f8k022210ex10i_neonode.htm


     

    
      EXHIBIT
10.1

      


      CONVERTIBLE LOAN
AGREEMENT

      


      THIS CONVERTIBLE LOAN
AGREEMENT (this “Agreement”) is entered into as
of the __ day of January 2010, 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 up to $1,000,000 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”).

      


      1.3           The
Loan will bear interest at a rate of 7% per year.  The accrued
interest will be payable on June 30th and
December 31st.

      


      1.4           Subject
to Section 2 below, the Loan will be repaid in cash on December 31, 2010 (the
“Due
Date”).

      


      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
Warrants.   Simultaneously with the execution of this
Agreement, the Company shall deliver to each Investor a Warrant Agreement (the
“Warrant Agreement”)
between each Investor and the Company substantially in the form attached hereto
as Schedule 1.6, providing the Investors
with a right to purchase an aggregate amount of up to
___________________________ 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 Investors under this Agreement, then
the Company shall issue additional Warrant Agreements to each Investor as
specified above.

      


      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      


      2.           Conversion

      


      2.1           Optional Conversion.
Each of the Investors shall have at any time prior to the Due Date 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 conversion or repayment in full 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.           Registration.   The
Company shall make an effort to file with the SEC a registration statement under
the Securities Act after the filing of its Annual Report on Form 10-K for the
fiscal year ending December 31, 2009 (the “Registration
Statement”).  Subject to the Investors timely providing the Company
with all Investor information reasonably necessary for the inclusion of the
Investors’ Restricted Shares and Warrant Shares in the Registration Statement,
the Company shall take all reasonable action under its power and control to
include such shares in the Registration Statement so as to permit the
disposition of the shares so registered.  Notwithstanding the
foregoing, if the Registration Statement is pursuant to an underwritten offering
and the managing underwriter advises the Company in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
there shall be excluded from such Registration Statement such number of
Restrictive Shares and Warrant Shares as agreed to by the Board of Directors and
the managing underwriter.  If any of the
Investors are affiliates of the Company (as defined in Rule 405) then the
inclusion of such Investors’ Restricted Shares and Warrant Shares in the
Registration Statement will be limited so that the aggregate amount of shares of
Affiliates included in the Registration Statement shall be no more than 9.99% of
the aggregate market value of the Company’s outstanding stock held by
non-affiliates.

      


      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 U.S. Securities and Exchange Commission (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.  Each Investor has been informed that due to the Company’s
current lack of cash resources, it was unable to obtain a review by its
registered independent accountants of the interim financial statements for the
three month period ended March 31, 2009, the six month period ended June 30,
2009, and the nine month period ended September 30, 2009.  In
addition, each Investor has received in writing from the Company such other
information concerning its operations, financial condition and other matters as
such Investor has requested in writing and considered all factors such Investor
deems material in deciding on the advisability of the Loan and investing in the
Restricted Shares.

       

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      
 

      4.2           Legal
Proceedings.

      


      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 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 Corporation misrepresented the success of its business to induce Empire’s
customers to invest in the Company. Empire is seeking compensatory damages in an
unspecified amount for the harm allegedly suffered. The Company believes that
the action has no merit and intends to defend vigorously against the action. The
Company’s Directors and Officer (D&O) insurance provider has extended
coverage and will cover the costs of legal representation, subject to the
payment by the Company of the retention amount of $150,000.

      


      4.2.2           Mr. David Berman. On
May 11, 2009, Mr. David Berman initiated a law suit against the Company in the
Supreme Court of the State of New York alleging that the Corporation
misrepresented the success of its business to induce Mr. Berman to invest in the
Company.  Mr. Berman, who was a client of Empire, invested $549,860.00 in
the Company’s private placement offerings on March 4, 2008 and May 16, 2008 and
purchased an additional 162,900 shares totaling $251,081.69 in the aftermarket.
The Company believes that the action has no merit and intends to defend
vigorously against the action. The Company’s D&O insurance provider has
extended coverage and will cover the costs of legal representation, subject to
the payment by the Company of the retention amount of $150,000

      


      4.2.3           Xerox Corporation. On
October 2, 2009, Xerox Corporation (“Xerox”) initiated a law suit against the
Company in the Superior Court of California alleging that the Company breached
an equipment lease agreement with Xerox and demanding payment of $108,592.81
plus interest and late payment charges.  The Company intends to defend
vigorously against the action. 

      


      5.           Representations, Warranties
and Covenants of the Company

      


      The
Company hereby represents, warrants and covenants as follows:

      


      5.1           Organization and
Qualification.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite corporate power to own its properties and to carry on its
business as it is now being conducted.

      


      5.2           Authorization,
Enforceability.  (i) The Company has the requisite corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder in accordance with the terms hereof; (ii) the execution and delivery
of this Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Company’s Board of
Directors and further consent or authorization of the Company by its Board of
Directors is not required; and (iii) upon the execution and delivery of this
Agreement by the Company, this Agreement will constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors’ rights and
remedies or by other equitable principles of general application.

       

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      
 

      5.3           Issuance of the Restricted
Shares.  The Restricted Shares to be issued, sold and delivered
by the Company hereunder, when so issued, sold and delivered, will be duly and
validly issued, fully paid and nonassessable and will be issued in reliance upon
applicable exemptions from the registration and qualification provisions of all
applicable securities laws of the United States and each state whose securities
laws may be applicable thereto.  All Restricted Shares will be issued
free of any preemptive or similar right and free and clear of any claim, lien,
security interest or other encumbrance.  Assuming the accuracy of the
Investors’ representations and warranties hereunder, the issuance to the
Investors of the Restricted Shares will be exempt from the registration
requirements of the Securities Act and will be made in reliance upon applicable
exemptions from the registration and qualification provisions of all applicable
state securities laws.

      


      6.           Representations, Warranties,
Acknowledgments, of the Investors

      


      Each
Investor hereby represents, warrants, acknowledges, understands and agrees (as
the case may be) to the following, and acknowledges that the Company's reliance
on exemption from registration pursuant to a registration statement under the
Securities Act of 1933, as amended (the “Securities Act”) is predicated upon the
representations of each Investor set forth herein:

      


      6.1           Authorization.   The
Investor has full power and authority to enter into this Agreement, and the
Agreement has been duly executed by the Investor, and such authorization
constitutes a valid and legally binding obligation of the Investor, enforceable
in accordance with its terms.

      


      6.2           The Restricted Shares Are
Not Registered.  The Investor hereby acknowledges that the
Restricted Shares will not be issued by the Company pursuant to a registration
statement under the Securities Act, and therefore the Investor may be required
to hold the Restricted Shares for an indeterminate period.  The
Restricted Shares are issued pursuant hereto in reliance upon a specific
exemption from the registration requirement of the Securities Act which depends,
in part, upon the accuracy of the representations, warranties, and agreements of
each Investor set forth in this Agreement.

      


      6.3           Investment
Intent.  The Investor is acquiring the Restricted Shares for
the Investor’s own account as principal, not as a nominee or agent, for
investment purposes only, and not with a view to, or for, resale, distribution
or fractionalization thereof, in whole or in part, which resale, distribution or
fractionalization would violate the Securities Act.  The Investor
agrees that a legend to the foregoing effect may be placed upon any and all
certificates issued representing the Restricted Shares.  Further, the
Investor does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to the Restricted Shares, for which the Investor is
purchasing.  The Investor acknowledges that he has been afforded the
opportunity to ask questions of, and to obtain any information from, the Company
and its Board of Directors as he or she deems necessary to determine the
suitability and advisability of, and the merits and risk of, investing in the
Company pursuant hereto.

      
 

      
        
           

        

        
          4

          
            

          

        

        
           

        

         

      

      6.4           Risk.   The
Investor is aware that: (i) investment in the Company involves a high degree of
risk, may result in a lack liquidity, and places substantial restrictions on
transferability of interest; and (ii) no Federal or state agency has made any
finding or determination as to the fairness for investment by the public, nor
has made any recommendation or endorsement, of the Restricted
Shares.

       

      6.5           ­Financial
Ability.  The Investor has sufficient financial resources
available to support the loss of all or a portion of Investor’s investment in
the Company, has no need for liquidity in the investment in the Company, and is
able to bear the economic risk of the investment.  The Investor is
sophisticated and experienced in investment matters, and, as a result, is in a
position to evaluate an investment in the Company.

      


      6.6           ­Information.  The
Investor has been furnished with any and all materials that he has requested
relating to the Company or the offering of the Restricted Shares, and the
Investor has been afforded the opportunity to ask questions of the senior
management and directors of the Company concerning the terms and conditions of
the offering and to obtain any additional information necessary to verify the
accuracy of the information provided to the Investor.  The Investor
understands that such material is current information about the Company and does
not in any way guarantee future performance or the completion of future proposed
events discussed in such material.  The Investor, either alone or with
his professional advisors, has the capacity to protect his own interests in
connection with this transaction.

      


      6.7           Regulation S
Exemption.  If the Investor is not a U.S. Person, the Investor
understands that that the Restricted Shares are being offered and sold to him in
reliance on an exemption from the registration requirements of United States
federal and the state securities laws under Regulation S promulgated under the
Securities Act, and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments, and understandings
of the Investor to determine the applicability of such exemptions and the
suitability of the Investor to acquire the Restricted Shares.

      


      6.8           The
Investor consents to the Company making a notation on its records or giving
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer of the Restricted Shares set forth in this Section
6.

      


      6.9           Legend.   The
certificates representing the Restricted Shares shall contain a legend
substantially as follows:

      


      “THE
SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH
RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR NEONODE, INC. RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO COUNSEL FOR
NEONODE, INC. THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
IS AVAILABLE.”

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      
 

      7.           Miscellaneous.

      


      7.1           Each
of the parties hereto shall perform such further acts and execute such further
documents as may reasonably be necessary to carry out and give full effect to
the provisions of this Agreement and the intentions of the parties as reflected
thereby.

      


      7.2           This
Agreement shall be governed by and construed according to the laws of the State
of New York, without regard to the conflict of laws provisions
thereof.

      


      7.3           Except
as otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto.

      


      7.4           This
Agreement and the Exhibits hereto constitute the full and entire understanding
and agreement between the parties with regard to the subject matters hereof and
thereof and supersede any prior agreement, understand or contract, written or
oral, with respect to the subject matter hereof and thereof.

      


      7.5           No
delay or omission to exercise any right, power, or remedy accruing to any party
upon any breach or default under this Agreement, shall be deemed a waiver of any
other breach or default theretofore or thereafter occurring. All remedies,
either under this Agreement or by law or otherwise afforded to any of the
parties, shall be cumulative and not alternative.

      


      7.6           If
any provision of this Agreement is held by a court of competent jurisdiction to
be unenforceable under applicable law, then such provision shall be excluded
from this Agreement and the remainder of this Agreement shall be interpreted as
if such provision were so excluded and shall be enforceable in accordance with
its terms; provided, however, that in such event this Agreement shall be
interpreted so as to give effect, to the greatest extent consistent with and
permitted by applicable law, to the meaning and intention of the excluded
provision as determined by such court of competent jurisdiction.

      


      7.7           This
Agreement may be executed in counterparts.

      


      IN WITNESS WHEREOF the parties have
signed this Convertible Loan Agreement in one or more counterparts as of the
date first hereinabove set forth.

       

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      
 

      For the Company:

      


      Neonode
Inc.

      


      


      By:           ____________________

      Name:     ____________________

      Title:       ____________________

      


      For the
Investors:

       

      
        
          
            	
                     

                  	 	
                     

                  	 	
                     

                  
	By: 	 	By: 	 	By: 
	 	 	 	 	 
	
                     

                  	 	
                     

                  	 	
                     

                  
	
                    By:   

                  	 	By: 	 	By: 


          

           

        



      


      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      
 

      EXHIBIT
A

      


      LIST OF
INVESTORS

       

      
 

      
        
          	
                  Investor:

                	
                  Portion
      of Investment Amount

                	
                  Address

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      


        

      

      



     

     

     

     

     

     

     

     

     

    
      


      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

       

      SCHEDULE
1.6

      


      WARRANT
AGREEMENT

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      9