NEONODE, INC. NOTE PURCHASE AGREEMENT
EXECUTION
COPY
NOTE
PURCHASE AGREEMENT (the “Agreement”)
dated
as of November 20, 2006 among NEONODE, INC., a Delaware corporation
(“Company”),
AIGH
Investment Partners LLC, a Delaware limited liability company ( “AIGH”),
and
any other person who executes this agreement from time to time as purchaser
of
Notes (collectively with AIGH, the “New
Investors”).
Background:
The
Company desires to sell to the New Investors, and the New Investors desire
to
purchase up to, $1,000,000 in principal amount of Senior Secured Notes, in
substantially the form attached hereto as Exhibit
1
(the
“Notes”).
On
February 28, 2006, the Company sold $4,000,000 principal amount of senior
secured notes on substantially the same terms as the Notes to AIGH and other
investors (collectively in this capacity, the “Investors”),
and
in connection therewith (i) the Company entered into the Security Agreement
with
AIGH (as agent for the Investors), (ii) AIGH entered the Intercreditor Agreement
with Petrus, and (iii) the Pledgors entered into the Stockholder Pledge
Agreements with the Investors. The Company may also sell additional notes of
similar tenor to the Notes to the New Investors or other investors, on or before
August 28, 2007, provided that the aggregate principal amount of such notes
together with the Notes does not exceed $1,800,000. The proceeds are necessary
for the development and continuance of the business of the Company and each
of
its subsidiaries.
Certain
Definitions:
“Common
Stock”
shall
mean stock of the Company of any class (however designated) whether now or
hereafter authorized, which generally has the right to participate in the voting
and in the distribution of earnings and assets of the Company without limit
as
to amount or percentage, including the Company’s Common Stock, $.01 par value
per share.
“Company”
includes the Company and any Person which shall succeed to or assume, directly
or indirectly, the obligations of the Company hereunder.
“Company
Disclosure”
means
the disclosure materials in the form attached as Exhibit
6
to this
Agreement.
“Governmental
Body”
shall
mean any: (a) nation, state, commonwealth, province, municipality or district;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or entity and any court or other
tribunal).
“Guaranties”
means
the respective guaranties, dated February 28, 2006, delivered to the Investors
identified on Exhibit
A
of the
Stockholder Pledge Agreements, respectively.
“Guarantors”
means
each of Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxx and Per Xxxxxxx, each as a party to
its
respective Guaranty.
“Intercreditor
Agreement”
means
the Intercreditor Agreement, dated February 28, 2006, between AIGH and
Petrus.
“Material
Adverse Change”
shall
mean any change in the facts represented by the Company in the Agreement or
the
business, financial condition, results of operation, prospects, properties
or
operations of the Company and its subsidiaries taken as a whole which may have
a
material adverse effect on the value of the Common Stock of the
Company.
“Material
Adverse Effect”
shall
mean a material adverse effect on the operations, assets, liabilities, financial
condition, prospects or business of the Company.
“Neonode
AB”
means
Neonode AB, a Swedish corporation.
“Own”
shall
mean own beneficially, as that term is defined in the rules and regulations
of
the SEC.
“Petrus”
means
Petrus Holdings, SA, a corporation organized under the laws of
Luxembourg.
“Person”
means
any individual, sole proprietorship, partnership, corporation, limited liability
company, business trust, unincorporated association, joint stock corporation,
trust, joint venture or other entity, any university or similar institution,
or
any government or any agency or instrumentality or political subdivision
thereof.
“Pledgors”
means
Xxxxxx XX, Iwo Jima Sarl and Wirelesstoys sweden AB, each as a party to its
respective Stockholder Pledge Agreement.
“Proprietary
Assets”
shall
mean any: (i) patent, patent application, trademark (whether registered or
unregistered), trademark application, trade name, fictitious business name,
service xxxx (whether registered or unregistered), service xxxx application,
copyright (whether registered or unregistered), copyright application, maskwork,
maskwork application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, invention, design, blueprint, engineering
drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset relating to the foregoing;
or
(ii) right to use or exploit any of the foregoing.
“SEC”
means
the Securities and Exchange Commission. “Securities Act” means the Securities
Act of 1933, as amended.
“Security
Agreement”
means
the Security Agreement, dated February 28, 2006, between the Company and AIGH,
as agent for the Investors.
“Stockholder
Pledge Agreements”
means
the Stockholder Pledge and Security Agreements, dated February 28, 2006, between
the Investors and each of the Pledgors, respectively.
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“Subsidiary”
shall
mean, immediately prior to the Closing, any corporation of which stock or other
interest having ordinary power to elect a majority of the board of directors
(or
other governing body) of such entity (regardless of whether or not at the time
stock or interests of any other class or classes of such corporation shall
have
or may have voting power by reason of the happening of any contingency) is,
immediately prior to the Closing, directly or indirectly Owned by the Company
or
by one or more of its Subsidiaries.
In
consideration of the mutual covenants contained herein, the parties agree as
follows:
1. Purchase
and Sale of Notes.
1.1 Sale
and Issuance of Notes.
The
Company shall sell to the New Investors and the New Investors shall purchase
from the Company, an aggregate principal amount of $1,000,000 of Notes at par.
The principal amount of Notes to be purchased by each of the New Investors
from
the Company at the Closing (as defined herein) is set forth opposite the name
of
each New Investor on the signature page hereof, subject to acceptance, in whole
or in part, by the Company.
1.2 Closing.
The
closing of the purchase and sale of $1,000,000 principal amount of Notes
hereunder (the “Closing”)
shall
take place within three business days after the date hereof; provided the
Company has not suffered any Material Adverse Change since the date hereof.
The
date on which the Closing occurs is referred to herein as the “Closing
Date.”
The
Closing shall take place at the offices of Xxxx & Hessen LLP, the New
Investors’ counsel, in New York, New York, or at such other location as is
mutually acceptable to the New Investors and the Company.
1.3 Conditions
of the Closing.
The
obligation of the New Investors to complete the purchase of the Notes at the
Closing is subject to fulfillment of the following conditions:
(a) the
Company and AIGH shall execute and deliver Amendment 1 to the Security
Agreement, dated the Closing Date, in the form attached as Exhibit
2
(the
“Security
Agreement Amendment”);
(b) each
Pledgor and AIGH shall execute and deliver Amendment 1 to such Pledgor’s
respective Stockholder Pledge Agreement, dated the Closing Date, each in
substantially the form attached as Exhibit
3
(the
“Stockholder
Pledge Amendment”);
(c) each
Guarantor and AIGH shall execute and deliver Amendment 1 to such Guarantor’s
respective Guaranty,
dated the Closing Date, each in substantially the form attached as Exhibit
4
(the
“Guaranty
Amendment”);
(d) Petrus,
the Investors, the New Investors and AIGH shall enter into Amendment 1 to the
Intercreditor Agreement, dated the Closing Date, in the form attached hereto
as
Exhibit
5
(the
“Intercreditor
Agreement Amendment”,
and
with the Agreement, the Notes, the Security Agreement Amendments, the
Stockholder Pledge Amendments, the Guaranty Amendments and other documents
required in connection with the transactions contemplated in the Agreement,
the
“Transaction
Documents”);
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(e) the
Company shall have executed and delivered all documents, such as financing
statements and assignments, reasonably requested by counsel for the New
Investors;
(f) the
absence of any Material Adverse Change since the date hereof;
(g) the
Company shall pay the New Investors’ expenses to the extent set forth in Section
6.9 hereof.
2. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to each of the New Investors as
follows:
2.1 Corporate
Organization; Authority; Due Authorization.
(a) The
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has
the
corporate power and authority to own or lease its properties as and in the
places where such business is now conducted and to carry on its business as
now
conducted and (iii) is duly qualified and in good standing as a foreign
corporation authorized to do business in every jurisdiction where the failure
to
so qualify, individually or in the aggregate, would have a Material Adverse
Effect. Set forth in the Company Disclosure is a complete and correct list
of
all Subsidiaries. Each Subsidiary is duly incorporated, and validly existing
under the laws of its jurisdiction of incorporation and is qualified to do
business as a foreign corporation in each jurisdiction in which qualification
is
required, except where failure to so qualify would not have a Material Adverse
Effect.
(b) The
Company (i) has the requisite corporate power and authority to execute, deliver
and perform this Agreement and the other Transaction Documents to which it
is a
party and to incur the obligations herein and therein and (ii) has been
authorized by all necessary corporate action to execute, deliver and perform
this Agreement and the other Transaction Documents to which it is a party and
to
consummate the transactions contemplated hereby and thereby (the “Contemplated
Transactions”).
Each
of this Agreement and the other Transaction Documents is a valid and binding
obligation of the Company enforceable in accordance with its terms except as
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors’ rights and the availability
of equitable remedies (regardless of whether such enforceability is considered
in a proceeding at law or equity).
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2.2 Capitalization.
As of
the date hereof, the authorized capital stock of the Company is 6,500,000 shares
of Common Stock, $.01 par value per share. Except as contemplated by this
Agreement and as set forth in the capitalization table included in the Company
Disclosure, there are (i) no outstanding subscriptions, warrants, options,
conversion privileges or other rights or agreements obligating the Company
or
Neonode AB to purchase or otherwise acquire or issue any shares of capital
stock
of the Company or Neonode AB (or shares reserved for such purpose), (ii) no
preemptive rights contained in the Company’s Certificate of Incorporation, as
amended (the “Certificate
of Incorporation”),
By-Laws of the Company or contracts to which the Company is a party or rights
of
first refusal with respect to the issuance of additional shares of capital
stock
of the Company, and (iii) no commitments or understandings (oral or written)
of
the Company or Neonode AB to issue any shares, warrants, options or other
rights. Except as disclosed in the Company Disclosure with respect to each
Subsidiary, (x) all the issued and outstanding shares of the Subsidiary’s
capital stock have been duly authorized and validly issued, are fully paid
and
nonassessable, have been issued in compliance with applicable federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, (y) except
as
disclosed in the Company Disclosure, there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts
or
commitments to issue or sell, shares of the Subsidiary’s capital stock or any
such options, rights, convertible securities or obligations, and (z) the Company
owns 100% of the outstanding equity of each Subsidiary.
2.3 Validity
of Notes.
The
issuance of the Notes has been duly authorized and the Notes are valid and
binding and upon Closing will be in full force and effect and enforceable in
accordance with their respective terms.
2.4 Private
Offering.
Neither
the Company nor anyone acting on its behalf has within the last 12 months
issued, sold or offered any security of the Company (including, without
limitation, any Notes) to any Person under circumstances that would cause the
issuance and sale of the Notes, as contemplated by this Agreement, to be subject
to the registration requirements of the Securities Act.
2.5 Brokers
and Finders.
The
Company has not retained any investment banker, broker or finder in connection
with the Contemplated Transactions.
2.6 Financial
Statements; Absence of Certain Changes.
Each of
(a) the unaudited statement of liabilities of the Company as of September 30,
2006, (b) the unaudited statements of income, retained earnings and cash flows
of the Company for the period ended on September 30, 2006, and (c) the unaudited
statements of income, retained earnings and cash flows of the Company for the
period ended on September, 2006, included in the Company Disclosure (including
any related notes and schedules, if any), (the “Financial
Statements”)
fairly
presents, in all material respects, the financial position of the Company,
or
the results of operations, retained earnings or cash flows, as the case may
be,
of the Company as of the referenced date or for the periods set forth therein
(subject to normal year-end audit adjustments which would not be material in
amount or effect), in each case (other than the statement of liabilities) in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and that the
unaudited statements may not contain all footnotes required by generally
accepted accounting principles. Neither the Company nor any Subsidiary has
any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), including for taxes, that would be required to be reflected
on,
or reserved against in, Financial Statements, except for (i) liabilities or
obligations that were so reserved on, or reflected in (including the notes
to),
the Financial Statements; and (ii) liabilities or obligations which would not,
individually or in the aggregate, have a Material Adverse Effect. Other than
the
indebtedness as set forth in the Financial Statements or the Company Disclosure,
neither the Company nor any Subsidiary has indebtedness as of the date hereof.
Except as specifically contemplated by this Agreement or as set forth in the
Company Disclosure and the Financial Statements, there has not been any Material
Adverse Change since September 30, 2006.
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2.7 Litigation.
Except
as set forth in the Company Disclosure, there are no claims, actions, suits,
investigations, inquiries or proceedings (“Actions”)
pending against the Company or its Subsidiaries or, to the knowledge of the
Company, threatened against the Company or its Subsidiaries, or any officer,
director, employee or agent thereof in his or her capacity as such, at
law
or in
equity, or before or by any court, tribunal, arbitrator, mediator or any federal
or state commission, board, bureau, agency or instrumentality that would
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect. To the Company’s knowledge, there is no factual or
legal basis for any such Action. The Company and each Subsidiary is not a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality and there is no
Action by the Company or any Subsidiary currently pending or which the Company
or any Subsidiary intends to initiate.
2.8 Proprietary
Assets.
(a) The
Company Disclosure sets forth, with respect to each Proprietary Asset of the
Company and any Subsidiary registered with or issued by any Governmental Body
or
for which an application has been filed with any Governmental Body, (i) a brief
description of such Proprietary Asset and (ii) the names of the jurisdictions
covered by the applicable registration or application.
The
Company Disclosure identifies and provides a brief description of all other
Proprietary Assets owned by the Company and any Subsidiary, and identifies
and
provides a brief description of each Proprietary Asset licensed to the Company
and any Subsidiary by any person (except for any Proprietary Asset that is
licensed to the Company or any Subsidiary under any third party license
generally available to the public at a cost of less than $10,000), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the Company or Subsidiary, as appropriate.
Except
as
set forth in the Company Disclosure, the Company and its Subsidiaries, as a
whole, have good, valid and marketable title to, or have a valid right to use,
all of the Proprietary Assets used in the Company’s business (including without
limitation all Proprietary Assets identified in the Company Disclosure), free
and clear of all liens and other encumbrances to the knowledge of the Company;
and are not obligated to make any payment to any person for the use of any
Proprietary Asset.
The
Company and each Subsidiary has not developed jointly with any other person
any
Proprietary Asset with respect to which such other person has any
rights.
Except
as
set forth in the Company Disclosure, none of which shall have a Material Adverse
Effect, the Company has no knowledge that any other person has any right, title
or interest in any of the Proprietary Assets of the Company or its
Subsidiaries.
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(b) The
Company and its Subsidiaries, as appropriate, have taken reasonable and
customary measures and precautions to protect and maintain the confidentiality
and secrecy of all Proprietary Assets of the Company and its Subsidiaries
(except Proprietary Assets whose value would be unimpaired by public disclosure)
and otherwise to maintain and protect the value of all Proprietary Assets of
the
Company and its Subsidiaries.
Each
employee, officer, director, consultant and contractor (not including
contractors without access to confidential information of the Company) of the
Company and its Subsidiaries (each, an “Employee”)
has
entered into and executed an agreement providing for (i) the assignment to
the
Company (or to any of its Subsidiaries) of personal rights or claims to
Proprietary Assets for which such Employee’s personal rights or claims arose out
of the scope of his/her employment or retainer by the Company or its
Subsidiaries and (ii) the nondisclosure of confidential information acquired
by
the Employee with respect to the Proprietary Assets of the Company and its
Subsidiaries or an employment or consulting agreement containing substantially
similar terms.
Except
as
set forth in the Company Disclosure, the Company and each Subsidiary has not
(other than pursuant to license agreements identified in the Company Disclosure)
disclosed or delivered to any person, or permitted the disclosure or delivery
to
any person of, (i) the source code, or any portion or aspect of the source
code,
of any Proprietary Asset of the Company or its Subsidiaries, (ii) the object
code, or any portion or aspect of the object code, of any Proprietary Asset
of
the Company or its Subsidiaries or (iii) any patent applications (except as
required by law).
(c) (i)
To
the knowledge of the Company, none of the Proprietary Assets of the Company
or
its Subsidiaries necessary for the conduct of their businesses infringes or
conflicts with any Proprietary Asset owned or used by any other Person, (ii)
to
the knowledge of the Company, the Company and each Subsidiary is not infringing,
misappropriating or making any unlawful use of, and the Company and each
Subsidiary has not at any time infringed, misappropriated or made any unlawful
use of, or received any notice or other communication (in writing or otherwise)
of any actual, alleged, possible or potential infringement, misappropriation
or
unlawful use of, any Proprietary Asset owned or used by any other person, and
(iii) to the knowledge of the Company, no other person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other person infringes or conflicts with, any Proprietary Asset
of the Company or its Subsidiaries.
(d) There
has
not been any claim by any customer or other person alleging that any Proprietary
Asset of the Company or its Subsidiaries (including each version thereof that
has ever been licensed or otherwise made available by the Company or its
Subsidiaries to any person) does not conform in all material respects with
any
specification, documentation, performance standard, representation or statement
made or provided by or on behalf of the Company or its Subsidiaries, and, to
the
knowledge of the Company, there is no basis for any such claim.
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(e) The
Company is not knowledgeable of any Proprietary Asset owned or used by any
other
person (except for any Proprietary Asset that is licensed to the Company or
any
Subsidiary under any third party license set forth in the Company Disclosure
or
would otherwise be commercially available) necessary to enable the Company
and
each Subsidiary to conduct its businesses in the manner in which such businesses
have been and are being conducted or are expected to be conducted pursuant
to
the Company Disclosure.
Neither
the Company nor any Subsidiary has licensed, or agreed to license, any of its
Proprietary Assets to any person on an exclusive, semi-exclusive or royalty-free
basis.
Neither
the Company nor any Subsidiary has entered into any covenant not to compete
or
contract limiting its ability to exploit fully any of its Proprietary Assets
or
to transact business in any market or geographical area or with any
person.
Without
limitation on the foregoing, except as set forth in the Company Disclosure,
no
officer, director or Stakeholder, either as an individual or through an
affiliate, has any claim to own or any other rights to use any of the
Proprietary Assets.
(f) Except
as
set forth in the Company Disclosure, the Company is not aware that any Employee
is obligated under any agreement (including licenses, covenants or commitments
of any nature) or subject to any judgment, decree or order of any court or
administrative agency, or any other restriction that would interfere with the
use of his or her best efforts to carry out his or her duties for the Company
and its Subsidiaries, as appropriate, or to promote the interests of the Company
and its Subsidiaries, as appropriate, or that would conflict with the Company’s
or its Subsidiaries’ business as proposed to be conducted.
The
Company does not believe it is or will be necessary to utilize any inventions
of
any Employees (or persons the Company or its Subsidiaries currently intend
to
hire) made prior to their employment or retainer by the Company or its
Subsidiaries, as appropriate, which have not been assigned to the
Company.
To
the
Company’s knowledge, after due inquiry, at no time during the conception of, or
reduction to practice, or development of, any of the Company’s or its
Subsidiaries’ Proprietary Assets was any developer, inventor or other
contributor to such Proprietary Assets operating under any grants from any
governmental entity or agency or private source, performing research sponsored
by any governmental entity or agency or private source or subject to any
employment agreement or invention assignment or nondisclosure agreement or
other
obligation with any third party that could adversely affect the Company’s or its
Subsidiaries’ rights in such Proprietary Assets.
(g) The
Company believes that the exceptions, qualifications and other disclosures
relating to the Proprietary Assets set forth in the Company Disclosure shall
not
have a Material Adverse Effect in the aggregate.
2.9 Company
Disclosure.
No
representation or warranty of the Company herein, no exhibit or schedule hereto,
and no information contained or referenced in the Company Disclosure, when
read
together, contains or will contain any untrue statement of a material fact
or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
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3. Representations
and Warranties of the New Investors.
Each
New
Investor represents and warrants to the Company as follows:
3.1 Authorization.
Such
New
Investor (i) has full power and authority to execute, deliver and perform this
Agreement and the other Transaction Documents to which it is a party and to
incur the obligations herein and therein and (ii) if applicable has been
authorized by all necessary corporate or equivalent action to execute, deliver
and perform this Agreement and the other Transaction Documents and to consummate
the Contemplated Transactions.
Each
of
this Agreement and the other Transaction Documents to which the New Investors
are parties is a valid and binding obligation of such New Investor enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the enforcement
of creditors’ rights and the availability of equitable remedies (regardless of
whether such enforceability is considered in a proceeding at law or
equity).
3.2 Brokers
and Finders.
Such
New
Investor has not retained any investment banker, broker or finder in connection
with the Contemplated Transactions.
4. Securities
Laws; Certain Covenants of New Investors.
4.1 This
Agreement is made with each New Investor in reliance upon such New Investor’s
representation to the Company, which by such New Investor’s execution of this
Agreement such New Investor hereby confirms, that the Notes to be received
by
such New Investor will be acquired for investment for such New Investor’s own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof such that such New Investors would constitute
an “underwriter” under the Securities Act.
4.2 Each
New
Investor understands and acknowledges that the offering of the Notes pursuant
to
this Agreement will not be registered under the Securities Act or qualified
under any state securities laws on the grounds that the offering and sale of
the
Notes are exempt from registration and qualification, respectively, under the
Securities Act and the Blue Sky Laws.
4.3 Each
New
Investor represents that (i) such New Investor is able to fend for itself in
the
Contemplated Transactions; (ii) such New Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating
the
merits and risks of such New Investor’s prospective investment in the Notes; and
(iii) such New Investor has the ability to bear the economic risks of such
New
Investor’s prospective investment and can afford the complete loss of such
investment.
4.4 Each
New
Investor further represents by execution of this Agreement that such New
Investor qualifies as an “accredited investor” as such term is defined under
Rule 501 promulgated under the Securities Act.
Any
New
Investor that is a corporation, a partnership, a limited liability company,
a
trust or other business entity further represents by execution of this Agreement
that it has not been organized for the purpose of purchasing the
Notes.
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4.5 Each
New
Investor agrees that the Notes and any shares of capital stock of the Company
received in respect of the foregoing held by it may not be sold by such New
Investor without registration under the Securities Act or an exemption
therefrom, and therefore such New Investor may be required to hold such
securities for an indeterminate period.
4.6 Each
New
Investor agrees that the obligations under the Notes shall be subject to the
Security Agreement, Stockholder Pledge Agreement and Intercreditor Agreement,
each as amended as contemplated herein, and further authorizes AIGH as such
New
Investor’s agent to enter into the Security Agreement Amendment, Stockholder
Pledge Amendment, Intercreditor Agreement Amendment and Guaranty Amendment
on
such Investor’s behalf.
AIGH
shall have no duty to any New Investor arising out of its actions or failure
to
act under the Security Agreement, Stockholder Pledge Agreement, Intercreditor
Agreement or Guaranties, each as amended as contemplated herein, provided that
AIGH shall apply the same standard of care as it would use in determining
whether to act under such agreements in its capacity as a New
Investor.
4.7 Each
New
Investor agrees to indemnify AIGH from and against any and all reasonable
claims, losses, and liabilities (including, without limitation, reasonable
attorney fees) arising out of or resulting from the Security Agreement,
Stockholder Pledge Agreement, Intercreditor Agreement or Guaranties, each as
amended as contemplated herein, except claims, losses, or liabilities resulting
from the gross negligence or willful misconduct of AIGH.
4.8 Each
New
Investor will upon demand pay the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees and expenses of counsel
and
of any experts and agents, which AIGH may incur in connection with (i) the
preparation and administration of the Security Agreement, Stockholder Pledge
Agreement, Intercreditor Agreement or Guaranties, each as amended as
contemplated herein; (ii) the exercise or enforcement of any of the rights
of
AIGH or the New Investors thereunder; or (iii) the failure by any New Investor
to perform or observe any of the provisions hereof or thereof.
5. Additional
Covenants of the Company.
5.1 Reports
and Information.
Until
the
sooner of repayment or conversion of all the Notes, the Company shall deliver
to
such New Investor (or the successor or assign of such New Investor),
contemporaneously with delivery to Petrus or its affiliates, a copy of each
report of the Company delivered to any such person.
5.2 Form
D.
As
soon
as is practicable following the Closing, the Company shall prepare and file
with
the SEC a Form D concerning the sale of the Notes.
5.3 Financial
Reports and Tax Returns.
Until
the
Company is a public company required to file financial reports with the
U.S.
Securities
and Exchange Commission, the Company will furnish or will cause to be furnished
to each New Investor:
(a) within
90
days after the end of each fiscal quarter and fiscal year of the Company,
respectively, financial statements (including income statement and balance
sheet) in accordance with generally accepted accounting standards (except that
interim financial statements need not contain footnotes or normal year-end
adjustments); and
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(b) within
90
days after the end of each fiscal year of the Company, an independent certified
audit of financial statements for such fiscal year.
6. Miscellaneous.
6.1 Entire
Agreement; Successors and Assigns.
This
Agreement and the other Transaction Documents constitute the entire contract
between the parties relative to the subject matter hereof and thereof, and
no
party shall be liable or bound to the other in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein.
This
Agreement and the other Transaction Documents supersede any previous agreement
among the parties with respect to the Notes.
The
terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective executors, administrators, heirs, successors and assigns
of
the parties.
Except
as
expressly provided herein, nothing in this Agreement, expressed or implied,
is
intended to confer upon any party, other than the parties hereto, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
6.2 Survival
of Representations and Warranties.
All
representations and warranties of the Company shall survive the execution and
delivery of this Agreement and the Closing hereunder and shall continue in
full
force and effect for one year after the Closing.
The
covenants of the Company set forth in Section 5 shall remain in effect as set
forth therein.
6.3 Governing
Law; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to principles of conflicts of law.
Each
party hereby irrevocably consents and submits to the jurisdiction of any New
York State or United States Federal Court sitting in the State of New York,
County of New York, over any action or proceeding arising out of or relating
to
this Agreement and irrevocably consents to the service of any and all process
in
any such action or proceeding by registered mail addressed to such party at
its
address specified in Section 6.6 (or as otherwise noticed to the other
party).
Each
party further waives any objection to venue in New York and any objection to
an
action or proceeding in such state and county on the basis of forum non
conveniens.
Each
party also waives any right to trial by jury.
6.4 Counterparts.
This
Agreement may be executed 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.
6.5 Headings.
The
headings of the sections of this Agreement are for convenience and shall not
by
themselves determine the interpretation of this Agreement.
6.6 Notices.
Any
notice required or permitted hereunder shall be given in writing and shall
be
deemed effectively
given upon (i) personal delivery, (ii) delivery by fax (with answer back
confirmed) or (iii) delivery by electronic mail (with reception confirmed),
addressed to a party at its address or sent to the fax number or e-mail address
shown below or at such other address, fax number or e-mail address as such
party
may designate by three days advance notice to the other party.
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11 -
Any
notice to New Investors shall be sent to the addresses set forth on the
signature pages hereof, with a copy to:
Xxxx
& Hessen LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx Xxxxxx, Esq.
Fax
Number: (000) 000-0000
e-mail:
xxxxxxx@xxxxxxxxxx.xxx
Any
notice to the Company shall be sent to:
Xxxxxxxxxxxxxxx
00
X000
00
Xxxxxxxxx, Xxxxxx
Attention:
President
Fax
Number: 00000-0-000 18 51
with
a
copy to:
Xxxx
Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxxxxxxxxx,
XX 00000
Attention:
Xxxxxx Xxxxxxxxx, Esq.
Fax
Number: 000-000-0000
6.7 Rights
of Transferees.
Any
and
all rights and obligations of the New Investor herein incident to the ownership
of Notes shall pass successively to all subsequent transferees of such
securities until extinguished pursuant to the terms hereof.
6.8 Severability.
Whenever
possible, each provision of this Agreement shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of
this
Agreement shall be deemed prohibited or invalid under such applicable law,
such
provision shall be ineffective to the extent of such prohibition or invalidity,
and such prohibition or invalidity shall not invalidate the remainder of such
provision or any other provision of this Agreement.
6.9 Expenses.
Irrespective
of whether the Closing is effected, the Company shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement.
Each
New
Investor shall be responsible for all costs incurred by such New Investor in
connection with the negotiation, execution, delivery and performance of this
Agreement including, but not limited to, legal fees and expenses, except that,
at the Closing, the Company shall pay legal fees and expenses to Xxxx &
Hessen LLP, as counsel to the New Investors.
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12 -
6.10 Amendments
and Waivers.
Unless
a
particular provision or section of this Agreement requires otherwise explicitly
in a particular instance, any provision of this Agreement may be amended and
the
observance of any provision of this Agreement may be waived (either generally
or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the
principal amount of the Notes.
Any
amendment or waiver effected in accordance with this Section 6.10 shall be
binding upon each holder of any Notes at the time outstanding (including
securities into which such Notes are convertible), each future holder of all
such Notes, and the Company.
[signature
page follows]
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13 -
EXHIBITS
TO
THE
NOTE PURCHASE AGREEMENT
|
Form
of Notes
|
|
|
Exhibit
2:
|
Form
of Security Agreement Amendment
|
|
Exhibit
3:
|
Form
of Stockholder Pledge Amendment
|
|
Exhibit
4:
|
Form
of Guaranty Amendment
|
|
Form
of Intercreditor Agreement Amendment
|
|
|
Exhibit
6:
|
Company
Disclosure, including Capitalization Table, Financial Statements,
etc.
|
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