EXHIBIT
10.1
CONVERTIBLE NOTE
AGREEMENT
THIS
CONVERTIBLE NOTE AGREEMENT (this “ Agreement ”) is
entered into as of the __ day of September 2009, by and between
Neonode, Inc ., a Delaware Company (the “
Company ”), and each of the entities set forth in
Exhibit A hereto (each, an “ Investor
”; and collectively, the “ Investors
”).
WHEREAS , the Company requires an infusion of funds in
order to finance the operations of the Company as set forth herein;
and
WHEREAS , the Investors are willing to make available a
convertible loan to the Company on the terms and conditions set
forth in this Agreement.
NOW,
THEREFORE , the parties
hereto hereby agree as follows:
1.
Convertible Loan .
1.1 Each
of the Investors agrees to lend to the Company the amount set forth
opposite its name in Exhibit A hereto (the “
Investment Amount ”), for an aggregate amount of
$1,250,000 hereunder (the “ Loan ”), subject to
the terms and conditions of this Agreement.
1.2 Each
of the Investors will transfer its respective Investment Amount to
the Company, in accordance with the wire transfer instructions
provided in writing by the Company to the Investors, on the first
business day following the approval of this Agreement by the
Company’s Board of Directors (the “ Closing
”). At the Closing, the Company will deliver to
each of the Investors a Note substantially as set forth in
Exhibit B .
1.3 The
Loan will bear interest at a rate of 7% per year. The
accrued interest will be payable June 30 th and December 31 st each year. The accrued interest will be payable
upon repayment of the Loan.
1.4 Subject
to Section 2 below, the Loan and accrued interest will be repaid on
or prior to December 31, 2010 (the “ Due Date
”). Without derogating from the provisions of Section 2
below, in the event that the Investment Amount and accrued interest
shall not be repaid by the Company by the Due Date and the Investor
has not converted the Investment Amount pursuant to Section 2 below
the Investor’s sole remedy for such non payment shall be the
payment of additional interest at a rate of 1% per
month.
1.5 As
security for the repayment of the Loan and accrued interest when
due, the Company hereby grants the Investors a security interest in
the intellectual property owned by the Company. The
security interest in the Company’s intellectual property
shall terminate upon either (a) the Company’s complete
repayment of the Loan and accrued interest, or (b) conversion of
the aggregate Investment Amount into the Restricted
Shares.
1.6
Grant of Warrant .
Simultaneously with the execution of this
Agreement, the Company shall deliver to each Lender a Warrant
Agreement (the “ Warrant Agreement ”) between
each Lender and the Company substantially in the form attached
hereto as Schedule 1.6 providing the Lenders with a right to
purchase fully-paid and non-assessable restricted shares of common
stock of the Company, at a price of $0.04 per share, (the “
Warrant Shares ”). In case the Company borrows
additional amounts from the Lenders under this Agreement, then the
Company shall issue additional Warrant Agreements to each Lender as
specified above.
2.1
Optional Conversion . Without derogating from the provisions
of Section 3 below, each of the Investors shall have at any time
prior to the repayment of such Investor’s Investment Amount
the option to convert its portion of the Investment Amount into
fully-paid and non-assessable restricted shares of common stock of
the Company, at a price of $0.02 per share, (the “
Restricted Shares ”).
2.2 Adjustment
of Conversion Price. Upon
issuance of additional common stock of the Company at a price per
share less than $0.02 per share at a subsequent round of financing
prior to the repayment of the Investment Amount, the conversion
price for the Restricted Shares will be reduced, for no additional
consideration, to an amount equal to the price per share paid for
the common stock of the Company at such subsequent financing
round.
2.3 The
Company shall, promptly upon any conversion of any Investor’s
Investment Amount, issue and deliver to such Investor a certificate
representing the number of shares of the Restricted Shares to which
such Investor shall be entitled upon conversion of such
Investor’s Investment Amount (bearing such legends as are
required under applicable law, in the opinion of counsel of the
Company).
3.
Acceleration of Repayment .
The Investment Amount will become, in the
Investors sole discretion, repayable upon the occurrence of an
Event of Acceleration (as defined below) that occurs prior to the
conversion of the Investment Amount under Section 2 above. For
the purposes of this Section 3, an “ Event of
Acceleration ” shall be deemed to exist upon the
occurrence of any of the following: (a) the Company
files a petition in bankruptcy, files a petition seeking any
reorganization, arrangement, composition, or similar relief under
any law regarding insolvency or relief for debtors, or makes an
assignment for the benefit of creditors; (b) a receiver, trustee,
or similar officer is appointed for the business or a significant
part of the property of the Company, and such appointments are not
stayed, enjoined, or discharged within forty five (45) days from
their commencement; (c) any involuntary petition or proceeding
under bankruptcy or insolvency laws is instituted against the
Company, and such actions are not stayed, enjoined, or discharged
within forty five (45) days from their commencement; (d)
the Company adopts a resolution for discontinuance of its business
or for its liquidation, dissolution or winding-up; or (e) a
sale of all or substantially all of the assets of the
Company.
4.
Information on the Company; Legal Proceedings
4.1
Information on the Company . Each Investor has been
furnished with or has had access at the EDGAR Website of the SEC to
the Company's Form 10-K filed on April 15, 2009 for the fiscal year
ended December 31, 2008 and the financial statements included
therein for the year ended December 31, 2008 together with all
subsequent filings made with the SEC available at the EDGAR website
("Reports"). Each Investor has been informed that to due
to the Company’s current lack of cash resources, it was
unable to obtain a review by our registered independent accountants
of the interim financial statements for the three-month period
ended March 31, 2009 and the six-month period ended June 30,
2009. In addition, each Investor may have received in
writing from the Company such other information concerning its
operations, financial condition and other matters as such Investor
has requested in writing, identified thereon as "Other Written
Information" and considered all factors such Investor deems
material in deciding on the advisability of investing in the
Restricted Shares.
4.2.1
Empire Asset Management . On December 9,
2008, Empire Asset Management (“Empire”), a broker
dealer that acted as the Company’s financial advisor and
exclusive placement agent and purchased stock for their own account
in previous private placement transactions, initiated a law suit
against the Company in the Supreme Court of the State of New York
alleging that the Company misrepresented the success of its
business to induce Empire to invest in the
Company. Empire is
