STOCKHOLDER PLEDGE AND SECURITY AGREEMENT
STOCKHOLDER
PLEDGE AND SECURITY AGREEMENT (“Agreement”) dated as of February 28, 2006, made
by ______________ (“Pledgor”), in favor of the Investors identified on Exhibit A
hereto (collectively, the “Investors”).
WITNESSETH;
WHEREAS,
Pledgor is a principal shareholder or an affiliate of an officer and director
of
Neonode, Inc., a Delaware corporation (“Neonode”);
WHEREAS,
Neonode plans to issue certain secured notes, dated as of the date hereof,
to
each of the Investors (the “Notes”);
WHEREAS,
Pledgor is executing and delivering this Agreement, granting to the Investors
a
security interest in the shares of Neonode listed on Exhibit B hereto owned
by
Pledgor (the “Pledged Shares”), to secure Neonode’s obligations to the Investors
under the Notes and this Agreement;
WHEREAS,
Pledgor has determined that the execution, delivery and performance of this
Agreement directly benefits Pledgor and is in its best interests as a principal
shareholder of Neonode:
WHEREAS,
the Investors have appointed AIGH Investment Partners, LLC (“AIGH”), and AIGH
has agreed to so act, as the pledgeholder (the “Pledgeholder”) for and on behalf
of the Investors and as the Investors’ agent for purposes of this
Agreement;
WHEREAS,
the affiliates of Pledgor have guaranteed certain of Pledgor’s Obligations
hereunder; and
WHEREAS,
the term “Default” shall mean any material breach of any of Neonode’s
obligations under the Notes or Pledgor’s representations, warranties or
covenants contained herein, the term “affiliate” means persons controlling,
controlled by or under common control with another person, and all terms used
in
this Agreement which are defined in Article 9 of the Uniform Commercial Code
(the “UCC”) as currently in effect in the State of New York and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein;
NOW,
THEREFORE, in order to induce the Investors to purchase the Notes and in
consideration of the premises and the agreements herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement hereby agree as
follows:
1. Representation.
Pledgor
hereby represents that neither it nor any of its affiliates owns any interest
in
any technology, intellectual property or other assets or rights of any nature
whatsoever used by Neonode or necessary for Neonode to carry on its
business.
2. Pledge
and Grant of Security Interest and Substituting and Release of
Collateral.
(a) As
collateral security for all of the Obligations (as defined in Section 3 hereof),
the Pledgor hereby pledges and assigns to the Investors and grants to the
Investors a continuing security interest in, the following (the “Pledged
Collateral”):
(i) The
Pledged Shares, the certificates representing the Pledged Shares and all options
and other rights, contractual or otherwise, in respect thereof, and
(ii) All
proceeds of any and all of the foregoing (including dividend whether paid in
cash or in kind); in each case, as its interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
3. Security
for Obligations.
The
security interest created hereby in the Pledged Collateral constitutes
continuing collateral security for the following (collectively, the
“Obligations”): (i) the timely satisfaction by Neonode of all of its liabilities
and obligations under the Notes, (ii) any breach by Pledgor of its
representations contained herein, and (iii) the performance by Pledgor of all
of
its obligations arising under, or contemplated by, this Agreement.
4. Delivery
of the Pledged Collateral.
All
certificates currently representing the Pledged Shares shall be delivered to
Pledgeholder on or prior to the execution and delivery of this Agreement, to
be
held by it as agent of and for the benefit of the Investors. All other
certificates and other instruments constituting Pledged Collateral from time
to
time shall be delivered to the Pledgeholder promptly upon the receipt thereof
by
or on behalf of the Pledgor. All such certificates and instruments shall be
held
on behalf of the Investors by Pledgeholder pursuant hereto and shall be
delivered in suitable form for transfer by delivery or shall be accompanied
by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to Pledgeholder.
5. Representations
and Warranties.
The
Pledgor represents and warrants as follows:
(a) The
Pledged Shares have been duly authorized and are validly issued, fully paid
and
nonassessable.
(b) The
Pledgor is and will be at all times the legal and beneficial owner of the
Pledged Collateral, free and clear of any lien, security interest, option or
other charge or encumbrance, except for transfer restrictions under applicable
federal and state securities laws and the security interest created by this
Agreement, except as set forth on Exhibit C attached hereto.
(c) Pledgor
shall be entitled to all dividends payable in cash.
(d) The
Investors’ rights to exercise any of their rights and remedied hereunder will
not contravene any contractual restriction binding on or affecting Pledgor
or
any of its properties and will not result in or require the creation of any
lien, security interest or other charge or encumbrance upon or with respect
to
any of its properties.
(e) No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or other regulatory body is required for (i) the
grant by Pledgor, or the perfection, of the security interest purported to
be
created hereby in the Pledged Collateral or (ii) the exercise by the Investors
of any of their rights and remedies hereunder, except as may be required in
connection with any sale of any Pledged Collateral by laws affecting the
offering and sale of securities generally.
(f) This
Agreement creates a valid security interest in favor of the Investors in the
Pledged Collateral, as security for the Obligations. Pledgeholder’s having
possession of the certificates representing the Pledged Shares and all other
certificates and instruments constituting Pledged Collateral from time to time
results in the perfection of such security interest. Such security interest
is,
or in the case of Pledged Collateral in which Pledgor obtains rights after
the
date hereof, will be, a perfected, first priority security
interest.
(g) All
shareholders of Neonode, including the Pledgor, have irrevocably waived all
pre-emption rights under the articles of association in relation to the Pledged
Collateral and all shareholders have undertaken to procure that such waiver
is
binding upon each waiving shareholder’s successors and assigns.
6. Covenants.
So long
as any of the Obligations shall remain outstanding, Pledgor will, unless the
Pledgeholder on the Investors’ behalf shall otherwise consent in
writing:
(a) keep
adequate records concerning the Pledged Collateral and permit the Pledgeholder
or other representative of the Investors at any reasonable time and from time
to
time examine and make copies of and abstracts from such records;
(b) at
its
expense, promptly deliver to the Investors a copy of each notice or other
communication received by it in respect of the Pledged Collateral;
(c) at
its
expense, defend Investors’ right, title and security interest in and to the
Pledged Collateral against the claims of any person;
(d) not
sell,
assign (by operation of law or otherwise), exchange or otherwise dispose of
any
Pledged Collateral or any interest therein;
(e) not
create or suffer to exist any lien, security interest or other charge or
encumbrance upon or with respect to any Pledged Collateral except for the
security interest created hereby, or
(f) not
make
or consent to any amendment or other modification or waiver with respect to
any
Pledged Collateral or enter into any agreement or permit to exist any
restriction with respect to any Pledged Collateral other than pursuant
hereto.
7. Voting
Rights, Dividends, Etc. in Respect of the Pledged Collateral.
(a) So
long
as no Default shall have occurred and be continuing:
(i) Pledgor
may exercise any and all voting and other consensual rights pertaining to any
Pledged Collateral for any purpose not inconsistent with the terms of this
Agreement;
(ii) Pledgor
may receive and retain in trust for the benefit of the Investors in case there
is a Default, any and all dividends paid in cash with respect of the Pledged
Collateral; and
(iii) The
Pledgeholder and the Investors will execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies and other instruments as Pledgor
may
reasonably request for the purpose of enabling Pledgor to exercise the voting
and other rights which it is entitled to exercise pursuant to paragraph (i)
of
this Section 7(a) and to receive the dividends which it is authorized to receive
and retain pursuant to paragraph (ii) of this Section 7(a).
(b) Upon
the
occurrence and during the continuance of a Default;
(i) all
rights of Pledgor to exercise the voting and other consensual rights which
it
would otherwise be entitled to exercise pursuant to paragraph (i) of a
subsection (a) of this Section 7, and to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to paragraph (ii) of
subsection (a) of this Section 7, shall cease, and all such rights shall
thereupon become vested in the Investors, who shall thereupon have the sole
right to exercise such voting and other consensual rights and to receive and
hold as Pledged Collateral such dividends;
(ii) without
limiting the generality of the foregoing, the Pledgeholder on the Investors’
behalf may, at its option, exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any of
the
Pledged Collateral as if it were the absolute owner thereof, including, without
limitation, the right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization, recapitalization
or
other adjustment of Neonode, or upon the exercise by Neonode of any right,
privilege or option pertaining to any Pledged Collateral, and, in connection
therewith, to deposit and deliver any and all of the Pledged Collateral with
any
committee, depository, transfer agent, registrar or other designated agent
upon
such terms and conditions as it may determine; and
(iii) all
dividends which are received by the Pledgor contrary to the provisions of
paragraph (i) of this Section 7(b) shall be received in trust for the benefit
of
the Investors, shall be segregated from other funds of Pledgor, and shall be
forthwith paid over to Pledgeholder as Pledged Collateral in the exact form
received with any necessary endorsement and/or appropriate stock powers duly
executed in blank, to be held by Pledgeholder as Pledged Collateral and as
further collateral security for the Obligations.
8. Additional
Provisions Concerning the Pledged Collateral.
(a) Upon
the
occurrence and during the continuance of a Default, Pledgor hereby appoints
Pledgeholder the Pledgor’s attorney-in-fact and proxy, with full authority in
the place and stead of the Pledgor and in name of Pledgor or otherwise, from
time to time in Pledgeholder’s discretion, to take any action and to execute any
instrument which Pledgeholder may deem necessary or advisable to accomplish
the
purposes of this Agreement (subject to the rights of the Pledgor under Section
7(a) hereof), including, without limitation, to receive, indorse and collect
all
instruments made payable to the Pledgor representing any dividend or other
distribution in respect of any Pledged Collateral and to give full discharge
for
the same.
(b) Upon
the
occurrence of and during the continuance of a Default, the Pledgor undertakes
to
execute and deliver (or cause to be executed and delivered) to the Pledgeholder
all such proxies and other instruments as the Pledgeholder may reasonably
request for the purpose of enabling the Pledgeholder to exercise the voting
and
other rights which the Pledgeholder is entitled to exercise under this Agreement
upon the occurrence and continuance of a Default.
(c) If
the
Pledgor fails to perform any agreement or obligation contained herein,
Pledgeholder itself may perform or cause performance of , such agreement or
obligation, and the expenses of Pledgeholder incurred in connection therewith
shall be payable by Pledgor.
(d) The
Pledgor hererby irrevocably waives all per-emption rights under Neonode’s
articles of association in relation to all shares in Neonode held by the
Pledgeholder for and on behalf of the Investors to secure the obligations under
the Notes.
9. Remedies
Upon Default:
If a
Default shall have occurred and be continuing;
(a) Upon
30
days prior notice to Pledgor, the Pledgeholder on the Investors’ behalf may
sell, assign and deliver to any person (including, but not limited to,
themselves) any or all of the Pledged Collateral in such manner and upon such
terms and conditions as the Pledgeholder, in its sole discretion may deem
proper, with or without demand, advertisement or notice to Pledgor of the date,
time or place of any such sale or sales or adjournments thereof.
(b) The
Pledgeholder on the Investors’ behalf may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
on
default; and without limiting the generality of the foregoing and without notice
except as specified below, sell the Pledged Collateral or any part thereof
in
one or more parcels at public or private sale, at any exchange or broker’s board
or elsewhere, at such price or prices and on such other terms as the
Pledgeholder may deem commercially reasonable. Pledgor agrees that, to the
extent notice of sale shall be required by law, at least 30 days notice to
Pledgor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Pledgeholder shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Pledgeholder may adjourn
any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(c) Pledgor
recognizes that the Pledgeholder on the Investors’ behalf may deem it
impracticable to effect a public sale of all or any part of the Pledged Shares
or any other securities constituting Pledged Collateral and that the
Pledgeholder on the Investors’ behalf may, therefore, determine to make one or
more private sales of any such securities to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such securities
for their own account, for investment and not with a view to the distribution
of
resale thereof. Pledgor acknowledges that any such private sale may be at prices
and on terms less favorable to the Investors than the prices and other terms
which might have been obtained at a public sale and, notwithstanding the
foregoing, agrees that such private sales shall be deemed to have been made
in a
commercially reasonable manner and that the Pledgeholder shall have no
obligation to delay the sale of any such securities for the period of time
necessary to permit the issuer of such securities to register such securities
for public sale under the United States Securities Act of 1933, a
amended.
(d) Any
cash
held by the Pledgeholder as Pledged Collateral and all cash proceeds received
by
the Pledgeholder in respect of any sale of, collection from, or other
realization upon, all or any part of the Pledged Collateral shall be applied
as
follows:
(i) First,
to
the payment of the reasonable costs and expenses, including reasonable
attorneys’ fees and legal expenses, incurred by the Investors in connection with
(A) the administration of this Agreement, (B) the custody, preservation, use
or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (C) the exercise or enforcement of any of the rights of
the
Investors hereunder or (D) the failure of Pledgor to perform or observe any
of
the provisions hereof;
(ii) Second,
at the option of the Pledgeholder on the Investors’ behalf, to the payment or
other satisfaction of any liens and other encumbrances upon any of the Pledged
Collateral;
(iii) Third,
to
the payment of the Obligations;
(iv) Fourth,
to the payment of any other amounts required by applicable law; and
(v) Fifth,
the surplus proceeds, if any, to Pledgor or to whosoever shall be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.
(e) Pledgor
hereby waives and releases any and all rights of equity of redemption whether
before or after any sale, transfer, or other disposition or application
contemplated by this Section 9 and, except as herein expressly required, any
and
all notice to Pledgor of the foregoing action.
(f) For
the
avoidance of doubt, Chapter 10 of the Swedish Commercial code (Sw.
Handelshalken) shall not apply when the Pledgeholder enforces the Pledged
Collateral.
10. Expenses.
Each
party to this Agreement shall pay all of its own expenses incurred in connection
with this Agreement.
11. Notices,
Etc.
All
notices and other communications provided for hereunder shall be in writing
and
shall be mailed, sent by fax or delivered, if to the Pledgeholder or the
Investors, c/o AIGH Investment Partners, LLC, 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000, fax 000-000-0000, Attention: Xxxx Xxxxxxxxx, with a copy to
Xxxx
& Hessen LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, fax
000-000-0000, Attention: Xxxxx Xxxxxx, Esq,; and if to Pledgor,
[________________] or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties complying
as
to delivery with the terms of this Section 11. All such notices and other
communications shall be effective (i) if mailed, when deposited in the mail,
(ii) if sent by facsimile, when received, or (iii) if delivered, when
delivered.
12. Pledgeholder.
The
Parties to this Agreement agree that AIGH, as the Pledgeholder (or any successor
Pledgeholder hereunder), shall have no liability for any act or omission in
the
capacity of the Pledgeholder under this Agreement except for a willful
misconduct or gross negligence. No successor Pledgeholder shall be liable for
any act or omissions of a predecessor Pledgeholder.
The
Pledgeholder may resign at any time by giving seven days written notice to
the
parties to this Agreement and the Investors, acting by a majority in number,
may
replace the Pledgeholder by giving the Pledgeholder two days written notice
of
the replacement and the identity of the new Pledgeholder. In the event of a
resignation, the Investors, acting by a majority in number, shall designate
a
successor Pledgeholder and give notice as to the identity of the new
Pledgeholder to the parties to this Agreement.
13. Miscellaneous.
(a) No
amendment of any provision of this Agreement shall be effective unless it is
in
writing and signed by the parties hereto, and no waiver of any provision of
this
Agreement, and no consent to any departure by Pledgor therefrom, shall be
effective unless it is in writing and signed by the Investors, and then such
waiver or consent shall be effective only in the specific instance and for
the
specific purpose for which given.
(b) No
failure on the part of the Pledgeholder or the Investors to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof,
nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Investors provided herein are cumulative and are in addition
to,
and not exclusive of, any rights or remedies provided by law.
(c) Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(d) Upon
the
satisfaction in full of the Obligations, (i) this Agreement and the security
interest created hereby shall terminate and all rights to the Pledged Collateral
shall revert to Pledgor, and (ii) the Pledgeholder or the Investors will, upon
Pledgor’s request; (A) return to Pledgor such of the Pledged Collateral as shall
not have been sold or otherwise disposed of or applied pursuant to the terms
hereof, and (B) execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination.
(e) This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York.
(f) The
courts of New York, New York shall have exclusive jurisdiction to settle any
dispute arising out of or in connection with this Agreement (including a dispute
regarding the existence, validity or termination of this Agreement or the
consequences of its nullity).
[Signatures
on the following pages.]
IN
WITNESS WHEREOF, the parties hereto have duly executed this Stockholder Pledge
and Security Agreement as of the date first above written.
PLEDGOR
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By:
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_____________________________
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Name:
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_____________________________
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Title:
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_____________________________
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PLEDGEHOLDER
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AIGH
INVESTMENT PARTNERS, LLC
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By:
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_______________________________
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Name:
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_______________________________
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Title:
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_______________________________
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EXHIBIT
A
The
Investors
EXHIBIT
B
Shares
of Neonode Inc held by the Pledgor
EXHIBIT
C
Liens,
Security Interest, Options or Other Charges or Encumbrances on the Pledged
Collateral