NEONODE INC. SBE NOTE PURCHASE AGREEMENT
EXHIBIT
10.1
NEONODE
INC.
NOTE
PURCHASE AGREEMENT (the “Agreement”)
dated
as of May 18, 2007 among NEONODE INC., a Delaware corporation (“Company”),
and
SBE, Inc., a Delaware limited liability company ( “SBE”
or
the
“New
Investor”).
Background: The
Company desires to sell to the New Investor, and the New Investor desires to
purchase, in two closings, senior secured notes, in substantially the form
attached hereto as Exhibit
1
(the
“Notes”)
in
aggregate principal amount of $1,000,000.
On
February 28, 2006, November 20, 2006 and January 22, 2007, the Company sold
senior secured notes in aggregate principal amount of $10,000,000 (the
“Bridge
Notes”)
to
accredited and non-US investors (collectively in this capacity, the
“Bridge
Investors”),
and
in connection therewith (i) the Company entered into the Security Agreement
with
AIGH (as agent for the Bridge Investors), (ii) the Intercreditor Agreement
was
amended and restated to reflect the issuance of additional Bridge Notes, and
(iii) the Pledgors entered into the Stockholder Pledge Agreements with the
Bridge Investors.
The
Company intends to sell additional Senior Secured Notes, substantially similar
to the Bridge Notes, in the principal amount of up to $3,000,000 (the
“May
2007 Notes”).
The
proceeds from the Notes and the May 2007 Notes are necessary for the development
and continuance of the business of the Company and each of its
Subsidiaries.
The
Company has entered into an Agreement and Plan of Merger and Reorganization,
dated January 19, 2007 (the “Merger
Agreement”),
by
and among the Company, SBE and Cold Winter Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of SBE (“Merger
Sub”),
which
provides for a merger (the “Merger”)
of the
Company with and into Merger Sub.
Certain
Definitions:
“AIGH”
means
AIGH Investment Partners, LLC, a Delaware limited liability
company.
“Capitalization
Table”
means
the Capitalization Table attached as Exhibit
7
to this
Agreement.
“Certificate
of Incorporation”
has
the
meaning set forth in Section 2.2.
“Closing”
or
“Closings”
have
the meanings set forth in Section 1.2.
“Collateral”
has
the
meaning set forth in the Security Agreement, as amended, a copy of which is
included with Exhibit
2
hereto.
“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.
“First
Closing”
has
the
meaning set forth in Section 1.2.
“First
Closing Date”
has
the
meaning set forth in Section 1.2.
“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, as amended, delivered to
the
investors identified on Exhibit
A
of the
Stockholder Pledge Agreements, respectively, copies of which are included with
Exhibit
4
hereto.
“Guarantors”
means
each of Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxx and Per Xxxxxxx, each as a party to
his
respective Guaranty.
“Intercreditor
Agreement”
means
the Intercreditor Agreement, dated February 28, 2006, as amended, 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.
“May
2007 Notes”
has
the
meaning set forth in the recitals.
“Merger”
has
the
meaning set forth in the recitals.
“Merger
Agreement”
has
the
meaning set forth in the recitals.
“Neonode
AB”
means
Neonode AB, a Swedish corporation.
2
“Notes”
has
the
meaning set forth in the recitals.
“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.
“Pledged
Collateral”
has
the
meaning set forth in the Stockholder Pledge Agreements, as amended, copies
of
which are included with Exhibit
3
hereto.
“Pledgors”
means
Xxxxxx XX (or its successor in interest, Athemis Limited), 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.
“Second
Closing”
has
the
meaning set forth in Section 1.2.
“Second
Closing Date”
has
the
meaning set forth in Section 1.2.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Security
Agreement”
means
the Security Agreement, dated February 28, 2006, as amended, between the Company
and AIGH, as agent for the Bridge Investors, a copy of which is included with
Exhibit
2
hereto.
“Stockholder
Pledge Agreements”
means
the Stockholder Pledge and Security Agreements, dated February 28, 2006, as
amended, between the Bridge Investors and each of the Pledgors, respectively,
copies of which are included with Exhibit
3
hereto.
3
“Subsidiary”
shall
mean, immediately prior to each 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 applicable Closing, directly or indirectly Owned by
the
Company or by one or more of its Subsidiaries.
“U.S.
person”
shall
have the meaning set forth in Regulation S of the SEC.
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 Investor and the New Investor shall purchase
from
the Company, Notes in an aggregate principal amount of $1,000,000 at par,
subject to acceptance, in whole or in part, by the Company.
1.2. Closings.
The
purchase and sale of the Notes hereunder shall take place in two closings (each
a “Closing”
and
collectively, the “Closings”).
The
first closing (the “First
Closing”)
hereunder shall be for $500,000 in principal amount of Notes and shall take
place within three business days after the date hereof (the “First
Closing Date”).
A
second closing (the “Second
Closing”)
for
the purchase and sale of an additional $500,000 in principal amount of Notes
shall take place on a date requested by Investor, but no later than June 15,
2007 (the “Second
Closing Date”).
Each
Closing shall take place at the offices of Xxxx & Hessen LLP, the Company’s
counsel, in New York, New York, or at such other location as is mutually
acceptable to the New Investor and the Company.
1.3. Conditions
of the First Closing.
The
obligation of the New Investor to complete the purchase of the Notes at the
First Closing is subject to fulfillment of the following
conditions:
(a) the
Company and AIGH shall execute and deliver Amendment 3 to the Security
Agreement, dated the First Closing Date, in the form attached as Exhibit 2
(“Security
Agreement Amendment No. 3”);
(c) each
Pledgor and AIGH shall execute and deliver the appropriate Amendment 3 to such
Pledgor’s respective Stockholder Pledge Agreement, dated the First Closing Date,
each in substantially the form attached as Exhibit 3
(“Stockholder
Pledge Amendment No. 3”);
(d) each
Guarantor and AIGH shall execute and deliver the appropriate Amendment 3 to
such
Guarantor’s respective Guaranty, dated the First Closing Date, each in
substantially the form attached as Exhibit
4
(“Guaranty
Amendment No. 3”,
and
with the Agreement, the Notes, Security Agreement Amendment No. 3, Stockholder
Pledge Amendment No. 3
and the
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
Investor; and
(f) the
absence of any Material Adverse Change since the date hereof.
1.4. Conditions
of the Second Closing.
The
obligation of the New Investor to complete the purchase of the Notes at the
Second Closing is subject to fulfillment of the following
condition:
(a) the
Merger Agreement shall have not have been terminated as of the Second Closing
Date.
2. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the New Investor 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.
The
authorized capital stock of the Company is 10,000,000 shares of Common Stock,
$.01 par value per share. Except as contemplated by this Agreement, and as
set
forth in the Capitalization Table, 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. The Capitalization
Table
sets forth accurately and completely the capitalization of the Company as of
the
date hereof and the anticipated capitalization of SBE after giving effect to
the
Merger.
2.3. Validity
of Notes.
The
issuance of the Notes has been duly authorized and upon each Closing the Notes
are valid and binding and will be in full force and effect and enforceable
in
accordance with their 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. The Company has, however, retained Xxxxxxx
Securities, Inc., as an advisor in connection with the Merger.
2.6. Financial
Statements; Absence of Certain Changes.
Each of
(a) the audited balance sheet of the Company as of December 31, 2006, (b) the
audited statements of income, and that the unaudited statements may not contain
all footnotes required by generally accepted accounting principles, retained
earnings and cash flows of the Company for the period ended on December 31,
2006, and (c) the audited statements of income, retained earnings and cash
flows
of the Company for the period ended on December 31, 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 in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may
be
noted therein. 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 any indebtedness other than reasonable accounts
payable. 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 December 31, 2006.
6
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.
7
(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.
(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.
8
(f) Except
as
set forth in the Company Disclosure, the Company is not knowledgeable 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.
3. Representations
and Warranties of the New Investor.
The New
Investor represents and warrants to the Company as follows:
9
3.1. The
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 Investor is a party is a valid and binding obligation
of the 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. The
New
Investor has not retained any investment banker, broker or finder in connection
with the Contemplated Transactions.
3.3. The
Notes
will be acquired for investment for the 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 the New Investor would constitute an “underwriter” under the
Securities Act.
3.4. The
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.
3.5. The
New
Investor represents that (i) the New Investor is able to fend for itself in
the Contemplated Transactions; (ii) the New Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating
the
merits and risks of the New Investor’s prospective investment in the Notes;
(iii) the New Investor recognizes that its investment in the Notes involves
a high degree of risk which may result in the loss of the total amount of its
investment and can afford the complete loss of such investment (iv) the New
Investor recognizes that the Company has a very limited operating history upon
which an evaluation of its business and prospects can be based; (v) the New
Investor recognizes that the Company's prospects must be considered in light
of
its limited operating history, together with the expenses, difficulties,
uncertainties and delays frequently encountered in connection with the early
phases of a new business; and (vi) the New Investor recognizes that there can
be
no assurance that the Company will ever achieve any time soon or sustain
profitability.
3.6. The
New
Investor has read and had the opportunity to discuss with management of the
Company: (i) this Agreement, (ii) the Merger Agreement, (iii) the Company
Disclosure and (iv) the Risk Factors in the form attached as Exhibit
5
hereto.
3.7 The
New
Investor (i) qualifies as an “accredited investor” as such term is defined under
Rule 501 promulgated under the Securities Act, and (ii) the New Investor has
not
been organized for the purpose of purchasing the Notes.
4. Securities
Laws; Certain Covenants of New Investor.
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4.1. The
New
Investor agrees that the Notes may not be sold by the New Investor without
registration under the Securities Act or an exemption therefrom, and therefore
the New Investor may be required to hold the Notes for an indeterminate
period.
4.2. The
New
Investor agrees that the obligations under the Notes shall be subject to the
Security Agreement, Stockholder Pledge Agreement and the Intercreditor
Agreement, each as amended as contemplated herein. AIGH shall have no duty
to
the New Investor arising out of its actions or failure to act under the Security
Agreement, Stockholder Pledge Agreement, the 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.
4.4. The
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 Notes, Security Agreement,
Stockholder Pledge Agreement, the 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.
4.5. The
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, the Intercreditor or Guaranties, each as amended as contemplated
herein; (ii) the exercise or enforcement of any of the rights of AIGH or the
New
Investor thereunder; or (iii) the failure by the New Investor to perform or
observe any of the provisions hereof or thereof.
4.6. The
New
Investor hereby appoints AIGH as its agent under the Security Agreement with
respect to the Collateral and the creation, perfection, priority, preservation,
protection and enforcement of a security interest therein in accordance with
the
terms of the Security Agreement. The New Investor hereby authorizes AIGH to
take
such actions with respect to the Collateral, for the pro-rata benefit of the
New
Investor, and the Bridge Investors in accordance with Section 9 of the Security
Agreement, as AIGH determines to take in its sole discretion, and the New
Investor agrees to indemnify and hold harmless AIGH for all costs, claims or
expenses (including without limitation attorneys’ fees and expenses) in
connection with such actions taken or omitted to be taken, except to the extent
resulting from the gross negligence or willful misconduct of AIGH. AIGH shall
provide prompt notice of any material action under the Security Agreement to
the
New Investor.
4.7. The
New
Investor hereby appoints AIGH as its agent under the Stockholder Pledge
Agreements with respect to the Pledged Collateral and the creation, perfection,
priority, preservation, protection and enforcement of a security interest
therein in accordance with the terms of the Stockholder Pledge Agreements.
The
New Investor hereby authorizes AIGH to take such actions with respect to the
Pledged Collateral, for the pro-rata benefit of the New Investor and the Bridge
Investors in accordance with Section 9 of the Stockholder Pledge Agreements,
as
AIGH determines to take in its sole discretion, and the New Investor agrees
to
indemnify and hold harmless AIGH for all costs, claims or expenses (including
without limitation attorneys’ fees and expenses) in connection with such actions
taken or omitted to be taken, except to the extent resulting from the gross
negligence or willful misconduct of AIGH. AIGH shall provide prompt notice
of
any material action under the Stockholder Pledge Agreements to the New
Investor.
11
5. Additional
Covenants of the Company.
5.1. Form
D.
As soon
as is practicable following each Closing, the Company shall prepare and file
with the SEC a Form D concerning the sale of the Notes.
5.2. 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 the 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
(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 Closings hereunder and shall continue in
full
force and effect for one year after the Second 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.
12
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.
Any
notice to the New Investor shall be sent to:
if
to New
Investor:
SBE,
Inc.
Attn:
Xxxxx Xxxxxxx
0000
Xxxxxxxxx Xxxxxxx
Xxxxx
000
Xxx
Xxxxx, XX 00000
Facsimile:
(000) 000-0000
with
a
copy to:
Cooley
Godward Kronish LLP
000
Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx
Xxxxxxxxx, XX 00000-0000
Attention:
Xxxxx Xxxxxxx, Esq.
Fax:
000-000-0000
Any
notice to the Company shall be sent to:
Neonode
Inc.
Xxxxxxxxxxxxxxx
00
X000
00
Xxxxxxxxx, Xxxxxx
Attention:
President
Fax
Number: +46-8-678 18 51
13
with
a
copy to:
Xxxx
& Hessen LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx Xxxxxx, 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 Closings are effected, the Company shall pay all
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement. The New Investor shall be
responsible for all costs incurred by the New Investor in connection with the
negotiation, execution, delivery and performance of this Agreement including,
but not limited to, legal fees and expenses.
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.
6.11. Conflicts.
The
Company and the New Investor (i) acknowledge that Xxxx & Hessen LLP, counsel
to the Company in the Contemplated Transactions and the Merger, has acted,
and
from time to time continues to act, as counsel to (A) the Bridge Investors
or
affiliates thereof, in connection with the Bridge Notes, and (B) AIGH in
connection with the Bridge Notes, the Security Agreement, investments in SBE,
and in unrelated matters, (ii) consent to the representation of the Company
and
such other representation of the Bridge Investors, or affiliates thereof, by
Xxxx & Hessen LLP, (iii) acknowledge that partners of Xxxx & Hessen LLP
own securities of SBE constituting less than 0.2% of outstanding stock of SBE,
and (iv) waive any conflicts of interest claim which may arise from any or
all
of the foregoing.
[signature
page follows]
14
SIGNATURE
PAGE
TO
NEONODE
INC.
Dated
May
18, 2007
IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the
18th
day
of
May, 2007, and execution of this Agreement shall constitute execution of the
consent to the applicable Stockholder Pledge Agreement, Guaranties and the
Security Agreement, each as amended.
|
SBE,
INC.
|
|
|
By:
/s/
Xxxxx X. Xxxxxxx
|
|
|
Name:
Xxxxx
X. Xxxxxxx
|
|
|
Title:
CFO
|
|
ACCEPTED
AND AGREED:
NEONODE
INC.
By:
/s/
Xxxxxx Xxxxxx
Name:
Xxxxxx Xxxxxx
Title:
President & CEO
Dated:
May
18, 2007
EXHIBITS
TO
THE
SBE NOTE PURCHASE AGREEMENT
| Exhibit 1: |
Form
of Note
|
| Exhibit 2: |
Form
of Security Agreement Amendment No. 3, Security Agreement Amendment
Xx. 0,
Xxxxxxxx Xxxxxxxxx Xxxxxxxxxx Xx. 0 and Security
Agreement
|
| Exhibit 3: |
Form
of Stockholder Pledge Amendment No. 3, Stockholder Pledge Amendment
Xx. 0,
Xxxxxxxxxxx Xxxxxx Xxxxxxxxx Xx. 0 and Stockholder Pledge Agreements,
for
each of
|
Xxxxxx
XX
Iwo
Jima
Sarl
Wirelesstoys
| Exhibit 4: |
Form
of Guaranty Amendment Xx. 0, Xxxxxxxx Xxxxxxxxx Xx. 0, Xxxxxxxx Amendment
No. 1 and Guaranties, for each of:
|
Per
Xxxxxxx
Xxxxxx
Xxxxxxxx
Xxxxxx
Xxxxxx
| Exhibit 5: |
Risk
Factors
|
| Exhibit 6: |
Company
Disclosure
|
| Exhibit 7: |
Capitalization
Table
|
