Document:

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Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of October
18, 2006, by and among Cyberkinetics Neurotechnology Systems, Inc., a Delaware corporation (the
“Company”), on the one hand and the purchasers signatory hereto (each such purchaser, a “Purchaser”
and collectively, the “Purchasers”), on the other hand.

     This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof among the Company and the Purchasers (the “Purchase Agreement”) and the Placement Agency
Agreement between the Company and CEUT (the “Agency Agreement”).

     The Company, CEUT and the Purchasers hereby agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in
the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used
in this Agreement, the following terms shall have the following meanings:

     “Advice” shall have the meaning set forth in Section 6(d).

     “Closing” means the closing of the transactions contemplated by the Purchase Agreement.

     “Effectiveness Date” means, with respect to the Registration Statement required to be filed
hereunder, the earlier of (a) the 120th calendar day following the date of the Closing, and (b) the
fifth Trading Day following the date on which the Company is notified by the Commission that the
Registration Statement will not be reviewed or is no longer subject to further review and comments.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Event” shall have the meaning set forth in Section 2(b).

     “Event Date” shall have the meaning set forth in Section 2(b).

     “Filing Date” means, with respect to the Registration Statement required to be filed
hereunder, the 45th calendar day following the date of the date of the Closing.

     “Holder” or “Holders” means the holder or holders, as the case maybe, from time to time, of
Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section5(c).

     “Indemnifying Party” shall have the meaning set forth in Section5(c).

     “Losses” shall have the meaning set forth in Section 5(a).

 

 

     “Plan of Distribution” shall have the meaning set forth in Section2(a).

     “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.

     “Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

     “Registrable Securities” means, as to this Agreement only, (a) the Shares and the Warrant
Shares, and (b) the shares issued or issuable upon exercise or conversion of those certain Warrants
issued to CEUT pursuant to the Placement Agent Agreement, together with any shares of Common Stock
issued or issuable upon any stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.

     “Registration Statement” means the registration statements required to be filed hereunder,
including (in each case) the Prospectus, amendments and supplements to the registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in the registration statement.

     “Rule 415” means Rule 415 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 purpose and effect as such Rule.

     “Rule 424” means Rule 424 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 purpose and effect as such Rule.

     “Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).

     2. Registration.

     (a) On or prior to the Filing Date, the Company shall prepare and file with the Commission the
Registration Statement covering the resale of all of the Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration Statement required hereunder
shall be on Form SB-2 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form SB-2, in which case the Registration shall be on another appropriate
form in accordance herewith). The Registration Statement

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required hereunder shall contain (except if otherwise directed by the Holders) substantially the
“Plan of Distribution” attached hereto as Annex A. Subject to the terms of this Agreement, the
Company shall use its commercially reasonable efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the filing thereof, but
in any event not later than the Effectiveness Date, and shall use its commercially reasonable
efforts to keep the Registration Statement continuously effective under the Securities Act until
the date when all Registrable Securities covered by the Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144(k) or pursuant to any other applicable
exemption from registration as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the
affected Holders (the “Effectiveness Period”).

     (b) If: (i) a Registration Statement is not filed on or prior to the Filing Date (if the
Company files a Registration Statement without affording the Holder the opportunity to review and
comment on the same as required by Section 3(a), the Company shall not be deemed to have satisfied
this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 461 promulgated under the Securities Act, within five Trading Days of the
date that the Company is notified (orally or in writing, whichever is earlier) by the Commission
that a Registration Statement will not be “reviewed,” or is not subject to further review, or (iii)
a Registration Statement filed or required to be filed hereunder is not declared effective by the
Commission on or before the Effectiveness Date, or (iv) after a Registration Statement is first
declared effective by the Commission, it ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective, or the Holders are not
permitted to utilize the Prospectus therein to resell such Registrable Securities, for in any such
case ten (10) consecutive Trading Days but no more than an aggregate of fifteen (15) Trading Days
during any 12-month period (which need not be consecutive Trading Days) (any such failure or breach
being referred to as an “Event,” and for purposes of clause (i) or (iii) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clause (iv) the date on which such ten (10) or fifteen (15) Trading
Day period, as applicable, is exceeded being referred to as “Event Date”), then in addition to any
other rights the Holders may have hereunder or under applicable law, then, on each such Event Date
and on each monthly anniversary of each such Event Date (if the applicable Event shall not have
been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder
an amount in cash, as liquidated damages and not as a penalty, equal to 2.0% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder. If the Company fails to pay any liquidated damages pursuant to
this Section in full within seven (7) days after the date payable, the Company will pay interest
thereon at a rate of 9% per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. Notwithstanding anything herein to
the contrary, (i) all such liquidated damages payable pursuant to Section 2(b) shall not exceed 10%
of the aggregate purchase price paid by such Holder pursuant to the Purchase Agreement, and (ii) if
an Event or the continuation of an Event is caused solely as a result of an act or omission by a
Holder, the Company shall not be liable to pay liquidated damages to such Holder that otherwise
would result on account of such Event or continuation of an Event.

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     3. Registration Procedures.

     In connection with the Company’s registration obligations hereunder, the Company shall:

     (a) Not less than five (5) Trading Days prior to the filing of the Registration Statement or
any related Prospectus or any amendment or supplement thereto, (i) furnish to the Holders copies of
any disclosure relating to the Holders, including but not limited to the entire Selling Stockholder
and Plan of Distribution sections which sections shall be subject to the prompt review of such
Holders, and (ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable Securities shall
reasonably object in good faith, provided that the Company is notified of such objection in writing
no later than two Trading Days after the Holders have been so furnished copies of such documents.
Prior to any filing relating to the Registration Statement, each Holder agrees to furnish to the
Company a completed Questionnaire in the form attached to this Agreement as Annex B (a “Selling
Shareholder Questionnaire”) within five Trading Days of written request by the Company.

     (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the Securities Act all of
the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably practicable to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and, as promptly as reasonably
practicable, upon request, provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the Holders thereof set
forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

     (c) Notify the Holders of Registrable Securities to be sold as promptly as reasonably
practicable and (if requested by any such Person) confirm such notice in writing promptly following
the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a “review” of the Registration Statement and whenever the Commission comments
in writing on the Registration Statement (the Company shall upon request provide true and complete
copies thereof and all written responses thereto to each of the Holders); and (C) with respect to
the Registration Statement or any post-effective

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amendment, when the same has become effective;(ii) of any request by the Commission or any other
Federal or state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of
the occurrence of any event or passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the Registration
Statement, Prospectus or other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading.

     (d) Use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of the Registration Statement, or (ii) any
suspension of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

     (e) Furnish to each Holder, without charge and upon request, at least one conformed copy of
the Registration Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by reference to the
extent requested by such Person, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.

     (f) Promptly (i) deliver to each Holder, without charge and upon request, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request and (ii) file with the SEC a final prospectus in
connection with resales by the Holder of Registrable Securities. Subject to the terms of this
Agreement, the Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except
after the giving of any notice pursuant to Section 3(c).

     (g) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable
efforts to register or qualify or cooperate with the selling Holders in connection with the
registration or qualification (or exemption from the Registration or qualification) of such
Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in writing, to keep the

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Registration or qualification (or exemption there from) effective during the Effectiveness Period
and to do any and all other acts or things reasonably necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration Statement; provided, that
the Company shall not be required to qualify generally to do business in any jurisdiction where it
is not then so qualified or where such qualification would, subject the Company to any tax in any
such jurisdiction where it is not then so subject or file a general consent to service of process
in any such jurisdiction.

     (h) If requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such Holders may
request.

     (i) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to
the Registration Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses (ii) through (v) of
Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will
use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company shall be entitled to exercise its right under this Section
3(i) to suspend the availability of a Registration Statement and Prospectus, subject to the payment
of liquidated damages pursuant to Section 2(b), for a period not to exceed sixty (60) Trading Days
(which need not be consecutive days) in any 12-month period.

     (j) Comply with all applicable rules and regulations of the Commission.

     The Company may require each selling Holder to furnish to the Company a certified statement as
to the number of shares of Common Stock beneficially owned by such Holder and, if required by the
Commission, the person thereof that has voting and dispositive control over the Shares. During any
periods that the Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails to furnish such
information within three (3) Trading Days of the Company’s request, any liquidated damages that are
accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur
solely because of such delay shall be suspended as to such Holder only, until two Trading Days
following the date on which such information is delivered to the Company.

     4. Registration Expenses. All fees and expenses incident to the performance of or

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compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses with respect to filings required to
be made with the Trading Market on which the Common Stock is then listed for trading, (ii) printing
expenses (including, without limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by
the holders of a majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi)
fees and expenses of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of any annual audit and
the fees and expenses incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be responsible for any
broker or similar commissions or, except to the extent provided for in the Transaction Documents,
any legal fees or other costs of the Holders.

     5. Indemnification.

     (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors, agents and employees
of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees
of each such controlling Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein (in the
case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly
for use in the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto
for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section
3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d). The Company shall notify the
Holders promptly of the institution,

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threat or assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.

     (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising
out of or based upon any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or necessary to make the
statements therein not misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such Prospectus or (ii) to the
extent that (1) such untrue statements or omissions are based upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved in writing by such
Holder expressly for use in the Registration Statement (it being understood that the Holder has
approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event of the type
specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is outdated or defective
and prior to the receipt by such Holder of the Advice contemplated in Section 6(e). In no event
shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to
such indemnification obligation.

     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party
shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations
or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have prejudiced the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably

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satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall reasonably believe that a material conflict of
interest is likely to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees
and expenses of one separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.

     Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice (which shall include reasonable supporting documentation of such fees and expenses) thereof
to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is not entitled to indemnification hereunder, determined based upon the
relative faults of the parties.

     (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to
an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The amount paid or payable by
a party as a result of any Losses shall be deemed to include, subject to the limitations set forth
in this Agreement, any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section was available to such
party in accordance with its terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the immediately preceding

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paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the net proceeds received
by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission, except in the case of fraud by such
Holder.

     The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous.

     (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their
obligations under this Agreement, each Holder or the Company, as the case may be, in addition to
being entitled to exercise all rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.

     (b) No Piggyback on Registrations. Neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of the Company in a
Registration Statement other than the Registrable Securities. The Company shall not file any other
initial registration statements until after the Effective Date (other than registration statements
on Form S-4 or Form S-8 or their then equivalents).

     (c) Compliance. Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement.

     (d) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder is advised in writing
(the “Advice”) by the Company that such Prospectus supplement or amended Registration Statement has
been filed with, and in the case of an amended Registration Statement declared effective by, the
SEC or the use of the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed to be incorporated
by reference in such Prospectus or Registration Statement. The Company will use its commercially
reasonable efforts to ensure that the use of the Prospectus maybe resumed as promptly as it
practicable. The Company agrees and acknowledges that any periods during which the Holder is
required to discontinue the disposition of the Registrable Securities hereunder shall be subject to
the provisions of Section 2(b).

     (e) Piggy-Back Registrations. If at any time during the Effectiveness Period there is

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not an effective Registration Statement covering all of the Registrable Securities and the Company
shall determine to prepare and file with the Commission a registration statement relating to an
offering for its own account under the Securities Act of any of its equity securities, other than
on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice of such determination
and, if within fifteen days after the date of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any part of such
Registrable Securities such Holder requests to be registered, subject to customary underwriter
cutbacks applicable to all holders of registration rights.

     (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the same shall be in writing and signed by the
Company and Holders of at least 66% of the then outstanding Registrable Securities.

     (g) Notices. Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be made in accordance with the provisions of the Purchase Agreement.

     (h) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure to the benefit of each
Holder. Each Holder may assign their respective rights hereunder in the manner and to the Persons
as permitted under the Purchase Agreement.

     (i) Execution and Counterparts. This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to bean original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding obligation of the party
executing (or on whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.

     (j) Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined with the provisions of the Purchase Agreement.

     (k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.

     (l) Severability. If any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to

11

 

achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

     (m) Headings. The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

     (n) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any other Holder hereunder, and no
Holder shall be responsible in any way for the performance of the obligations of any other Holder
hereunder. Nothing contained herein or in any other agreement or document delivered at any closing,
and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the
Holders as a partnership, an association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this Agreement, and it
shall not be necessary for any other Holder to be joined as an additional party in any proceeding
for such purpose.

[SIGNATURE PAGES FOLLOW]

12

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	CYBERKINETICS NEUROTECHNOLOGY SYSTEMS, INC.

 	 
	 	By:  	/s/ Timothy R. Surgenor
 	 
	 	 	Name:  	Timothy R. Surgenor 	 
	 	 	Title:  	President and Chief Executive Officer 	 

[SIGNATURE PAGES OF PURCHASERS FOLLOW]

 

 

PURCHASER SIGNATURE PAGES TO

CYBERKINETICS NEUROTECHNOLOGY SYSTEMS, INC.

REGISTRATION RIGHTS AGREEMENT

	 	 	 	 	 
	 
	 
(Name of Purchaser)

 	 	 

	 	 	 	 	 
	 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 

[PURCHASER SIGNATURE PAGES CONTINUE]

	 	 	 	 	 
	 
	 
(Name of Purchaser)

 	 	 
	 	 	 

	 	 	 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 

[PURCHASER SIGNATURE PAGES CONTINUE]

	 	 	 	 	 
	 
	 
(Name of Purchaser)

 	 	 

	 	 	 	 	 
	 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 

[PURCHASER SIGNATURE PAGES CONTINUE]

	 	 	 	 	 
	 
	 
(Name of Purchaser)

 	 	 

	 	 	 	 	 
	 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 

[PURCHASER SIGNATURE PAGES CONTINUE]

 

 

ANNEX A

PLAN OF DISTRIBUTION

     The Selling Stockholders (the “Selling Stockholders”) of the common stock (“Common Stock”) of
Cyberkinetics Neurotechnology Systems, Inc., a Delaware corporation (the “Company”) and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on any stock exchange, market or trading facility on which the shares
are traded or in private transactions. These sales may be at fixed or negotiated prices. The
Selling Stockholders may use any one or more of the following methods when selling shares:

	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	 
	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
	 
	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
	 
	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	•	 	privately negotiated transactions;
	 
	•	 	settlement of short sales entered into after the date of this prospectus;
	 
	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price
per share;
	 
	•	 	a combination of any such methods of sale;
	 
	•	 	through the writing or settlement of options or other hedging transactions, whether through an options exchange or
otherwise; or
	 
	•	 	any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. Each Selling Stockholder does not expect these commissions
and discounts relating to its sales of shares to exceed what is customary in the types of
transactions involved.

     In connection with the sale of our common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the

 

 

delivery to such broker-dealer or other financial institution of shares offered by this prospectus,
which shares such broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it
does not have any agreement or understanding, directly or indirectly, with any person to distribute
the Common Stock.

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

     Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act.
In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any agreements, understandings or
arrangements with any underwriter or broker-dealer regarding the sale of the resale shares. There
is no underwriter or coordinating broker acting in connection with the proposed sale of the resale
shares by the Selling Stockholders.

     We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to our common stock for a period of two business days prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations hereunder, including Regulation M, which may limit the
timing of purchases and sales of shares of our common stock by the Selling Stockholders or any
other person. We will make copies of this prospectus available to the Selling Stockholders and have
informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.

 

 

ANNEX B

Cyberkinetics Neurotechnology Systems, Inc.

SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

     The undersigned beneficial owner of common stock, par value $0.001 per share (the “Common
Stock”), of Cyberkinetics Neurotechnology Systems, Inc., a Delaware corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or intends to file with the
Securities and Exchange Commission (the “Commission”) a registration statement on Form SB-2 (the
“Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the
terms of that certain Registration Rights Agreement, dated as of                                                              , 2006 (the “Registration Rights
Agreement”), among the Company and the Purchasers named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the
Registration Rights Agreement.

     Certain legal consequences arise from being named as a selling security holder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling security holder in the Registration
Statement and the related prospectus.

NOTICE

     The undersigned beneficial owner (the “Selling Security holder”) of Registrable Securities
hereby elects to include the Registrable Securities owned by it and listed below in Item 3 (unless
otherwise specified under such Item 3)in the Registration Statement.

QUESTIONNAIRE

     The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

	1.	 	NAME.

     (a) Full Legal Name of Selling Security holder

	 	 
	 
	 

 

 

     (b) Full Legal Name of Registered Holder (if not the same as (a) above) through which
Registrable Securities Listed in Item 3 below are held:

	 	 
	 
	 

     (c) Full Legal Name of Natural Control Person (which means a natural person who directly or
indirectly, alone or with others has the power to vote or dispose of the securities covered by the
questionnaire):

	 	 
	 
	 

	2.	 	ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:

	 	 	 	 
	 	Telephone:

	 	  

	 	 	 	 
	 	Fax:

	 	  

	 	 	 	 
	 	Contact Person:

	 	  

	3.	 	BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:

	 	(a)	 	Type and Number of Registrable Securities beneficially owned:
	 
	 	 
	 
	 

	 
	 	 
	 
	 

	 
	 	 
	 
	 

	4.	 	BROKER-DEALER STATUS:

	 	(a)	 	Are you a broker-dealer?
	 
	 	Yes o No o

     Note: If yes, the Commission’s staff has indicated that you should be identified as an
underwriter in the Registration Statement.

     (b) Are you an affiliate of a broker-dealer? Yes o No o

     (c) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable
Securities in the ordinary course of business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings, directly or indirectly, with any
person to distribute the Registrable Securities?

     Yes o No o

 

 

	5.	 	BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING SECURITYHOLDER.

     Except as set forth below in this Item 5, the undersigned is not the beneficial or registered
owner of any securities of the Company other than the Registrable Securities listed above in Item
3.

     (a) Type and Amount of Other Securities beneficially owned by the Selling Security holder:

	 	 
 	 
 	 

	 
	 	 
 	 
 	 

	6.	 	RELATIONSHIP WITH THE COMPANY:

     Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three years. State any exceptions here:

     State any exceptions here:

	 	 
 	 
 	 

	 
	 	 
 	 
 	 

     The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

     By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus. The undersigned understands that such
information will be relied upon by the Company in connection with the preparation or amendment of
the Registration Statement and the related prospectus.

     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 
	Dated:                                          	Beneficial Owner

 	 
	 	  	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:exv10w1

 

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of October 18, 2006, 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 0.5 share of Common Stock (“Warrant Shares”) (the Common Shares and the
Warrant Shares are collectively referred to herein as the “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.

     “CEUT” means C.E. Unterberg, Towbin, LLC.

     “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.

     “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).

     “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.

     “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(j).

     “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.

2

 

     “Placement Agent Agreement” means that certain engagement letter relating to the transaction
contemplated hereby between the Company and C.E. Unterberg, Towbin, LLC.

     “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.

     “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 Small Cap 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. Up to 12,500,000 units may be sold hereunder. Upon satisfaction of the conditions set forth
in Section 2.3, the Closing shall occur at the offices of C.E. Unterberg, Towbin, LLC, 350 Madison
Avenue, New York, NY 10017 or such other location as the parties shall mutually agree. The payment
of the aggregate Subscription Amounts and disbursement of funds shall be through an escrow with
C.E. Unterberg,

3

 

Towbin, LLC or such other escrow agent as approved by the Company (the “Escrow Agent”).

     2.2 Deliveries.

     (a) On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser
or CEUT, 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

          (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;

4

 

          (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) a minimum of $10,000,000 shall have been received by the Escrow Agent.

          (vi) The Purchasers and CEUT shall have received an opinion of counsel to the Company in form
and substance reasonably satisfactory to the Purchasers.

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 businesses 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, 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 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

5

 

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 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 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 would not 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 Common 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, $0.001 par value per share, and no shares of preferred stock. As of the date
hereof, there were 29,096,661 shares of common stock outstanding and no shares of preferred stock

6

 

outstanding. In addition, there were outstanding options and warrants to purchase 10,273,7[63]
shares of Common Stock. All of the outstanding shares of capital stock of the Company 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 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 apart
or, to the knowledge of the Company, between or among any of the Company’s stockholders. No
anti-dilution or other similar rights will be triggered by the issuance of the Securities pursuant
to this Agreement.

     (h) Material Changes. Since June 30, 2006, (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 or 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 Common Shares or (ii) could,
if there were an unfavorable decision, 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’s
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 would not
result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any
Subsidiary has received any written 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 would 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. There is no claim, action or
proceeding pending, or to the knowledge of the Company threatened, against the Company or any of
its Subsidiaries regarding its Intellectual Property Rights.

7

 

The Company is unaware of any facts or circumstances that would give rise to such foregoing
infringements, claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy and confidentiality of their Intellectual
Property Rights.

     (l) Certain Fees. Except for placement agent fees to CEUT and its co-placement agent WBB, 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 Units by any form of
general solicitation or general advertising. The Company has offered the Units 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 Units, 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 manner so that it will not become subject to the Investment Company Act.

     (o) Registration Rights. Other than as contemplated hereby, 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, 2004 and 2005 and related statements of operations, changes in
stockholders equity and cash flows for the years ended December 31, 2004 and 2005, and (b)
unaudited balance sheets as at June 30, 2006 and the related statement of operations, changes in
stockholders equity and cash flows for the six months ended June 30, 2006 (collectively, the
“Financial Statements”). The Financial Statements (i) fairly present the financial position and
results of operations of the Company as of the dates indicated, and (ii) were prepared in
accordance with U.S. GAAP in effect as of the dates indicated (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).

     (q) SEC Documents. For a period of two years prior to the date hereof, the Company has timely
filed all reports, schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC Documents”). The Company has made
available to the Purchasers or their respective representatives true, correct and complete copies
of the SEC Documents not available on the EDGAR system, if any. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were

8

 

filed with the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

     (r) Internal Accounting and Disclosure Controls. Each of the Company and its Subsidiaries
maintains a system of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in
conformity with U.S. GAAP and to maintain asset and liability accountability, (iii) access to
assets or incurrence of liabilities is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets and liabilities is compared
with the existing assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any difference. Neither the Company nor any of its Subsidiaries have received any
written notice from any accountant identifying a material weakness in any part of the system of
internal accounting controls of the Company or any of its Subsidiaries that is not specified in the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.

     (s) Form SB-2 Eligibility. The Company is eligible to register the Shares and the Warrant
Shares for resale by the Purchasers using Form SB-2 promulgated under the Securities Act.

     (t) Disclosure. The Company confirms that neither it nor any other Person acting on its
behalf has provided any of the Purchasers or their agents or counsel with any information that
constitutes material, nonpublic information concerning the Company or its Subsidiaries other than
the existence of the transactions contemplated by this Agreement or the other Transaction
Documents. The Company understands and confirms that each of the Purchasers will rely on the
foregoing representations in effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company is true
and correct and does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.

     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 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.

9

 

     (b) Investment Intent. Such Purchaser understands that the Common Shares and the Warrants are
“restricted securities” and have not been registered under the Securities Act or any applicable
state securities law and is acquiring the Common Shares and Warrants as principal for its own
account and not with a view to or for distributing or reselling such Common Shares or Warrants, or
any part thereof, has no present intention of distributing any of such Common Shares or Warrants
and has no arrangement or understanding with any other persons regarding the distribution of such
Common Shares or Warrants (this representation and warranty not limiting such Purchaser’s right to
sell the Common Shares or Warrant Shares pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). Such Purchaser is acquiring the
Common 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 Common 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
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 Units 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.

     (f) Reliance on Exemptions. Such Purchaser understands that the Units are being offered and
sold to it in reliance on specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire the Common Shares
and the Warrants.

     (g) Information. Such Purchaser and its advisors, if any, have been furnished with all
publicly available materials relating to the business, finances and operations of the Company and
such other publicly available materials relating to the offer and sale of the Units as have been
requested by such Purchaser. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Purchaser or its advisors, if any, or its representatives shall
modify, amend or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained herein. Such Purchaser understands that its investment in the Units involves a
high degree of risk. Such Purchaser has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment

10

 

decision with respect to its acquisition of the Common Shares and the Warrants.

     (h) No Governmental Review. Such Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Common Shares and Warrants or the fairness or suitability of
the investment in the Common Shares and Warrants nor have such authorities passed upon or endorsed
the merits of the offering of the Common Shares and Warrants.

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 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 Common 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

11

 

pledged or secured Securities to the pledgees or 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 pledge 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), 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 legends
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 there
from.

     4.2 Furnishing of Information. As long as any Purchaser owns Securities, the Company
will use commercially reasonable 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 Rule144(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
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.

12

 

     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. On or before 8:30 AM Eastern Time on the first business day following
the date of this Agreement, the Company shall issue a press release describing the material terms
and conditions of the transactions contemplated by the Transaction Documents. On the same day, the
Company shall file a Current Report on Form 8-K, attaching the material Transaction Documents
(including, this Agreement, the Registration Rights Agreement and a form of Warrant), in compliance
with the 1934 Act. 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. Without the prior written consent of any applicable Purchaser,
the Company shall not 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, 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 Common Stock
or otherwise.

     4.7 Subsequent Equity Sales. Except for Exempt Issuances, from the date hereof until
sixty (60) days following 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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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 the date that is five
business days from the date of this Agreement; provided that no such termination will affect the
right of any party to sue 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
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 a sixty-six percent (66%) of the Common Shares 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. No Purchaser may

14

 

assign any or all of its rights under this Agreement to any Person without the prior written
consent of the Company.

     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, exceopt that CEUT is an intended
third-party beneficiary of Section 2.2(a) and 2.3(b)(vii).

     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 New York, 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 New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, 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 another 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 beach 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 therefore, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.

15

 

     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 therefore, a new
certificate, but only upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or 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 remedy at law would be adequate.

     5.15 Indemnification of Purchasers. Subject to the provisions of this Section 5.15,
the Company will indemnify and hold the Purchasers and their directors, officers, shareholders,
partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a)
any breach of any of the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the Warrants or (b) any action instituted against a Purchaser, or any of
them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of
such Purchaser, with respect to any of the transactions contemplated hereby (unless such action is
based upon a breach of such Purchaser’s representations, warranties or covenants under this
Agreement or the Warrants or any agreements or understandings such Purchaser may have with any such
stockholder or any violations or alleged violation by the Purchaser of state or federal securities
laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense thereof with counsel
of its own choosing. Any Purchaser Party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of such counsel shall
be at the expense of such Purchaser Party except to the extent that (i) the employment thereof and
the Company’s payment of such fees and expenses has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of the Company and the
position of such Purchaser Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach
of any of the representations, warranties, covenants or agreements made by the Purchasers in this
Agreement or in the other Transaction Documents.

     5.16 Purchasers not Acting as a Group. The Purchasers and the Company acknowledge and
agree that no action has been taken by any Purchaser or the Company pursuant hereto or to the other
Transaction Documents, deemed to constitute the Purchasers as a partnership, an association, a
joint

16

 

venture or any other kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or would deem such Purchasers to be members of a “group” for purposes of Section
13(d) of the Exchange Act, and the Purchasers have not agreed to act together for the purpose of
acquiring, holding, voting or disposing of equity securities of the Company. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do so by the Purchasers. The
Company acknowledges that such procedure with respect to the Transaction Documents in no way
creates a presumption that the Purchasers are in any way acting in concert or as a “group” for the
purposes of Section 13(d) of the Exchange Act with respect to the Transaction Documents or the
transactions contemplated hereby or thereby. Each Purchaser acknowledges that it has been
represented by its own separate legal counsel in their review and negotiation of the Transaction
Documents.

(Signature Pages Follow)

17

 

     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/ Timothy R. Surgenor
 	 
	 	 	Name:  	Timothy R. Surgenor 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

Address for Notice

100 Foxborough Boulevard

Suite 240

Foxborough, Massachusetts 02035

with a copy to (which shall not constitute notice):

Michael A. Hickey, Esq.

Kirkpatrick & Lockhart Nicholson Graham LLP

State Street Financial Center

One Lincoln Street

Boston, MA 02109

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGES FOR PURCHASERS FOLLOW.]

18

 

[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):

EIN:                                         

Subscription Amount: $                                         Units

Number:                                         

 

19

 

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 Cyberkinetics 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:                                                              , 2006

I. PURCHASE PRICE

GROSS PROCEEDS TO BE RECEIVED IN TRUST $

II. DISBURSEMENTS

$

$

$

TOTAL AMOUNT DISBURSED: $

WIRE INSTRUCTIONS:

To:                                                             

To:                                                             

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Disclosure Schedule

     The following are exceptions to the representations, warranties of Cyberkinetics
Neurotechology Systems, Inc. (the “Company”) contained in the Securities Purchase Agreement, dated
as of October 18, 2006 (the “Agreement”), pursuant to which the Purchasers will purchase, and the
Company will sell to the Purchasers, shares of Common Stock on the terms and conditions set forth
in the Agreement, and should be considered an integral part of the Agreement. The section numbers
in this Disclosure Schedule correspond to the section numbers in the Agreement; provided,
however, that any information disclosed herein under any section number shall be deemed
disclosed and incorporated into any other sections, schedules or exhibits under the Agreement where
such disclosure would be appropriate, whether or not repeated under any section number where such
disclosure might be deemed appropriate, so long as such information would on its face reasonably be
deemed to apply under such other section. All exhibits attached hereto are incorporated by
reference herein. Any terms defined in the Agreement shall have the same meaning when used in this
Disclosure Schedule as when used in the Agreement, unless the context otherwise requires.

     3.1(a) Subsidiaries

     Cyberkinetics, Inc., a Delaware corporation.

     Andara Life Science, Inc., a Indiana corporation

     CYBK, Inc., a Rhode Island corporation.

     3.1(e) Filings, Consents and Approvals

     The Company has the following obligation which expires on October 31, 2006 under the
Securities Purchase Agreement dated September 26, 2005:

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.

21

 

     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.

     The Company has not issued any shares of its Common Stock at a price less than the Per
Share Unit Price while this provision has been in effect and this provision will not be triggered
as long as no Additional Shares are issued at a price less than $1.20 per share prior to October
31, 2006.

     In a letter agreement dated September 23, 2005, Hunter World Markets, Inc. was granted a right
of first refusal to serve as placement agent for any financing of the Company to be conducted
within twelve (12) months from the effective date of the Registration Statement related to the
September 2006 Private Placement. The Company received a waiver of right of first refusal with
respect to the October 2006 private placement from Hunter World Markets on September 13, 2006.

     3.1(o) Registration Rights

          The Company entered into Registration Rights Agreements dated October 7, 2004 and
September 26, 2005 with certain investors. Under those Agreements, the Company agreed to register
shares of its common stock and shares underlying common stock purchase warrants issued in
connection with Private Placement transactions consummated on those dates. Although the Company
registered the shares and maintains currently effective registration statements covering those
shares, the Company has an obligation to maintain the effectiveness of the registration
statement(s) until the earlier of the date on which all of those shares have been sold or the date
on which any unsold shares become eligible for resale under Rule 144(k).

     The Company has granted piggy back registration rights to GE Capital with respect to 91,301
shares of the Company’s common stock and to CEO Cast, Inc. with respect to 32,000 shares of common
stock.

     In a letter agreement with Trout Group dated March 1, 2005, the Company agreed to issue
$30,000 of shares of its common stock on a quarterly basis in exchange for investor relations
consulting and services. Included in that letter agreement was an obligation of the Company to make
reasonable efforts to register the shares issued in a reasonable time, either by a piggyback
registration or otherwise.

22

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