EXHIBIT 10.2
NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL (WHICH
COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
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Principal
Amount: $_______
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Issue Date:
_______________
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CONVERTIBLE PROMISSORY
NOTE
FOR VALUE
RECEIVED, NEONODE INC., a Delaware corporation (hereinafter called
“Borrower”), hereby promises to pay
____________________________________ (the “Holder”) or
its registered assigns or successors in interest or order, without
demand, the sum of _________________________________Dollars
($________) (“Principal Amount”), on December 31, 2010
(the “Maturity Date”), if not sooner paid.
This Note has
been entered into pursuant to the terms of a Convertible Note
Agreement between the Borrower and the Holder, dated of even date
herewith (the “Convertible Note Agreement”), and shall
be governed by the terms of such Convertible Note Agreement. Unless
otherwise separately defined herein, all capitalized terms used in
this Note shall have the same meaning as is set forth in the
Convertible Note Agreement. The following terms shall apply to the
Note:
ARTICLE I
INTEREST;
AMORTIZATION
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1.1.
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1.1 Interest
Rate . Interest on the outstanding
Principal Amount shall accrue from the date of the Note and shall
be payable in arrears on December 31, and on June 30 of each year
as long as the Note is outstanding and on the Maturity Date,
accelerated or otherwise, when the principal and remaining accrued
but unpaid interest shall be due and payable. Interest on the
outstanding principal balance of this Note shall accrue at a rate
of seven percent (7.0%) per annum (the “Interest
Rate”). Interest on the outstanding principal balance of the
Note shall be computed on the basis of the actual number of days
elapsed and a year of three hundred and sixty (360)
days.
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1.2.
Default Interest Rate . Following the occurrence
and during the continuance of an Event of Default (as defined in
Article IV), which, if susceptible to cure is not cured within
twenty (20) days, otherwise then from the first date of such
occurrence, the annual interest rate on this Note shall be ten
percent (10%). Such interest shall be due and payable
together with regular scheduled payments of interest.
1.3.
Conversion Privileges . The Conversion Privileges
set forth herein shall remain in full force and effect immediately
from the date hereof and until the Note is paid in full regardless
of the occurrence of an Event of Default. The Note shall
be payable in full on the Maturity Date, unless previously
converted into Common Stock.
ARTICLE
II
OPTIONAL
REDEMPTION
2.1.
Optional Redemption of Principal Amount
. Provided an Event of Default or an event which with
the passage of time on the giving of notice could become an Event
of Default has not occurred, unless such Event of Default has been
cured, then commencing six months (6) after the Issue Date of this
Note, the Borrower will have the option of prepaying the
outstanding Principal Amount of this Note ("Optional Redemption"),
in whole or in part, by paying to the Holder a sum of money equal
to one hundred and twenty percent (120%) of the Principal Amount to
be redeemed, together with accrued but unpaid interest thereon and
any and all other sums due, accrued or payable to the Holder
arising under this Note or any Transaction Document through the
Redemption Payment Date as defined below (the "Redemption
Amount"). Borrower’s election to exercise its
right to prepay must be by notice in writing (“Notice of
Redemption”). The Notice of Redemption shall
specify the date for such Optional Redemption (the "Redemption
Payment Date"), which date shall be thirty (30) business days after
the date of the Notice of Redemption (the "Redemption Period"). A
Notice of Redemption shall not be effective with respect to any
portion of the Principal Amount for which the Holder has a pending
election to convert pursuant to Section 3.1. A
Redemption Notice may be given not more than two
times. On the Redemption Payment Date, the Redemption
Amount, less any portion of the Redemption Amount against which the
Holder has previously exercised its rights pursuant to Section 3.1,
shall be paid in good funds to the Holder. In the event the
Borrower fails to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then (i) at the Holder’s
election, such Notice of Redemption will be null and void, (ii)
Borrower will not have the right to deliver another Notice of
Redemption, and (iii) Borrower’s failure may be deemed by
Holder to be a non-curable Event of Default. A Notice of
Redemption may be cancelled at the option of the Holder, if at any
time during the Redemption Period an Event of Default, or an event
which with the passage of time or giving of notice could become an
Event of Default (whether or not such Event of Default has been
cured), occurs. If the Borrower gives notice of to the Holder of
Redemption of the Note, the Holder has the option of converting the
Note pursuant to Section 3.1.
ARTICLE
III
CONVERSION
RIGHTS
3.1.
Holder’s Conversion
Rights . Subject to Section 3.2, the Holder
shall have the right, but not the obligation, to convert all or any
portion of the then aggregate outstanding Principal Amount of this
Note, together with interest, if any, into shares of Common Stock,
subject to the terms and conditions set forth in this Article III,
at the rate of $0.02 per share of Common Stock
(“Conversion Price”), as the same may be adjusted
pursuant to this Note. The Holder may exercise such
right by delivery to the Borrower of a written Notice of Conversion
pursuant to Section 3.3.
3.2.
Conversion Limitation
. Neither Holder
nor the Borrower may convert on any date that amount of the Note
Principal or interest in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number
of shares of Common Stock beneficially owned by the Holder and its
affiliates on a Conversion Date, (ii) any Common Stock issuable in
connection with the unconverted portion of the Note, and (iii) the
number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this provision
is being made, which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock of the Borrower on such Conversion
Date. For the purposes of the provision to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall
not be limited to aggregate conversions of only 4.99% and aggregate
conversion by the Holder may exceed 4.99%. The Holder
shall have the authority and obligation to determine whether the
restriction contained in this Section 3.2 will limit any conversion
hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of
which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder. The Holder
may waive the conversion limitation described in this Section 3.2,
in whole or in part, upon and effective after 61 days prior written
notice to the Borrower to increase such percentage to up to
9.99%.
3.3.
Mechanics of Holder’s
Conversion .
(a)
In the event that the Holder elects to
convert any amounts outstanding under this Note into Common Stock,
the Holder shall give notice of such election by delivering an
executed and completed notice of conversion (a “Notice of
Conversion”) to the Borrower, which Notice of Conversion
shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and amounts being
converted. The original Note is not required to be
surrendered to the Borrower until all sums due under the Note have
been paid. On each Conversion Date (as hereinafter
defined) and in accordance with its Notice of Conversion, the
Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its
records. Each date on which a
Notice of Conversion is delivered or telecopied to the Borrower in
accordance with the provisions hereof shall be deemed a
“Conversion Date.” A form of Notice
of Conversion to be employed by the Holder is annexed hereto
as Exhibit A.
(b) Pursuant
to the terms of a Notice of Conversion, the Borrower will issue
instructions to the transfer agent accompanied by an opinion of
counsel (if so required by the Borrower’s transfer agent),
and, except as otherwise provided below, shall cause the transfer
agent to transmit the certificates representing the Conversion
Shares to the Holder by crediting the account of the Holder’s
designated broker with the Depository Trust Corporation
(“DTC”) through its Deposit Withdrawal Agent Commission
(“DWAC”) system within three (3) business days after
receipt by the Borrower of the Notice of Conversion (the
“Delivery Date”). In the case of the
exercise of the conversion rights set forth herein, the conversion
privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of
Conversion. The Holder shall be treated for all purposes as the
beneficial holder of such shares of Common Stock, or, in the case
that Borrower delivers physical certificates as set forth below,
the record holder of such shares of Common Stock, unless the Holder
provides the Borrower written instructions to the contrary.
Notwithstanding the foregoing to the contrary, the
Borrower or its transfer agent shall only be obligated to issue and
deliver the shares to the DTC on the Holder’s behalf via DWAC
(or certificates free of restrictive legends) if the registration
statement providing for the resale of the shares of Common Stock
issuable upon the conversion of this Note is effective and the
Holder has complied with all applicable securities laws in
connection with the sale of the Common Stock, including, without
limitation, the prospectus delivery requirements and has provided
representations accordingly. In the event that
Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the
Conversion Shares by the Delivery Date to an address designated by
Holder in the U.S.
3.4.
Conversion Mechanics
.
(a)
The number of shares of Common Stock to
be issued upon each conversion of this Note pursuant to this
Article III shall be determined by dividing that portion of the
Principal Amount and interest and fees to be converted, if any, by
the then applicable Fixed Conversion Price.
(b)
The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion
shall be subject to adjustment from time to time upon the happening
of certain events while this conversion right remains outstanding,
as follows:
A.
Merger, Sale of
