, the
"Legend Removal Date"), deliver or cause to be delivered to such Purchaser a
certificate representing such Shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
(d) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from certificates
representing Common Shares and Warrant Shares as set forth in this Section 4.1
is predicated upon the Company's reliance that the Purchaser will sell any
Common Shares and Warrant Shares pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company will use best efforts to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Shares
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the
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extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Units in a manner that would require the registration under the
Securities Act of the sale of the Units to the Purchasers or that would be
integrated with the offer or sale of the Units for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Publicity. The Company, and each Purchaser shall consult with each
other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company, nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, neither the Company shall publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law and (ii) to the extent such disclosure is required by law or
Trading Market regulations.
4.5 Reservation of Common Stock. As of the date hereof, each of the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue the Securities
pursuant to this Agreement.
4.6 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Shares or otherwise.
4.7 Subsequent Equity Sales. Except for Exempt Issuances, from the date
hereof until the Effective Date, neither the Company nor any Subsidiary shall
issue shares of Common Stock or Common Stock Equivalents.
4.8 Delivery of Shares After Closing. The Company shall deliver, or cause
to be delivered, the respective Shares purchased by each Purchaser to such
Purchaser within three Trading Days of the Closing Date.
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4.9 Most Favored Nations. If, at any time and from time to time during the
period commencing on the Closing Date and ending on the first anniversary of the
Effective Date, the Company issues additional shares of Common Stock or Common
Stock Equivalents (the "Additional Shares") at a price or exercise price per
share of Common Stock (the "Effective Price") less than Per Share Unit Price (as
adjusted hereunder to such date), then the Company shall provide notice thereof
to the Purchasers, and, within twenty business days from receipt of such notice,
the Purchasers or any of them shall have the right to purchase additional shares
of Common Stock (the "Purchase Shares") at a purchase price equal to the par
value thereof (the "Purchase Share Price") in accordance with the following:
(a) There shall be calculated a per share price (the "Adjusted
Price") determined by a fraction, the numerator of which shall be $19,020,581
PLUS the product of the number of Additional Shares multiplied by the Effective
Price PLUS any prior products of previously issued Additional Shares multiplied
by the applicable Effective Price(s) with respect to such issuances, and the
denominator of which shall be 15,850,484 PLUS the number of Additional Shares
PLUS any previously issued Additional Shares.
(b) Each Purchaser shall be entitled to purchase that number of
Purchase Shares at the Purchase Price equal to the difference between the
product of the total dollars paid by Purchaser for shares of common stock
hereunder (the "Purchaser Amount") divided by the Adjusted Price LESS the
product of the Purchaser Amount divided by the Per Share Purchase Price.
By way of example only, if the Company issued 4,000,000 Additional Shares
at an Effective Price of $1.00 per share, and there had been no previous
adjustments further to this Section 4.9, the Adjusted Price would be $1.16
($19,020,581 PLUS $4,000,000 divided by 15,850,484 PLUS 4,000,000). If the
Purchaser purchased $1,000,000 of Common Stock further to this Agreement,
he/she/it would be entitled to purchase 28,736 Purchase Shares (1,000,000
divided by 1.16 or 862,069 shares LESS 1,000,000 divided by 1.2 or 833,333
shares).
Notwithstanding the foregoing, no adjustment will be made in respect of
Exempt Issuances.
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before October 14, 2005; provided that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
5.2 Fees and Expenses. The Company shall deliver, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as otherwise set forth in this Agreement or in the Placement Agent
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
14
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Shares.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (c) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchasers holding at least 66% of the Units at such time or, in
the case of a waiver, by the party against whom enforcement of any such waiver
is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares, provided such transferee agrees in
writing to be bound, with respect to the transferred Shares, by the provisions
hereof that apply to the "Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
15
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of Los Angeles. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Los Angeles,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival. The representations and warranties herein shall survive the
Closing and delivery of the Units for two years from the date hereof.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Replacement of Shares. If any certificate evidencing any Shares is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
16
destruction and customary and reasonable indemnity, if requested. The applicants
for a new certificate under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Shares.
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
(Signature Pages Follows)
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CYBERKINETICS NEUROTECHNOLOGY
SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
Address for Notice
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
with a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
17
[PURCHASER SIGNATURE PAGES TO CYBERKINETICS NEUROTECHNOLOGY SYSTEMS, INC.
SECURITIES PURCHASE AGREEMENT PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Common Stock Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
INVESTING ENTITY
-----------------------------------------------
By:
-------------------------------------------
Name:
Title:
Email Address:
Address for Notice of Investing Party:
With a copy to (which shall not constitute
notice):
Address for Delivery of Units for Investing
Entity (if not same as above):
Subscription Amount: $________________________
Units: ________________________
EIN Number: ________________________
18
ANNEX A
CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the
date hereto, the purchasers shall purchase up to $___________ of Units from
Cyberkenetics Neurotechnology Systems, Inc., a Delaware corporation (the
"Company"). All funds will be wired into an escrow account. All funds will be
disbursed in accordance with this Closing Statement.
DISBURSEMENT DATE: SEPTEMBER ____, 2005
I. PURCHASE PRICE
GROSS PROCEEDS TO BE RECEIVED IN TRUST $
II. DISBURSEMENTS
$
$
$
$
$
TOTAL AMOUNT DISBURSED: $
WIRE INSTRUCTIONS:
To: _________________________________
To: _________________________________
00
XXXXX X
XXXX XX XXXX-XX XXXXXXXXX
XXX Partners, L.P.
Global Life Science Ventures Fonds II GMBH & Co., KG
Global Life Science Ventures Fund II L.P.
mRNA Fund II LP
Oxford Bioscience Partners IV L.P.
NeuroVentures Fund, LP
Ladies and Gentlemen:
The undersigned is an owner of record, or beneficially, of (i) ___________
shares of the common stock, par value $.0001 per share (the "Common Stock") of
Cyberkinetics Neurotechology Systems, Inc. (the "Company") which were issued to
the undersigned in exchange for shares of common stock, par value .00001 per
share, of Cyberkinetics, Inc. ("Predecessor Cyberkinetics") issued upon
conversion of shares of Series A Preferred Stock of Predecessor Cyberkinetics
previously held by the undersigned, and (ii) any shares of common stock of
Predecessor Cyberkinetics issued to the undersigned in conjunction with the
Series A Preferred Stock (collectively, the "Shares").
The Company has agreed to register the Shares concurrent with the
registration of up to $15 million of Common Stock and Warrants to purchase
Common Stock to be sold by the Company in a private placement pursuant to a
resale registration statement on Form SB-2 (the "Registration Statement"). The
undersigned recognizes that the filing of the Registration Statement will be of
benefit to the undersigned. The undersigned acknowledges that the Company is
relying on the representations and agreements of the undersigned contained in
this letter in filing the Registration Statement.
In consideration of the foregoing, the undersigned hereby agrees that
he/she/it will not, directly or indirectly, sell, any of the Shares further to
the Registration Statement, except (i) that 25% of the Shares shall become
saleable by the undersigned nine (9) months after the date that the Registration
Statement is declared effective by the Securities and Exchange Commission (the
"Effectiveness Date"), but subject to the Permitted Amount (as defined below),
if the closing price of the Common Stock for 20 of the preceding 30 consecutive
trading days is equal to or greater than $3.00 per share with an average daily
volume of over 100,000 shares traded per day, and (ii) all of the Shares shall
become saleable by the undersigned twelve (12) months after the Effectiveness
Date, without regard to the Permitted Amount, at which point this Agreement
shall terminate.
20
For purposes hereof, the Permitted Amount shall consist of the greater of
(a) 1% of the then outstanding shares of the Common Stock, and (b) the average
weekly trading volume for the four (4) week period preceding such sale.
If the Company does not receive a signed copy of this Agreement, nothing
shall preclude the undersigned from selling any or all of the aforementioned
Shares further to Rule 144 without restrictions which would attach had said
Shares been sold further to the Registration Statement.
If the Company shall at any time after the date hereof subdivide its
outstanding shares of Common Stock into a greater number of shares (by any stock
split, stock dividend or otherwise), then the number of Shares saleable in
paragraph 3 above shall be proportionately increased.
The undersigned agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of the aforementioned shares of the Common Stock held by the
undersigned if and only if such aforementioned shares are not sold in compliance
with the foregoing restrictions. This will confirm that the undersigned owns
shares of Common Stock in excess of the number of shares referenced in the first
paragraph herein and that in no event will any shares in excess of the number of
shares referenced in first paragraph herein be subject to this Lock-up
Agreement.
This Agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives and assigns of the
undersigned.
_______________________________________
Printed Name of Holder
By:____________________________________
Signature______________________________
21
