NEONODE, INC. NOTE PURCHASE AGREEMENT
NOTE
PURCHASE AGREEMENT (the “Agreement”)
dated
as of February 28, 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 “Investors”).
Background: The
Company desires to sell to the Investors, and the Investors desire to purchase
up to $5,500,000 in principal amount of Senior Secured Notes, in substantially
the form attached hereto as Exhibit 1 (the “Notes”).
It is
anticipated there will be up to two closings since the Notes will be issued
in
tranches. 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 corporation or other entity which shall succeed
to
or assume, directly or indirectly, the obligations of the Company hereunder.
The
term “corporation”
shall
include an association, joint stock company, business trust, limited liability
company or other similar organization.
“Company
Disclosure”
means
the disclosure delivered to the Investors prior to the execution of this
Agreement.
“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.
“Neonode
AB”
means
Neonode AB, a Swedish corporation.
“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.
“Public
Offering”
shall
mean a registered public offering of Common Stock of the Company.
“SEC”
means
the Securities and Exchange Commission.
“Securities
Act”
means
the Securities Act of 1933, as amended.
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 Investors and the Investors shall purchase from the
Company, up to an aggregate in principal amount of $5,500,000 of Notes at par.
The principal amount of Notes to be purchased by the Investors from the Company
in the First Closing (as defined herein) is set forth opposite the name of
each
Investor on the signature page hereof, subject to acceptance, in whole or in
part, by the Company. Subject to Section 1.4 hereof, AIGH shall purchase the
Notes included in the Second Closing whether or not any other Investor agrees
to
participate in such purchase.
1.2. Closings.
The
closings of the purchase and sale of the Notes hereunder (each a “Closing”)
shall
take place (i) within three business days after the date hereof, for the
purchase of $4,000,000 principal amount of Notes (the “First
Closing”)
and,
(ii) immediately prior to filing of an appropriate registration statement in
connection with a Public Offering with Xxxxxxx Securities, Inc. or other
investment bank satisfactory to the Investors, for the purchase of $1,500,000
principal amount of Notes (the “Second
Closing”);
provided in each case the Company has not suffered any Material Adverse Change
since the date hereof. Any date on which a Closing occurs is referred to herein
as the “Closing
Date.”
The
date on which the First Closing takes place is referred to herein as the
“First
Closing Date.”
The
date on which the Second Closing takes place is referred to herein as the
“Second
Closing Date.”
Each
Closing shall take place at the offices of Xxxx & Hessen LLP, the Investors’
counsel, in New York, New York, or at such other location as is mutually
acceptable to the Investors and the Company.
1.3. Conditions
of First Closing.
The
obligation of the Investors to complete the purchase of the Notes at the First
Closing is subject to fulfillment of the following conditions:
(a) the
Company and the Investors shall execute and deliver a Security Agreement, dated
the First Closing Date, in the form attached as Exhibit 2
(the
“Security
Agreement”);
(b) certain
stockholders of the Company (the “Pledgors”)
and
the Investors shall execute and deliver a Pledge and Security Agreement, dated
the First Closing Date, in the form attached as Exhibit 3
(the
“Stockholder
Pledge Agreement”);
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(c) each
Pledgor shall execute and deliver to the Investors a Guaranty Agreement, dated
the First Closing Date, in the form attached as Exhibit
4
(the
“Guaranty”);
(d) Petrus
and the Investors shall enter into the Intercreditor Agreement, dated the First
Closing Date, in the form attached hereto as Exhibit
5
(the
“Intercreditor
Agreement”,
and
with the Agreement, the Notes, the Security Agreements, the Stockholder
Pledge Agreement, the Guaranty and
other
documents required in connection with the transactions contemplated in the
Agreement, the “Transaction
Documents”);
(e) the
Company shall have executed and delivered all documents, such as financing
statements and assignments, reasonably requested by counsel for the Investors;
(f) the
absence of any Material Adverse Change since the date hereof, and
(g) the
Company shall pay the Investors expenses to the extent set forth in Section
6.9
hereof.
1.4. Conditions
of Second Closing.
The
obligations of the Investors to complete the purchase of the Notes at the Second
Closing are subject to fulfillment of the following conditions:
(a) the
absence of Material Adverse Change since the date hereof; and
(b) the
Company shall pay the 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 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 on the operations, prospects, assets, liabilities, financial condition
or
business of the Company
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(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).
2.2. Capitalization.
As of
February 28, 2006, 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 or as set forth 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) except as set forth in the
Capitalization Table attached hereto as Exhibit 6 (the “Capitalization
Table”),
(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, the Company owns
100% of the outstanding equity of Neonode AB.
2.3. Validity
of Notes.
The
issuance of the Notes has been duly authorized.
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. Absence
of Certain Changes.
Except
as specifically contemplated by this Agreement or set forth in the Company
Disclosure, there has not been any Material Adverse Change since December 31,
2005.
2.7. 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 Investors.
Each
Investor represents and warrants to the Company as follows:
3.1. Authorization.
Such
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 Investors are parties is a valid and binding obligation
of such 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
Investor has not retained any investment banker, broker or finder in connection
with the Contemplated Transactions.
4. Securities
Laws.
4.1. This
Agreement is made with each Investor in reliance upon such Investor’s
representation to the Company, which by such Investor’s execution of this
Agreement such Investor hereby confirms, that the Notes to be received by such
Investor will be acquired for investment for such 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 Investors would constitute an “underwriter” under
the Securities Act.
4.2. Each
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 Blue Sky 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
Investor represents that (i) such Investor is able to fend for itself in
the Contemplated Transactions; (ii) such Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating
the
merits and risks of such Investor’s prospective investment in the Notes; and
(iii) such Investor has the ability to bear the economic risks of such
Investor’s prospective investment and can afford the complete loss of such
investment.
4.4. Each
Investor further represents by execution of this Agreement that such Investor
qualifies as an “accredited investor” as such term is defined under Rule 501
promulgated under the Securities Act. Any 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. By
acceptance hereof, each 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 Investor without registration under the Securities Act or an
exemption therefrom, and therefore such Investor may be required to hold such
securities for an indeterminate period.
5. Additional
Covenants of the Company.
5.1. Reports
and Information.
Until
the sooner of repayment or conversion of all the Notes or a Public Offering,
the
Company shall deliver to such Investor (or the successor or assign of such
Investor), contemporaneously with delivery to Petrus or its affiliates, a copy
of each report of the Company delivered to any such person.
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 Fourth 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.
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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 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:
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 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.
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6.9. Expenses.
Irrespective of whether any 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 Investor shall be responsible for all
costs incurred by such 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 each Closing, the Company shall pay legal
fees and expenses to Xxxx & Hessen LLP, as counsel to the
Investors.
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
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 Securities are convertible), each future
holder of all such Notes, and the Company.
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
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NEONODE
INC.
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By:
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Its:
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AIGH
INVESTMENT PARTNERS, LLC
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By:
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Its:
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SIGNATURE
PAGE
TO
SUBSCRIPTION
AGREEMENT
Dated
February 28, 2006
IF
the
PURCHASER is an INDIVIDUAL, please complete the following:
IN
WITNESS WHEREOF, the undersigned has executed this Agreement this ____ day
of
________, 2006.
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Amount
of Subscription:
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$__________
principal
amount of Notes
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Print
Name
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Signature
of Investor
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Social
Security Number
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Address
and Fax Number
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E-mail
Address
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ACCEPTED
AND AGREED:
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By:
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Dated:
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SIGNATURE
PAGE
TO
SUBSCRIPTION
AGREEMENT
Dated
February 28, 2006
IF
the
PURCHASER is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY, TRUST or
OTHER ENTITY, please complete the following:
IN
WITNESS WHEREOF, the undersigned has executed this Agreement this __th day
of
__________, 2006.
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Amount
of subscription:
$____________
principal amount of Notes
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___________________________________
Print
Full Legal Name of Partnership,
Company,
Limited Liability Company, Trust or Other Entity
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By:
__________________________________
(Authorized
Signatory)
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Name:
________________________________
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Title:
_________________________________
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Address
and Fax Number: _____________
___________________________________
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Taxpayer
Identification Number: __________
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Date
and
State of Incorporation or Organization:__________________________
Date
on
which Taxable Year Ends:_____________________________________
E-mail
Address: ________________________
ACCEPTED
AND AGREED:
By: ____________________________
Name:
__________________________
Title: ___________________________
Dated: __________________________
EXHIBITS
TO
THE
NOTE PURCHASE AGREEMENT
Exhibit
1: Form
of
Notes
Exhibit
2: Form
of
Security Agreement
Exhibit
3: Form
of
Stockholder Pledge Agreement
Exhibit
4: Form
of
Guaranty
Exhibit
5: Form
of
Intercreditor Agreement
Exhibit
6: Capitalization
Table
Exhibit
1
Form
of
Notes
Exhibit
2
Form
of
Security Agreement
Exhibit
3
Form
of
Stockholder Pledge Agreement
Exhibit
4
Form
of
Guaranty
Exhibit
5
Form
of
Intercreditor Agreement
Exhibit
6
Capitalization
Table
