SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CYBERONICS, INC.
----------------
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class of Securities)
23251P 10 2
(CUSIP Number)
Kevin S. Moore
Senior Vice President and Chief Financial Officer
The Clark Estates, Inc.
30 Wall Street
New York, New York 10005
(212) 269-1833
With a copy to:
David W. Ambrosia, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
(212) 858-1208
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 28, 1997
--------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
Schedule because of Rule 13d- 1(b)(3) or (4), check the following [ ].
<PAGE>
CUSIP No. 23251P 10 2
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1) Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
The Clark Estates, Inc.
13-5524538
- --------------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See
Instructions)
(a) |_|
(b) |X|
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3) SEC Use Only
- --------------------------------------------------------------------------------
4) Source of Funds (See Instructions)
OO
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5) Check if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e)
|_|
- --------------------------------------------------------------------------------
6) Citizenship or Place of Organization
New York
- --------------------------------------------------------------------------------
Number of Shares 7) Sole Voting Power
1,226,208
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Beneficially 8) Shared Voting Power
0
-------------------------------------------
Owned by Each 9) Sole Dispositive Power
1,226,208
-------------------------------------------
Reporting Person With 10) Shared Dispositive Power
0
- --------------------------------------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,226,208
- --------------------------------------------------------------------------------
12) Check if the Aggregate Amount in Row 11) Excludes Certain
Shares (See Instructions)
|_|
- --------------------------------------------------------------------------------
13) Percent of Class Represented by Amount in Row 11)
9.2%
- --------------------------------------------------------------------------------
14) Type of Reporting Person (See Instructions)
CO
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<PAGE>
The summary descriptions contained in this statement of
certain agreements and documents are qualified in their entirety by reference to
the complete texts of such agreements and documents filed as Exhibits hereto,
which agreements and documents are hereby incorporated herein by reference.
Item 1. Security and Issuer
This statement relates to the Common Stock, $.01 par value per
share (the "Common Stock"), of Cyberonics, Inc., a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 17448
Highway 3, Suite 100, Webster, Texas 77598.
Item 2. Identity and Background
(a) - (c) This statement is being filed by The Clark Estates,
Inc. ("Reporting Person").
The Reporting Person is a New York corporation principally
engaged in the business of providing administrative services relating to
investments of certain institutional, corporate, individual and trust accounts
affiliated with the Clark family. The principal business and principal office
address of the Reporting Person is 30 Wall Street, New York, New York 10005.
The name, business address, present principal occupation or
employment of each executive officer and director of the Reporting Person (the
"Executive Officers and Directors") are set forth in Schedule I hereto, which is
incorporated herein by reference.
(d) - (e) During the last five years, neither the Reporting
Person nor, to the best knowledge of the Reporting Person, any of the Executive
Officers and Directors has (A) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (B) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) Each of the persons listed in this Item 2 or Schedule I
hereto is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration
On March 28, 1997, twenty-four accounts for which the
Reporting Person provides management and administrative services (the
"Purchasers"), the Company and certain other purchasers entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement") and a Registration Rights
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<PAGE>
Agreement (the "Registration Rights Agreement") whereby the Purchasers used
personal funds to purchase from the Company in a private placement an aggregate
of 901,408 shares of Common Stock at a price of $4.4375 per share, or an
aggregate purchase price of $3,999,998. Combined with previous purchases of
Common Stock made during the Company's initial public offering and on the open
market thereafter, this purchase brought the Reporting Person's indirect
beneficial ownership of Common Stock above 5% of such class. The form of Stock
Purchase Agreement and the form of Registration Rights Agreement are attached
hereto as Exhibits A and B, respectively.
Item 4. Purpose of Transaction
The shares of Common Stock purchased through the Stock
Purchase Agreement were acquired for investment purposes. The Reporting Person
does not have any intention of acquiring control over the Company; however,
depending upon market and other conditions, the Reporting Person or the accounts
for which it provides administrative services may acquire additional shares of
Common Stock for investment purposes if such shares become available at prices
that are attractive, or may dispose of all or a portion of the shares currently
owned or hereinafter acquired. In addition, pursuant to a letter agreement dated
March 28, 1997 (the "Letter Agreement"), the Company agreed to allow the
Reporting Person to designate one person reasonably acceptable to the Company to
serve on the Company's Board of Directors, which right shall continue for so
long as accounts for which the Reporting Person provides administrative services
continue to own an aggregate of at least 600,000 shares of Common Stock
purchased through the Stock Purchase Agreement. The Letter Agreement is attached
hereto as Exhibit C.
Except as disclosed above, the Reporting Person does not have
any plans or proposals of the type set forth in Paragraphs (a) through (j) of
Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on March 28, 1997, the
Reporting Person beneficially owns 1,226,208 shares of Common Stock,
constituting approximately 9.2% of the outstanding shares of Common Stock.
(b) The Reporting Person has sole power to vote or to direct
the vote of the shares of Common Stock referred to in paragraph (a) above and
sole power to dispose or to direct the disposition of any of such shares.
(c) Except as described in Item 3, neither the Reporting
Person nor, to the best knowledge of the Reporting Person, any of the Executive
Officers and Directors, has effected any transactions in shares of Common Stock
during the past 60 days.
(d) Not applicable.
(e) Not applicable.
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<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer
Except for the Stock Purchase Agreement, the Registration
Rights Agreement and the Letter Agreement, neither the Reporting Person, nor (to
the best knowledge of the Reporting Person) any of the Executive Officers and
Directors, has any contract, arrangement, understanding or relationship (legal
or otherwise) with any person with respect to any securities of the Company,
including but not limited to the transfer or voting of any of such securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss or the giving or the
withholding of proxies.
In the Stock Purchase Agreement, each of the Purchasers
covenanted not to sell any shares of Common Stock purchased thereby unless such
transaction (i) is registered under the Securities Act of 1933, (ii) is made
pursuant to Rule 144 under the Securities Act of 1933 or (iii) is made subject
to such conditions as the Company shall impose, in accordance with another
exemption from the registration requirements of the Securities Act of 1933.
Notwithstanding the foregoing, the Registration Rights Agreement provides that
any Holder of Registrable Securities may transfer the whole or any part thereof
and all rights provided under the Registration Rights Agreement to certain
affiliated Persons and entities, provided that certain conditions are met.
Pursuant to the Registration Rights Agreement, the Company has
granted to the Shareholders listed on Exhibit A thereto certain "Requested" and
"Piggyback" registration rights with respect to the shares of Common Stock
purchased through the Stock Purchase Agreement. The Registration Rights
Agreement also contains certain holdback provisions applicable in the case of
certain registered offerings by the Company.
Item 7. Material to be Filed as Exhibits
Exhibit A Form of Common Stock Purchase Agreement, dated March 28,
1997, between Cyberonics, Inc. and the purchasers listed on
Exhibit A thereto.
Exhibit B Form of Registration Rights Agreement, dated March 28, 1997,
by and among Cyberonics, Inc. and the stockholders listed on
Exhibit A thereto.
Exhibit C Letter Agreement, dated March 28, 1997, from Cyberonics,
Inc. to The Clark Estates, Inc.
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<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 7, 1997
- -----------------------------
Date
/s/ Kevin S. Moore
- -----------------------------
Signature
Kevin S. Moore
Senior Vice President and Chief
Financial Officer
The Clark Estates, Inc.
- -----------------------------
Name/Title
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<PAGE>
SCHEDULE I
Executive Officers and Directors of
The Clark Estates, Inc.
Except where otherwise indicated, the business address of each of the
following is The Clark Estates, Inc., 30 Wall Street, New York, New York 10005.
Principal Occupation
Name and Name of Business
- ---- --------------------
Edward W. Stack President and Director
The Clark Estates, Inc.
Management Services
Jane F. Clark Chairman and Director
The Clark Estates, Inc.
Management Services
Kevin S. Moore Senior Vice President, Chief
Financial Officer and Director
The Clark Estates, Inc.
Management Services
William T. Burdick Secretary
The Clark Estates, Inc.
Management Services
Anne L. Peretz Director
The Clark Estates, Inc.
Management Services
Marshall F. Wallach Director
The Clark Estates, Inc.
Management Services
<PAGE>
EXHIBIT A
CYBERONICS, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of March 28, 1997, between
Cyberonics, Inc., a Delaware corporation (the "Company"), and the purchasers who
are signatories hereto and listed on Exhibit A hereto (the "Purchasers").
WHEREAS, the Company wishes to sell and the Purchasers desire to
purchase shares of the Company's Common Stock;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Sale and Purchase of Shares. Subject to the terms and
conditions hereof, the Company will issue and sell to the Purchasers, and each
Purchaser will purchase from the Company, the number of shares of Common Stock
set opposite such Purchaser's name on the signature page hereto at the price of
$4.4375 per share. The obligations of each Purchaser hereunder are separate and
not joint and no Purchaser shall be obligated to purchase any number of shares
in excess of the number set opposite its name. The total amount of Common Stock
sold to the Purchasers pursuant to this Agreement is hereinafter referred to as
the "Shares."
2. Closing Date; Delivery.
2.1 Closing Date. The closing of the purchase and sale of the
Shares hereunder (the "Closing") will be held at the offices of Wilson Sonsini
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050, on the
date hereof (the "Closing Date"), or at such other time and place as the Company
and the Purchasers may mutually agree upon.
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser a certificate registered in such Purchaser's name, representing the
shares of Common Stock purchased by the Purchaser. At the Closing, each
Purchaser will pay to the Company by certified check or wire transfer the amount
of the purchase price set forth opposite the name of such Purchaser on the
signature page of such Purchaser attached hereto.
3. Definitions. Unless the context otherwise requires, the terms
defined in this Section 3 shall have the meanings herein specified for all
purposes of this Agreement.
"Affiliate" shall have the meaning set forth in Rule 405
under the Securities Act.
"Agreement" means this agreement, including the exhibits
hereto.
"Certificate" means the Certificate of Incorporation of the
Company as filed with the Delaware Secretary of State as amended to the date
hereof.
"Closing" is defined in Section 2.1.
-1-
<PAGE>
"Closing Date" is defined in Section 2.1.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, $.01 par
value, authorized by the Certificate, any additional shares of Common Stock
which may be authorized in the future by the Company, and any stock into which
such Common Stock may hereafter be changed, and shall also include capital stock
of any other class of the Company which is not preferred as to dividends or
assets over any other class of stock of the Company and which is not subject to
redemption.
"Company SEC Reports" shall mean the Company's (i) Annual
Reports on Form 10-K for the fiscal years ended June 30, 1995 and June 30, 1996,
each as amended, as filed with the Commission, and (ii) Quarterly Reports on
Form 10-Q for the fiscal quarters ended September 30, 1996 and December 31,
1996, as filed with the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Shares" is defined in Section 1.
4. Representations and Warranties by the Company. The Company
represents and warrants to the Purchasers as of the date hereof that:
4.1 Organization and Standing. The Company is a corporation
duly organized and validly existing under, and by virtue of, and is in good
standing under the laws of the State of Delaware, and has the requisite
corporate power and authority to own its properties and to carry on its business
as now being conducted. The Company is qualified to do business and in good
standing as a foreign corporation in every jurisdiction in which its ownership
of property or conduct of business requires it so to be qualified and in which
the failure to so qualify would have a material adverse affect on the financial
condition or business of the Company.
4.2 Reports and Financial Statements. The Company has
furnished the Purchasers with true and complete copies of its Company SEC
Reports (without exhibits thereto). As of their respective filing dates, the
Company SEC Reports were prepared in all material respects in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the Commission thereunder applicable to such
Company SEC Reports.
4.3 No Material Adverse Change. Since the respective dates as
of which information is given in the Company SEC Reports, there has been no
material adverse change in the condition, financial or otherwise, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the normal course of business.
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<PAGE>
4.4 Shares. The Shares, when issued and paid for pursuant to
the terms of the Agreement, will be duly and validly authorized, issued and
outstanding, fully paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions.
4.5 Corporate Acts and Proceedings. This Agreement has been
duly authorized by the requisite corporate action and has been duly executed and
delivered by an authorized officer of the Company, and is a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies. The requisite corporate
action necessary to the authorization, creation, issuance and delivery of the
Shares has been taken by the Company.
4.6 No Implied Representations. All of the Company's
representations and warranties are contained in this Agreement and no other
representations or warranties by the Company shall be implied.
5. Representations and Warranties by the Purchasers;
Restrictions on Transfer.
Each Purchaser hereby severally represents and warrants to
the Company as of the date hereof, as follows:
5.1 Authorization. Purchaser has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver the Agreement, to purchase the Shares to be
purchased by it and to carry out and perform all of its obligations under the
Agreement. The Agreement constitutes the legal, valid and binding obligation of
the Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies.
5.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(5), (a)(6) or (a)(7)
or a "Qualified Institutional Buyer" as defined in Rule 144A under the
Securities Act. Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Shares. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Shares. Purchaser is not a "broker" or a "dealer" as defined
in the Exchange Act and is not an "affiliate" of the Company as defined in the
Securities Act.
5.3 Investment Intent. Purchaser is purchasing the Shares for
its own account as principal, for investment purposes only, and not with a
present view to, or for, resale, distribution or fractionalization thereof, in
whole or in part, within the meaning of the Securities Act. Purchaser
understands that its acquisition of the Shares has not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Purchaser's investment intent as
expressed herein.
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<PAGE>
Purchaser has, in connection with its decision to purchase the number of Shares
set forth in the Agreement, relied solely upon the Company SEC Reports and the
representations and warranties of the Company contained herein. Purchaser will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose
of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares except in compliance with the Securities Act and the rules
and regulations promulgated thereunder.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Purchaser understands
that the certificates evidencing the Shares will be imprinted with a legend that
prohibits the transfer of the Shares unless (a) such transaction is registered
or such registration is not required, and (b) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act, and if
the Company shall so request in writing, an opinion reasonably satisfactory to
the Company, delivered by counsel reasonably satisfactory to the Company, is
obtained to the effect that the transaction is so exempt.
5.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in the Company SEC Reports, the Agreement or any other materials
presented to Purchaser in connection with the purchase and sale of the Shares
constitutes legal, tax or investment advice. Purchaser has consulted such legal,
tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of the Shares.
6. Restrictions on Transferability of Shares; Compliance with
Securities Act.
6.1 Restrictions on Transferability. The Shares shall not be
transferable in the absence of registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of the
Agreement.
6.2 Restrictive Legend. Each certificate representing the
Shares shall bear substantially the following legends (in addition to any
legends required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
6.3 Transfer of Shares. Each Purchaser hereby covenants with
the Company not to make any sale of the Shares except either (a) a sale of
Shares in accordance with the Registration Statement, in which case the
Purchaser covenants to comply with the requirement of delivering a current
prospectus, (b) a sale of Shares in accordance with Rule 144, in which case the
Purchaser covenants to comply with Rule 144 and to deliver such additional
certificates and documents as the Company may reasonably request, or (c) subject
to such conditions as the Company in its sole discretion shall impose, in
accordance with another exemption from the registration requirements of the
Securities Act. The legend set forth in Section 6.2 will be removed from a
certificate representing Shares following and in
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<PAGE>
connection with any sale of Shares pursuant to subsection (a) or (b) hereof but
not in connection with any sale of Shares pursuant to subsection (c) hereof.
7. Conditions to Closing.
7.1 Conditions to Obligations of Purchasers. The obligations
of each Purchaser hereunder shall be subject to the following conditions:
(a) The representations and warranties of the
Company shall be true and accurate on the Closing Date; and
(b) The Company shall have executed and delivered a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit B.
(c) The aggregate purchase price for the Shares sold
hereunder shall be equal to or greater than $6,800,000.
7.2 Conditions to Obligations of Company. The obligations of
the Company hereunder shall be subject to the condition that the representations
and warranties of the Purchasers shall be true and accurate on the Closing Date.
8. Miscellaneous.
8.1 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by or on behalf
of the Purchaser, and the sale and purchase of the Shares and payment therefor.
8.2 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.
8.3 Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.
8.4 Choice of Law. It is the intention of the parties that the
internal laws of the State of Delaware, without regard to the body of law
controlling conflicts of law, shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties set forth herein.
8.5 Counterparts. This Agreement may be executed concurrently
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized representatives as of
the day and year first above written.
CYBERONICS, INC.
By:/s/ Robert P. Cummins
-------------------------------
Name: Robert P. Cummins
Title: Chief Executive Officer
THE FERNLEIGH FOUNDATION
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Treasurer
THE CLARK FOUNDATION
By:/s/ Kevin S. Moore
-----------------------------
Name: Kevin S. Moore
Title: Treasurer
THE SCRIVEN FOUNDATION
By:/s/ Kevin S. Moore
-----------------------------
Name: Kevin S. Moore
Title: Treasurer
THE MARY IMOGENE BASSETT HOSPITAL-
SCC RESEARCH FUND
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Treasurer
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<PAGE>
THE FARMERS' MUSEUM, INC.
By:/s/ Richard C. Vanison
------------------------------
Name: Richard C. Vanison
Title: Treasurer
ANNUITY TRUST FOR KATHRYN J. CLARK
u/w STEPHEN C. CLARK, JR. ART 18
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR MARTIN PERETZ, 1976
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Trustee
TRUST FOR ANNE L. PERETZ, 1944
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
EDMUND S. TWINING III
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
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<PAGE>
TRUST FOR DOROTHY POTTER BOARDMAN
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR SUSAN CLARK TWINING, 1946
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
THE SCRIVEN FOUNDATION - M FUND
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Treasurer
THE MARY IMOGENE BASSETT HOSPITAL-
TRUSTEE FUND
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Treasurer
EVE C. LABOUISSE
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
-8-
<PAGE>
NEW YORK STATE HISTORICAL
ASSOCIATION - STEPHEN C. CLARK FUND
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Treasurer
JANE FORBES CLARK
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
TRUST FOR EVGENIA S. PERETZ
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR JESSE W. PERETZ
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR DAVID L. FARNSWORTH
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
-9-
<PAGE>
TRUST FOR ANNE E. FARNSWORTH
By:/s/ Edward W. Stack
------------------------------
Name: Edward W. Stack
Title: Trustee
RESIDUARY TRUST FOR JANE FORBES
CLARK II
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Trustee
CLARA WELCH THANKSGIVING HOME, INC.
By:/s/ Richard c. Vanison
------------------------------
Name: Richard C. Vanison
Title: Treasurer
RESIDUARY TRUST u/w SUSAN CLARK
TWINING
By:/s/ Jane Forbes Clark
------------------------------
Name: Jane Forbes Clark
Title: Trustee
DIANA R. TWINING
By:/s/ Kevin S. Moore
------------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
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<PAGE>
Capital Research and Management Company on
behalf of SMALLCAP World Fund, Inc.
By:/s/ Catherine M. Ward
------------------------------
Name: Catherine M. Ward
Title: Senior Vice President
AEOW 96, LLC
By:/s/ Will K. Weinstein
------------------------------
Name: Will K. Weinstein
Title: Member Manager
STANLEY H. APPEL, M.D.
By:/s/ Stanley H. Appel
------------------------------
ROBERT P. CUMMINS
By:/s/ Robert P. Cummins
------------------------------
MARILYN LUNNEY
By:/s/ Marilyn Lunney
------------------------------
WILLIAM H. DUFFELL, JR.
By:/s/ William H. Duffell, Jr.
------------------------------
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<PAGE>
IRA FBO ROBERT P. CUMMINS, DLJSC AS
CUSTODIAN
By:
------------------------------
Name:
Title:
ROBERT P. CUMMINS AS CUSTODIAN FOR
LINDA G. CUMMINS UNDER THE TEXAS
UNIFORM TRANSFERS TO MINORS ACT
By:/s/ Robert P. Cummins
------------------------------
Name: Robert P. Cummins
Title: Custodian
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<PAGE>
EXHIBIT A
Schedule of Purchasers
NUMBER OF AGGREGATE
SHARES PURCHASE
NAME AND ADDRESS OF PURCHASER PURCHASED PRICE
----------------------------- --------- ----------
THE FERNLEIGH FOUNDATION 16,000 71,000.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE CLARK FOUNDATION 347,408 1,541,623.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE SCRIVEN FOUNDATION 82,000 363,875.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE MARY IMOGENE BASSETT HOSPITAL - 15,000 66,562.50
SCC RESEARCH FUND
c/o The Clark Estates
30 Wall Street,
9th Floor New York, NY
10005
THE FARMERS' MUSEUM, INC. 60,000 266,250.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
ANNUITY TRUST FOR KATHRYN J. CLARK 10,000 44,375.00
u/w STEPHEN C. CLARK, JR. ART. 18
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR MARTIN PERETZ, 1976 6,000 26,625.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
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<PAGE>
NUMBER OF AGGREGATE
SHARES PURCHASE
NAME AND ADDRESS OF PURCHASER PURCHASED PRICE
TRUST FOR ANNE L. PERETZ, 1944 20,000 88,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
EDMUND S. TWINING III 20,000 88,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR DOROTHY POTTER BOARDMAN 12,000 53,250.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR SUSAN CLARK TWINING, 1946 14,000 62,125.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE SCRIVEN FOUNDATION - M FUND 70,000 310,625.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE MARY IMOGENE BASSETT HOSPITAL - 22,000 97,625.00
TRUSTEE FUND
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
EVE C. LABOUISSE 30,000 133,125.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
NEW YORK STATE HISTORICAL 30,000 133,125.00
ASSOCIATION - STEPHEN C. CLARK FUND
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
JANE FORBES CLARK 70,000 310,625.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
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<PAGE>
NUMBER OF AGGREGATE
SHARES PURCHASE
NAME AND ADDRESS OF PURCHASER PURCHASED PRICE
TRUST FOR EVGENIA S. PERETZ 4,000 17,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR JESSE W. PERETZ 4,000 17,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR DAVID L. FARNSWORTH 4,000 17,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR ANNE E. FARNSWORTH 4,000 17,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
RESIDUARY TRUST FOR JANE FORBES 35,000 155,312.50
CLARK II
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
CLARA WELCH THANKSGIVING HOME, INC. 4,000 17,750.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
RESIDUARY TRUST u/w SUSAN CLARK 20,000 88,750.00
TWINING
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
DIANA R. TWINING 2,000 8,875.00
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
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<PAGE>
NUMBER OF AGGREGATE
SHARES PURCHASE
NAME AND ADDRESS OF PURCHASER PURCHASED PRICE
----------------------------- --------- ----------
SMALLCAP WORLD FUND, INC. 494,000 2,192,125.00
(Registered in the name of Kane & Co.)
c/o Capital Research & Management Company
Attn: James P. Ryan
333 South Hope Street
Los Angeles, CA 90071
AEOW 96, LLC 56,339 250,004.31
c/o Genesis Merchant Group
Attn: Will K. Weinstein
909 Montgomery Street, #600
San Francisco, CA 94133
STANLEY H. APPEL, M.D. 40,000 177,500.00
c/o Baylor College of Medicine
1 Baylor Place
Houston, TX 77030
ROBERT P. CUMMINS 7,750 100,953.12
c/o Cyberonics, Inc.
17448 Highway 3, Suite 100
Webster, TX 77598
MARILYN LUNNEY 6,000 26,625.00
c/o Cyberonics, Inc.
Attn: Shawn Lunney
17448 Highway 3, Suite 100
Webster, TX 77598
WILLIAM H. DUFFELL, JR. 1,127 5,001.06
c/o Cyberonics, Inc.
17448 Highway 3, Suite 100
Webster, TX 77598
IRA FBO ROBERT P. CUMMINS, 7,750 34,390.63
DLJSC AS CUSTODIAN
c/o Donaldson Lufkin Jenrette
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<PAGE>
NUMBER OF AGGREGATE
SHARES PURCHASE
NAME AND ADDRESS OF PURCHASER PURCHASED PRICE
----------------------------- --------- ----------
ROBERT P. CUMMINS AS CUSTODIAN 5,000 22,187.50
FOR LINDA G. CUMMINS UNDER THE
TEXAS UNIFORM TRANSFERS TO
MINORS ACT
c/o Cyberonics, Inc.
Attn: Robert P. Cummins
17448 Highway 3, Suite 100
Webster, TX 77598
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<PAGE>
COMMON STOCK PURCHASE AGREEMENT
CYBERONICS, INC.
March 28, 1997
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<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of this
28 day of March, 1997, by and among Cyberonics, Inc., a Delaware Corporation
(the "Company") and the stockholders whose names are set forth on Exhibit A
hereto (the "Stockholders").
Recitals
WHEREAS, the Company and the Stockholders are parties to a Common Stock
Purchase Agreement dated the date hereof pursuant to which the Stockholders are
purchasing an aggregate of up to 1,700,000 shares of the Company's Common Stock
(the "Shares");
WHEREAS, the Company has agreed to provide the Stockholders with
certain rights to register the Shares as provided herein;
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Holder" shall mean any Stockholder holding Registrable
Securities and any Person holding Registrable Securities to whom the rights
under this Agreement have been transferred in accordance with Section 3.8
hereof.
"Initiating Holders" shall mean any Stockholders or
transferees of Stockholders under Section 3.8 hereof who in the aggregate are
Holders of not less than 50% of the then outstanding Registrable Securities.
"Person" shall mean an individual, corporation, partnership,
limited liability company, association, joint-stock company, trust where the
interests of the beneficiaries are evidenced by a security, unincorporated
organization, estate, governmental or political subdivision thereof or
governmental agency.
"Public Offering" shall mean the closing of an underwritten
public offering of Common Stock registered with the Commission under the
Securities Act.
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<PAGE>
"Registrable Securities" means (i) the Shares and (ii) any
Common Stock of the Company issued or issuable in respect of the Shares upon any
stock split, stock dividend, recapitalization, or similar event; excluding in
all cases, however, any Registrable Securities sold by a Holder including a sale
pursuant to a registration statement under this Agreement, a transaction
pursuant to Rule 144 or any other transaction in which registration rights are
not transferred pursuant to Section 3.8 hereof.
"Registration Statement" shall mean a registration statement
provided for in Section 6 of the Securities Act under which securities are
registered under the Securities Act, together with any preliminary, final or
summary prospectus contained therein, any amendment or supplement thereto, and
any document incorporated by reference therein.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, other than
Selling expenses (as defined below), incurred by the Company in complying with
Sections 3.1 or 3.2 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company) and the reasonable fees and disbursements
of one counsel for all Holders.
"Rule 144" shall mean Rule 144 promulgated under the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and, except as set forth in the definition of
"Registration Expenses" above, all fees and disbursements of counsel for any
Holder.
2. Notice of Proposed Transfers.
2.1 Restriction on Transfer. The Shares shall not be sold,
assigned, transferred or pledged except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Stockholder will cause any proposed
purchaser, assignee, transferee, or pledgee of the Shares to agree to take and
hold such securities subject to the provisions and upon the conditions specified
in this Agreement. If a Holder wishes to sell Registrable Securities (other than
in a registered offering pursuant to Section 3 hereof, pursuant to Rule 144 or
pursuant to a permitted transfer pursuant to Section 2.2 below), it shall
deliver a written notice to the Company disclosing in reasonable detail the
terms and conditions of the proposed sale and shall provide to the Company, at
such Holder's expense either (i) a written opinion of legal counsel who
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<PAGE>
shall be, and whose legal opinion shall be, reasonably satisfactory to the
Company, addressed to the Company, to the effect that the proposed transfer of
the Shares may be effected without registration under the Securities Act, or
(ii) a "no action" letter from the Commission to the effect that the transfer of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto.
2.2 Permitted Transfers. Notwithstanding Section 2.1 hereof,
any Holder may transfer the whole or any part of the Registrable Securities and
all rights provided in this Agreement with respect thereto (a) to any entity or
Person whose affairs are under common management with a Stockholder, (b) to any
partners, or retired partners, or to the estate of any partners or retired
partners of a Stockholder which is a partnership, and (c) to any stockholder,
parent or subsidiary corporation of a Stockholder which is a corporation;
provided that the Transferee enters into an Agreement with the Stockholders and
the Company in which the Transferee shall be bound by and entitled to the
benefit of the provisions of this Agreement.
2.3 Stockholder Covenant. No Holder shall mortgage, pledge,
charge, hypothecate, grant a security interest in, or otherwise encumber, or
allow or permit any charge, security interest, encumbrance, pledge, mortgage,
hypothecation, lien or adverse claim to attach to, affect or encumber, his or
its Registrable Securities or any part thereof, or any interest therein.
2.4 Restrictive Legend. Each certificate representing
Registrable Securities shall be stamped or otherwise imprinted with legends
substantially in the following form (in addition to any legend required under
applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID
ACT."
Each Stockholder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Common Stock in
order to implement the restrictions on transfer established in this Agreement.
3. Registration Rights.
3.1 Requested Registration.
(a) In case the Company shall receive from Initiating
Holders a written request that the Company effect any registration,
qualification or compliance with respect to a proposed registration of Shares (a
"Requested Registration") with an aggregate offering price to the public of (x)
at
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<PAGE>
least $1,000,000 if such registration may be effected pursuant to a Registration
Statement on Form S-3 (or a successor form) or (y) at least $5,000,000 if such
registration is effected pursuant to a Registration Statement on a form other
than Form S-3, the Company will:
(i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best
lawful efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities law and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested by the Initiating Holders
and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holders
joining in such request as are specified in a written request received by the
Company within 20 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 3.1:
(A) In any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in effecting such registration, qualification or compliance unless
the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act;
(B) During the period starting with
the date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date three (3) months immediately following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), providing that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective (and provided, further, that the Company cannot pursuant to this
Section 3.l(a)(ii)(B) delay implementation of a demand for registration more
than once in any 12-month period);
(C) After the Company has effected
two such registrations pursuant to this subsection 3.1(a); provided, that a
registration will only be counted for purposes of this Section 3.1(a)(ii)(C) if
(x) such registration has been declared or ordered effective, and (y) no stop
order, injunction or the like has been entered barring sales of securities
thereunder (other than a stop order, injunction or the like which is promptly
resolved, in which case the Company shall use its best lawful efforts to keep
the Registration Statement effective for an additional period equal to the
period during which the stop order, injunction or the like barred sales); or
(D) If the Company shall furnish to
such Holders a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
lawful efforts to register, qualify or
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<PAGE>
comply under this Section 3.1 shall be deferred once (with respect to any demand
for registration hereunder) for a period not to exceed ninety (90) days from the
date of receipt of written request from the Initiating Holders, provided that
the Company may, by furnishing another certificate pursuant to this Section
3.1(a)(ii)(D), delay implementation of a demand for registration for one
additional period of up to ninety (90) days. In the event of such a delay by the
Company, the Initiating Holders will be entitled to withdraw their request for
such Requested Registration, in which case such right of Requested Registration
shall be restored under Section 3.1(a)(C) hereof.
Subject to the foregoing clauses (A) through (D), the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable, after receipt of the
request or requests of the Initiating Holders.
(b) The Company may register securities for sale for
its own account in any registration requested pursuant to this Section 3.1 and
may also register restricted securities held by other stockholders; provided,
however, that in the event that the number of shares to be included in a
registration is to be limited, then securities to be sold for the Company's own
account and restricted securities held by other stockholders shall be eliminated
from the registration prior to reducing the number of Shares included in such
registration.
3.2 Company Registration.
(a) Notice of Registration. If at any time or from
time to time the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders, other
than (i) a registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Commission Rule 145 transaction, the Company
will:
(i) promptly give to each Holder written
notice thereof; and
(ii) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after receipt of such written
notice from the Company, by any Holder (a "Piggyback Registration").
(b) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 3.2 (but not its obligation to pay registration expenses
pursuant to Section 3.4 hereof) prior to the effectiveness of such registration
whether or not any Holder has elected to include securities in such
registration.
(c) Survival of Requested Registration. No
registration of Registrable Securities effected under Section 3.2(a) shall
relieve the Company of its obligation to effect any Requested Registration under
Section 3.1(a) hereof.
3.3 Underwriting. In the event that a registration
pursuant to Section 3.1 or 3.2 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part
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<PAGE>
of the notice given to Holders. In such event, the Company shall (together with
all Holders and other holders proposing to distribute their securities through
such underwriting) enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting (x) by the Company if
such registration is initiated by the Company or (y) by a majority in interest
of the Holders initially requesting registration if such registration is
initiated by Holders; provided, however, that underwriters selected by Holders
shall be subject to the Company's reasonable approval. Notwithstanding any other
provision of this Section 3.3, if the managing underwriter advises the Company
and the Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten on behalf of stockholders, then the Company
shall so advise all Holders, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated as
follows: (i) any shares which were to be included in such registration that are
not "Registrable Securities" under this Agreement would first be eliminated from
the offering; (ii) if further reduction in the number of shares is required,
then the number of shares to be included on behalf of Holders would be allocated
among all Holders requesting registration of Shares in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities (or other holder
distributing its securities through the underwriting) disapproves of the terms
of the underwriting, such person may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. The Registrable Securities
and/or other securities so withdrawn shall also be withdrawn from registration.
3.4 Expenses of Registration. All Registration Expenses
incurred in connection with the registrations pursuant to Section 3.1 and all
registrations pursuant to Section 3.2 shall be borne by the Company. All Selling
Expenses relating to securities registered on behalf of the Holders or other
holders registering securities shall be borne by the Holders or holders of such
securities pro rata on the basis of the number of shares so registered.
3.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
(a) Prepare and file with the Commission a
Registration Statement (including amendments and supplements thereto) with
respect to such securities and use its best lawful efforts to cause such
Registration Statement to become and remain effective for at least ninety (90)
days or until the distribution described in the Registration Statement has been
completed;
(b) Furnish to each underwriter such number of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the
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<PAGE>
shares by such underwriter. In addition, the Company will promptly furnish to
each underwriter and Holder notice of any NASDAQ listing, and notice of any
stop-order or similar notice issued by the Commission or any state agency
charged with the regulation of securities, and use commercially reasonable
efforts to promptly obtain the withdrawal of any order suspending the
effectiveness of such Registration Statement or sales of securities thereunder;
and
(c) At any time when a prospectus relating thereto is
required to be delivered under the Securities Act, notify each seller of
Registrable Securities covered by such Registration Statement promptly after the
Company discovers that the prospectus included in such Registration Statement as
then in effect includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of any such seller promptly prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include 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
the light of the circumstances under which they were made, not misleading. Each
holder of Registrable Securities agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in this Section
3.5(c), such holder will discontinue immediately such holder's disposition of
securities pursuant to the Registration Statement until such holder receives
copies of the supplemented or amended prospectus contemplated by this Section
3.5(c) and, if so directed by the Company, will deliver to the Company all
copies, other than permanent file copies, then in such holder's possession of
the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
3.6 Indemnification.
(a) To the extent permitted by law, the Company will
indemnify each Holder participating in a registration pursuant to this
Agreement, each of such Holder's officers, directors, partners and trustees, and
each person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder or
holder, each of its officers, directors, partners and trustees, and each person
controlling such Holder or holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss,
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<PAGE>
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by such Holder, controlling person or
underwriter specifically for use therein. Notwithstanding the foregoing, insofar
as the foregoing indemnity relates to any such untrue statement (or alleged
untrue statement) or omission (or alleged omission) made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement becomes effective or in the
final prospectus filed with the Commission pursuant to Rule 424(b) of the
Commission, the indemnity agreement herein shall not inure to the benefit of any
underwriter or (if there is no underwriter) any Holder if a copy of the final
prospectus filed pursuant to Rule 424(b) was delivered to such underwriter or
Holder, but was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act.
(b) To the extent permitted by law, each Holder or
holder will, if Registrable Securities or other securities held by such Holder
or holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder or holder, each of its officers,
directors, partners and trustees and each person controlling such Holder or
holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, and will reimburse the Company, such Holders or holders, such
directors, officers, partners, trustees, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder or holder specifically for use therein.
Notwithstanding the foregoing, the liability of each Holder or holder under this
subsection (b) shall be limited in an amount equal to the net proceeds from the
sale of the shares sold by such Holder or holder, unless such liability arises
out of or is based on willful misconduct by such Holder or holder. In addition,
insofar as the foregoing indemnity relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the Commission at the time the registration statement becomes
effective or in the final prospectus filed pursuant to Rule 424(b) of the
Commission, the indemnity agreement herein shall not inure to the benefit of the
Company, any underwriter or (if there is no underwriter) any Holder if a copy of
the final prospectus filed pursuant to Rule 424(b) was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
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<PAGE>
(c) Each party entitled to indemnification under this
Section 3.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate or different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. No Indemnified Party shall consent to entry of any
judgment or enter into any settlement without the consent of each Indemnifying
Party.
(d) If the indemnification provided for in this
Section 3.6 is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred to therein, 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,
claims, damages or liabilities, in a proportion which reflects the relative
fault of the Company on the one hand and of the stockholders offering securities
in the offering (the "Selling Stockholders") on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and the Selling Stockholders on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of material fact or the omission or alleged
omission to state a material fact relates to information supplied in writing by
the Company or by the Selling Stockholders and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Selling Stockholders agree that it
would not be just and equitable if contribution pursuant to this Section 3.6(d)
were based solely upon the number of entities from whom contribution was
requested or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 3.6(d). The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to above in this Section 3.6(d) shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim, subject to the provisions of Section 3.6(c) hereof. Notwithstanding
the provisions of this Section 3.6(d), no Selling Stockholder shall be required
to contribute any amount or make any other payments under this Agreement which
in the aggregate exceed the proceeds received by such Selling Stockholder. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11
of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
-9-
<PAGE>
3.7 Information by Holder.
(a) The Holder or Holders of Registrable Securities
included in any registration and the holder or holders of any other securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, holder or holders, the Registrable Securities
or other securities held by them and the distribution proposed by such Holder or
Holders, holder or holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in Section 3.
(b) The failure of any Holder or Holders of
Registrable Securities or any holder or holders of other securities to be
included in a registration to furnish the information requested pursuant to
Section 3.7(a) shall not affect the obligation of the Company under Section 3 to
the remaining Holder(s) or holder(s) who furnish such information unless, in the
reasonable opinion of counsel to the Company or the underwriters, such failure
impairs or may impair the legality of the Registration Statement or the
underlying offering.
3.8 Transfer of Registration Rights. The rights granted to a
Stockholder under this Agreement may be assigned to a transferee or assignee in
connection with any transfer or assignment of Registrable Securities by a
purchaser provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws, (ii) such assignee or transferee
acquires at least 100,000 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, dividends, subdivisions, combinations,
recapitalization and the like) and (iii) the Stockholder notifies the Company in
writing of the transfer or assignment and the assignee or transferee agrees in
writing to be bound by the provisions of this Agreement.
3.9 Holdback Agreements.
(a) Each Holder of Common Stock party hereto agrees
by acquisition of such Common Stock not to effect any public sale or
distribution of any equity securities of the Company during the seven days prior
to and the 120 days after any Public Offering, Requested Registration or
Piggyback Registration has become effective, except as part of such Public
Offering, Requested Registration or Piggyback Registration, as the case may be,
unless the managing underwriter of the Public Offering, Requested Registration
or Piggyback Registration otherwise agrees to such sale or distribution.
(b) The Company agrees (x) not to effect any public
sale or distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven days
prior to and the 120 days after any Public Offering, Requested Registration or
Piggyback Registration has become effective, except as part of such Public
Offering, Requested Registration or Piggyback Registration, as the case may be,
and except pursuant to registrations on Form S-4, S-8 or any successor or
similar forms thereto unless the managing underwriter otherwise agrees to such
sale or distribution.
-10-
<PAGE>
4. Miscellaneous.
4.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY THE INTERNAL LAWS OF THE STATE OF DELAWARE.
4.2 Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.3 Termination. The provisions of this Agreement shall
terminate as to each Holder, at such time as such Holder may sell all Shares
held by it in any single three-month period. In addition this Agreement shall
terminate in its entirety upon the earliest to occur of the following:
(a) three years from the date hereof;
(b) the effective date of a corporate reorganization
of the Company which results in the then current stockholders of the Company
owning less than 50% of the equity securities of the surviving company, or the
sale of all or substantially all of the assets of the Company; and
(c) the sale of all or substantially all of the
assets of the Company.
4.4 Amendment. This Agreement may be amended, waived,
discharged or terminated by a written instrument signed by the Company and by
the holders of at least sixty percent (60%) in interest of the aggregate of the
then outstanding Registrable Securities; provided, however, that any amendment,
waiver, discharge or termination of any provision hereof which would have the
effect of altering the rights of any Holder or Holders in relation to the rights
of any other Holder or Holders shall not be effective unless approved by Holders
of a majority in interest of the adversely affected Registrable Securities.
4.5 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof.
4.6 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger including Federal Express or similar courier service, addressed (a)
if to a Stockholder, at such Stockholder's address set forth on Exhibit A
hereto, or at such other address as such Stockholder shall have furnished to the
Company in writing, or (b) if to the Company, to Cyberonics, Inc., 17448 Highway
3, Suite 100, Webster, Texas 77598, Attn: President, or at such other address as
the Company shall have furnished to the Stockholders. Each such notice or other
communication shall for all purposes of this Agreement be treated as effective
upon receipt.
4.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all of the
Stockholders, each of which shall be enforceable
-11-
<PAGE>
against the parties actually executing such counterparts, and all of which
together shall constitute one instrument.
4.8 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
4.9 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
-12-
<PAGE>
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective
upon the date first set forth above.
"COMPANY"
CYBERONICS, INC.
By:/s/ Robert P. Cummins
----------------------------
Name: Robert P. Cummins
Title: Chief Executive Officer
THE FERNLEIGH FOUNDATION
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
THE CLARK FOUNDATION
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
THE SCRIVEN FOUNDATION
By:/s/Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
-13-
<PAGE>
THE MARY IMOGENE BASSETT HOSPITAL-SCC
RESEARCH FUND
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
THE FARMERS' MUSEUM, INC.
By:/s/ Richard C. Vanison
----------------------------
Name: Richard C. Vanison
Title: Treasurer
ANNUITY TRUST FOR KATHRYN J. CLARK u/w
STEPHEN C. CLARK, JR. ART 18
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR MARTIN PERETZ, 1976
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Trustee
TRUST FOR ANNE L. PERETZ, 1944
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
-14-
<PAGE>
EDMUND S. TWINING III
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
TRUST FOR DOROTHY POTTER BOARDMAN
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR SUSAN CLARK TWINING, 1946
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
THE SCRIVEN FOUNDATION - M FUND
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
THE MARY IMOGENE BASSETT HOSPITAL-
TRUSTEE FUND
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
-15-
<PAGE>
EVE C. LABOUISSE
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
NEW YORK STATE HISTORICAL
ASSOCIATION - STEPHEN C. CLARK FUND
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Treasurer
JANE FORBES CLARK
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
TRUST FOR EVGENIA S. PERETZ
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR JESSE W. PERETZ
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
-16-
<PAGE>
TRUST FOR DAVID L. FARNSWORTH
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
TRUST FOR ANNE E. FARNSWORTH
By:/s/ Edward W. Stack
----------------------------
Name: Edward W. Stack
Title: Trustee
RESIDUARY TRUST FOR JANE FORBES CLARK II
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Trustee
CLARA WELCH THANKSGIVING HOME, INC.
By:/s/ Richard C. Vanison
----------------------------
Name: Richard C. Vanison
Title: Treasurer
RESIDUARY TRUST u/w SUSAN CLARK TWINING
By:/s/ Jane Forbes Clark
----------------------------
Name: Jane Forbes Clark
Title: Trustee
-17-
<PAGE>
DIANA R. TWINING
By:/s/ Kevin S. Moore
----------------------------
Name: Kevin S. Moore
Title: Attorney in Fact
Capital Research and Management Company
on behalf of SMALLCAP World Fund, Inc.
By:/s/ Catherine M. Ward
----------------------------
Name: Catherine M. Ward
Title: Senior Vice President
AEOW 96, LLC
By:/s/ Will K. Weinstein
----------------------------
Name: Will K. Weinstein
Title: Managing Member
STANLEY H. APPEL, M.D.
By:/s/ Stanley H. Appel
----------------------------
ROBERT P. CUMMINS
By:/s/ Robert P. Cummins
----------------------------
-18-
<PAGE>
MARILYN LUNNEY
By:/s/ Marilyn Lunney
----------------------------
WILLIAM H. DUFFELL, JR.
By:/s/ William H. Duffell, Jr.
----------------------------
IRA FBO ROBERT P. CUMMINS, DLJSC AS
CUSTODIAN
By:
----------------------------
Name:
Title:
ROBERT P. CUMMINS AS CUSTODIAN FOR LINDA
G. CUMMINS UNDER THE TEXAS UNIFORM
TRANSFERS TO MINORS ACT
By:/s/ Robert P. Cummins
----------------------------
Name: Robert P. Cummins
Title: Custodian
-19-
<PAGE>
EXHIBIT A
Schedule of Purchasers
NUMBER OF
REGISTRABLE
NAME AND ADDRESS OF PURCHASER SECURITIES
----------------------------- -----------
THE FERNLEIGH FOUNDATION 16,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE CLARK FOUNDATION 347,408
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE SCRIVEN FOUNDATION 82,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE MARY IMOGENE BASSETT HOSPITAL
- - SCC RESEARCH FUND 15,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE FARMERS' MUSEUM, INC. 60,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
ANNUITY TRUST FOR KATHRYN J. CLARK u/w STEPHEN C. 10,000
CLARK, JR. ART. 18
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR MARTIN PERETZ, 1976 6,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR ANNE L. PERETZ, 1944 20,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
-1-
<PAGE>
NUMBER OF
REGISTRABLE
NAME AND ADDRESS OF PURCHASER SECURITIES
----------------------------- -----------
EDMUND S. TWINING III 20,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR DOROTHY POTTER BOARDMAN 12,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR SUSAN CLARK TWINING, 1946 14,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE SCRIVEN FOUNDATION - M FUND 70,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
THE MARY IMOGENE BASSETT HOSPITAL - TRUSTEE FUND 22,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
EVE C. LABOUISSE 30,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
NEW YORK STATE HISTORICAL ASSOCIATION - STEPHEN C. 30,000
CLARK FUND
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
JANE FORBES CLARK 70,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR EVGENIA S. PERETZ 4,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
-2-
<PAGE>
NUMBER OF
REGISTRABLE
NAME AND ADDRESS OF PURCHASER SECURITIES
----------------------------- -----------
TRUST FOR JESSE W. PERETZ 4,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR DAVID L. FARNSWORTH 4,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
TRUST FOR ANNE E. FARNSWORTH 4,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
RESIDUARY TRUST FOR JANE FORBES CLARK II 35,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
CLARA WELCH THANKSGIVING HOME, INC. 4,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
RESIDUARY TRUST u/w SUSAN CLARK TWINING 20,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
DIANA R. TWINING 2,000
c/o The Clark Estates
30 Wall Street, 9th Floor
New York, NY 10005
SMALLCAP WORLD FUND, INC. 494,000
(Registered in the name of Kane & Co.)
c/o Capital Research & Management Company
Attn: James P. Ryan
333 South Hope Street
Los Angeles, CA 90071
AEOW 96, LLC 56,339
c/o Genesis Merchant Group
Attn: Will K. Weinstein
909 Montgomery Street, #600
San Francisco, CA 94133
-3-
<PAGE>
NUMBER OF
REGISTRABLE
NAME AND ADDRESS OF PURCHASER SECURITIES
----------------------------- -----------
STANLEY H. APPEL, M.D. 40,000
c/o Baylor College of Medicine
1 Baylor Place
Houston, TX 77030
ROBERT P. CUMMINS 22,750
c/o Cyberonics, Inc.
17448 Highway 3, Suite 100
Webster, TX 77598
MARILYN LUNNEY 6,000
c/o Cyberonics, Inc.
Attn: Shawn Lunney
17448 Highway 3, Suite 100
Webster, TX 77598
WILLIAM H. DUFFELL, JR. 1,127
c/o Cyberonics, Inc.
17448 Highway 3, Suite 100
Webster, TX 77598
IRA FBO ROBERT P. CUMMINS, 7,750
DLJSC AS CUSTODIAN
c/o Donaldson Lufkin Jenrette
Attn: ----
- ----
- ----
ROBERT P. CUMMINS AS CUSTODIAN 5,000
FOR LINDA G. CUMMINS UNDER THE
TEXAS UNIFORM TRANSFERS TO
MINORS ACT
c/o Cyberonics, Inc.
Attn: Robert P. Cummins
17448 Highway 3, Suite 100
Webster, TX 77598
-4-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
CYBERONICS, INC.
March 28, 1997
-1-
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions................................................1
2. Notice of Proposed Transfers.......................................2
2.1 Restriction on Transfer................................2
2.2 Permitted Transfers....................................3
2.3 Stockholder Covenant...................................3
2.4 Restrictive Legend.....................................3
3. Registration Rights................................................3
3.1 Requested Registration.................................3
3.2 Company Registration...................................5
3.3 Underwriting...........................................5
3.4 Expenses of Registration...............................6
3.5 Registration Procedures................................6
3.6 Indemnification........................................7
3.7 Information by Holder.................................10
3.8 Transfer of Registration Rights.......................10
3.9 Holdback Agreements...................................10
4. Miscellaneous.....................................................11
4.1 Governing Law.........................................11
4.2 Successors and Assigns................................11
4.3 Termination...........................................11
4.4 Amendment.............................................11
4.5 Entire Agreement......................................11
4.6 Notices, etc..........................................11
4.7 Counterparts..........................................11
4.8 Severability..........................................12
4.9 Titles and Subtitles..................................12
-i-
<PAGE>
EXHIBIT C
The Clark Estates
c/o Mr. Kevin Moore
Page 1
CYBERONICS, INC.
March 28, 1997
The Clark Estates
Attn: Kevin Moore
30 Wall Street, 9th Floor
New York, NY 10005
Re: Designation of Board Member
Dear Kevin:
By a Common Stock Purchase Agreement dated the date of this letter,
certain persons and entities whose business affairs are managed by or under
common management with The Clark Estates (the "Clark Group") are purchasing an
aggregate of 901,408 shares of the Common Stock of Cyberonics, Inc. (the
"Company"). In consideration of such investment, Cyberonics hereby agrees with
The Clark Estates as follows:
1. Concurrent with the closing of the securities purchase referred to
in the preceding paragraph, The Clark Estates, on behalf of the Clark Group,
shall have the right to designate one person reasonably acceptable to the
Company to serve on the Company's Board of Directors. Upon such designation, the
Company shall take such actions as may be necessary to appoint The Clark
Estates' designee to the Company's Board of Directors.
2. For so long as the Clark Group continues to own an aggregate of at
least 600,000 of the shares of Common Stock referred to in the first paragraph
of this letter, the Company will cause one person designated by The Clark
Estates to be nominated for election to the Company's Board of Directors at each
meeting of Company stockholders at which directors are being elected.
3. If the person designated to serve on the Company's Board of
Directors by The Clark Estates dies or otherwise becomes incapacitated while
serving as a director, or resigns from the Cyberonics Board, The Clark Estates,
on behalf of the Clark Group shall have the right to designate a replacement
reasonably acceptable to the Company. Upon such designation, the Company shall
take such actions as may be necessary to appoint The Clark Estates' replacement
designee to the Company's Board of Directors.
<PAGE>
The Clark Estates
c/o Mr. Kevin Moore
Page 2
4. Failure to exercise the right granted under this letter agreement to
designate a member to serve on the Company's Board of Directors shall not result
in forfeiture of such right.
Very truly yours,
CYBERONICS, INC.
By:/s/ Robert P. Cummins
----------------------------
Name: Robert P. Cummins
Title: Chief Executive Officer
<PAGE>
