Document:

f8k0514ex10iv_neonode.htm

Exhibit 10.4

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

neonode inc.

 

Agent warrant

 

Agent Warrant No. 1

 

Date of Issuance: May 15, 2014 (“Issuance Date”)

 

Neonode Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Ascendiant Capital Markets, LLC, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Agent Warrant to purchase Common Stock (including any Agent Warrants to purchase Common Stock issued in exchange, transfer or replacement hereof, the “Agent Warrant”), at any time or times on or after the date hereof (the “Initial Exercisability Date”), but not after 11:59 p.m., New York time, on the Termination Date, 75,000 (subject to adjustment as provided herein) fully paid and non-assessable shares of Common Stock (as defined below) (the “Agent Warrant Shares”).  Except as otherwise defined herein, capitalized terms in this Agent Warrant shall have the meanings set forth in Section 16.  This Agent Warrant is one of the Agent Warrants to purchase Common Stock (the “Agent Warrants”) issued pursuant to the Securities Purchase Agreement, dated as of May 9, 2014, by and among the Company and the purchasers signatory thereto (the “Purchase Agreement”).

 

  

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1.             EXERCISE OF WARRANT.

 

(a)            Mechanics of Exercise.  Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f) and (g)), this Agent Warrant may be exercised by the Holder on any day on or after the Initial Exercisability Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Agent Warrant.  Within one (1) Trading Day following an exercise of this Agent Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Agent Warrant Shares as to which this Agent Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)).  The Holder shall not be required to deliver the original of this Agent Warrant in order to effect an exercise hereunder.  Execution and delivery of an Exercise Notice with respect to less than all of the Agent Warrant Shares shall have the same effect as cancellation of the original of this Agent Warrant and issuance of a new Agent Warrant evidencing the right to purchase the remaining number of Agent Warrant Shares.  Execution and delivery of an Exercise Notice for all of the then-remaining Agent Warrant Shares shall have the same effect as cancellation of the original of this Agent Warrant after delivery of the Agent Warrant Shares in accordance with the terms hereof.  On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day following the date on which the Company has received such Exercise Notice, the Company shall, (X) provided that the Agent Warrant Shares are subject to an effective registration statement (or this Agent Warrant is being exercised pursuant to the Cashless Exercise provision and an exemption from registration is then available) Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (Y) if a registration statement is not then available for the resale of the Agent Warrants, the Holder is not utilizing Cashless Exercise and the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, provide evidence that the Agent Warrant Shares have been registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.  Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Agent Warrant Shares with respect to which this Agent Warrant has been exercised, irrespective of the date such Agent Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the evidence of such Agent Warrant Shares (as the case may be).  If this Agent Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Agent Warrant Shares represented by this Agent Warrant submitted for exercise is greater than the number of Agent Warrant Shares being acquired upon an exercise, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Agent Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Agent Warrant Shares purchasable immediately prior to such exercise under this Agent Warrant, less the number of Agent Warrant Shares with respect to which this Agent Warrant is exercised.  No fractional shares of Common Stock are to be issued upon the exercise of this Agent Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all fees which may be payable with respect to the issuance and delivery of Agent Warrant Shares upon exercise of this Agent Warrant.  Notwithstanding the foregoing, except in the case where an exercise of this Agent Warrant is validly made pursuant to a Cashless Exercise, the Company’s failure to deliver Agent Warrant Shares to the Holder on or prior to the second (2nd) Trading Day after the Company’s receipt of the Aggregate Exercise Price shall not be deemed to be a breach of this Agent Warrant.

 

  

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(b)           Exercise Price.  For purposes of this Agent Warrant, “Exercise Price” means $5.09, subject to adjustment as provided herein.

 

(c)           Company’s Failure to Timely Deliver Securities.  If the Company shall fail, for any reason or for no reason, to issue to the Holder within the later of (i) three (3) Trading Days after receipt of the applicable Exercise Notice and (ii) two (2) Trading Days after the Company’s receipt of the Aggregate Exercise Price (or valid notice of Cashless Exercise) (such later date, the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Agent Warrant (as the case may be) (a “Delivery Failure”), then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after such Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 1% of the product of (A) the aggregate number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible date on which the Company could have issued such shares of Common Stock to the Holder without violating Section 1(a).  In addition to the foregoing, if on or prior to the Share Delivery Deadline, the Company shall fail to register such shares of Common Stock on the Company’s share register or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be), and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Exercise Notice and ending on the date of such issuance and payment under this clause (ii).

 

  

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(d)           Cashless Exercise.  Notwithstanding anything contained herein to the contrary (other than Sections 1(f) and 1(g) below), if at any time after the six-month anniversary of the Closing Date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Agent Warrant Shares by the Holder, the Holder may, in its sole discretion, exercise this Agent Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

 

           Net Number = (A x B) - (A x C)

                                                                               D

 

For purposes of the foregoing formula:

	
  

	
A = the total number of shares with respect to which this Agent Warrant is then being exercised.

 

	
  

	
B =the quotient of (x) the sum of the VWAP of the Common Stock of each of the ten (10) Trading Days ending at the close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice, divided by (y) ten (10).

 

	
  

	
C = the Exercise Price then in effect for the applicable Agent Warrant Shares at the time of such exercise.

 

	
  

	
D = the VWAP of the Common Stock at the close of business on the Principal Market on the date of the delivery of the applicable Exercise Notice.

 

(e)           Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Agent Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Agent Warrant Shares that are not disputed and resolve such dispute in accordance with Section 13.

 

  

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(f)            Limitations on Exercises.  Notwithstanding anything to the contrary contained in this Agent Warrant, this Agent Warrant shall not be exercisable by the Holder hereof to the extent (but only to the extent) that after giving effect to such exercise the Holder (together with any of its affiliates) would beneficially own in excess of  4.99% (the “Maximum Percentage”) of the Common Stock.  To the extent the above limitation applies, the determination of whether this Agent Warrant shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as the case may be, as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be).  No prior inability to exercise this Agent Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability.  For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Purchase Agreement) and the rules and regulations promulgated thereunder.  The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation.  The limitations contained in this paragraph shall apply to a successor Holder of this Agent Warrant.  The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Agent Warrant or securities issued pursuant to the Purchase Agreement.  At any time the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in a written notice by the Holder to the Company (subject to the Company’s consent to any such increase, not to be unreasonably withheld); provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of the Agent Warrants.

 

(g)           Insufficient Authorized Shares.  The Company shall at all times keep reserved for issuance under this Agent Warrant a number of shares of Common Stock at least equal to 125% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder (without regard to any limitation otherwise contained herein with respect to the number of shares of Common Stock that may be acquirable upon exercise of this Agent Warrant).  If, notwithstanding the foregoing, and not in limitation thereof, at any time while any of the Agent Warrants remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of the Agent Warrants at least a number of shares of Common Stock (the “Required Reserve Amount”) equal to the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Agent Warrants then outstanding (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the Agent Warrants then outstanding.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock.  In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.  In the event that the Company is prohibited from issuing shares of Common Stock upon an exercise of this Agent Warrant due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for the cancellation of such portion of this Agent Warrant exercisable into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with respect to such Authorization Failure Shares to the Company and ending on the date of such issuance and payment under this Section 1(g), and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.

 

  

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2.             ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF AGENT WARRANT SHARES.  The Exercise Price and number of Agent Warrant Shares issuable upon exercise of this Agent Warrant are subject to adjustment from time to time as set forth in this Section 2.

 

(a)           Stock Dividends and Splits.  Without limiting any provision of Section 4, if the Company, at any time on or after the date of the Purchase Agreement, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.  If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

 

(b)           Number of Agent Warrant Shares.  Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 2, the number of Agent Warrant Shares that may be purchased upon exercise of this Agent Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Agent Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).

 

(c)           Stock Combination Event Adjustment. If at any time and from time to time on or after the Issuance Date the Company combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares (each, a “Stock Combination Event”) and the product of (i) the quotient determined by dividing (x) the Exercise Price in effect immediately prior to the Stock Combination Event by (y) the quotient determined by dividing (A) the sum of the VWAP of the Common Stock on each day of the fifteen (15) Trading Day period immediately prior to the Stock Combination Event, divided by (B) fifteen (15); and (ii) the quotient determined by dividing (x) the sum of the VWAP of the Common Stock on each day of the fifteen (15) Trading Day period immediately following the date of such Stock Combination Event, divided by (y) fifteen (15) (each, an “Event Market Price”) is less than the Exercise Price then in effect (after giving effect to the adjustment in clause (b) above), then on the sixteenth (16th) Trading Day immediately following such Stock Combination Event, the Exercise Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in clause (b) above) shall be reduced (but in no event increased) to the Event Market Price.  For the avoidance of doubt, if the adjustment in the immediately preceding sentence would otherwise result in an increase in the Exercise Price hereunder, no adjustment shall be made.

 

(d)           Calculations.  All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable; provided that any individual adjustments  below one cent or 1/100th of a share that arise from one or more related transactions shall be aggregated for purposes of determining the appropriate adjustment hereunder.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

3.             RIGHTS UPON DISTRIBUTION OF ASSETS.  In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Agent Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Agent Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

 

  

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4.             PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a)            Purchase Rights.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Agent Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

 

(b)           Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Agent Warrant and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 4(b), including agreements to deliver to the Holder in exchange for this Agent Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Agent Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Agent Warrant (without regard to any limitations on the exercise of this Agent Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Agent Warrant immediately prior to the consummation of such Fundamental Transaction.  Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Agent Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Agent Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.  Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Agent Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Agent Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Agent Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Agent Warrant), as adjusted in accordance with the provisions of this Agent Warrant.  Notwithstanding the foregoing, and without limiting Section 1(f) hereof, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Agent Warrant.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Agent Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of the Agent Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Agent Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Agent Warrant).  Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.

 

  

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(c)           Black Scholes Redemption. Notwithstanding the foregoing and the provisions of Section 4(b) above, at the request of the Holder delivered at any time commencing on the earliest to occur of (x) the public disclosure of any Fundamental Transaction, (y) the consummation of any Fundamental Transaction and (z) the Holder first becoming aware of any Fundamental Transaction through the date that is ninety (90) days after the public disclosure of the consummation of such Fundamental Transaction by the Company pursuant to a Current Report on Form 8-K filed with the SEC, the Company or the Successor Entity (as the case may be) shall purchase this Agent Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Black Scholes Value.

 

(d)           Application.  The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied as if this Agent Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Agent Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act and thereafter receivable upon exercise of this Agent Warrant (or any such other warrant)).

 

5.             NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Purchase Agreement), Bylaws (as defined in the Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agent Warrant, and will at all times in good faith carry out all the provisions of this Agent Warrant and take all action as may be required to protect the rights of the Holder.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Agent Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the exercise of this Agent Warrant, and (iii) shall, in accordance with Section 1(g) above, so long as any of the Agent Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Agent Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Agent Warrants then outstanding (without regard to any limitations on exercise).

 

6.             WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Agent Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Agent Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Agent Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Agent Warrant Shares which it is then entitled to receive upon the due exercise of this Agent Warrant.  In addition, nothing contained in this Agent Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Agent Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

7.             REISSUANCE OF WARRANTS.

 

(a)            Transfer of Agent Warrant.  If this Agent Warrant is to be transferred, the Holder shall surrender this Agent Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Agent Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Agent Warrant Shares being transferred by the Holder and, if less than the total number of Agent Warrant Shares then underlying this Agent Warrant is being transferred, a new Agent Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Agent Warrant Shares not being transferred.

 

  

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(b)           Lost, Stolen or Mutilated Agent Warrant.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Agent Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Agent Warrant, the Company shall execute and deliver to the Holder a new Agent Warrant (in accordance with Section 7(d)) representing the right to purchase the Agent Warrant Shares then underlying this Agent Warrant.

 

(c)            Exchangeable for Multiple Agent Warrants.  This Agent Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Agent Warrant or Agent Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Agent Warrant Shares then underlying this Agent Warrant, and each such new Agent Warrant will represent the right to purchase such portion of such Agent Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.

 

(d)           Issuance of New Agent Warrants.  Whenever the Company is required to issue a new Agent Warrant pursuant to the terms of this Agent Warrant, such new Agent Warrant (i) shall be of like tenor with this Agent Warrant, (ii) shall represent, as indicated on the face of such new Agent Warrant, the right to purchase the Agent Warrant Shares then underlying this Agent Warrant (or in the case of a new Agent Warrant being issued pursuant to Section 7(a) or Section 7(c), the Agent Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Agent Warrants issued in connection with such issuance, does not exceed the number of Agent Warrant Shares then underlying this Agent Warrant), (iii) shall have an issuance date, as indicated on the face of such new Agent Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Agent Warrant.

 

8.             NOTICES.  Whenever notice is required to be given under this Agent Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Purchase Agreement.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Agent Warrant, including in reasonable detail a description of such action and the reason therefor.  Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Agent Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company takes action with respect to Section 2, 3, or 4, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the SEC (as defined in the Purchase Agreement) pursuant to a Current Report on Form 8-K.  It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

 

  

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9.             AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Agent Warrant (other than Section 1(f)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.  No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

10.           SEVERABILITY.  If any provision of this Agent Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agent Warrant so long as this Agent Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

11.           GOVERNING LAW.  This Agent Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agent Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

12.           CONSTRUCTION; HEADINGS.  This Agent Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof.  The headings of this Agent Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Agent Warrant.  Terms used in this Agent Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Purchase Agreement) in such other Transaction Documents unless otherwise consented to in writing by the Holder.

 

  

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13.           DISPUTE RESOLUTION.  In the case of a dispute as to the determination of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value or the arithmetic calculation of the number of Agent Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute.  If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value or the number of Agent Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Holder that is reasonably acceptable to the Company or (b) the disputed arithmetic calculation of the number of Agent Warrant Shares to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Company.  The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be).  Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error.

 

14.           REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Agent Warrant shall be cumulative and in addition to all other remedies available under this Agent Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Agent Warrant.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.  Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Agent Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.  The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Agent Warrant (including, without limitation, compliance with Section 2 hereof).  The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Agent Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

 

  

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15.           TRANSFER.  This Agent Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by Section 4.1(a) of the Purchase Agreement.

 

16.           CERTAIN DEFINITIONS.  For purposes of this Agent Warrant, the following terms shall have the following meanings:

 

(a)           “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination.  If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(b)   “Black Scholes Value” means the value of the unexercised portion of this Agent Right remaining on the date of the Holder’s request pursuant to Section 4(c), which value is calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to Section 4(c) and (2) the sum of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price in effect on the date of the Holder’s request pursuant to Section 4(c), (iii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Agent Right as of the date of the Holder’s request pursuant to Section 4(c) and (2) the remaining term of this Agent Right as of the date of consummation of the applicable Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(c) if such request is prior to the date of the consummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading Day immediately following the earliest to occur of (x) the public disclosure of the applicable Fundamental Transaction, (y) the consummation of the applicable Fundamental Transaction and (z) the date on which the Holder first became aware of the applicable Fundamental Transaction.

 

  

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(c)            “Bloomberg” means Bloomberg, L.P.

 

(d)           “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(e)            “Closing Sale Price” means, for any security as of any date, the last closing trade price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last trade price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing does not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security by Bloomberg, the average of the ask prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).  If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(f)            “Common Stock” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(g)           “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(h)           “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Select Market, the Nasdaq Global Market or the Principal Market.

 

(i)            “Expiration Date” means the date that is the eighteen (18) month anniversary of the Initial Exercisability Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.

 

  

13

  

 

(j)             “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

 

(k)            “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(l)             “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(m)          “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(n)           “Principal Market” means the Nasdaq Capital Market.

 

(o)           “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

  

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(p)           “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

 

(q)           “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 

(r)            “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).  If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

 [signature page follows]

 

  

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IN WITNESS WHEREOF, the Company has caused this Agent Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

	 	
NEONODE INC.

	 	 	 
	
 

	
By: 

	 
	 	 	Name: 

Title:

	 	 	 
	 	 	 

 

  

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EXHIBIT A

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

 

WARRANT TO PURCHASE COMMON STOCK

 

NEONODE INC.

 

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Agent Right Shares”) of Neonode Inc., a Delaware corporation (the “Company”), evidenced by Agent Right to Purchase Common Stock No. _______ (the “Agent Right”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Agent Right.

 

1.           Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

 

	
  

	
____________

	
a “Cash Exercise” with respect to _________________ Agent Right Shares; and/or

 

	
  

	
____________

	
a “Cashless Exercise” with respect to _______________ Agent Right Shares.

 

2.           Payment of Exercise Price.  In the event that the Holder has elected a Cash Exercise with respect to some or all of the Agent Right Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Agent Right.

 

3.           Delivery of Agent Right Shares.  The Company shall deliver to Holder, or its designee or agent as specified below, __________ Agent Right Shares in accordance with the terms of the Agent Right.  Delivery shall be made to Holder, or for its benefit, to the following address:

 

	 
	 
	 
	 
	 

 

	
Date: _____________ __,                                               

 

_________________________

Name of Registered Holder

 

	
By:  ______________________

        Name:

        Title:

 

  

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EXHIBIT B

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 201_, from the Company and acknowledged and agreed to by _______________.

 

 

	 	
 

	 	 	 
	 	 	 
	
 

	
By: 

	 
	 	 	Name: 

Title:f10q0314ex10iv_starstream.htm

Exhibit 10.4

 

OVERHEAD AGREEMENT

 

THIS OVERHEAD AGREEMENT (the “Agreement”), is made as of this 19th day of February, 2014 (the “Effective Date”), by and between Destro Films, LLC, a California limited liability company, aka Liz Destro (“Producer”), on the one hand, and Starstream Entertainment Inc., a Nevada Corporation (“Company”), on the other hand.

 

1. Overhead Contribution. For good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, Company agrees to provide Producer with the following amounts (the “Overhead Contribution”):

 

(a)           Two Hundred Fifty Thousand U.S. Dollars ($250,000), payable in six (6) equal installments over the course of the first year of the Term (as defined below), with the first installment payable on the Effective Date and each additional installment payable on the date that is two (2) months after the payment date for the prior installment; and

 

(b)           Two Hundred Fifty Thousand U.S. Dollars ($250,000), payable in six (6) equal installments over the course of the second year of the Term, with the first installment payable on the one (1) year anniversary of the Effective Date and each additional installment payable on the date that is two (2) months after the payment date for the prior installment.

 

The Overhead Contribution shall be paid by Company to Producer in cash or wire-transfer of immediately available funds to an account designated by Producer in writing. The Overhead Contribution received by Producer shall be immediately available to Producer for use in Producer’s sole discretion. Company shall be entitled to recoup the Overhead Contribution as agreed between the parties in good faith on a project by project basis during the Term, but in any event Company shall be paid not less than two percent (2%) of the Budget for each Picture (as defined below) that commences pre-production photography during the Term plus six months, whether or not financed by Company, for purposes of such recoupment. As used herein, the term “Budget” shall mean the actual direct out of pocket costs stated for the budget of the Picture pursuant to the actual direct production budget on the first day of principal photography (but shall not include any amounts for the completion bond fee, contingency, financing costs, deferments or general overhead). Recoupment shall occur from the Picture/s financed under this Agreement only and Producer shall not be individually liable for Company’s recoupment.

 

2. First Right to Finance. Provided that Producer has received the Overhead Contribution from Company as required pursuant to this Agreement, during the Term Company shall have a right of first negotiation to provide all production financing required by Producer in order for Producer to produce each motion picture for which Producer and/or any of its affiliates owns and/or controls the rights, including all Pictures Producer wishes to produce (a “Picture”), which right of first negotiation shall be exercised as follows:

 

(a)           During the Term Producer shall submit to Company in writing all “key elements” (i.e., budget, screenplay, cast and crew attachments, production schedule and proposed shooting locations) (collectively, the “Key Elements”) then existing for each motion picture project that Producer desires to produce, prior to submitting such Key Elements to any third party for purposes of seeking production financing. Within ten (10) business days after Company’s receipt of such Key Elements, Company shall notify Producer in writing whether it is interested in providing production financing for the applicable motion picture project (the “Notice of Interest”), which Notice of Interest shall include Company’s conditions for such financing, if any (the “Company Conditions”). If Company indicates in its Notice of Interest that it is not interested in providing production financing for the applicable motion picture project based upon the Key Elements, or fails to provide a Notice of Interest within such ten (10) business day period, Producer shall have no further obligations to Company under this Section 2 with respect to such motion picture project. If there are any material changes to the Key Elements (which shall mean, for purposes of the budget, a decrease in total cost of more than five percent (5%) after Company’s delivery of a Notice of Interest but prior to the parties concluding a definitive written agreement for production financing for the applicable motion picture project as contemplated in Section 2(b) below, Producer shall resubmit such revised Key Element(s) to Company pursuant to this Section 2(a), and the balance of the terms contained in this Section 2(a) shall apply thereto.

 

  

 

  

 

(b)           If Company indicates in its Notice of Interest that it is interested in providing production financing for such motion picture project and delivers such Notice of Interest in a timely manner as set forth in Section 2(a) above, Producer shall vet the project and thereafter, once the applicable motion picture project becomes (or is intended to become) a Picture and Producer has developed a financing plan therefor, Producer shall deliver to Company a copy of such financing plan (the “Financing Plan”). The parties thereafter shall exclusively negotiate in good faith over the next ten (10) business days the terms of the agreement for Company’s financing of the applicable Picture based upon the Financing Plan and the Key Elements. If the parties fail to enter into a definitive financing agreement within said ten (10) business day period, Producer shall have no further obligations to Company under this Section 2 with respect to such Picture. In the event that Producer suffers from an incapacity during such 10 day period that materially hinders the negotiation process (i.e. inability or failure to coherently communicate for more than 48 hours), the period shall be automatically extended in proportion to the duration of the incapacity.

 

(c)           The provisions of this Section 2 shall not apply to any motion picture projects submitted to and rejected by Company for proposed production financing prior to the Effective Date, including, without limitation, “Break it Down” and “Grey Division.”

 

(d)           Notwithstanding anything to the contrary contained herein, Producer’s obligations pursuant to this Section 2, as applicable, shall not apply to any motion picture project (i) which already has production financing attached prior to Producer’s acquisition of and/or control over the rights thereto notwithstanding Producer’s compliance with the provisions of Section 2(a) above, if applicable, or (ii) that does not require production financing. If during the Term Producer is offered the opportunity by any third party to provide production financing for any motion picture project that Producer or its affiliates does not (and is not intended to) own or control, Producer first shall exclusively provide such opportunity to Company for a ten (10) business day period, and shall forward to Company copies of all Key Elements provided to Producer in connection therewith. If Company does not commit to provide the required production financing within such ten (10) business day period, Producer shall be entitled to forward such opportunity to any third party in its sole discretion without any further obligation to Company.

 

(e)           As used herein, the “Term” shall mean the period beginning on the Effective Date and ending two (2) years thereafter.

 

3. Credit. Provided that Producer has received the Overhead Contribution from Company as required pursuant to this Agreement, Company shall be provided with an on-screen “Special Thanks” credit on each Picture that commences principal photography during the Term if Company has not provided any production financing for such Picture pursuant to the terms hereof. All other aspects of Company’s credit shall be within Producer’s sole discretion. Producer will notify all third parties of the credit provisions hereunder; provided, however, that no casual or inadvertent failure by Producer to comply with the provisions of this Section nor any failure by third parties to comply with their agreements with Producer shall constitute a breach of this Agreement by Producer. Producer shall use reasonable efforts to cure any alleged failure to comply with the provisions of this Section 4 prospectively where commercially practicable (e.g., with respect to positive prints not yet created) upon receipt of written notice from Company of any such alleged failure provided that said notice specifies the details thereof.

 

  

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4. Controls. As between Producer and Company, Producer shall have all creative and business controls, rights of designation and approvals with respect to each Picture and any and all development and production thereof subject to the financing agreement/s negotiated in good faith by the parties.

 

5. Indemnification.

 

(a)           Company shall defend, indemnify and hold Producer, its successors, licensees, assigns, and parent, subsidiary and affiliated companies, and the directors, officers, members, managers, shareholders, employees, agents, licensees and assigns of each of the foregoing, harmless from all third party claims, liabilities, damages, costs and expenses (including, without limitation, reasonable outside legal fees and expenses) (collectively, “Claims”) arising out of or resulting from any breach by Company of any representation, warranty or agreement made by Company hereunder.

 

(b)           Producer shall defend, indemnify and hold Company, its successors, licensees, assigns, and parent, subsidiary and affiliated companies, and the directors, officers, members, managers, shareholders, employees, agents, licensees and assigns of each of the foregoing, harmless from all Claims arising from any breach by Producer of any representation, warranty or agreement made by Producer hereunder.

 

(c)           Each party agrees that, upon receipt or presentation of any claim or notification of the institution of any action with respect to which indemnification might be required hereunder, it shall promptly notify the other party in writing thereof. Any such indemnitee shall have the right, in its discretion and at its sole expense, to retain independent counsel and to participate in any such defense.

 

6. Representations and Warranties.

 

(a)           Producer hereby represents and warrants as follows:

 

(i)             Producer is a limited liability company duly formed and validly existing pursuant to the laws of its jurisdiction of formation as shown on page 1 of this Agreement and has the full limited liability company right, power and authority to enter into and perform its obligations hereunder.

 

(ii)            There is no matter, litigation, tax claim, proceeding or dispute pending or, to Producer’s knowledge, threatened against or affecting Producer or its property, the adverse determination of which would materially and adversely affect Producer’s financial condition or operations or impair Producer’s ability to perform its obligations hereunder.

 

(iii)           This Agreement has been duly executed and delivered by Producer and constitutes a legal, valid and binding obligation of Producer, enforceable in accordance with its terms, subject to bankruptcy, insolvency, arrangement and laws generally affecting the enforceability of creditors’ rights (other than those pertaining to fraudulent assignments and preferences).

 

(iv)           To the best of Producer’s knowledge, the execution and delivery of this Agreement does not, and the performance by Producer of its obligations under this Agreement will not contravene any laws, regulations or by-laws applicable thereto.

 

  

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(v)            The execution, delivery and performance by Producer of this Agreement will not contravene any agreement, contract or other instrument to which it is a party or by which it or its property may be bound.

 

(b)           Company hereby represents and warrants as follows:

 

(i)             Company is a corporation duly and validly existing pursuant to the laws of its jurisdiction of Nevada as shown on page 1 of this Agreement and has the full, right, power and authority to enter into and perform its obligations hereunder.

 

(ii)            This Agreement has been duly executed and delivered by Company and constitutes a legal, valid and binding obligation of Company, enforceable in accordance with its terms, subject to bankruptcy, insolvency, arrangement and laws generally affecting the enforceability of creditors’ rights (other than those pertaining to fraudulent assignments and preferences).

 

(iii)           The execution, delivery and performance by Company of this Agreement will not contravene any agreement, contract or other instrument to which Company is a party or by which Company or Company’s property may be bound.

 

7. Assignment. Company may not transfer its liabilities or obligations or requirements hereunder without Producer’s prior written consent (which consent shall not be unreasonably withheld), and any attempted assignment without such consent shall be void ab initio. Producer may assign its liabilities or obligations hereunder, in whole or in part, to any third party, and upon such third party’s assumption of such liabilities and/or obligations, Producer’s shall be released from such liabilities and obligations hereunder.

 

8. Notices. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing (unless otherwise specifically provided) and delivered to each party at the following address:

 

	 	
To Producer:

	 
	 	 	 
	 	 	 
	 	
With a copy to:

	
Lisa Nitti, Esq.

21860 Burbank Blvd., Suite 170

Woodland Hills, California 91367

	 	 	 
	 	
To Company:

	
100 Skypark Drive

Monterey, CA 93940

 

or to such other address or addresses as either party may have furnished to the other in writing in accordance herewith. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by reputable overnight courier, upon the earlier of the date of receipt or one (1) business day after deposit with such carrier; and (c) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid.

 

9. Status of Parties. Producer, on the one hand, and Company, on the other hand, are independent contractors with respect to each other. Nothing herein shall create any association, partnership, joint venture or agency relationship between the parties.

 

  

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10. Company’s Remedies. The rights and remedies of Company in the event of any breach by Producer of this Agreement shall be limited to Company’s right to recover damages, if any, in an action at law, and Company hereby waives any right or remedy in equity, including without limitation any right to terminate or rescind this Agreement and/or to seek injunctive or other equitable relief with respect to any breach of Producer’s obligations hereunder and/or to enjoin or restrain or otherwise impair in any manner the production, distribution, exhibition or other exploitation of any Picture, or any parts or elements thereof.

 

11. Attorneys’ Fees. If any legal action, arbitration or other proceeding is brought for the enforcement of this Agreement, or because of any dispute, alleged breach, default or misrepresentation in connection with this Agreement, the successful or prevailing party shall be entitled to recover reasonable outside attorneys’ fees and other costs that it incurred in that action, arbitration or other proceeding, in addition to any other relief to which it may be entitled.

 

12. Governing Law and Venue. This Agreement is to be governed and construed in accordance with the laws of the State of California applicable to contracts made and to be performed wholly within such state, and without regard to the conflict of laws principles thereof. A suit brought hereon shall be brought in the state or federal court sitting in Los Angeles, California, and the parties hereto hereby waive any claim or defense that such forum is not convenient or proper. Each party hereby agrees that any such court shall have in personam jurisdiction over it and consents to service of process in any manner authorized by California law. If one or more provisions of this Agreement are held to be illegal or unenforceable under applicable California law, such illegal or unenforceable portion(s) shall be limited or excluded from this Agreement to the minimum extent required and the remaining portions of this Agreement shall be interpreted as if such portion(s) were so limited or excluded and shall be enforceable in accordance with its terms.

 

13. Limitation of Liability. EXCEPT FOR DAMAGES ARISING OUT OF OR AS A RESULT OF A PARTY’S INDEMNIFICATION OBLIGATION UNDER SECTION 6 SOLELY TO THE EXTENT ARISING FROM A THIRD PARTY CLAIM, NEITHER PARTY WILL BE LIABLE HEREUNDER FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES (INCLUDING DAMAGES FOR LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF OR UNAUTHORIZED ACCESS TO INFORMATION OR LOST OPPORTUNITIES), COST OF COVER OR ANY PUNITIVE OR EXEMPLARY DAMAGES, EVEN IF SUCH PARTY HAS BEEN MADE AWARE OF THE POSSIBILITY OF SUCH DAMAGES.

 

14. General. Captions appearing at the commencement of the Sections hereof are descriptive only and are for convenience and shall not be construed as part of this document. Each provision of this Agreement performable by any party hereto shall be deemed both a covenant and a condition. This Agreement is to be deemed to have been prepared collectively by the parties hereto and if any inconsistencies or ambiguities exist herein, it shall not be interpreted or construed against any party as the drafter. All of the terms and provisions contained herein shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

 

15. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, shall supersede any oral or prior written agreements between Company and Producer with regard to the subject matter set forth herein, and shall not be modified or amended except by a document in writing signed by both the parties. Unless and until this Agreement is modified or amended by the parties hereto in writing, if ever, this Agreement shall be binding upon the parties. Each party acknowledges that no representation or warranty not expressly set forth in this Agreement or the Exhibits hereto has been made or relied upon by the other party. This Agreement may be executed in any number of counterparts, by manual or PDF signatures, each of which will be an original, but all of which together will constitute one and the same agreement.

 

[Signature page follows]

 

  

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written above.

 

	 	
DESTRO FILMS, LLC

	 
	 	 	 	 
	 	
By:

	/s/ Liz Destro	 
	 	 	Name: Liz Destro	 
	 	 	Title: President	 
	 	 	 	 
	 	STARSTREAM ENTERTAINMENT	 
	 	 	 	 
	 	By:	/s/ Kim Leadford	 
	 	 	Name: Kim Leadford	 
	 	 	Title: CEO	 

 

 

 

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