EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

           This Employment Agreement (this “ Agreement ”), is made and entered into this 18th day of September, 2006 (the “ Effective Date ”), by and between Cyberkinetics Neurotechnology Systems, Inc., a Delaware corporation (the “ Company ”), and Kurt H. Kruger (the “ Executive ”).

                     Whereas , the parties wish to set forth their understanding and agreement regarding the employment of the Executive by the Company;

                     Now therefore , in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

Section 1. Employment Services.

          During the Employment Period (as defined below), the Executive will serve as the Company’s Chief Financial Officer and will have such duties and responsibilities as would normally attach to that position, including such duties and responsibilities as are customary among persons employed in a similar capacity for similar companies, subject to the authority of the CEO and President of the Company. The Executive will faithfully and diligently carry out his duties and responsibilities and comply with all of the reasonable and lawful directives of the CEO, to which the Executive will report. The Executive will, if so elected, serve as a director of the Company and, if requested by the Company, an officer or director of any subsidiary or affiliate of the Company without compensation in addition to that provided in this Agreement. For purposes of this Agreement, an “affiliate” of the Company means any corporation, limited partnership, limited liability company or other entity engaged in the same business as the Company, or a related business, and which is controlled by, or under common control with, the Company.

Section 2. Term.

          The Company shall employ the Executive, and the Executive accepts such employment, commencing on the Effective Date and continuing thereafter until such time as this Agreement has terminated under the provisions of Section 5 hereof (the “ Employment Period ”).

Section 3. Performance.

          During the Employment Period, the Executive shall devote his best efforts and all of his business time and attention (except for vacation periods and reasonable periods of illness or other incapacity) to the business of the Company and its affiliates and will not engage in consulting work or in any other trade or business for his own account or for or on behalf of any other person, firm, corporation, limited partnership, limited liability company or other entity without the written consent of the Board of Directors of the Company (the “ Board ”) in each case, which shall not be granted if any such activity, in the opinion of the Board, competes, conflicts or interferes with the performance of his duties hereunder in any material way.

Section 4. Compensation and Benefits.

	(a)		Salary. For services to the Company rendered by the Executive in any capacity during the Employment Period, including, without limitation, services as a manager, officer, director or member of any committee of the Company or of any subsidiary, affiliate or division thereof, the Company will pay or cause to be paid to the Executive a base salary at the rate of not less than $220,000 per annum (or such higher amount as the Compensation Committee of the Board (the “ Compensation Committee ”) may establish from time to time). The Executive’s base salary for any partial year will be prorated based upon the number of days elapsed in such year. The Executive’s base salary will be payable periodically in accordance with the Company’s customary payroll practices for its executives. Such base salary shall be reviewed in the month of April after the end of each fiscal year, starting with the fiscal year ending December 31, 2006, and may be increased based on the Executive’s performance, but not decreased, by the Board (or the Compensation Committee) in its reasonable discretion. The term “base salary” shall not include any payment or other benefit which is denominated as or is in the nature of a bonus, incentive payment, profit-sharing payment, performance share award, stock option, stock appreciation right, retirement or pension accrual, insurance benefit, other fringe benefit or expense allowance, whether or not taxable to the Executive as income.
	(b)		Annual Performance Bonus. The Executive will be eligible to receive an annual cash performance bonus of up to $25,000 for the fiscal year ending December 31, 2006 (the “ Pro-Rated Annual Performance Bonus ”). For fiscal years subsequent to the fiscal year ending December 31, 2006, the Executive will be eligible to earn and receive an annual cash performance bonus of up to $75,000 (the “ Annual Performance Bonus ” and, together with the Pro-Rated Annual Performance Bonus, the “ Performance Bonus ”). The Compensation Committee shall consider and make a determination as to the amount of the bonus, if any, earned by the Executive not later than the first day of the month of March after the end of each fiscal year during the Employment Period, starting with the fiscal year ending December 31, 2006. Any bonus amount earned during the applicable fiscal year shall be paid no later than March 15 th following the end of such fiscal year. Bonus awards shall be based upon the performance by the Executive as measured against objective and reasonable criteria mutually agreed and approved in advance by the Executive and the Compensation Committee, which criteria shall be set forth in Schedule 1 to this Agreement. To the extent that at least 50% of the criteria are achieved, the Executive shall be paid a pro rata percentage of the Performance Bonus. In the event the Executive exceeds such criteria set forth in Schedule 1 to this Agreement, the Compensation Committee may, in its sole and absolute discretion, increase the Annual Performance Bonus to an amount greater than $75,000.

	(c)		Four Year Stock Option Grant. Simultaneously with the execution and delivery of this Agreement, the Company hereby grants to the Executive an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended, to purchase up to 200,000 shares of the Company’s Common Stock (the “ Four-Year Option ”) pursuant to the terms and conditions of that certain Four-Year Option Agreement, a copy of which is attached hereto and incorporated herein as Exhibit A (the “ Four-Year Option Agreement ”). Under the terms of the Four-Year Option Agreement, the Four-Year Option will have an exercise price equal to the fair value of the Company’s Common Stock as of the Effective Date and the shares of the Company’s Common Stock granted under the Four-Year Option will become vested and exercisable over a period of four (4) years as follows: (i) 25% on the first anniversary of the Effective Date and (ii) an additional 6.25% shall vest every three months after the first anniversary of the Effective Date for the next three years, as long as the Executive continues to be employed by the Company on each successive vesting date under the terms and conditions of this Agreement (or another agreement mutually agreed upon). The Four-Year Option will have a term of ten (10) years from the Effective Date.
	(d)		Performance Stock Option Grant. Simultaneously with the execution and delivery of this Agreement, the Company hereby grants to the Executive an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended, to purchase up to 100,000 shares of the Company’s Common Stock (the “ Performance Option ”) pursuant to the terms and conditions of that certain Performance Option Agreement, a copy of which is attached hereto and incorporated herein as Exhibit B (the “ Performance Option Agreement ”). Under the terms of the Performance Option Agreement, the Performance Option will have a per share exercise price equal to the fair market value of the Company’s Common Stock as of the Effective Date and the shares of the Company’s Common Stock granted under the Option will become fully vested and exercisable on the ninth anniversary of the Effective Date (unless vested earlier pursuant to Section 4(f) below) , as long as the Executive continues to be employed by the Company on such vesting date under the terms and conditions of this Agreement (or another agreement mutually agreed upon). The Performance Option will have a term of ten (10) years from the Effective Date.
	(e)		Restricted Stock. Simultaneously with the execution and delivery of this Agreement, the Company hereby grants to the Executive 100,000 shares of the Company’s Common Stock (the “ Restricted Stock ”) pursuant to the terms and conditions of that certain Restricted Stock Agreement, a copy of which is attached hereto and incorporated herein as Exhibit C (the “ Restricted Stock Agreement ”). Under the terms of the Restricted Stock Agreement, the Restricted Stock will vest over a period of four (4) years as follows: 25,000 shares on each anniversary of the Effective Date until fully

			vested (unless vested earlier pursuant to Section 4(f) below), as long as the Executive continues to be employed by the Company on such vesting date under the terms and conditions of this Agreement (or another agreement mutually agreed upon).
	(f)		Accelerated Vesting of Stock Options. (i) Upon any sale, merger or other transaction resulting in (i) a change in control of the Company and (ii) the Company’s or its successor’s failure to continue to employ or failure to offer to employ the Executive under the terms and conditions of this Agreement (or another agreement mutually agreed upon), any unvested options to purchase shares of the Company’s Common Stock or unvested shares of Restricted Stock granted to the Executive pursuant to Sections 4(c), 4(d) or 4(e) above which remain outstanding immediately prior to the effective date of the change in control shall immediately vest and, in the case of options, become exercisable prior to such sale, merger or other change of control transaction. (ii) If the Executive voluntary resigns by reason of a Deemed Termination Event (as defined below), then that portion of the options to purchase shares of the Company’s Common Stock and that portion of the unvested shares of Restricted Stock granted to the Executive pursuant to Sections 4(c), 4(d) or 4(e) above which would have vested during the period commencing on the Date of Termination (as defined below) and ending twelve (12) months after the Date of Termination, shall immediately vest and, in the case of options, become exercisable as of the Date of Termination. (iii) For purposes of this Section 4(f), a change of control shall be deemed to occur upon: (1) any sale or exchange of greater than 50% of the voting interests of the Company; (2) any merger of the Company with an unaffiliated third party in which the Company does not survive the merger; or (3) any sale of all or substantially all assets of the Company. As long as the Executive continues to be employed by the Company under the terms and conditions of this Agreement (or another agreement mutually agreed upon) on an Event-Based Vesting Date (as defined below), a portion of the unvested Performance Options granted to the Executive pursuant to Section 4(d) shall vest immediately upon the achievement of certain objectives (each, an “ Event-Based Vesting Date ”) as follows: (i) Performance Options to purchase up to 33,333 shares shall vest upon the Company obtaining a significant institutional investor base or research analyst coverage by a nationally-recognized investment firm as determined by the Company’s Board of Directors, (ii) Performance Options to purchase up to 33,333 shares shall vest upon the Company being listed on a national securities exchange (as such term is defined by the federal securities laws) and (iii) Performance Options to purchase up to 33,334 shares shall vest upon the Company completing a transaction with a significant corporate investor or entering into a significant partnership each as determined by the Company’s Board of Directors.

(g)

Other Benefits. In addition to the compensation described in this Section 4, and such other amounts not constituting base salary as may be provided to the Executive from time to time by the Board, the Executive will be entitled during the Employment Period to participate in any retirement plans, bonus plans, welfare benefit plans and other employee benefit plans of the Company that may be in effect from time to time with respect to executives of the Company generally, to the extent the Executive is eligible under the terms of those plans. The Executive shall also be entitled to the following:

	•		Twenty (20) days of paid vacation per year.
	•		The Company shall reimburse the Executive in accordance with the Company’s reimbursement policy for all reasonable and necessary business expenses incurred by him in the course of performing his duties hereunder, provided that such expenses are appropriately documented in accordance with the Company’s reimbursement policy.
	•		The Executive shall be entitled to a life insurance policy in a face amount equal to Three Hundred Thousand Dollars ($300,000.00) (the “ Life Insurance ”), which such policy shall be convertible to an individual policy at the Executive’s election upon termination of Executive’s employment with the Company.

Section 5. Termination.

     The Executive’s employment hereunder shall terminate under the following circumstances:

(a)

Death or Disability. The Executive’s employment with the Company shall automatically terminate upon the death or Disability (as defined below) of the Executive. “ Disability ” shall mean that the Executive is no longer able to perform the essential functions of the Executive Vice President for a continuous period of six (6) months or a total of nine (9) months in any one-year period. If any question arises as to whether the Executive has been so disabled, the Executive shall submit to an examination by a physician mutually acceptable to the Board and the Executive and, following such examination, the physician shall submit to the Company and to the Executive a report in reasonable detail setting forth his or her opinion as to whether the Executive was so disabled. Such report shall for the purposes of this Agreement be conclusive of the issue. Notwithstanding the foregoing, in the event of a Disability, the Company shall take no action that violates the applicable provisions of the Americans With Disabilities Act. If the Executive’s employment with the Company is terminated due to the death or Disability of the Executive, then Company shall promptly pay (and in any event no later than five (5)

days after the date of death or Disability) to the Executive’s estate or to the Executive any and all amounts then owed to the Executive, including all accrued and unpaid base salary, vacation pay, other benefits, and any applicable earned portion of the Performance Bonus less any applicable withholdings. In a