Exhibit 10.1
JOINT VENTURE AND STRATEGIC INVESTMENT
AGREEMENT
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 100 Foxborough
Blvd., Foxborough MA 02035 ("
CYKN ")
and NEUROMetrix, Inc., a Delaware corporation with its principal
offices at 62 Fourth Avenue, Waltham, MA 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.
(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.
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 ".
(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.
(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
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