EXHIBIT 10.13
TRAFALGAR VENTURES INC.
REGISTRATION RIGHTS AGREEMENT
OCTOBER ___, 2004
.
.
.
Article 1. Certain Definitions.................................................. 1
Article 2. Registration Rights.................................................. 2
Section 2.1 Incidental/"Piggy-Back" Registration...................... 2
Section 2.2 Demand Registration....................................... 3
Section 2.3 Conditional Registration.................................. 4
Section 2.4 Information Required for Registration..................... 4
Section 2.5 Effectiveness of Registration Statements.................. 4
Section 2.6 Termination of Registration Rights........................ 4
Section 2.7 Exchange Act Registration................................. 4
Section 2.8 Damages................................................... 5
Section 2.9 Further Obligations of the Company........................ 5
Section 2.10 Expenses.................................................. 6
Section 2.11 Delay of Registration..................................... 6
Section 2.12 Conditions to Registration Obligations.................... 7
Section 2.13 Transferability of Registration Rights.................... 7
Article 3. Indemnification...................................................... 7
Section 3.1 Indemnification of Holders of Registrable Shares.......... 7
Section 3.2 Indemnification of Company................................ 9
Article 4. Covenants............................................................ 10
Section 4.1 Registration of Shares.................................... 10
Section 4.2 Lock-Up Agreements........................................ 10
Article 5. General.............................................................. 11
Section 5.1 No Waiver; Cumulative Remedies............................ 11
Section 5.2 Amendments, Waivers and Consents.......................... 11
Section 5.3 Addresses for Notices..................................... 11
Section 5.4 Binding Effect; Assignment................................ 12
Section 5.5 Entire Agreement.......................................... 12
Section 5.6 Severability.............................................. 12
Section 5.7 Governing Law............................................. 13
Section 5.8 Headings.................................................. 13
Section 5.9 Counterparts.............................................. 13
Section 5.10 Expenses.................................................. 13
Section 5.11 Further Assurances........................................ 13
Section 5.12 Agreement on File......................................... 13
ii
TRAFALGAR VENTURES INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
October ___, 2004, by and among Trafalgar Ventures Inc., a Nevada corporation
(the "Company") and the individuals and entities listed on Exhibit A (the
"Investors").
RECITALS:
A. The Investors are the holders of Series A Redeemable Convertible
Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock"),
in Cyberkinetics, Inc., a Delaware corporation ("CKI"), and party to a certain
Amended and Restated Investors' Rights Agreement, dated June 30, 2003 (the
"Investors' Rights Agreement").
B. Concurrently herewith, the Company is entering into a Merger
Agreement, dated of even date herewith (the "Merger Agreement") pursuant to
which Trafalgar Acquisition Corporation, a Nevada company ("MergerSub") and a
wholly owned subsidiary of the Company, will merge with and into CKI, and CKI
shall thereby become a wholly owned subsidiary of the Company (the "Merger").
C. Pursuant to the Merger, the Investors will convert their shares
of Series A Preferred Stock into shares of common stock of CKI, and subsequently
exchange such shares of common stock for shares of common stock in the Company.
D. The obligations of the Company and the Investors to enter into
this Agreement are conditioned upon, among other things, the completion of the
Merger.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledge, the parties hereto further
agree as follows:
ARTICLE 1. CERTAIN DEFINITIONS
As used in this Agreement, the following underlined terms shall have the
corresponding meanings:
"Agreement" has the meaning set forth in the Preamble.
"Company" has the meaning set forth in the Preamble.
"Commission" means the Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act and the Exchange Act.
"Common Stock" means (a) the Company's Common Stock, $0.001 par value per share,
as authorized on the date of this Agreement; (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference; and (c) any other securities of the Company into
which or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Deferral Period" has the meaning set forth in Section 2.11.
"Exchange Act" means the Securities Exchange of Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"First Release" has the meaning set forth in Section 4.2(a).
"Investors" has the meaning set forth in the Preamble.
"Investors' Rights Agreement" has the meaning set forth in the Recitals.
"Keyperson" has the meaning set forth in Section 4.2(a).
"Merger" has the meaning set forth in the Recitals.
"Merger Agreement" has the meaning set forth in the Recitals.
"MergerSub" has the meaning set forth in the Recitals.
"Other CKI Shareholders" has the meaning set forth in Section 4.2(b).
"Permitted Transferee" has the meaning set forth in Section 2.13.
"Person" means an individual, corporation, partnership, joint venture, trust, or
unincorporated organization (including but not limited to a limited liability
company), or a body politic, government or any agency or political subdivision
thereof.
"Qualified PIPE" means a private investment in the Company, to take place
following the Merger in which the aggregate proceeds to the Company (after
deducting any fees, discounts, and commissions) equals or exceeds $[5] million
and pursuant to which the Company will agree to use its best efforts to register
the shares sold in the private placement under the Securities Act.
"Registrable Shares" means (i) the shares of Common Stock issued and issuable
to the Investors pursuant to the Merger; provided, however, that shares of
Common Stock which are Registrable Shares shall cease to be Registrable Shares
upon any sale pursuant to (x) a registration statement under the Securities Act,
(y) Section 4(1) of the Securities Act, or (z) Rule 144 promulgated under the
Securities Act, or any sale, transfer or assignment in any manner to any Person
who, by virtue of Section 2.13 hereof, is not entitled to the rights provided by
this Agreement.
"Securities Act" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"Series A Preferred Stock" has the meaning set forth in the Recitals.
ARTICLE 2. REGISTRATION RIGHTS
Section 2.1 Incidental/"Piggy-Back" Registration.
If at any time following the six-month anniversary of the effective date of the
Merger the Company shall determine to register under the Securities Act
(including pursuant to a demand of any Investor of the Company exercising
registration rights) any of its securities (other than a registration including
the shares issued as part of the Qualified PIPE and other than a registration on
Form S-8 or Form S-4 or their then equivalents or similar registrations of
2
securities issued in business combination transactions or employee benefit
plans), the Company shall send to each holder of Registrable Shares, including
each holder who has the right to acquire Registrable Shares, written notice of
such determination and, if within 30 days after receipt of such notice, such
holder shall so request in writing, the Company shall use its best efforts to
include in such registration statement all or any part of the Registrable Shares
such holder requests to be registered therein, provided that if, in connection
with any offering involving an underwriting of Common Stock to be issued by the
Company, the managing underwriter shall impose a limitation on the number of
shares of such Common Stock which may be included in any such registration
statement because, in such underwriter's judgment, such limitation is necessary
to effect an orderly public distribution, and such limitation is imposed pro
rata with respect to all securities whose holders have contractual, incidental
or "piggyback" rights to include such securities in the registration statement
and as to which inclusion has been requested pursuant to such right, and there
is first excluded from such registration statement all shares of Common Stock
sought to be included therein by (i) any current or former director, officer or
employee of the Company, (ii) any holder thereof not having any such
contractual, incidental registration rights, and (iii) any holder thereof having
contractual, incidental or "piggyback" registration rights subordinate and
junior to the rights of the holders of Registrable Shares, then the Company
shall be obligated to include in such registration statement only such limited
portion (which may be none) of the Registrable Shares with respect to which such
holder has requested inclusion hereunder. No incidental or "piggyback" right
under this Section 2.1 shall be construed to limit any registration required
under Section 2.2, below. Notwithstanding any provision to the contrary in this
Agreement, prior to the effectiveness of such registration statement, the
Company shall have the right to postpone or withdraw any registration pursuant
to this Section 2.1 without obligation to any Investor.
Section 2.2 Demand Registration.
(a) If at any time following the six-month anniversary of the
effective date of the Merger one or more holders of at least 60% of the then
outstanding Registrable Shares shall notify the Company in writing that it or
they intend to offer or cause to be offered for public sale all or any portion
of such Registrable Shares, the Company will so notify all holders of
Registrable Shares, including all holders who have a right to acquire
Registrable Shares. If the holders initiating the registration intend to
distribute the Registrable Shares in an underwritten offering, they shall so
advise the Company in their request. In the event such registration is
underwritten, the right of other holders of Registrable Shares to participate
shall be conditioned on such holders' participation in such underwriting upon
the same terms and conditions; provided that the terms of the underwriting are
consistent with this Agreement. Upon written request of any holder given within
30 days after the receipt by such holder from the Company of such notification,
the Company will use its best efforts to cause such of the Registrable Shares as
may be requested by any holder thereof (including the holder or holders giving
the initial notice of intent to offer) to be registered under the Securities Act
as expeditiously as possible, provided that such Registrable Shares have a
minimum market value equal to or in excess of $5,0000,000. The Company shall not
be required to affect more than two registrations pursuant to this Section 2.2.
If the Company determines to include shares to be sold by it in any registration
requested pursuant to this Section 2.2, such registration shall be deemed to
have been a registration under Section 2.1 of this Agreement, and not a
registration under this Section 2.2, if the holders of Registrable Shares are
unable to include in any such registration statement all of the Registrable
Shares initially requested for inclusion in such registration statement.
3
(b) If a holder or holders of Registrable Shares exercise a
mandatory registration right under this Section 2.2 to participate in a
registration initiated by any other Person other than the holders of Registrable
Shares under mandatory registration rights, and such holder or holders are not
able to include in such registration all the Registrable Shares which they had
requested for inclusion, then such registration shall not be deemed to have been
a mandatory registration under this Section 2.2; provided, however, that such
registration shall be deemed to be a mandatory registration under this Section
2.2 if the holders of Registrable Shares are offered the opportunity to
participate, pro rata, in a registration initiated by such other Person, whether
or not they decide to so participate.
Section 2.3 Conditional Registration
The Company will register one-third of the Registrable Shares held by the
Investors, on a pro rata basis, at the six month, twelve month and eighteen
month anniversaries of the Merger, provided that such registration is approved
in advance by the Company's Board of Directors.
Section 2.4 Information Required for Registration.
Any holder or holders of Registrable Shares included in any registration shall
promptly furnish to the Company such information regarding such holder or
holders and the distribution proposed by such holder or holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to herein.
Section 2.5 Effectiveness of Registration Statements.
The Company will use its best efforts to maintain the effectiveness of any
registration statement pursuant to which any of the Registrable Shares are being
offered until the earlier to occur of (i) the completion by the underwriters of
the distribution pursuant to such registration statement, or (ii) six months
after the effectiveness of any registration statement, and from time to time
will amend or supplement such registration statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act and any applicable state securities statute or regulation. The Company will
also provide each holder of Registrable Shares with as many copies of the
prospectus contained in any such registration statement as it may reasonably
request.
Section 2.6 Termination of Registration Rights.
The obligations of the Company pursuant to this Article 2 shall terminate (i) as
to any holder of Registrable Shares, at such time as such holder is able to sell
all such Registrable Shares held by such holder within a single three month
period under Rule 144 or such holder is able to sell all Registrable Shares held
by it pursuant to Rule 144(k) promulgated under the Securities Act, or (ii) once
all Registrable Shares are registered.
Section 2.7 Exchange Act Registration.
If the Company at any time shall list any of its Common Stock on any national
securities exchange and shall register such Common Stock under the Exchange Act,
the Company will, at its expense, simultaneously list on such exchange and
maintain such listing of all of the Registrable Shares to the extent not already
listed. If the Company becomes subject to the reporting requirements of either
Section 13 or Section 15(d) of the Exchange Act, the Company will use its best
efforts to timely file with the Commission such information as the Commission
may require under either of said Sections. The Company shall use its best
efforts to take all action as may be required as a condition to the availability
of Rule 144 under the Securities Act
4
(or any successor exemptive rule hereinafter in effect) with respect to such
Common Stock. The Company shall furnish to any holder of Registrable Shares
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company as filed with the Commission,
and (iii) such other reports and documents as a holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a holder to
sell any such Registrable Shares without registration. After the occurrence of
the Merger, the Company agrees to use its best efforts to facilitate and
expedite transfers of the Registrable Shares pursuant to Rule 144 under the
Securities Act, which efforts shall include timely notice to its transfer agent
to expedite such transfers of Registrable Shares.
Section 2.8 Damages.
The Company recognizes and agrees that the holder of Registrable Shares will not
have an adequate remedy if the Company fails to comply with this Agreement and
that damages may not be readily ascertainable, and the Company expressly agrees
that, in the event of such failure, it shall not oppose an application by the
holder of Registrable Shares or any other Person entitled to the benefits of
this Agreement seeking specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such breach of this
Agreement.
Section 2.9 Further Obligations of the Company.
Whenever, under the provisions of this Agreement, the Company is required
hereunder to register Registrable Shares, it agrees that it shall also do the
following:
(a) furnish to each selling holder such copies of each
preliminary and final prospectus and such other documents as said holder may
reasonably request to facilitate the public offering of its Registrable Shares;
(b) use its best efforts to register or qualify the Registrable
Shares covered by said registration statement under the applicable securities or
"blue sky" laws of such jurisdiction as any selling holder may reasonably
request (to the extent required by applicable law);
(c) furnish to each selling holder a "signed counterpart" of:
(i) an opinion of counsel for the Company, dated the effective
date of the registration statement; and
(ii) "comfort" letters signed by the Company's independent
public accountants who have examined and reported on the Company's financial
statements included in the registration statement, to the extent permitted by
the standards of the American Institute of Certified Public Accountants,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities, to the extent that the Company is
required to deliver or cause the delivery of such opinion or "comfort" letters
to the underwriters in an underwritten public offering of securities;
(d) furnish to each selling holder a copy of all documents filed
and all correspondence from or to the Commission in connection with any such
offering of securities;
5
(e) use its best efforts to insure the obtaining of all necessary
approvals from the National Association of Securities Dealers, Inc.; and
(f) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Merger, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
Section 2.10 Expenses.
Subject to the last sentence of this Section 2.10, in the case of any
registration under Article 2 of this Agreement, the Company shall bear all costs
and expenses of each such registration, including, but not limited to, printing,
legal and accounting expenses, Securities and Exchange Commission and National
Association of Securities Dealers, Inc. filing fees and expenses, and "blue sky"
fees and expenses and the reasonable fees and disbursements of not more than one
counsel for the selling holders of Registrable Shares in connection with the
registration of their Registrable Shares; provided, however, that the Company
shall have no obligation to pay or otherwise bear any portion of the
underwriters' commissions or discounts attributable to the Registrable Shares.
The Company shall pay all expenses in connection with any registration initiated
pursuant to this Agreement which is withdrawn, delayed or abandoned at the
request of the Company, unless such registration is withdrawn, delayed or
abandoned solely because of any actions of the holders of Registrable Shares.
Section 2.11 Delay of Registration.
Notwithstanding any provision of this Agreement to the contrary, for a period
not to exceed 90 days, the Company shall have the right to defer the filing or
effectiveness of a registration statement pursuant to this Agreement at any time
when the Company, in the good faith judgment of its Board of Directors as
certified by the Chief Executive Officer of the Company, reasonably believes
that the filing thereof at the time requested, or the offering of Registrable
Shares pursuant thereto, would materially and adversely affect (i) an
acquisition, merger, recapitalization, consolidation, reorganization or similar
transaction by or of the Company, (ii) pre-existing and continuing negotiations,
discussions or pending proposals with respect to any of the foregoing
transactions, or (iii) the financial condition of the Company in view of the
disclosure of any pending or threatened litigation, claim, assessment or
governmental investigation which may be required thereby; provided, however,
that such right to delay the filing of a registration statement may not be
exercised by the Company more than once in any twelve-month period.
Notwithstanding the provisions of Section 2.2, in the event that the Company is
requested to file any registration statement pursuant to Section 2.2, the
Company shall not be obligated to effect the filing of such registration
statement: (a) during the 90 days following the effective date of any other
registration statement pertaining to an underwritten public offering of
securities for the account of the Company or any holder of Registerable Shares;
or (b) during a period of no more than 90 days after the date of a request for
registration pursuant to Section 2.2 (the "Deferral Period") if at the time of
such request (1) the Company is engaged, or has fixed plans to engage in a firm
commitment underwritten public offering of Common Stock in which the holders of
Registrable Securities include Registrable Securities pursuant to Section 2.1
that is expected in good faith to occur within the Deferral Period, or (2) the
Company is currently engaged in a self-tender or exchange offer and the filing
of a registration statement would cause a violation of the Exchange Act;
provided, however, that the terms of this sentence and the prior sentence of
this Section 2.11 shall not be interpreted to
6
permit the Company to defer the filing or effectiveness of a registration
statement requested pursuant to Section 2.2 for more than 90 days, regardless of
how many of the conditions for Company deferral are satisfied.
Section 2.12 Conditions to Registration Obligations.
The Company shall not be obligated to effect the registration of Registrable
Shares pursuant to Section 2.1 and Section 2.2 unless all holders of shares
being registered consent to reasonable conditions imposed by the Company as the
Company shall determine with the advice of counsel to be required by law
including, without limitation:
(a) conditions prohibiting the sale of shares by such holders
until the registration shall have been effective for a specified period of time;
(b) conditions requiring such holder to comply with all
prospectus delivery requirements of the Securities Act and with all
anti-stabilization, anti-manipulation and similar provisions of Section 10 of
the Exchange Act and any rules issued thereunder by the Commission, and to
furnish to the Company information about sales made in such public offering;
(c) conditions prohibiting such holders upon receipt of
electronic or written notice from the Company (until further notice) from
effecting sales or shares, such notice being given to permit the Company to
correct or update a registration statement or prospectus; and
(d) conditions requiring that at the end of the period during
which the Company is obligated to keep the registration statement effective
under Section 2.5, the holders of shares included in the registration statement
shall discontinue sales of shares pursuant to such registration statement upon
receipt of notice from the Company of its intention to remove from registration
the shares covered by such registration statement that remain unsold, and
requiring such holders to notify the Company of the number of shares registered
that remain unsold immediately upon receipt of notice from the Company.
Section 2.13 Transferability of Registration Rights.
The rights to cause the Company to register Registrable Shares pursuant to
Section 2.1 and Section 2.2 may be assigned by any Investor to a Permitted
Transferee, and by such Permitted Transferee to a subsequent Permitted
Transferee, but only if such rights are transferred (a) to an affiliate, partner
or stockholder of such holder of Registrable Shares (a "Permitted Transferee")
or (b) in connection with the sale or other transfer of not less than an
aggregate of 100,000 Registrable Shares or some lesser number, if such lesser
number represents all the Registrable Shares then held by such holder. Any
Permitted Transferee to whom registration rights under this Agreement are
transferred shall (i) as a condition to such transfer, deliver to the Company a
written instrument by which such Permitted Transferee agrees to be bound by the
obligations imposed upon holders of Registrable Shares under this Agreement, and
(ii) be deemed to be a holder of Registrable Shares hereunder.
ARTICLE 3. INDEMNIFICATION.
Section 3.1 Indemnification of Holders of Registrable Shares.
(a) In the event that the Company registers any of the
Registrable Shares under the Securities Act, the Company will, to the extent
permitted by law, indemnify and hold harmless each holder and each underwriter
of the Registrable Shares (including their officers,
7
directors, affiliates and partners) so registered (including any broker or
dealer through whom such shares may be sold) and each Person, if any, who
controls such holder or any such underwriter within the meaning of Section 15 of
the Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them become
subject under the Securities Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse each such holder,
each such underwriter and each such controlling Person, if any, for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or any
filing with any state securities commission or agency, in any preliminary or
amended preliminary prospectus or in the final prospectus (or the registration
statement or prospectus as from time to time amended or supplemented by the
Company) or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act or any
state securities laws or regulations applicable to the Company and relating to
action or inaction required of the Company in connection with such registration,
unless such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary or amended
preliminary prospectus or final prospectus in reliance upon and in conformity
with information furnished in writing to the Company in connection therewith by
such holder of Registrable Shares, any such underwriter or any such controlling
Person expressly for use therein.
(b) Promptly after receipt by any holder of Registrable Shares,
any underwriter or any controlling Person of notice of the commencement of any
action in respect of which indemnity may be sought against the Company, such
holder of Registrable Shares, or such underwriter or such controlling Person, as
the case may be, shall notify the Company in writing of the commencement
thereof, and, subject to the provisions hereinafter stated, the Company shall
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to such holder of Registrable Shares,
such underwriter or such controlling Person, as the case may be), and the
payment of expenses insofar as such action shall relate to any alleged liability
in respect of which indemnity may be sought against the Company.
(c) Such holder of Registrable Shares, any such underwriter or
any such controlling Person shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the Company unless the
employment of such counsel has been specifically authorized by the Company. The
Company shall not be liable to indemnify any Person for any settlement of any
such action effected without the Company's consent (which consent shall not be
unreasonably withheld or delayed). The Company shall not, except with the
approval of each party being indemnified under this Section 3.1, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
(d) To provide for just and equitable contribution to joint
liability under the Securities Act, in any case in which any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 3.1 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of
8
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this Section 3.1 provides for indemnification
in such case, then the Company and such holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the holder of Registrable
Shares on the other, in connection with the statements or omission which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company, on the one
hand, and of the holder of Registrable Shares, on the other, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, on the one hand, or by the
holder of Registrable Shares, on the other, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) no such
holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Shares offered by it pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
Section 3.2 Indemnification of Company.
(a) In the event that the Company registers any of the
Registrable Shares under the Securities Act, each holder of the Registrable
Shares so registered, to the extent permitted by law, will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed or otherwise participated in the presentation of the registration
statement, each underwriter of the Registrable Shares so registered (including
any broker or dealer through whom such of the shares may be sold) and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Company and
each such director, officer, underwriter or controlling Person for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or any
filing with any state securities commission or agency, in any preliminary or
amended preliminary prospectus or in the final prospectus (or in the
registration statement or prospectus as from time to time amended or
supplemented) or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statement therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by such
holder of Registrable Shares expressly for use therein; provided, however, that
such holder's obligations hereunder shall be limited to any amount equal to the
proceeds received by such holder of the Registrable Shares sold in such
registration.
(b) Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against such holder of
Registrable Shares, the Company will notify such holder of Registrable Shares in
writing of the commencement thereof, and such holder of Registrable Shares
shall, subject to the provisions hereinafter stated, assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to the Company) and the payment of expenses insofar as such action
9
shall relate to the alleged liability in respect of which indemnity may be
sought against such holder of Registrable Shares.
(c) The Company and each such director, officer, underwriter or
controlling Person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of such holder of Registrable Shares
unless employment of such counsel has been specifically authorized by such
holder of Registrable Shares. Such holder of Registrable Shares shall not be
liable to indemnify any Person for any settlement of any such action effected
without such holder's consent (which consent shall not be unreasonably withheld
or delayed).
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which the Company
exercising its rights under this Agreement makes a claim for indemnification
pursuant to this Section 3.2, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding that this
Section 3.2 provides for indemnification, in such case, then, the Company and
such holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and of the holder of Registrable Shares on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
holder of Registrable Shares on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the holder of
Registrable Shares on the other, and each party's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Shares offered by it pursuant to such registration statement;
and (B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
ARTICLE 4. COVENANTS
Section 4.1 Registration of Shares
The Company hereby covenants that it will not register any shares of Common
Stock held by any former holders of the securities of CKI, other than the
Investors, until the earlier of (1) the second anniversary of the Merger; or (2)
any day following the first anniversary of the Merger when, for a period of 20
consecutive trading days, the average stock price for the shares of Common Stock
is greater than $8 per share and the average daily trading volume is over 50,000
shares.
Section 4.2 Lock-Up Agreements
(a) The Company hereby covenants that it will use its best efforts to
obtain Lock-Up Agreements from each of the individuals listed on Exhibit B
attached hereto (each a "Keyperson"), pursuant to which each Keyperson agrees
not to in any way dispose of any shares of Common Stock owned either of record
or beneficially by such Keyperson, or publicly announce such Keyperson's
intention to dispose of such Common Stock, until: (1) as to
10
fifty percent (50%) of the shares of Common Stock held by such Keyperson,
through the earlier of (i) the close of trading on the second anniversary of the
date of the Merger, or (ii) the first day following the first anniversary of the
Merger when, for a period of 20 consecutive trading days, the average stock
price for Common Stock is greater than $8 per share and the average daily
trading volume is over 50,000 shares (the "First Release"); and (2) as to the
remaining shares of Common Stock held by such Keyperson, until 180 days after
the First Release.
(b) The Company hereby covenants that it will use its best efforts
to obtain Lock-Up Agreements from each of the holders of shares of CKI, or
options or warrants to purchase shares of CKI, other than the Investors and the
Keypersons (the "Other CKI Shareholders"), pursuant to which each Other CKI
Shareholder agrees not to in any way dispose of any shares of Common Stock owned
either of record or beneficially by such Other CKI Shareholder, or publicly
announce such Other CKI Shareholder's intention to dispose of such Common Stock,
until the earlier of (i) the close of trading on the second anniversary of the
date of the Merger, or (ii) the first day following the first anniversary of the
Merger when, for a period of 20 consecutive trading days, the average stock
price for Common Stock is greater than $8 per share and the average daily
trading volume is over 50,000 shares.
ARTICLE 5. GENERAL.
Section 5.1 No Waiver; Cumulative Remedies.
No failure or delay on the part of any party to this Agreement in exercising any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
Section 5.2 Amendments, Waivers and Consents.
Except as hereinafter provided, changes in or additions to this Agreement may be
made, termination of this Agreement, and compliance with any covenant or
provision set forth herein may be omitted or waived, if the Company (i) shall
obtain consent thereto in writing from the holder or holders of at least
two-thirds in interest of the Registrable Shares, and (ii) shall deliver copies
of such consent in writing to any holders who did not execute such consent;
provided that any amendment of this Section 5.2 shall require unanimous
agreement of the Company and each of the Investors. Any wavier or consent may be
given subject to satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 5.3 Addresses for Notices.
All notices, requests, consents and other communications hereunder shall be in
writing, shall be addressed to the receiving party's address set forth below or
to such other address as a party may designate by notice hereunder, and shall be
either (i) delivered by hand, (ii) made by telecopy or facsimile transmission,
(iii) sent by overnight courier, or (iv) sent by registered or certified mail,
return receipt requested, postage prepaid.
If to the Company:
Trafalgar Ventures Inc.
c/o Cyberkinetics, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investors: to the addresses set forth on Exhibit A to this Agreement
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telecopy or facsimile transmission, at the time that receipt
thereof has been acknowledged by electronic confirmation or otherwise, (iii) if
sent by overnight courier, on the next business day following the day such
notice is delivered to the courier service, or (iv) if sent by registered or
certified mail, on the fifth business day following the day such mailing is
made. Any party may change the address to which notices, requests, consents and
other communications hereunder are to be delivered by giving the other parties
notice in the manner set forth in this Section 5.3.
Section 5.4 Binding Effect; Assignment.
This Agreement shall be binding upon and inure to the benefit of the Company and
the Investors and their respective heirs, successors and assigns, except that
the Company shall not have the right to delegate its obligations hereunder or to
assign its rights hereunder or any interest herein without the prior written
consent of the holders of at least two-thirds in interest of the Registrable
Shares.
Section 5.5 Entire Agreement.
This Agreement constitutes the entire agreement between the parties and
supersedes any prior understandings or agreements concerning the subject matter
hereof.
Section 5.6 Severability.
The provisions of this Agreement, are severable and, in the event that any court
of competent jurisdiction shall determine that any one or more of the provisions
or part of a provision contained in this Agreement, shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement, but instead this Agreement shall be reformed and
construed as if such invalid or illegal or unenforceable provision, or part of a
provision, had never been contained herein, and such provisions or part reformed
so that it would be valid, legal and enforceable to the maximum extent possible.
12
Section 5.7 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware, and without giving effect to choice of
laws provisions.
Section 5.8 Headings.
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
Section 5.9 Counterparts.
This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
Section 5.10 Expenses.
If any action at law or in equity is necessary to enforce or interpret the terms
of this Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
Section 5.11 Further Assurances.
From and after the date of this Agreement, upon the request of any Investor or
the Company, the Company and the Investor shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
Section 5.12 Agreement on File.
An original copy of this Agreement, duly executed by each of the parties hereto,
shall be delivered to the Secretary of the Company and maintained at the
principal executive office of the Company and made available for inspection by
any person requesting it.
13
IN WITNESS WHEREOF, the parties have executed this Investors' Rights Agreement
as of the date first written above.
TRAFALGAR VENTURES INC.
By:_________________________________________
Name and Title:
OXFORD BIOSCIENCE PARTNERS IV, L.P.
By: OBP MANAGEMENT IV, L.P., its General Partner
By:_________________________________________
Name and Title:
mRNA FUND II, L.P.
By: OBP MANAGEMENT IV, L.P.
By:_________________________________________
Name and Title:
GDH PARTNERS, L.P.
By: GDH PARTNERS, LLC
By:_________________________________________
Name and Title:
THE GLOBAL LIFE SCIENCE VENTURES GMBH
acting in its capacity as general manager of
THE GLOBAL LIFE SCIENCE VENTURES FONDS II GmbH & CO KG
By:_________________________________________
Name and Title:
GLOBAL LIFE SCIENCE VENTURES (GP) LIMITED
acting in its capacity as general manager of
THE GLOBAL LIFE SCIENCE VENTURES FUND II LIMITED PARTNERSHIP
By:_________________________________________
Name and Title:
NEUROVENTURES FUND L.P.
By: NEUROVENTURES CAPITAL LLC
By:_________________________________________
Name and Title:
14
EXHIBIT A
INVESTORS AND NOTICE ADDRESSES
OXFORD BIOSCIENCE PARTNERS IV, L.P.
c/o Oxford Bioscience Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, General Partner
mRNA FUND II, L.P.
c/o Oxford Bioscience Partners
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, General Partner
GDH PARTNERS, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
THE GLOBAL LIFE SCIENCE VENTURES FONDS II GMBH & CO., KG
c/o The Global Life Science Ventures GmbH
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇. ▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇
THE GLOBAL LIFE SCIENCE VENTURES FUND II LIMITED PARTNERSHIP
c/o Global Life Science Ventures (GP), Ltd.
▇.▇. ▇▇▇ ▇▇▇
13-15 Victoria Road
▇▇. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
NEUROVENTURES FUND LP
c/o NeuroVentures Capital LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
15
EXHIBIT B
KEYPERSONS
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D.
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Ph.D.
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ Nandini
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
16