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to Section 14(a) of the Securities
Exchange Act of
1934
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14a-6(e)(2))
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Definitive Proxy Statement
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Soliciting Material Pursuant to §240.14a-12
_____________________________________________________________________________________________
NEONODE INC.
(Name of Registrant as Specified In Its Charter)
_____________________________________________________________________________________________
(Name of Person(s)
Filing Information Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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NEONODE INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2015
Stockholders of Neonode Inc.:
Notice is hereby given that the 2015 Annual Meeting of Stockholders
of Neonode Inc., a Delaware corporation (“Neonode”),
will be held on June 8, 2015 at 3:00 p.m. local time at
Neonode’s principal executive office located at Storgatan
23C, 11455 Stockholm, Sweden, to conduct the following
business:
1. To
elect two Class I directors to serve on the Board of Directors of
Neonode for a term of three years and until the election and
qualification of their respective successors;
2. To
approve, on a nonbinding advisory basis, the compensation of
Neonode’s named executive officers;
3. To
approve the Neonode Inc. 2015 Stock Incentive Plan;
4. To
ratify the appointment of KMJ Corbin and Company LLP as
Neonode’s independent registered public accounting firm for
the fiscal year ending December 31, 2015; and
5. To
transact any other business that may properly come before the
meeting.
The record date for the annual meeting is April 16, 2015. Only
stockholders of record, or their proxies, at the close of business
on that date may vote at the meeting or any adjournment
thereof.
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By Order of the Board of Directors
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/s/ Lars Lindqvist
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Lars
Lindqvist
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Vice President, Finance, Chief Financial
Officer,
Treasurer and Secretary
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April 24, 2015
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Important Notice
Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders
to be Held on Monday, June 8, 2015: This
notice, the proxy statement, the proxy card, and Neonode’s
annual report are available at
http://www.astproxyportal.com/ast/16987
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Table of
Contents
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NEONODE INC. – PROXY STATEMENT
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1
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Proxy Statement for the 2015 Annual
Meeting
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1
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Questions and Answers About the 2015 Annual
Meeting
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1
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Proxy Solicitation
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3
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Notice and Access
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3
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PROPOSAL 1 – ELECTION OF CLASS I
DIRECTORS
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4
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Class I Nominees
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4
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Required Vote and Recommendation
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4
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BOARD MATTERS AND CORPORATE
GOVERNANCE
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5
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Composition of the Board of Directors
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5
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Leadership of the Board of Directors
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6
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Committees of the Board of Directors
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6
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Meetings of the Board of Directors
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9
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Director Compensation
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9
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Communication with the Board of
Directors
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9
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Risk Oversight
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10
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Code of Ethics
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10
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Section 16(a) Beneficial Ownership Reporting
Compliance
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10
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PROPOSAL 2 – ADVISORY VOTE ON NAMED
EXECUTIVE OFFICERS COMPENSATION
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11
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Required Vote and Recommendation
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11
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EXECUTIVE OFFICERS
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11
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COMPENSATION DISCUSSION AND ANALYSIS
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13
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Overview
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13
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Compensation Committee
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13
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Role of Chief Executive Officer
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14
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Compensation Philosophy
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14
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Components of Compensation
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14
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Severance and Change in Control
Arrangements
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16
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Clawback Policy
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16
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Insider Trading Policy
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16
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Stock Ownership Guidelines
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16
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EXECUTIVE COMPENSATION
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17
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Summary Compensation Table
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17
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Employment Agreements
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18
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Grant of Plan Based Awards
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18
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Outstanding Equity Awards at Fiscal
Year-End
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18
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Option Exercises
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19
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Potential Payments Upon Termination or Change of
Control
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19
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REPORT OF THE COMPENSATION COMMITTEE
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20
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Compensation Committee Interlocks and Insider
Participation
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20
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i
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PROPOSAL 3 – APPROVAL OF THE NEONODE INC.
2015 STOCK INCENTIVE PLAN
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21
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Reasons
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21
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Required Vote and Recommendation
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22
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DESCRIPTION OF THE NEONODE INC. 2015 STOCK
INCENTIVE PLAN
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23
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General Information
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23
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Administration of the 2015 Plan
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23
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Types of 2015 Plan Awards
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24
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Tax Withholding
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25
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Limitations on Transfer of Awards
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25
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Adjustments for Change in Control
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25
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Termination of Employment or Services
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26
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Federal Tax Consequences
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26
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PROPOSAL 4 – RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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29
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Required Vote and Recommendation
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29
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PRINCIPAL ACCOUNTANT FEES AND
SERVICES
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30
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Pre-Approval of Audit and Non-Audit
Services
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30
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REPORT OF THE AUDIT COMMITTEE
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31
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
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Review, Approval or Ratification of Transactions
with Related Persons
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32
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Director Independence
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32
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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Beneficial Ownership Table
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Securities Authorized for Issuance under Equity
Compensation Plans
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ADDITIONAL INFORMATION
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35
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Annual Report
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35
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Stockholder Proposals
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Householding
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Other Matters
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36
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APPENDIX A – NEONODE INC. 2015 STOCK
INCENTIVE PLAN
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A-1
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ii
NEONODE INC. –
PROXY STATEMENT
Proxy Statement for the
2015 Annual Meeting
This proxy statement is furnished by and on behalf of the Board of
Directors of Neonode Inc., a Delaware corporation
(“we”, “us”, “our”,
“company,” or “Neonode”), in connection
with the Annual Meeting of Stockholders of Neonode to be held on
June 8, 2015 at 3:00 p.m. local time at Neonode’s principal
executive office located at Storgatan 23C, 11455 Stockholm,
Sweden.
This proxy statement and accompanying materials are first being
sent or given to stockholders on approximately April 24, 2015.
Questions and Answers
About the 2015 Annual Meeting
What is
the purpose of the 2015 Annual Meeting? At the
2015 Annual Meeting, stockholders will be asked to:
•
elect two Class I directors to Neonode’s Board of Directors
for a term of three years;
•
hold an advisory vote on the compensation of Neonode’s named
executive officers (the “say-on-pay” vote);
•
approve the Neonode Inc. 2015 Stock Incentive Plan; and
•
ratify the appointment of KMJ Corbin and Company LLP as
Neonode’s independent registered public accounting firm for
the fiscal year ending December 31, 2015.
Stockholders also may be asked to act on any other business that
may properly come before the meeting. Members of our
company’s management team will be present at the meeting to
respond to appropriate questions from stockholders.
Who is
entitled to vote? The
record date for the 2015 Annual Meeting is April 16, 2015. Only
stockholders of record at the close of business on that date are
entitled to vote at the meeting. Each share of common stock and
Series B Preferred Stock entitles the holder thereof to one vote on
each matter properly brought before the meeting. As of the record
date, 40,455,352 shares of our common stock were issued and
outstanding and 83 shares of Series B Preferred Stock were issued
and outstanding.
What is
the difference between being a “record holder” and
holding shares in “street name”? A
record holder is listed as a stockholder on the share register of
our company. Shares held in “street name” are held of
record in the name of a brokerage firm or bank for the benefit of
another person.
Am I
entitled to vote if my shares are held in “street
name”? If
your shares are held by a broker or bank, you are considered the
beneficial owner of shares held in “street name”. If
your shares are held in street name, proxy materials should be
forwarded to you by the record holder if it is a broker or bank
along with a voting instruction card. As the beneficial owner, you
may direct your broker or bank record holder how to vote your
shares, and your broker or bank is required to vote your shares in
accordance with your instructions.
What is
the quorum requirement? A
quorum is necessary to hold a valid meeting. A quorum will be
present if a majority of the outstanding shares eligible to vote
are represented in person or by proxy at the meeting. Your shares
will be counted towards the quorum only if you submit a valid proxy
(or one is submitted on your behalf by your broker or bank, or
other nominee record holder) or if you vote in person at the
meeting. Abstentions and broker non-votes will be counted towards
the quorum requirement.
Who can
attend the 2015 Annual Meeting? All
of our stockholders of record as of the close of business on April
16, 2015 may attend the 2015 Annual Meeting. “Street
name” holders also are invited to attend the meeting;
however, if you are not the stockholder of record, you may not vote
your shares in person at the meeting unless you request and obtain
a valid proxy from your broker or bank.
What if
a quorum is not present at the meeting? If
a quorum is not present at the scheduled time of the meeting,
either the chairman of the meeting or a majority of the outstanding
shares entitled to vote represented at the meeting may adjourn the
meeting.
1
How
many votes do I have? On
each matter to be voted upon, you have one vote for each share of
common stock and/or preferred stock you own as of the record
date.
Can I
change my vote after I submit my proxy? If
you are a record holder of shares, you may revoke your proxy and
change your vote at any time before your proxy is actually
voted:
•
by signing and delivering another proxy with a later date;
•
by giving written notice of such revocation to the Corporate
Secretary of our company prior to or at the meeting; or
•
by voting in person at the meeting.
What if
I do not specify how my shares are to be
voted? If
you submit a proxy but do not indicate any voting instructions, the
persons named as proxies will vote in accordance with the
recommendations of the Board of Directors.
How are
votes counted? Votes
will be counted by the inspector of election appointed for the 2015
Annual Meeting, who will separately count “for” and
“against” votes, abstentions, and broker non-votes.
What is
an abstention? An
“abstention” represents a stockholder’s
affirmative choice to decline to vote on a proposal, other than the
election of directors (the choices for election of directors are
limited to “For” or “Withhold”).
How
will abstentions be treated? Under
the Bylaws of our company, abstained shares are excluded from the
votes cast, so they will have no practical effect for or against a
proposal.
What is
a broker non-vote? If
you are a “street name” beneficial owner but do not
provide voting instructions to your broker record holder, then
under applicable rules your broker may only exercise discretionary
authority to vote on routine matters. Of the items described in
this proxy statement, routine matters consist only of Proposal 4. A
broker may not exercise discretionary authority to vote on
non-routine matters. This lack of discretionary authority is called
a “broker non-vote.” Of the items described in this
proxy statement, non-routine matters consist of Proposal 1,
Proposal 2, and Proposal 3.
How
will broker non-votes be treated? Broker
non-votes will be treated as shares present for quorum purposes,
but not considered entitled to vote on that matter. Therefore,
broker non-votes do not count as votes for or against any
proposal.
What
are the recommendations of the Board of
Directors? The
Board recommends that you vote:
•
FOR the election of the Class I nominees named in this proxy
statement to the Board of Directors;
•
FOR the approval, on an advisory basis, of the compensation of the
named executive officers;
•
FOR the approval of the Neonode Inc. 2015 Stock Incentive Plan;
and
•
FOR the ratification of KMJ Corbin and Company LLP as independent
registered public accounting firm for the fiscal year ending
December 31, 2015.
How
many votes are required to elect the director
nominee? The
affirmative vote of a plurality of the shares cast at the 2015
Annual Meeting is required to elect the Class I directors. This
means that the two nominees that receive more affirmative votes
than any other person(s) will be elected directors.
How
many votes are required to approve the remaining
proposals? The
affirmative vote of a majority of the shares cast at the 2015
Annual Meeting is required to approve each remaining proposal.
Will
any other business be conducted at the 2015 Annual
Meeting? We
know of no other matter that will be presented at the meeting.
However, if any other matter properly comes before the stockholders
for a vote at the meeting, the proxy holder(s) will vote your
shares in accordance with the recommendations of the Board of
Directors or otherwise at the discretion of the proxy
holder(s).
2
Where
can I find the voting results of the 2015 Annual
Meeting? We
intend to announce preliminary voting results at the 2015 Annual
Meeting and file final results in a Current Report on Form 8-K with
the Securities and Exchange Commission (the “SEC”)
within four days of the meeting.
Proxy
Solicitation
We will bear the entire cost of this proxy solicitation. Our
directors, officers and regularly engaged employees may solicit
proxies personally or by mail, telephone, facsimile, internet or
other electronic means, for which solicitation they will not
receive any additional compensation. We will reimburse brokerage
firms, bank, custodians, and other fiduciaries for their
out-of-pocket expenses in forwarding solicitation materials to
beneficial owners upon our request.
Notice and
Access
We are using the “Notice and Access” method of posting
the proxy materials online instead of mailing printed copies. We
believe that this process will provide you with a convenient and
quick way to access the proxy materials, including this proxy
statement and our annual report, and authorize a proxy to vote your
shares, while allowing us to conserve natural resources and reduce
the costs of printing and distributing the proxy materials.
Most stockholders will not receive paper copies of the proxy
materials unless they request them. Instead, a Notice and Access
card, which has been mailed to our stockholders of record, provides
instructions regarding how you may access or request all of the
proxy materials by telephone, e-mail, or online. The Notice and
Access card also instructs you how to submit your proxy via the
mail or online. If you prefer to receive a paper or e-mail copy of
the proxy materials, you should follow the instructions for
requesting such materials printed on the Notice and Access
card.
If your shares are held by a brokerage firm or bank on your behalf
in “street name”, you as beneficial owner should
receive a Notice and Access card that instructs you how to provide
your broker or bank with voting instructions for your shares. Most
brokers and banks enable beneficial owners to provide voting
instructions via the mail, online, or other means.
It is important that
your shares be represented at the 2015 Annual Meeting
and voted in accordance with your wishes. Whether or not you plan
to attend the meeting,
please complete a proxy as promptly as possible so that your shares
will be voted at the 2015 Annual Meeting.
This will not limit your right to vote in person or to attend the
meeting.
3
PROPOSAL 1 –
ELECTION OF CLASS I DIRECTORS
Class I
Nominees
Two persons will be elected at the 2015 Annual Meeting of
Stockholders to serve as Class I directors of the Board of
Directors of our company. The elected Class I directors are
expected to serve until the 2018 Annual Meeting of Stockholders of
Neonode or until their respective successors are duly elected and
qualified, or until earlier death, resignation, or removal.
The Board of Directors has nominated Per Bystedt and Thomas
Eriksson for reelection as Class I directors of the Board of
Directors. Mr. Bystedt and Mr. Eriksson each are willing to be
reelected as members of the Board. If Mr. Bystedt or Mr. Eriksson
becomes unavailable to serve as a director for any reason (which
event is not anticipated), the shares represented by proxy may
(unless such proxy contains instructions to the contrary) be voted
for such other person or persons as may be determined by the holder
of the proxy.
Biographical information about Mr. Bystedt and Mr. Eriksson, and
the continuing members of the Board of Directors, is provided under
“Composition of the Board of Directors” in the Board
Matters and Corporate Governance section below.
Required Vote and
Recommendation
Directors are elected by a plurality of the votes of the holders of
common stock and Series B Preferred Stock present in person or by
proxy and entitled to vote at the meeting. Provided a quorum is
present, the nominees receiving the highest number of affirmative
votes will be elected as the Class I directors. Abstentions and
broker non-votes will not be counted as votes cast and will have no
effect on the result of the vote, although they will count towards
the presence of a quorum. Properly executed and unrevoked proxies
will be voted “FOR” the nominees of the Board of
Directors unless contrary instructions are indicated in the
proxy.
The Board of
Directors recommends that you vote “FOR” the election
of
the Board of Directors’ nominees for Class I
directors.
4
BOARD MATTERS AND
CORPORATE GOVERNANCE
Composition of the Board
of Directors
In accordance with our Certificate of Incorporation, the Board of
Directors is divided into three classes. Each class consists, as
nearly as possible, of one-third of the total number of directors.
Each class has a three-year term.
Vacancies on the Board of Directors may be filled only by persons
elected by a majority of the remaining directors. A director
elected by the Board to fill a vacancy in a class shall serve for
the remainder of the full term of that class, and until the
director’s successor is elected and qualified. This includes
vacancies created by an increase in the number of directors.
The identities and biographies of each member of the three classes
of the Board of Directors serving staggered, three-year terms are
as follows:
Class
I Directors Continuing in Office with a Term Expiring at the 2015
Annual Meeting:
Per Bystedt, age 49, has served as Executive Chairman of the
Board of Directors of Neonode since January 2011 and previously as
Chairman of the Board of Directors since August 2007. From May 2008
to January 2011, Mr. Bystedt served as Chief Executive Officer of
Neonode, and he served as the interim Chief Executive Officer of
Neonode from October 2005 to July 2006. From 1997 to 2008, Mr.
Bystedt served as Chief Executive Officer and President of Spray
AB, an internet investment company. From 2000 to 2010, Mr. Bystedt
served as a member of the Board of Directors of Axel Johnson AB.
From 2000 to 2008, Mr. Bystedt served as a member of the Board of
Directors of Eniro AB, and from 2005 to 2008 he served as a member
of the Board of Directors of Servera AB. From 2005 to 2010, Mr.
Bystedt was the Chairman of the Board of Directors of AIK Fotboll
AB. From 1997 to 2005, Mr. Bystedt served as a member of the Board
of Directors of Ahlens AB, and from 1998 to 2000 he was Chairman of
the Board of Directors of Razorfish, Inc.
The Board of Directors has concluded that Mr. Bystedt should serve
as director because of his past experience as Chief Executive
Officer of our company, his understanding of finance and
technology, and his more than twenty years of management and
business oversight experience as a chief executive officer and
member of the boards of directors of various companies.
Thomas Eriksson, age 45, has served as Chief Executive
Officer of Neonode since January 2011, as director since December
2009. Mr. Eriksson also has served as Chief Executive Officer of
Neonode Technologies AB, a wholly-owned subsidiary of Neonode,
since January 1, 2009. Mr. Eriksson was one of the founders of our
company in 2001 and he served as Chief Technical Officer of Neonode
from February 2006 to December 31, 2008. Prior to joining Neonode,
Mr. Eriksson founded several companies with products ranging from
car electronics test systems and tools to GSM/GPRS/GPS-based fleet
management systems including M2M applications and wireless
modems.
The Board of Directors has concluded that Mr. Eriksson should serve
as director because of his current role as Chief Executive Officer
of our company, his experience as one of the founders of our
company, and his understanding of our technology.
Class
II Director Continuing in Office with a Term Expiring at the 2016
Annual Meeting:
John Reardon, age 55, has served as a director of Neonode
and its predecessors since February 2004. Mr. Reardon has served as
President and member of the Board of Directors of The RTC Group, a
technical publishing company, since 1990. Mr. Reardon also serves
on the Board of Directors of One Stop Systems, Inc., a computing
systems and manufacturing company, and Middle Canyon, Inc., a
private distribution and integration company representing major
industrial computing lines.
The Board of Directors has concluded that Mr. Reardon should serve
as director because of his institutional knowledge of our company
and his twenty-five years of experience in management, finance, and
business development.
5
Class
III Directors Continuing in Office with a Term Expiring at the 2017
Annual Meeting:
Mats Dahlin, age 60, has served as a director of Neonode
since November 2011. He served as President of Ericsson Enterprises
AB from January 2004 to May 2005, and was responsible for its
global operations, including development and implementation of
worldwide enterprise strategy. From October 1998 to December 2003,
Mr. Dahlin held various positions in Ericsson, including serving as
Group Executive Vice President, President of Ericsson Radio Systems
AB, Head of Segment Network Operators, Head of Ericsson’s
Mobile Systems Division, and Head of Market Area EMEA. Since June
2005, Mr. Dahlin has pursued independent investments and has served
as a board member and advisor to the companies in which he
invests.
The Board of Directors has concluded that Mr. Dahlin should serve
as director because of his investment background, his understanding
of the communications and technology industry, and his thirty years
of experience in management and marketing.
Per Löfgren, age 51, has served as Vice President
Global Sales and Chief Financial Officer for Segment Global
Services of Ericsson AB since January 2015. He also has served as
President of Ericsson AB since January 2015. From 2011 to 2014, he
served as Executive Vice President and Chief Financial Officer of
Ericsson North America. From 2008 until 2011, Mr. Löfgren
served as President of Ericsson Sweden AB. Prior to 2008, he served
in various Ericsson business units globally as a division chief
financial officer, controller, marketing and other management
positions.
The Board of Directors has concluded that Mr. Löfgren should
serve as director because of his qualification as an audit
committee financial expert, his general financial and business
knowledge, and his thirty years of experience in the communications
and technology industry.
Leadership of the Board
of Directors
The business of our company is managed under the direction of the
Board of Directors, which is elected by our stockholders. The basic
responsibility of the Board is to lead our company by exercising
business judgment to act in what each director reasonably believes
to be the best interests of our company and its stockholders.
Leadership is important to facilitate the ability of the Board to
act effectively as a working group so that our company and its
performance may benefit. The Board does not have a lead independent
director. The Board has chosen to separate the positions of chief
executive officer and chairman. The Board believes that it is
appropriate to have one individual responsible for our
company’s operational aspects and a second individual
responsible for our company’s strategic aspects. In
connection with Mr. Eriksson’s appointment as Chief Executive
Officer in 2011, the Board of Directors determined that Mr. Bystedt
should serve as Executive Chairman of the Board of Directors. As
prior Chief Executive Officer of our company with knowledge of our
challenges and opportunities, Mr. Bystedt’s role as Executive
Chairman includes providing feedback on the direction, performance,
and strategy of our company.
Committees of the Board
of Directors
The Board of Directors has established three committees: an Audit
Committee, a Compensation Committee, and a Nominating and
Governance Committee. Messrs. Reardon, Dahlin and Löfgren are
the current members of each committee. Mr. Lindqvist served on each
committee, including as Chairman of the Audit Committee, prior to
his resignation from the Board on August 8, 2014 when Mr.
Löfgren assumed his positions on each committee.
In 2014, the Audit Committee met four times, the Compensation
Committee met once, and the Nominating and Governance Committee met
once. All of the directors attended at least 75% of the meetings of
each committee on which he was then serving. In addition, the
independent directors of the Board of Directors regularly meet in
executive sessions.
The Board of Directors has adopted written charters for each of the
Audit Committee, Compensation Committee, and Nominating and
Governance Committee. Copies of the Audit Committee Charter,
Compensation Committee Charter, and Nominating and Governance
Committee Charter are available on our website at
http://www.neonode.com/investor-relations/corporate-governance/.
The information contained on our website is not part of and is not
incorporated by reference into this proxy statement. Each of the
committees has the authority under its respective charter to engage
legal counsel or other experts or consultants, as it deems
appropriate to carry out its responsibilities.
6
The Board of Directors has determined that Messrs. Reardon, Dahlin,
and Löfgren meet applicable SEC and NASDAQ Stock Market rules
and regulations regarding “independence” and are able
to exercise independent judgment with respect to our company.
Messrs. Reardon, Dahlin, and Löfgren also meet the
independence requirements of each charter of the Audit Committee,
Compensation Committee, and Nominating and Governance
Committee.
Audit
Committee. The members of the Audit Committee
are Messrs. Löfgren, Dahlin, and Reardon. Mr. Löfgren is
Chairman of the Audit Committee. The Board of Directors has
determined that Mr. Löfgren qualifies as an “audit
committee financial expert”, as defined in SEC rules. The
Audit Committee, which was established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), oversees our company’s corporate
accounting and financial reporting process, the audits of our
company’s financial statements, and the integrity of
financial reports and other financial information provided by our
company to the government and the public. The Audit
Committee’s authority and responsibilities are specified in
its charter and include the following:
•
determining whether to retain or terminate the existing independent
registered public accounting firm or to appoint and engage a new
independent registered public accounting firm;
•
reviewing and approving the retention of the independent registered
public accounting firm to perform any proposed permissible
non-audit services;
•
discussing with management and with the independent registered
public accounting firm the results of the annual audit and the
results of the quarterly financial statements;
•
reviewing the financial statements to be included in the Annual
Report on Form 10-K;
•
conferring with management and the independent registered public
accounting firm regarding the effectiveness of internal controls
over financial reporting; and
•
establishing procedures for the receipt, retention, and treatment
of complaints received regarding accounting, internal accounting
controls, or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters.
Compensation
Committee. The members of the Compensation
Committee are Messrs. Dahlin, Löfgren, and Reardon. Mr. Dahlin
is Chairman of the Compensation Committee. The Compensation
Committee reviews all components of executive officer and director
compensation. The Compensation Committee’s authority and
responsibilities are specified in its charter and include the
following:
•
reviewing and approving the compensation and other terms of
employment of the chief executive officer;
•
reviewing and approving corporate performance objectives and goals
relevant to the compensation of the chief executive officer;
•
reviewing and approving the compensation and other terms of
employment of the other executive officers; and
•
administering and reviewing incentive-based or equity compensation
plans of the executive officers and other employees.
In addition, the Compensation Committee considers matters related
to individual compensation, such as compensation for new executive
hires, as well as various compensation policy issues throughout the
year. For executives other than the chief executive officer, the
Compensation Committee receives and considers performance
evaluations and compensation recommendations submitted to the
Compensation Committee by the chief executive officer. In the case
of the chief executive officer, the evaluation of his performance
is conducted by the Compensation Committee, which determines any
adjustments to his compensation as well as awards to be granted.
The agenda for meetings of the Compensation Committee typically is
determined by its chairman, with the assistance of the chief
executive officer and chief financial officer. For equity grants,
the Compensation Committee selects an exercise price that equals
the closing price of shares of our common stock on the NASDAQ Stock
Market on the grant date.
7
To perform its duties, the Compensation Committee has the authority
to retain or terminate any consulting firm used to evaluate
director or executive compensation, and to determine and approve
the terms, costs and fees for such engagements. The Compensation
Committee did not retain such a consultant in 2014 and has not
engaged such a consultant for 2015.
Nominating and Governance
Committee. The members of the Nominating and
Governance Committee are Messrs. Reardon, Dahlin, and Löfgren.
Mr. Reardon is Chairman of the Nominating and Governance Committee.
The Nominating and Governance Committee’s authority and
responsibilities are specified in its charter and include the
following:
•
developing and recommending to the Board of Directors criteria for
selecting qualified director candidates;
•
identifying individuals qualified to become members of the Board of
Directors;
•
evaluating and selecting, or recommending to the Board of
Directors, director nominees for each election of directors;
•
considering committee member qualifications, appointment, and
removal;
•
recommending codes of conduct and codes of ethics applicable to our
company; and
•
providing oversight in the evaluation of the Board of Directors and
each committee.
The Nominating and Governance Committee believes that candidates
for director should have certain minimum qualifications, including
being able to read and understand basic financial statements, being
over 21 years of age and possessing personal integrity and ethics.
The Nominating and Governance Committee also considers factors as
whether a candidate possesses relevant expertise upon which to be
able to offer advice and guidance to management, has sufficient
time to devote to the affairs of our company, has demonstrated
excellence in his or her field, has the ability to exercise sound
business judgment, and has the commitment to rigorously represent
the long-term interests of our stockholders. The Nominating and
Governance Committee retains the right to modify these
qualifications from time to time.
The Nominating and Governance Committee does not have a specific
policy with respect to the consideration of diversity in
identifying director nominees. Candidates are reviewed in the
context of the current composition of the Board of Directors and
whether it reflects the appropriate balance of independence, sound
judgment, business specialization, technical skills, diversity, and
other desired qualities. The Nominating and Governance Committee
seeks to have a Board with a diversity of background and
experience.
In the case of an incumbent director whose terms of office are set
to expire, the Nominating and Governance Committee reviews the
director’s overall service to our company during their term,
including the number of meetings attended, level of participation,
quality of performance, and any other relationships and
transactions that might impair the director’s independence or
judgment. In the case of new director candidates, the Nominating
and Governance Committee determines whether the candidate will be
independent pursuant to applicable SEC and NASDAQ Stock Market
rules and regulations. The Nominating and Governance Committee may
conduct appropriate and necessary inquiries into the backgrounds
and qualifications of current or possible nominees. To date, the
Nominating and Governance Committee has not paid a fee to any third
party to assist in the process of identifying or evaluating
director candidates.
The Nominating and Governance Committee will consider director
candidates recommended by stockholders. The Nominating and
Governance Committee does not intend to alter the manner in which
it evaluates a candidate as described above for nominees based on
whether the candidate was recommended by a stockholder. Since 2014,
there have been no material changes to the procedures by which
stockholders may recommend director candidates.
Stockholders may directly nominate a person for director only by
complying with the procedure set forth in the Bylaws of our
company, which in summary requires that the stockholder submit the
name of the nominee in writing to the Corporate Secretary of our
company not less than 60 days nor more than 90 days prior to the
first anniversary of the date of the preceding year’s annual
meeting. Nominations may be mailed or delivered to Corporate
Secretary, Neonode Inc., Storgatan 23C, 11455, Stockholm, Sweden,
at least six months prior to any meeting at which directors are to
be elected. As described in more detail in the Bylaws of our
company, nominations must include the full name
8
of the nominee, complete biographical information of the nominee
including a description of business experience for at least the
previous five years, a description of the nominee’s
qualifications for director, and a representation that the
nominating stockholder is a beneficial owner or record holder of
shares of our stock. Any such submission must be accompanied by the
written consent of the nominee to be named as a nominee and to
serve as a director if elected. To date, the Nominating and
Governance Committee has not received any director nominations from
our stockholders.
Meetings of the Board of
Directors
The Board of Directors met eight times during 2014. Each director
attended 75% or more of the meetings of the Board.
Although our company does not have a policy requiring their
attendance, members of the Board of Directors are encouraged to
attend the annual meeting of stockholders. Two members of the Board
attended last year’s 2014 Annual Meeting of Stockholders. We
anticipate that each member of the Board will attend this
year’s 2015 Annual Meeting, either in person or
telephonically.
Director
Compensation
In 2014, Messrs. Bystedt, Reardon, Dahlin, Lindqvist, and
Löfgren received fees for serving as a member of the Board of
Directors. Mr. Bystedt was paid $91,000 for serving as the
Executive Chairman of the Board. Aside from Mr. Bystedt, the annual
retainer for each non-employee director is $48,000, payable monthly
in arrears. Directors do not receive per-meeting fees. The members
of the Board also are eligible for reimbursement for their expenses
incurred in attending Board meetings.
The following table lists the compensation paid to non-employee
directors for their services as members of the Board for the year
ended December 31, 2014. Compensation paid to Mr. Bystedt and Mr.
Eriksson, and Mr. Lindqvist upon becoming an executive officer of
our company, is presented as part of the “Summary
Compensation Table” in the Executive Compensation section
below.
|
|
Fees
Earned or
Paid in
Cash
|
|
|
|
|
John Reardon
|
|
$
|
48,000
|
|
|
—
|
|
$
|
48,000
|
Mats Dahlin
|
|
$
|
48,000
|
|
|
—
|
|
$
|
48,000
|
Lars Lindqvist(3)
|
|
$
|
30,000
|
|
$
|
46,651
|
|
$
|
76,651
|
Per Löfgren(3)
|
|
$
|
18,000
|
|
|
—
|
|
$
|
18,000
|
Communication with the
Board of Directors
Stockholders, or anyone else wishing to contact the Board of
Directors directly, may send a written communication to Corporate
Secretary, Neonode Inc., Storgatan 23C, 11455, Stockholm, Sweden.
The Corporate Secretary will forward such correspondence only to
the intended recipients, whether the entire Board or only an
individual member of the Board. However, prior to forwarding any
correspondence, the Corporate Secretary of our company may review
such correspondence and, at his discretion, may not forward certain
items if deemed to be of a commercial nature or in bad faith.
9
Risk
Oversight
Management continually monitors the material risks facing our
company. The Board of Directors is responsible for exercising
oversight of management’s identification of, planning for,
and managing these risks, which include financial, technological,
competitive, and operational risks. The Board periodically reviews
and considers the relevant risks faced by our company. Further,
particularly as a prior Chief Executive Officer of our company, the
Executive Chairman is well-positioned to lead Board discussions on
risk due to his knowledge of our company and industry.
Code of
Ethics
The Board of Directors has adopted the Code of Business Conduct
applicable to our officers, directors, and employees. The Code of
Business Conduct contains a separate Code of Ethics that applies
specifically to our company’s chief executive officer and
senior financial officers. The Code of Business Conduct, including
the Code of Ethics, is available on our website at
http://www.neonode.com/investor-relations/corporate-governance/. If
we amend or waive the Code of Business Conduct or Code of Ethics
with respect to our directors, principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions, we will post
the amendment or waiver on our website. The information contained
on our website is not part of and is not incorporated by reference
into this proxy statement.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and
executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of
ownership and changes in ownership with the SEC. Based solely upon
a review of the copies of such reports and written representations
that no other reports were required, we believe that all of our
directors, executive officers, and greater than ten percent
beneficial owners have complied with the reporting requirements of
Section 16(a) for the year ended December 31, 2014.
10
PROPOSAL 2 –
ADVISORY VOTE ON NAMED EXECUTIVE OFFICERS
COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 (the “Dodd-Frank Act”) requires that we provide
our stockholders with the opportunity to vote to approve, on a
nonbinding, advisory basis, the compensation of the named executive
officers as disclosed in this proxy statement. This proposal,
commonly known as a “say-on-pay” proposal, provides
stockholders the opportunity to express their views on the
compensation of the named executive officers, which for 2014
consisted of Messrs. Bystedt, Eriksson, Lindqvist, and Brunton. The
Board of Directors has determined that our company will hold a
nonbinding, advisory “say-on-pay” vote every year until
the next required advisory vote on the frequency of such vote,
which will occur no later than the 2018 Annual Meeting of
Stockholders.
As described in the Compensation Discussion and Analysis section
below, our compensation programs are designed to attract and retain
key executives responsible for the success of our company and are
administered in the long-term interests of our company and our
stockholders. The Board of Directors believes that the compensation
paid to the named executive officers for 2014 is reasonable and
appropriate.
Accordingly, stockholders are being asked to vote on the following
resolution at the 2015 Annual Meeting:
“RESOLVED, that the stockholders of Neonode Inc. approve, on
an advisory basis, the compensation of the named executive
officers, as disclosed in Neonode Inc.’s Proxy Statement for
the 2015 Annual Meeting of Stockholders pursuant to the
compensation disclosure rules of the Securities and Exchange
Commission, including the summary compensation table and the other
related tables and disclosure.”
Required Vote and
Recommendation
Approval of the compensation of the named executive officers
requires the affirmative vote of a majority of the votes of the
holders of shares of our common stock and Series B Preferred Stock
present in person or by proxy and entitled to vote at the meeting.
This vote is advisory and therefore is not binding. However, the
Board of Directors and the Compensation Committee will review the
voting results and take them into account in making decisions
regarding future compensation of the named executive officers.
Abstentions and broker non-votes will not be counted as votes cast
and will have no effect on the result of the vote, although they
will count towards the presence of a quorum. Properly executed and
unrevoked proxies will be voted “FOR” Proposal 2 unless
contrary instructions are indicated in the proxy.
The Board of
Directors recommends that you vote “FOR” the approval,
on an advisory basis,
of the compensation of the named executive officers as disclosed in
this proxy statement.
11
EXECUTIVE
OFFICERS
Information about our executive officers is as follows:
|
|
|
|
|
|
|
Per Bystedt
|
|
49
|
|
Executive Chairman
|
|
May 2008
|
|
|
|
|
|
|
|
Thomas Eriksson
|
|
45
|
|
Chief Executive Officer and Director; Chief
Executive Officer of Neonode Technologies AB
|
|
April 2009
|
|
|
|
|
|
|
|
Lars Lindqvist
|
|
58
|
|
Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary
|
|
August 2014
|
Biographical information regarding Mr. Bystedt and Mr. Eriksson is
under “Composition of the Board of Directors” in the
Board Matters and Corporate Governance section above.
Lars Lindqvist, age 57, has served as an executive officer
of Neonode since August 2014. Upon becoming an executive officer,
Mr. Lindqvist resigned as member of the Board of Directors of
Neonode, a position he had held since November 2011. Prior to
becoming an executive officer of our company, Mr. Lindqvist served
as a management consultant to LQ Consulting GmbH since January
2013, interim Chief Executive Officer of 24 Mobile Advertising
Solutions AB from June 2012 to December 2012, interim Chief
Executive Officer of ONE Media Holding AB from April 2011 to May
2012, and Chief Financial Officer for Mankato Investments AG Group
from June 2005 to March 2011. In addition, Mr. Lindqvist was Chief
Financial Officer of Microcell OY, a Finnish ODM of mobile phones,
from August 2002 to May 2005, and he was Chief Financial Officer of
Ericsson Mobile Phones from May 1995 to July 2002.
12
COMPENSATION DISCUSSION
AND ANALYSIS
Overview
Our executive compensation programs seek to balance the interests
of stockholders and executives while supporting our need to attract
and retain competent executive management. Toward this end, the
Board of Directors and the Compensation Committee seek to emphasize
the enhancement of stockholder value and deliver a total executive
compensation package in a cost-effective manner.
2014
Summary:
For 2014, the Compensation Committee acted in a conservative manner
with respect to executive compensation by not awarding a bonus to
the Chief Executive Officer and not granting any equity awards to
the named executive officers. In addition, no perquisites were paid
to the named executive officers in 2014.
Say-on-Pay:
At our 2014 Annual Meeting of Stockholders, approximately 97% of
the votes cast in the advisory “say-on-pay” vote were
voted for approval of the compensation of the named executive
officers as disclosed in our 2014 proxy statement. The Board of
Directors and Compensation Committee have considered the results of
the 2014 “say-on-pay” vote and believe that the
substantial support by our stockholders indicates they generally
are supportive of our approach to executive compensation. The Board
of Directors and Compensation Committee will continue to consider
“say-on-pay” votes in formulating future executive
compensation policies and decisions.
Governance:
These additional factors are important attributes of our
company’s overall program with respect to executive
compensation:
•
The named executive officers maintain a significant equity position
in our company.
•
Our employees, including executives, are prohibited from pledging
or hedging, or short selling short, their shares of our common
stock.
•
Incentive compensation paid to executive officers is subject to a
Clawback Policy adopted by the Board of Directors.
•
Outstanding stock options are not subject to automatic vesting upon
a change in control of our company.
•
Our company annually holds an advisory vote on named executive
officer compensation.
Compensation
Committee
The Compensation Committee of the Board of Directors oversees our
executive compensation program. The Compensation Committee, which
is composed solely of independent directors, reviews executive
officer performance and reviews and approves executive officer
compensation.
In addition, the Compensation Committee administers the 1998
Non-Officer Stock Option Plan, 2001 Non-Employee Director Stock
Option Plan, and 2006 Equity Incentive Plan of our company. In that
capacity, the Compensation Committee selects the employees,
including executives, and non-employee directors of our company who
will receive awards, determines the number of shares covered
thereby, and establishes the terms, conditions, and other
provisions of the grants.
Under its charter, the Compensation Committee has the authority to
retain or terminate any consulting firm used to evaluate director
or executive compensation, and to determine and approve the terms,
costs and fees for such engagements. The Compensation Committee did
not retain a compensation consultant in 2014 and has not engaged a
compensation consultant for 2015.
13
Role of Chief Executive
Officer
The Compensation Committee establishes compensation policies and
practices for the chief executive officer. The chief executive
officer recommends compensation packages for the remaining
executive officers based on his review of our company’s
performance and the executive’s contribution to this
performance, and salary levels for our employees in general. After
reviewing these recommendations and after discussion with the chief
executive officer, the Compensation Committee makes whatever
modifications it believes are appropriate.
Compensation
Philosophy
The Board of Directors
believe that executive compensation should vary with our
performance in achieving our financial and non-financial
objectives, should be tied to individual performance, and should be
structured to align the interests of our executive officers with
the interests of our stockholders. The Compensation Committee seeks
to provide a total compensation package that is adequate and
competitive in relation to the compensation practices of comparable
companies of our size and type of business. Accordingly, the
Compensation Committee provides salaries based upon individual
performance together, where appropriate, with periodic cash bonuses
and stock options based on our overall performance relative to our
corporate objectives and the executive’s individual
contributions.
The Compensation Committee has not adopted formal guidelines for
allocating total compensation between long-term and current
compensation or equity compensation and cash compensation but
rather allocates on a case-by-case basis as appears appropriate in
achieving objectives of our compensation philosophy.
In reviewing the competitiveness of our executive compensation, the
Compensation Committee takes into account information from sources
such as independent members of the Board of Directors and publicly
available data relating to the compensation practices and policies
of other companies in our industry. However, the Compensation
Committee has not developed any specific list of peer group
companies to inform its compensation decisions. Consistent with
this view, the Compensation Committee has not targeted a
predetermined percentile of any peer group companies in determining
compensation. While benchmarking may not necessarily be appropriate
for a company of our size or as a sole tool for setting
compensation because some aspects of our business and objectives
are unique to us, the Compensation Committee may in the future
gather and review peer group information if the Compensation
Committee determines it be important to its decision-making
process.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally disallows a federal income tax deduction to public
companies for certain compensation over $1,000,000 paid to a chief
executive officer and the three other most highly compensated
executive officers other than the chief financial officer.
Qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. The
Compensation Committee does not believe that Section 162(m) or
other accounting and tax treatment of particular forms of
compensation materially affect compensation decisions. However, the
Compensation Committee will evaluate the effect of such accounting
and tax treatment on an ongoing basis and will make appropriate
modifications to compensation policies where appropriate.
Components of
Compensation
The primary elements of total compensation we historically pay to
our executive officers, including the chief executive officer and
the other executive officers identified under the “Summary
Compensation Table” below, include the following:
•
base salary;
•
cash bonus;
•
awards under our equity incentive plans;
•
benefits under our defined contribution plans; and
•
benefits under our health and welfare benefits plans.
Base
Salaries:
Base salaries for executives are reviewed annually and adjustments
are determined, where appropriate, to maintain salaries at
competitive levels, taking into account each executive’s
experience and individual performance, to maintain an equitable
relationship between executive salaries and overall salaries for
other employees, and to reflect the executive’s annual
performance evaluation.
14
For 2014, as summarized in the discussion under “Employments
Agreements” in the Executive Compensation section below, Mr.
Bystedt continued to receive his annual chairmanship fee but did
not receive any additional salary for his executive services. For
2014, the base salary of Mr. Eriksson was maintained at the same
level as 2013. For 2014, the base salary of Mr. Lindqvist upon his
appointment as Chief Financial Officer was established at a rate
comparable to that of the prior Chief Financial Officer. For 2015,
the Compensation Committee has determined to maintain base salaries
for the named executive officers at the same level as 2014.
Cash
Bonuses:
The Compensation Committee determines whether executives should
receive cash bonuses based on achievement of major corporate
objectives and the contribution of the executive, above normal
expectations, to our overall success and achievements in creating
stockholder value. The Compensation Committee may award bonuses at
its discretion based upon subjective factors it determines after
the conclusion of the year.
To date, the Compensation Committee has established a
non-discretionary bonus structure solely for Mr. Eriksson as Chief
Executive Officer tied to the performance of the share price of our
common stock (NEON) relative to the price of the NASDAQ-100
Technology Sector Index (NDXT) based upon a maximum payout to Mr.
Eriksson of 1,000,000 Swedish Kronor (“SEK”)
(approximately $115,000). If the price of shares of our common
stock increases during the year by more than 25% of the increase in
the price of the NASDAQ-100 Technology Sector Index, then Mr.
Eriksson is entitled to the maximum payout. If the price of shares
of our common stock increases during the year at approximately the
same percentage as the NASDAQ-100 Technology Sector Index, then Mr.
Eriksson is entitled to 50% of the maximum. The price of shares of
our common stock in 2014 did not increase relative to the
NASDAQ-100 Technology Sector Index. As a result, the Compensation
Committee did not award a non-discretionary cash bonus to Mr.
Eriksson for 2014.
As described under “Employment Agreements” in the
Executive Compensation section below, the Compensation Committee
and Board of Directors agreed to provide Mr. Lindqvist with
transition and relocation fees upon his agreeing to become our
Chief Financial Officer. In addition, the Compensation Committee
and Board of Directors agreed in advance to award Mr. Lindqvist a
bonus for 2014 of up to 300,000 SEK at the Chief Executive
Officer’s discretion. Based upon his personal observations
working with Mr. Lindqvist in the role of Chief Financial Officer,
Mr. Eriksson determined to award the full bonus of 300,000 SEK to
Mr. Lindqvist for 2014.
Equity
Incentive Plan Awards:
We use the grant of options
and other equity awards under our equity incentive plans,
particularly the 2006 Equity Incentive Plan, as the primary vehicle
for providing long-term incentive compensation opportunities to our
employees, including executives. The options we have granted have a
per share exercise price which is not less than the closing price
of a share of our common stock on the NASDAQ Stock Market on the
grant date. Accordingly, options granted under our equity incentive
plans have no value unless the market price of our common stock
increases after the grant date. Our equity incentive awards are
designed to provide at-risk compensation that aligns
management’s financial interests with those of our
stockholders, encourages management ownership of our common stock,
supports the achievement of corporate financial objectives, and
provides competitive equity reward opportunities. When determining
whether to grant equity awards, the Compensation Committee
considers the executive’s responsibilities and anticipated
contributions to achieving our performance goals, and its judgment
about whether the complete compensation package provided to the
executive is sufficient to retain, motivate and adequately reward
him.
For 2014, the Compensation Committee determined not to grant equity
awards to the named executive officers. In making this decision,
the Compensation Committee considered that (i) in April 2012, each
of the named executive officers was awarded a sufficient number of
seven-year options that fully vested in 2014, and (ii) the
financial results and condition of our company did not merit
awarding additional equity awards in 2014.
Defined
Contribution Plans:
In accordance with Swedish practice, we contribute an amount equal
to five percent of the salary of each Swedish employee, including
Messrs. Bystedt, Eriksson, and Lindqvist, to Swedish pension
organizations through an arrangement akin to a 401(k) plan.
15
Health
and Welfare Benefits Plans:
We provide employee benefits programs to our executives in Sweden,
including healthcare, disability, and life insurance. Our employee
benefits plans are provided on a non-discriminatory basis to all
employees.
Severance and Change in
Control Arrangements
Certain of the named executive officers will receive compensation
if, under certain circumstances, their employment is terminated by
our company or in connection with a change in control of our
company. See “Payments Upon Termination or Change in
Control” below for a description of these provisions. We
believe that these arrangements represent a fair allocation of the
risks of termination between us and the executive, preserving a
measure of economic security for him while making it possible for
his employment to be terminated without additional liability to our
company in the event of changes in our condition and affairs.
Clawback
Policy
The Board of Directors has adopted a policy giving it authority to
retroactively recoup any cash bonus or incentive compensation paid
to any executive officer, including the named executive officers,
where it is subsequently determined following a significant or
material restatement of our financial statements that the award
would not have been paid if performance had been measured in
accordance with the restated financials for a period covering any
of the three fiscal years preceding the restatement. We intend to
amend this policy as needed to comply with any additional
requirements of the Dodd-Frank Act with respect to clawbacks after
the SEC adopts regulations implementing the requirements.
Insider Trading
Policy
Pursuant to our company’s Policy Against Insider Trading and
Securities Fraud, we prohibit our executive officers and directors
from pledging their shares of our common stock or hedging the
economic risk of ownership of their shares. All of our executive
officers and directors are in compliance with these anti-pledging
and anti-hedging provisions. In addition, pursuant to the Policy
Against Insider Trading and Securities Fraud and in accordance with
applicable law, our executive officers and directors are prohibited
from entering into short sale transactions of shares of our common
stock.
Stock Ownership
Guidelines
The Board of Directors believes that the interests of our executive
officers and our stockholders should be aligned and for this reason
supports our executive officers acquiring or maintaining a
significant equity ownership position in our company so as to have
a meaningful personal financial stake in our success. Mr. Bystedt
and Mr. Eriksson each beneficially own in excess of five percent of
our common stock. However, we have not adopted formal stock
ownership guidelines.
16
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The following table presents information regarding compensation
earned by the named executive officers. Messrs. Bystedt, Eriksson,
and Lindqvist are compensated in Swedish Kronor
(“SEK”); accordingly, for purposes of this table,
compensation paid in SEK has been converted to US Dollars at an
approximate weighted average exchange rate of 6.86, 6.51 and 6.78
SEK to one US Dollar for the years ended December 31, 2014, 2013
and 2012, respectively.
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
All
Other
Compensation(3)
|
|
|
Per Bystedt(4)
|
|
2014
|
|
$
|
91,000
|
|
|
—
|
|
|
—
|
|
$
|
4,708
|
|
$
|
95,708
|
Executive Chairman
|
|
2013
|
|
$
|
95,813
|
|
|
—
|
|
|
—
|
|
$
|
4,791
|
|
$
|
100,604
|
|
|
2012
|
|
$
|
116,814
|
|
|
—
|
|
$
|
357,017
|
|
$
|
5,841
|
|
$
|
479,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Eriksson
|
|
2014
|
|
$
|
264,540
|
|
|
—
|
|
|
—
|
|
$
|
24,463
|
|
$
|
361,903
|
Chief Executive
|
|
2013
|
|
$
|
276,383
|
|
$
|
76,773
|
|
|
—
|
|
$
|
13,819
|
|
$
|
366,975
|
Officer
|
|
2012
|
|
$
|
269,764
|
|
$
|
147,492
|
|
$
|
948,081
|
|
$
|
19,296
|
|
$
|
1,384,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lars Lindqvist(5)
|
|
2014
|
|
$
|
86,459
|
|
$
|
43,752
|
|
|
—
|
|
$
|
83,186
|
|
$
|
213,397
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Brunton(6)
|
|
2014
|
|
$
|
125,000
|
|
|
—
|
|
|
—
|
|
$
|
180,000
|
|
$
|
305,000
|
former Chief Financial
|
|
2013
|
|
$
|
200,000
|
|
|
—
|
|
|
—
|
|
$
|
12,000
|
|
$
|
212,000
|
Officer
|
|
2012
|
|
$
|
196,333
|
|
|
—
|
|
$
|
670,400
|
|
$
|
5,000
|
|
$
|
871,733
|
|
|
|
|
Defined
Contribution Plan
Matching
|
|
|
|
|
|
|
Per
Bystedt
|
|
2014
|
|
$
|
4,708
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2013
|
|
$
|
4,791
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2012
|
|
$
|
5,841
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
Eriksson
|
|
2014
|
|
$
|
24,463
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2013
|
|
$
|
13,819
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2012
|
|
$
|
19,296
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lars
Lindqvist
|
|
2014
|
|
$
|
17,588
|
|
$
|
36,443
|
|
$
|
29,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Brunton
|
|
2014
|
|
$
|
12,300
|
|
|
—
|
|
|
—
|
|
$
|
180,000
|
|
|
2013
|
|
$
|
12,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2012
|
|
$
|
5,000
|
|
|
—
|
|
|
—
|
|
|
—
|
17
Employment
Agreements
On January 28, 2011, our company entered into a services agreement
with Mr. Bystedt that initially provided him with an annual
chairmanship fee and an annual services fee. The annual services
fee compensated Mr. Bystedt for his more active role with our
company as Mr. Eriksson transitioned into the position of Chief
Executive Officer in January 2011. The terms of Mr. Bystedt’s
services agreement provided for an annual chairmanship fee of
$48,000 and an annual services fee of $100,000. Effective January
1, 2012, following our public offering of common stock in December
2011 and with Mr. Eriksson having served as Chief Executive Officer
for nearly a year, the Board of Directors set Mr. Bystedt’s
annual chairmanship fee at $96,000 and the annual services fee at
$52,000. Effective July 1, 2012, following the listing of shares of
our common stock on the NASDAQ Stock Market and our 2012 Annual
Meeting, the Board of Directors eliminated the annual services fee
payable to Mr. Bystedt due to his less active role in our
company’s day-to-day operations.
On March 5, 2014, our company entered into an employment agreement
with Mr. Eriksson. Under his employment agreement, Mr. Eriksson is
entitled to receive a monthly salary of 150,000 SEK (approximately
$22,000). Mr. Eriksson’s employment agreement also provides
that, at the discretion of the Compensation Committee, he is
eligible to receive an annual bonus up to 1,000,000 SEK
(approximately $146,000) and participate in bonus and stock option
programs. In addition, Mr. Eriksson is eligible to receive health
care, pension, and other benefits available to Neonode’s
Swedish employees. His employment agreement contains other
customary Swedish employment and post-termination provisions.
On August 5, 2014, our company entered into an employment agreement
with Mr. Lindqvist. Under his employment agreement, Mr. Lindqvist
is entitled to receive a monthly salary of 125,000 SEK
(approximately $18,000). In addition, Mr. Lindqvist was paid a fee
of 250,000 SEK (approximately $36,000) during the initial 30 days
of his transition into his role as Chief Financial Officer, and a
fee of 200,000 SEK (approximately $29,000) in connection with his
relocation to Stockholm, Sweden. Mr. Lindqvist’s Employment
Agreement also provided that he was entitled to receive a bonus for
2014 of up to 300,000 SEK (approximately $44,000) at the discretion
of the chief executive officer and a bonus in each subsequent year
of up to 50% of his total yearly salary. In addition, Mr. Lindqvist
is eligible to receive health care, pension, and other benefits
available to Neonode’s Swedish employees. His employment
agreement contains other customary Swedish employment and
post-termination provisions.
On August 5, 2014, as described below under “Potential
Payments Upon Termination or Change in Control”, our company
entered into a separation agreement with Mr. Brunton in connection
with his retirement as Chief Financial Officer of our company. On
August 5, 2014, our company also entered into a consulting
agreement with Mr. Brunton pursuant to which he has performed
non-executive consulting services for our company for compensation
at a rate of $3,333.32 per month.
The summaries of the employment agreements above are qualified in
their entirety by reference to the actual agreements, copies of
which are filed and incorporated by reference into our annual
report on Form 10-K for the year ended December 31, 2014.
Grant of Plan Based
Awards
No equity awards were granted to the named executive officers for
the year ended December 31, 2014.
Outstanding Equity
Awards at Fiscal Year-End
The following table presents information regarding the outstanding
equity awards held by the named executive officers as of December
31, 2014.
18
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
|
|
Per Bystedt
|
|
1/02/2008
|
(1)(2)
|
|
1,600
|
|
—
|
|
$
|
86.25
|
|
1/02/2015
|
|
|
4/26/2012
|
(1)(3)
|
|
90,000
|
|
—
|
|
$
|
4.25
|
|
4/26/2019
|
Thomas
Eriksson
|
|
4/26/2012
|
(3)
|
|
239,0000
|
|
—
|
|
$
|
4.25
|
|
4/26/2019
|
Lars
Lindqvist
|
|
4/26/2012
|
(1)(2)
|
|
60,000
|
|
—
|
|
$
|
4.25
|
|
4/26/2019
|
|
|
1/08/2014
|
(1)(4)
|
|
10,000
|
|
10,000
|
|
$
|
6.21
|
|
1/08/2021
|
David
Brunton
|
|
4/26/2012
|
(3)
|
|
169,000
|
|
—
|
|
$
|
4.25
|
|
4/26/2019
|
Option
Exercises
No options were exercised by the named executive officers during
the year ended December 31, 2014.
Potential Payments Upon
Termination or Change of Control
Payments
Upon Termination:
Messrs. Bystedt, Eriksson, and Lindqvist are not entitled to any
severance or other additional benefits upon termination of their
employment with our company.
In addition, the terms of the outstanding option award agreements
held by the named executive officers do not contain a provision
that would accelerate the option if the employment of the executive
officer is terminated for any reason.
On August 5, 2014, our company entered into a separation agreement
with Mr. Brunton in connection with his retirement as Chief
Financial Officer of our company. Under the terms of the separation
agreement, in lieu of any severance amount due to him and any other
accrued benefits due to him, our company agreed to pay $180,000 to
Mr. Brunton and also provide him with health insurance through his
65th birthday in 2015. In addition, given that Mr. Brunton agreed
to continue as a consultant, our company agreed to modify Mr.
Brunton’s outstanding options so that their amended
expiration date is July 1, 2015; otherwise, in accordance with the
provisions of the 2006 Plan, Mr. Brunton’s options would have
terminated three months following his termination of full-time
employment.
Severance
and Other Benefits Upon Change of Control:
The Board of Directors has an unwritten understanding with Mr.
Eriksson that if his employment terminates due to a Change in
Control Termination, he would be entitled to receive an amount
equal to six months of base salary paid in equal monthly
installments over the six months following the Change in Control
Termination. The understanding of the Board is that “Change
in Control” and “Change in Control Termination”
as applied to Mr. Eriksson shall be determined in the same manner
as in executive severance agreements entered into with executives
who have since separated from our company, including Mr. Brunton.
Consistent with those past executive severance agreements, the
understanding of the Board is that a “Change in
Control” generally means the sale of more than 50% of our
company’s assets or stock to a purchaser or group of
purchasers, or a merger in which our stockholders receive less than
50% of the voting shares of the surviving entity, and a
“Change in Control Termination” generally means an
involuntary termination without cause or a voluntary termination
with good reason, either of which occurs within six months of a
Change in Control.
Mr. Bystedt and Mr. Lindqvist are not contractually entitled any
severance or other additional benefits upon termination of his
employment in connection with the change in control of our
company.
In addition, the terms of the outstanding option award agreements
held by the named executive officers do not contain provisions that
would accelerate their options if their employment is terminated in
connection with a change in control of our company.
19
REPORT OF THE
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of Neonode
Inc. has reviewed and discussed with management the Compensation
Discussion and Analysis included in the proxy statement for the
2015 Annual Meeting of Stockholders of Neonode. Based on the review
and discussion, the Compensation Committee recommended to the Board
of Directors that the Compensation Discussion and Analysis be
included in such proxy statement.
|
|
THE COMPENSATION COMMITTEE
|
|
|
Mats Dahlin, Chairman
|
|
|
Per Löfgren
|
|
|
John Reardon
|
The foregoing Report
of the Compensation Committee is not soliciting material, shall not
be deemed filed with the Securities and Exchange Commission and
shall not be incorporated by reference in any filing of Neonode
under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language
in any such filing.
Compensation Committee
Interlocks and Insider Participation
In 2014, none of the members of the Compensation Committee were
current or former officers or employees of our company at the time
they were serving on the Compensation Committee. As a result, there
were no “interlocks” (as defined by the rules of the
SEC) with respect to any member of the Compensation Committee
during 2014.
20
PROPOSAL 3 –
APPROVAL OF THE NEONODE INC. 2015 STOCK INCENTIVE PLAN
The Board of Directors is requesting that stockholders vote in
favor of approving the 2015 Stock Incentive Plan (“2015
Plan”), which was reviewed and approved by the Compensation
Committee and adopted by the Board on April 15, 2015. We believe
that the 2015 Plan is in the best interest of our stockholders and
our company. The 2015 Plan will continue to provide participant and
stockholder alignment, maintain our broad-based equity program, and
help attract, motivate and retain employees and consultants.
As adopted by the Board, the 2015 Plan reserves 2,100,000 shares
for stock awards. A maximum of 150,000 shares can be awarded to an
individual participant during a year. An additional 150,000 shares
can be awarded to an individual participant in the year that the
participant first becomes an employee of our company.
If the 2015 Plan is approved, no further awards will be granted
under the 2006 Equity Incentive Plan (“2006 Plan”). As
a result, the 2015 Plan will replace the 2006 Plan in advance of
its January 2016 expiration. The 2015 Plan thereby will become the
sole plan for providing stock-based incentive compensation to
eligible employees, consultants, and directors. The Board has
chosen to adopt the 2015 Plan, rather than extend the 2006 Plan,
primarily to update administration and award provisions.
The principal features of the 2015 Plan are summarized in the
Description of the Neonode Inc. 2015 Stock Incentive Plan section
below. The summary is qualified in its entirety by the full text of
the 2015 Plan, which is set forth as Appendix A to this proxy
statement.
Reasons
We believe that our future success depends significantly on our
ability to attract, motivate and retain high quality employees,
consultants, and directors. Equity is a key component of our total
compensation package and closely aligns these employees’,
consultants’, and directors’ interests with those of
our stockholders. Given market practices for compensation in the
technology industries where we compete, we need to be able to offer
sufficient equity incentives in order to attract and retain
management with the skills and experience critical to our success.
Significantly, the 2006 Plan is scheduled to expire in January
2016. If the 2015 Plan is not approved by stockholders, then our
company’s ability to provide equity compensation will be
severely limited.
Consistent
with Responsible Governance:
The 2015 Plan contains important features to promote accepted
practices regarding use and administration of equity awards:
•
Stock option and
stock appreciation rights exercise prices will not be lower than
the fair market value of a share on the grant date. The
2015 Plan prohibits granting stock options and stock appreciation
rights with exercise prices lower than the fair market value of a
share of our common stock on the grant date.
•
Performance-based
awards. The 2015 Plan allows for issuing
performance-based awards, including awards intended to qualify as
performance-based under Section 162(m) of the Internal Revenue Code
Section, as amended (the “Code”).
•
No Liberal Share
Recycling. Shares of stock used to pay the exercise
price or withholding taxes related to an outstanding award,
unissued shares resulting from the net settlement of outstanding
stock appreciation rights, and shares purchased by our company in
the open market using the proceeds of option exercises do not
become available for issuance as future awards under the 2015
Plan.
•
Does not permit
repricings without stockholder approval. Without
stockholder approval, we may not amend any option or stock
appreciation right to reduce the exercise price or replace any
stock option or stock appreciation right with cash or any other
award when the price per share of the stock option or stock
appreciation right exceeds the fair market value of the underlying
shares.
•
Annual award limits
for employees and directors. The 2015 Plan includes
limits on the number of shares that may be awarded to an individual
in a given year.
•
No Tax
Gross-ups. The 2015 Plan does not provide for any tax
gross-ups.
21
•
No Automatic
Grants. The 2015 Plan does not provide for automatic
grants to any participant.
•
No Evergreen
Provision. The 2015 Plan does not contain an
“evergreen” feature pursuant to which the shares
authorized for issuance under the 2015 Plan can be automatically
replenished.
•
Clawback
feature. The 2015 Plan includes a clawback provision in
the event of certain restatements of our company’s financial
results.
•
No automatic
acceleration upon change in control. The 2015 Plan does
not mandate that options fully vest upon a change in control of our
company. Historically, award agreements under the 2006 Plan have
not included provisions for acceleration of options upon a change
in control.
•
Provides for
independent administration. The Compensation Committee
of the Board, which consists solely of independent non-employee
directors, generally administers the 2015 Plan.
Quantitative
Analysis:
Under the 2006 Plan, a total of 4,052,000 shares have been reserved
for issuance to employees, consultants, and directors. The Board
has granted awards totaling 2,297,658 shares to employees,
consultants, and directors. As of December 31, 2014, the total
number of shares subject to outstanding awards under the 2006 Plan
was 1,706,200 shares, or 4.32% of the basic weighted average shares
outstanding.
The following table presents information about our recent
“burn rate under” the 2006 Plan. Burn rate is
calculated by dividing the total number of shares granted each year
by the basic weighted average shares outstanding for the
period.
|
|
|
|
|
|
|
|
|
Total number of shares granted
|
|
1,704,000
|
|
|
145,000
|
|
|
405,200
|
|
|
751,400
|
|
Basic Wtd. Avg. Shares Outstanding
|
|
33,002,647
|
|
|
35,265,956
|
|
|
39,532,000
|
|
|
n/a
|
|
Burn rate
|
|
5.16%
|
|
|
0.41%
|
|
|
1.02%
|
|
|
2.09%
|
|
Section
162(m):
The 2015 Plan also is submitted to our stockholders, in accordance
with Section 162(m) of the Code, in order to allow us to provide
certain performance-based compensation that is deductible for
Federal income tax purposes. The affirmative vote of stockholders
is required for approval in order for us to grant performance-based
compensation qualified under the 2015 Plan pursuant to Section
162(m) of the Code.
Required Vote and
Recommendation
Approval of Proposal 3 requires the affirmative vote of a majority
of the votes of the holders of shares of our common stock and
Series B Preferred Stock present in person or by proxy and entitled
to vote at the meeting. Abstentions and broker non-votes will not
be counted as votes cast and will have no effect on the result of
the vote, although they will count towards the presence of a
quorum. Properly executed and unrevoked proxies will be voted
“FOR” Proposal 3 unless contrary instructions are
indicated in the proxy.
The Board of
Directors recommends that you vote “FOR”
the adoption of the Neonode Inc. 2015 Stock Incentive
Plan.
22
DESCRIPTION OF THE
NEONODE INC. 2015 STOCK INCENTIVE PLAN
A description of the Neonode Inc. 2015 Stock Incentive Plan (the
“2015 Plan”) is presented below. The following
description is not complete and is qualified by reference to the
full text of the 2015 Plan, which is appended to this proxy
statement as Appendix A.
General
Information
The Board of Directors has adopted the 2015 Plan to encourage our
company’s employees, consultants, and directors to own stock
and align their interests with those of our stockholders and to
attract, motivate and retain qualified employees, consultants, and
directors.
All of our employees, consultants, and directors are eligible to
receive awards under the 2015 Plan.
Under the 2015 Plan, the aggregate number of shares of our common
stock that may be issued may not exceed 2,100,000 shares. We refer
to this as the Share Reserve. If any award under the 2015 Plan is
forfeited or cancelled or otherwise expires or terminates without
issuance of shares of our common stock or is settled for cash, the
underlying shares of our common stock become available again to be
granted under the 2015 Plan. To prevent dilution or enlargement of
the rights of participants under the 2015 Plan, appropriate
adjustments will be made if any change is made to the outstanding
shares of our common stock by reason of any merger, reorganization,
statutory share exchange, consolidation, recapitalization, dividend
or distribution, stock split, reverse stock split, spin-off or
similar transaction or other change in corporate structure
affecting our common stock or its value. The 2015 Plan permits the
granting of a variety of stock-based awards.
Administration of the
2015 Plan
The 2015 Plan will be administered by the Board of Directors
through the Compensation Committee. Among other powers specifically
set forth in the 2015 Plan, the Board has the power and authority
at its discretion to:
(a) determine
which employees, consultants, and directors shall be granted stock
awards;
(b)
prescribe the terms and conditions of the stock awards;
(c) interpret
the 2015 Plan and stock awards;
(d)
adopt such procedures and sub-plans as are necessary or for the
purpose of satisfying applicable laws;
(e) adopt
rules for the administration, interpretation and application of the
2015 Plan; and
(f)
interpret, amend or revoke any such rules.
In the case of awards designated as awards under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the
“Code”), the Board’s power to take certain
actions will be limited by Section 162(m) of the Code. The
Board’s authority also is limited in certain instances by
Section 409A of the Code. The Board, without stockholder approval,
is not permitted to (i) cancel outstanding options or stock
appreciation rights in exchange for cash or in exchange for the
grant of new awards as substitutes under the 2015 Plan, or (ii)
amend outstanding options or stock appreciation rights to reduce
the exercise price below the exercise price of the original
award.
The 2015 Plan provides that, at the Board’s discretion,
directors serving on committees may be “outside
directors” within the meaning of Section 162(m) of the Code.
This limitation would exclude from the applicable committee
directors who are (i) current employees of our company, (ii) former
employees of our company receiving compensation for past services
(other than benefits under a tax-qualified pension incentive plan),
(iii) current and former officers of our company, (iv) directors
currently receiving direct or indirect remuneration from our
company in any capacity (other than as a director), and (v) any
other person who is otherwise not considered an “outside
director” for purposes of Section 162(m).
Participants under the 2015 Plan will be bound by any decision or
action that the Board takes under the 2015 Plan. No new awards may
be made under the 2015 Plan on or after April 15, 2020. The 2015
Plan may be amended or terminated by the Board at any time,
although no 2015 Plan amendment will be effective without
stockholder approval if such amendment materially increases the
benefits accruing to participants under the 2015 Plan,
increases
23
the Share Reserve subject to the 2015 Plan, changes the provisions
relating to eligibility for awards or modifies the 2015 Plan in any
manner requiring stockholder approval under any applicable stock
exchange rule. The terms of an award agreement may not be amended
in a manner adverse to any participant without such
participant’s consent, except to the extent provided in the
participant’s award agreement or to bring the 2015 Plan or
the participant’s award into compliance with (or qualify for
an exemption under) Section 409A of the Code. The terms of a
participant award may be adjusted, though, in the event of certain
extraordinary corporate transactions or events, and the vesting
provisions may be waived or adjusted if the participant’s
employment or directorship terminates.
Types of 2015 Plan
Awards
Options. Options
provide participants with the right to purchase a given number of
newly issued shares of our common stock at a fixed price, without
fees, commissions, or other charges. The Board may grant incentive
stock options (satisfying certain conditions for favorable tax
treatment under Section 422 of the Code and nonqualified stock
options under the 2015 Plan). There are 2,100,000 shares of our
common stock reserved for issuance under the 2015 Plan as incentive
stock options if the Board so desires. The Board determines the
terms of any option grant, subject to the limitations in the 2015
Plan, and such terms will be set forth in an award agreement. No
option may be exercised after the 10th anniversary of the date the
option was granted. The exercise price of any option granted under
the 2015 Plan will not be less than the fair market value of our
common stock on the grant date. If permitted in the award
agreement, payment upon exercise may be made by (1) cash or check,
(2) delivery of shares of our common stock, (3) pursuant to a
broker-assisted cashless exercise, (4) delivery of other
consideration approved by the Board with a fair market value equal
to the exercise price, or (5) other means determined by the Board.
Shares of our common stock surrendered upon exercise will be valued
at fair market value, and the certificates for such shares will be
duly endorsed for transfer or accompanied by appropriate stock
powers and will be surrendered to us. A payment method involving
delivery or withholding of shares of our common stock may not be
used if it would violate applicable law or would result in adverse
accounting consequences for us. Participants will not receive
dividend equivalents rights on option awards.
Options constituting incentive stock options may be granted only to
our employees. The aggregate market value, determined on the grant
date of incentive stock options first becoming exercisable during a
calendar year, may not exceed $100,000. In addition, in the event a
participant is a more than a 10% stockholder of our company, the
exercise price of the incentive stock option may not be less than
110% of the fair market value of the common stock on the grant
date, and the option may not be exercised more than five years
after the grant date. In addition to these conditions, in order to
receive the favorable tax treatment under Section 422 of the Code,
the participant would be required to satisfy certain holding period
requirements for the shares following exercise.
Stock
Appreciation Rights. A
stock appreciation right is the right to receive cash or shares of
our common stock upon exercise of the right based upon the amount
of appreciation in the fair market value of the common stock from
the specified exercise price. The Board may grant stock
appreciation rights pursuant to such terms and conditions as the
Board determines, subject to the limitations in the 2015 Plan, and
such terms will be set forth in an award agreement. No stock
appreciation right may be exercised more than 10 years after the
grant date. The exercise price may not be less than the fair market
value of the common stock on the grant date. Upon exercise of a
stock appreciation right, a participant will have the right to
receive the excess of the aggregate fair market value of the shares
on the exercise date over the aggregate exercise price for the
portion of the right being exercised. Payments may be made to a
participant in cash or shares of our common stock as specified in
the award agreement. Participants will not receive dividend
equivalent rights on stock appreciation rights awards.
Restricted Stock and
Restricted Stock Units. Restricted
stock is issued stock that generally may not be transferred until
the restrictions have lapsed or other vesting conditions have been
satisfied. Restricted stock units give participants the right to
receive cash or shares of our common stock upon the lapse of the
restrictions or satisfaction of the vesting conditions. The Board
may grant awards of restricted stock and restricted stock units
pursuant to such terms and conditions, including restrictions on
transferability and alienation and other restrictions, as the Board
determines, subject to the limitations in the 2015 Plan, and such
terms will be set forth in an award agreement. Any stock
certificate a participant receives upon a grant of restricted stock
will typically be set forth in a legend to reflect the applicable
transfer restrictions, or we may retain the stock certificate until
the restrictions lapse. If the restricted stock is issued in book
entry form, a notation with similar restrictive effect will be made
with the book entry. The Board may require payment of consideration
for restricted stock granted under the 2015 Plan, which may be
payable in cash, stock or other property. For issued and
outstanding shares of restricted stock, participants
24
have the same rights as other stockholders, including all voting
and dividend rights upon issuance of the related stock certificate,
even if the shares remain subject to transfer restrictions. For
restricted stock units, participants may receive dividend
equivalent rights at the Board’s discretion. Restricted stock
units are payable in shares of our common stock or cash as of the
vesting date, as provided in the award agreement, and must be
settled within 2½ months after the later of the end of the
calendar or fiscal year in which the restricted stock unit
vests.
Stock
Bonus. The
Board may grant stock bonuses on terms and conditions that the
Board determines, subject to the limitations in the 2015 Plan, and
such terms will be set forth in an award agreement. The
determination for granting stock bonuses is at the discretion of
the Board and may be based on the participant’s attainment of
certain milestones or performance levels as established by the
Board.
Section
162(m) Awards. The
Board may designate that any award in the form of restricted stock,
restricted stock units, or stock bonuses be granted pursuant to
Section 162(m) of the Code. As a result, such awards will be
subject to certain additional requirements intended to satisfy the
exemption for performance-based compensation from the deductibility
limitation in Section 162(m) of the Code. The performance criteria
will be one or more of the objective performance or operational
goals listed in the 2015 Plan, and will be specified in the award
agreement along with any other additional requirements relating to
Section 162(m) of the Code.
Limitations on
Awards
The 2015 Plan provides certain limitations on the amount of awards.
Subject to adjustment as provided in the 2015 Plan, with respect to
awards intended to be Section 162(m) awards and option and stock
appreciation rights awards intended to be exempt from the
deductibility limitation in Section 162(m) of the Code, no
participant in any one fiscal year may be granted (a) options or
stock appreciation rights of more than 150,000 shares of our common
stock, or (b) restricted stock or restricted stock units that are
denominated in more than 150,000 shares of our common stock.
Notwithstanding the foregoing, during the fiscal year in which a
participant first becomes an employee, he or she may be granted a
stock award to receive up to a total of an additional 150,000
shares of our common stock. If an award is cancelled, the cancelled
award will continue to be counted towards the applicable
limitations.
Tax
Withholding
We have the right to withhold, or require payment of, the amount of
any applicable tax upon exercise, award or lapse of restrictions,
as required by law.
Limitations on Transfer
of Awards
Participants may not transfer, pledge, assign or otherwise alienate
any award of restricted stock or restricted stock units, and
participants may not transfer any other award except by will or the
laws of descent and distribution. Stock options and stock
appreciation rights may only be exercised by a participant during
that participant’s lifetime. However, notwithstanding these
restrictions, a participant may assign or transfer, without
consideration, an award, other than an incentive stock option, with
the consent of the Board and subject to various conditions stated
in the 2015 Plan. All shares of our common stock subject to an
award and evidenced by a stock certificate will contain a legend
restricting the transferability of the shares pursuant to the terms
of the 2015 Plan, which can be removed once the restrictions have
terminated, lapsed or been satisfied. If shares are issued in book
entry form, a notation to the same restrictive effect will be
placed on the transfer agent’s books in connection with such
shares.
Adjustments for Change
in Control
Awards under the 2015 Plan are generally subject to special
provisions upon the occurrence of a change in control transaction
of the kind described in the 2015 Plan. There is no automatic
accelerated vesting of outstanding awards in the event of a change
in control. However, the Board may, but is not required to, provide
in an award agreement or otherwise that upon a change in control
transaction (i) all outstanding options or stock appreciation
rights immediately become fully vested and exercisable, (ii) any
restriction period on restricted stock or a restricted stock unit
award will immediately lapse so that the shares become freely
transferable, (iii) all performance goals are deemed to have been
satisfied and any restrictions on any performance award immediately
lapse and the awards become immediately payable, or (iv) all
performance measures are deemed to have been satisfied for any
outstanding incentive award, which immediately become payable. The
Board also may determine that upon a change in control,
25
any outstanding option or stock appreciation right will be
cancelled in exchange for payment in cash, stock or other property
for each vested share in an amount equal to the excess of the fair
market value of the consideration to be paid in the change in
control transaction over the exercise price.
Clawback
If the Board of Directors determines that a participant engaged in
an act of embezzlement, fraud, or breach of fiduciary duty that
contributed to our company being obligated to restate its financial
statements, the Board may require the participant to repay the
proceeds from the sale or other disposition of shares received
through the 2015 Plan, for the period covering any of the three
fiscal years preceding the restatement.
Termination of
Employment or Services
Options
and Stock Appreciation Rights. Unless
otherwise provided in the related award agreement, if a
participant’s employment or services is terminated for any
reason prior to the date that an option or stock appreciation right
becomes vested, that participant’s right to exercise the
option or stock appreciation right is forfeited and all rights
cease. If an option or stock appreciation right becomes vested
prior to a participant’s termination of employment or
services for any reason other than death or disability, then that
participant will have the right to exercise the option or stock
appreciation right to the extent it was exercisable upon
termination before the earlier of three months after termination or
the expiration of the option or stock appreciation right unless
otherwise specified in the related award agreement. If termination
is due to a participant’s disability or death, then that
participant or that participant’s estate may exercise the
option or stock appreciation right to the extent it was exercisable
upon termination until 12 months following the date of termination,
subject to any limitations in the award agreement. The Board may,
at its discretion, accelerate a participant’s right to
exercise an option or extend the option term, subject to any other
limitations.
Restricted Stock and
Restricted Stock Units. Unless
otherwise provided in the related award agreement, if a
participant’s employment or services is terminated for any
reason, any portion of restricted stock or restricted stock units
not yet vested is generally forfeited to us (subject to a refund of
any purchase price paid by the participant). At its sole
discretion, the Board may provide in a participant’s
agreement that a restricted stock or restricted stock unit award
will continue after termination of employment or services or also
may waive or change any restrictions at its sole discretion except
for restrictions on a Section 162(m) award. The Board may, for
Section 162(m) awards, deem restrictions and performance goals
satisfied if a participant terminates employment due to death or
disability.
Federal Tax
Consequences
The brief discussion of tax consequences set forth below is not
intended to be a complete statement of the US federal tax
consequences as they relate to awards under the 2015 Plan or of
disposing of shares of our common stock received under the 2015
Plan. This summary does not include the tax laws of any
municipality, state or foreign country in which a participant
resides. Stock option grants under the 2015 Plan may be intended to
qualify as incentive stock options under Section 422 of the Code or
may be non-qualified stock options governed by Section 83 of the
Code. Because of the complex nature of tax provisions regarding
awards, participants are urged to consult a tax adviser before
making decisions with respect to any award.
Nonqualified Stock
Options. There
will be no federal income tax consequences to a participant or to
our company upon the grant of a nonqualified stock option. When a
nonqualified option is exercised, a participant will recognize
ordinary income in an amount equal to the excess of the fair market
value of the option shares on the date of exercise over the
exercise price, and we will be allowed a corresponding tax
deduction, subject to any applicable limitations under Section
162(m) of the Code. Any gain that a participant realizes when the
participant later sells or disposes of the option shares will be
short-term or long-term capital gain, depending on how long the
participant held the shares.
Incentive Stock
Options. There
are no federal income tax consequences to participants or to our
company upon the grant of an incentive stock option. If a
participant holds shares acquired upon the exercise of an incentive
stock option (i.e., option
shares) for the required holding period of at least two years after
the date the option was granted and one year after exercise of the
option, the difference between the exercise price and the amount
realized upon sale or disposition of the option shares will be
long-term capital gain or loss, and we will not be entitled to a
federal income tax deduction. If a participant disposes of the
option shares in a sale, exchange, or other disqualifying
26
disposition before the required holding period ends, the
participant will recognize taxable ordinary income in an amount
equal to the difference between the exercise price and the lesser
of the fair market value of the shares on the date of exercise or
the disposition price, and we will be allowed a federal income tax
deduction equal to such amount, subject to any applicable
limitations under Section 162(m) of the Code. Any amount received
by a participant in excess of the fair market value on the exercise
date will be taxed to the participant as capital gain, and we will
receive no corresponding deduction. While the exercise of an
incentive stock option does not result in current taxable income,
the excess of the fair market value of the option shares at the
time of exercise over the exercise price will be a tax preference
item that could subject a participant to alternative minimum tax in
the year of exercise.
Stock
Appreciation Rights. Participants
will not recognize income, and our company will not be allowed a
tax deduction, at the time a stock appreciation right is granted.
When a stock appreciation right is exercised, the cash or fair
market value of any shares of our common stock received will be
taxable to a participant as ordinary income, and we will be allowed
a federal income tax deduction equal to such amount, subject to any
applicable limitations under Section 162(m) of the Code.
Restricted Stock
Awards. Unless
a participant makes an election to accelerate recognition of income
to the grant date as described below, a participant will not
recognize income, and our company will not be allowed a tax
deduction, at the time a restricted stock award is granted. When
the restrictions lapse, participants will recognize ordinary income
equal to the fair market value of the common stock as of that date,
less any amount paid for the stock, and we will be allowed a
corresponding tax deduction, subject to any applicable limitations
under Section 162(m) of the Code. However, if a participant files
an election under Section 83(b) of the Code within 30 days after
the grant date, the participant will recognize ordinary income as
of the grant date equal to the fair market value of the stock as of
that date, less any amount paid for the stock, and we will be
allowed a corresponding tax deduction at that time, subject to any
applicable limitations under Section 162(m) of the Code. Any future
appreciation in the stock will be taxable to the participant at
capital gains rates. However, if the stock is later forfeited, the
participant will not be able to recover the tax previously paid
pursuant to the Section 83(b) election.
Restricted Stock Unit
Awards and Stock Bonuses. Participants
will not recognize income, and our company will not be allowed a
tax deduction, at the time a restricted stock unit award or stock
bonus is granted. When a participant receives payment under a
restricted stock unit award or stock bonus, the fair market value
of any shares of stock received will be ordinary income to the
participant, and we will be allowed a corresponding tax deduction
at that time, subject to any applicable limitations under Section
162(m) of the Code.
Section
409A. Section
409A of the Code has implications that affect traditional deferred
compensation plans, as well as certain equity awards. Section 409A
of the Code requires compliance with specific rules regarding the
timing of exercise or settlement of equity awards. If a participant
holds awards, the participant is subject to the following penalties
if the terms of such awards are not exempted from or do not comply
with the requirements of Section 409A of the Code: (i) appreciation
is includible in the participant’s gross income for tax
purposes once the awards are no longer subject to a
“substantial risk of forfeiture” (e.g.,
upon vesting); (ii) the participant is required to pay interest at
the tax underpayment rate plus 1% commencing on the date an award
subject to Section 409A of the Code is no longer subject to a
substantial risk of forfeiture; and (iii) the participant incurs a
20% penalty tax on the amount required to be included in income.
The 2015 Plan and the awards granted under the 2015 Plan are
intended to conform to or be exempt from the requirements of
Section 409A of the Code.
Potential Limitation on
Company Deductions. Section
162(m) of the Code denies a deduction to any publicly held
corporation for compensation paid to certain “covered
employees” in a taxable year to the extent that compensation
to such covered employee exceeds $1 million. It is possible that
compensation attributable to awards, when combined with all other
types of compensation received by a covered employee from our
company, may cause this limitation to be exceeded in any particular
year.
Certain kinds of compensation, including qualified
“performance-based compensation,” are disregarded for
purposes of the deduction limitation. In accordance with Treasury
Regulations issued under Section 162(m), compensation attributable
to stock options will qualify as performance-based compensation if
the award is granted by a compensation committee comprised solely
of “outside directors” and either (i) the plan contains
a per-participant limitation on the number of shares for which such
awards may be granted during a specified period, the
per-participant limitation is approved by the stockholders, and the
exercise price of the award is no less than the fair market value
of the stock on the grant date, or (ii) the award is granted (or
exercisable) only upon the
27
achievement (as certified in writing by the compensation committee)
of an objective performance goal established in writing by the
compensation committee while the outcome is substantially
uncertain, and the award is approved by stockholders.
Awards to purchase restricted stock, restricted stock units and
stock bonuses will qualify as performance-based compensation under
the Treasury Regulations only if (i) the award is granted by a
compensation committee comprised solely of “outside
directors”, (ii) the award is granted (or exercisable) only
upon the achievement of an objective performance goal established
in writing by the compensation committee while the outcome is
substantially uncertain, (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award
that the performance goal has been satisfied, and (iv) prior to the
granting (or exercisability) of the award, stockholders have
approved the material terms of the award (including the class of
employees eligible for such award, the business criteria on which
the performance goal is based, and the maximum amount – or
formula used to calculate the amount – payable upon
attainment of the performance goal).
28
PROPOSAL 4 –
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected KMJ
Corbin and Company LLP as our company’s independent
registered public accounting firm for the fiscal year ending
December 31, 2015, and the Board is asking stockholders to ratify
that selection. A representative of KMJ Corbin and Company LLP is
not expected to be present at the 2015 Annual Meeting.
Although ratification is not required by the Bylaws of our company
or otherwise, the Board of Directors considers the selection of the
independent registered public accounting firm to be an important
matter of stockholder concern and is submitting the selection of
KMJ Corbin and Company LLP for ratification by stockholders as a
matter of good corporate practice. If the selection is not
ratified, the Audit Committee will consider whether it is
appropriate to select another independent registered public
accounting firm. Even if the selection is ratified, the Audit
Committee at its discretion may select a different independent
registered public accounting firm at any time during the year if it
determines that such a change would be in the best interest of our
company.
Required Vote and
Recommendation
Ratification of the appointment of KMJ Corbin and Company LLP as
our company’s independent registered public accounting firm
for the fiscal year ending December 31, 2015 requires the
affirmative vote of a majority of the votes of the holders of
shares of our common stock and Series B Preferred Stock present in
person or by proxy and entitled to vote at the meeting. Abstentions
and broker non-votes, if any, will not be counted as votes cast and
will have no effect on the result of the vote, although they will
count towards the presence of a quorum. Properly executed and
unrevoked proxies will be voted FOR Proposal 4 unless contrary
instructions are indicated in the proxy.
The Board of
Directors recommends that you vote “FOR” the
ratification of the appointment
of KMJ Corbin and Company LLP as Neonode’s
independent registered public accounting firm
for the fiscal year ending December 31, 2015.
29
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
The following table lists aggregate fees billed to us for the
fiscal years ended December 31, 2014 and 2013, by KMJ Corbin and
Company LLP, Neonode’s independent registered public
accounting firm.
|
|
|
|
|
Audit Fees
|
|
$
|
284
|
|
$
|
252
|
Audit-Related Fees
|
|
|
—
|
|
|
—
|
Tax Fees
|
|
|
—
|
|
|
—
|
All Other Fees
|
|
|
—
|
|
|
—
|
Total Fees
|
|
$
|
284
|
|
$
|
252
|
Audit
Fees. These represent aggregate fees billed for
professional services rendered for the audit of our annual
consolidated financial statements and internal control over
financial reporting, the review of the condensed consolidated
financial statements included in our Quarterly Reports on Form
10-Q, and the review of registration statements including consents
provided therewith and related matters.
Pre-Approval of Audit
and Non-Audit Services
Pursuant to applicable law, and as set forth in the terms of its
charter, the Audit Committee of the Board of Directors is
responsible for appointing, setting compensation for, and
overseeing the work of our company’s independent registered
public accounting firm. Any audit or non-audit services proposed to
be performed are considered by and, if deemed appropriate, approved
by the Audit Committee in advance of the performance of such
services. All of the fees earned by KMJ Corbin and Company LLP
described above were attributable to services pre-approved by the
Audit Committee.
30
REPORT OF THE AUDIT
COMMITTEE
The Audit Committee of the Board of Directors of Neonode assists
the Board of Directors in its oversight of Neonode’s
accounting and financial reporting process and interacts directly
with and evaluates the performance of Neonode’s independent
registered public accounting firm.
Management is responsible for Neonode’s internal controls and
the financial reporting process. The independent registered public
accounting firm is responsible for performing an independent audit
of Neonode’s consolidated financial statements and assessment
of Neonode’s internal control over financial reporting in
accordance with standards of the Public Company Accounting
Oversight Board and to issue a report thereon. The Audit
Committee’s responsibility is to monitor and oversee these
processes.
The Audit Committee reviewed and discussed the audited consolidated
financial statements of Neonode for the year ended December 31,
2014 with management and KMJ Corbin and Company LLP. The Audit
Committee also discussed with KMJ Corbin and Company LLP the
matters required to be discussed by Auditing Standard No. 16, as
adopted by the Public Company Accounting Oversight Board. In
addition, the Audit Committee received from KMJ Corbin and Company
LLP the written disclosures and the letter required by the
applicable requirements of the Public Company Accounting Oversight
Board with respect to KMJ Corbin and Company LLP’s
communications with the Audit Committee concerning independence,
and the Audit Committee discussed with KMJ Corbin and Company LLP
their independence from Neonode and its management.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of
Directors approved, that the audited consolidated financial
statements of Neonode be included in Neonode’s Annual Report
on Form 10-K for the year ended December 31, 2014, which was filed
with the Securities and Exchange Commission on March 12, 2015.
|
|
THE AUDIT COMMITTEE
|
|
|
Per Löfgren, Chairman
|
|
|
Mats Dahlin
|
|
|
John Reardon
|
The foregoing Report
of the Audit Committee is not soliciting material, shall not be
deemed filed with the Securities and Exchange Commission and shall
not be incorporated by reference in any filing of Neonode under the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, whether made before or after the date hereof
and irrespective of any general incorporation language in any such
filing.
31
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Review, Approval or
Ratification of Transactions with Related Persons
The Board of Directors has adopted a written policy that addresses
related person transactions requiring disclosure under Item 404 of
Regulation S-K as promulgated by the SEC. A related person of our
company includes a director, a director nominee, an executive
officer, a stockholder beneficially owning a more than five percent
voting interest in our company, or an immediate family member of
any of the foregoing. Under the policy, any transaction in which a
related person has a direct or indirect material interest and where
the amount exceeds $120,000 must be approved by disinterested
members of the Board of Directors.
In determining whether to approve or ratify a related person
transaction, the Board of Directors will take into account, whether
(i) the terms are fair to our company and on the same basis
generally available to an unrelated person, (ii) there are business
reasons for our company to enter into the transaction, (iii) it
would impair independence of an outside director, and (iv) it would
present an improper conflict of interest, taking into account
factors that the Board of Directors deems relevant.
Since the beginning of 2014
and including any currently proposed, there have been no related
person transactions in respect of our company within the scope of
Item 404(a) of Regulation S-K as promulgated by the SEC.
Director
Independence
The Board of Directors has determined that each of Mr. Dahlin, Mr.
Löfgren, and Mr. Reardon is an independent director within the
meaning of the applicable NASDAQ Stock Market rules. The Board is
composed of a majority of independent directors and, as described
under “Committees of the Board of Directors” in the
Board Matters and Corporate Governance section above, each
established committee of the Board – the Audit Committee, the
Compensation Committee, and the Nominating and Governance Committee
– is comprised solely of independent directors.
32
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial Ownership
Table
The following table presents certain information as of April 16,
2015 regarding the beneficial ownership of shares of our common
stock by: (i) principal stockholders known by us to be beneficial
owners of more than five percent of common stock; (ii) each
director and nominee for director; (iii) each of the named
executive officers, as identified under “Summary Compensation
Table” in the Executive Compensation section above; and (iv)
all of our current directors and executive officers as a group. To
our knowledge, none of the beneficial owners listed below owned
shares of our preferred stock as of April 16, 2015.
Percentage ownership is based on 40,455,435 shares, representing
the aggregate number of shares of our common stock and Series B
preferred stock outstanding as of April 16, 2015. In computing the
number of shares beneficially owned by a person and the percentage
ownership of that person, shares of our common stock that could be
issued upon the exercise of outstanding options and warrants held
by that person that are exercisable at the present time or within
60 days of April 16, 2015 are considered outstanding; however,
these shares are not considered outstanding when computing the
percentage ownership of any other person.
|
|
|
|
|
|
|
|
FMR
LLC(1)
|
|
5,557,950
|
|
13.7
|
%
|
245 Summer Street
Boston, MA 02210
|
|
|
|
|
|
|
|
|
|
|
AWM
Investment Company, Inc.(2)
|
|
2,768,640
|
|
6.8
|
%
|
c/o Special Situations Funds
527 Madison Avenue
Suite 2600
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
Columbus Capital Management, LLC(3)
|
|
2,162,025
|
|
5.3
|
%
|
1 Market Street
Spear Tower, Suite 3790
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
|
|
Per
Bystedt(4)(5)(6)
|
|
3,162,191
|
|
7.8
|
%
|
|
|
|
|
|
Thomas Eriksson(4)(7)
|
|
2,133,755
|
|
5.2
|
%
|
|
|
|
|
|
Mats
Dahlin(4)(8)
|
|
1,335,394
|
|
3.3
|
%
|
|
|
|
|
|
Per
Löfgren(4)
|
|
45,000
|
|
|
*
|
|
|
|
|
|
John
Reardon(4)(9)
|
|
120,034
|
|
|
*
|
|
|
|
|
|
Lars
Lindqvist(4)
|
|
139,722
|
|
|
*
|
|
|
|
|
|
David
Brunton(4)
|
|
630,540
|
|
1.6
|
%
|
|
|
|
|
|
All Current Directors, Nominees, and Executive
Officers as a
Group (6 persons)
|
|
6,936,096
|
|
16.8
|
%
|
33
Securities Authorized
for Issuance under Equity Compensation Plans
The following table presents information regarding securities
authorized for issuance under equity compensation plans as of
December 31, 2014:
|
|
Number of
securities to
be issued upon
exercise of
outstanding
options,
warrants and
rights
|
|
Weighted-
average
exercise price
of outstanding
options,
warrants and
rights
|
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in the first
column)
|
Equity compensation plans approved by
securityholders(2)
|
|
1,708,880
|
|
$
|
4.79
|
|
1,754,342
|
Equity compensation plans not approved by
securityholders(3)
|
|
280,520
|
|
$
|
1.46
|
|
—
|
Total
|
|
1,989,400
|
|
$
|
4.32
|
|
1,754,342
|
34
ADDITIONAL
INFORMATION
Annual Report
On March 6, 2015, we filed with the SEC our Annual Report on Form
10-K for the year ended December 31, 2014. A copy of our annual
report is being made available to all stockholders along with this
proxy statement. The Notice and Access card provided to
stockholders contains instructions on how to access this proxy
statement and our annual report. The Notice and Access card also
contains instructions as to how to obtain a paper or e-mail copy of
the proxy materials.
Our filings with the SEC are accessible on our company website at
http://www.neonode.com/investor-relations/sec-filings/. The
information contained on our website is not part of and is not
incorporated by reference into this proxy statement.
We will provide
without charge to any person solicited hereby, upon the written
request of any such person, a copy of our Annual Report on Form
10-K for the year ended December 31, 2014. Requests should be
directed to us at our principal executive office at Storgatan 23C,
11455, Stockholm, Sweden.
Stockholder
Proposals
From time to time, stockholders present proposals that may be
proper subjects for inclusion in a proxy statement and for
consideration at an annual meeting of stockholders. To be included
in the proxy statement for our 2016 Annual Meeting of Stockholders,
proposals must be received by us no later than December 26, 2015
and otherwise must comply with SEC rules governing inclusion of
such proposals. Stockholders intending to present proposals should
note that December 26, 2015 is a Saturday. Any proposal received
after December 26, 2015 will be untimely, in accordance with SEC
rules and regulations.
Matters (other than nominations of candidates for election as
directors) may be brought before the meeting by stockholders only
by complying with the procedure set forth in the Bylaws of our
company, which in summary requires notice in writing to the
Corporate Secretary of our company be delivered or mailed to, and
received at, our principal executive office not less than 60 days
nor more than 90 days prior to the anniversary of the prior
year’s annual meeting. Each such stockholder notice shall set
forth as to each matter the stockholder proposes to bring before
the annual meeting: (1) a brief description of the matter desired
to be brought before the annual meeting and the reasons for
bringing such matter before the annual meeting; (2) the name and
address, as they appear on our company’s books, of the
stockholder proposing such business; (3) the class and number of
shares of our company which are beneficially owned by the
stockholder; (4) any material interest of the stockholder in such
business; and (5) any other information that is required to be
provided by the stockholder pursuant to applicable SEC rules. For
information regarding nominating candidates for election as
directors, refer to description under “Committees of the
Board of Directors” in the Board Matters and Corporate
Governance section above.
Householding
Under rules adopted by the SEC, we are permitted to deliver a
single set of proxy materials to any household at which two or more
stockholders reside if we believe the stockholders are members of
the same family. This process, called householding, allows us to
reduce the number of copies of these materials we must print and
mail. Even if householding is used, each stockholder will continue
to be entitled to submit a separate proxy or voting
instruction.
If you share the same last name and address with another of our
stockholders who also holds his or her shares directly, and you
each wish to start householding for our annual reports and proxy
statements, please contact us at our principal executive offices at
Storgatan 23C, 11455, Stockholm, Sweden, or by calling us at 46 (0)
8 667 17 17.
If you consent to householding, your election will remain in effect
until you revoke it. Should you later revoke your consent, you will
be sent separate copies of those documents that are mailed at least
30 days or more after receipt of your revocation.
In addition, some broker and bank record holders who hold shares of
our common stock for beneficial owner street name holders may be
participating in the practice of householding proxy statements and
annual reports. If your household receives a single set of proxy
materials for this year, but you prefer to receive your own copy,
contact us as stated above, and we will promptly send you a copy.
If a broker or bank holds shares of our common stock
35
for your benefit and you share the same last name and address with
another stockholder for whom a broker or bank holds shares of our
common stock, and together both of you prefer to receive only a
single set of our disclosure documents, contact your broker or bank
as described in the voter instruction card or other information you
received from your broker or bank.
Other Matters
The Board of Directors of our company knows of no matters to be
presented for stockholder action at the 2015 Annual Meeting other
than as set forth in this proxy statement. However, other matters
may properly come before the 2015 Annual Meeting or any adjournment
or postponement thereof. In the event that other matters properly
come before the 2015 Annual Meeting, the proxy holder(s) will vote
as recommended by the Board or, if no recommendation is given, at
the discretion of the proxy holder(s).
36
APPENDIX A
NEONODE INC.
2015 STOCK INCENTIVE PLAN
1.
Establishment, Purpose
and Term of Plan.
1.1
Establishment. The
Plan is hereby established effective as of April 15, 2015.
1.2
Purpose. The
purpose of the Plan is to (i) advance the interests of the
Participating Company Group and its stockholders by providing an
incentive to attract, retain and reward persons performing services
for the Participating Company Group and by motivating such persons
to contribute to the growth and profitability of the Participating
Company Group; and (ii) permit the payment of compensation that
qualifies as “performance-based compensation” under
Section 162(m) of the Code. The Company intends that Awards granted
pursuant to the Plan be exempt from or comply with Section 409A of
the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3
Term of
Plan. The Plan
shall continue in effect until its termination by the Board;
provided, however, that all Awards shall be granted, if at all,
within five (5) years from the earlier of the date the Plan is
adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company.
2.
Definitions and
Construction.
2.1
Definitions. Whenever
used herein, the following terms shall have their respective
meanings set forth below:
(a)
“1933
Act” means
the Securities Act of 1933, as amended.
(b)
“1934
Act” means
the Securities Exchange Act of 1934, as amended.
(c)
“Applicable
Laws” means
the requirements relating to the administration of equity-based
awards under U.S. federal and state corporate laws, U.S. federal
and state securities laws, the Code, any stock exchange or
quotation system on which the Company’s common stock is
listed or quoted and the applicable laws of any foreign country or
jurisdiction where Awards are, or will be, granted under the
Plan.
(d)
“Award”
means an Option, Stock Appreciation Right, Stock Bonus, Restricted
Stock, or Restricted Stock Units granted under the Plan.
(e)
“Award
Agreement”
means a written or electronic agreement between the Company and a
Participant setting forth the terms, conditions and restrictions of
the Award granted to the Participant.
(f)
“Board”
means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan,
“Board”
also means such Committee(s).
(g)
“Cause”
means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Participant’s Award Agreement
or written contract of employment or service, any of the following:
(i) the Participant’s theft, dishonesty, willful misconduct,
breach of fiduciary duty for personal profit, or falsification of
any Participating Company documents or records; (ii) the
Participant’s material failure to abide by a Participating
Company’s code of conduct or other policies (including,
without limitation, policies relating to confidentiality and
reasonable workplace conduct); (iii) the Participant’s
unauthorized use, misappropriation, destruction or diversion of any
tangible or intangible asset or corporate opportunity of a
Participating Company (including, without limitation, the
Participant’s improper use or disclosure of a Participating
Company’s confidential or proprietary information); (iv) any
intentional act by the Participant which has a material detrimental
effect on a Participating Company’s reputation or business;
(v) the Participant’s repeated failure or inability to
perform any reasonable assigned duties after written notice from a
Participating Company of, and a reasonable opportunity to cure,
such failure or inability; (vi) any material breach by the
Participant of any employment or service agreement between the
Participant and a Participating Company, which breach is not cured
pursuant to the terms of such agreement; or (vii) the
Participant’s conviction (including any plea of guilty or
nolo
contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the
Participant’s ability to perform his or her duties with a
Participating Company.
A-1
(h)
“Change in
Control” means
the occurrence of any of the following events:
(i)
A change in the ownership of the Company that occurs on the date
that any one person, or more than one person acting as a group
(“Person”), acquires ownership of the stock of the
Company that, together with the stock held by such Person,
constitutes more than fifty percent (50%) of the total voting power
of the stock of the Company. For purposes of this subsection (i),
the acquisition of additional stock by any one Person, who is
considered to own more than fifty percent (50%) of the total voting
power of the stock of the Company will not be considered an
additional Change in Control; or
(ii)
A change in the effective control of the Company that occurs on the
date that a majority of members of the Board is replaced during any
twelve (12) month period by directors whose appointment or election
is not endorsed by a majority of the members of the Board prior to
the date of the appointment or election; or for purposes of this
subsection (ii), once any Person is considered to be in effective
control of the Company, the acquisition of additional control of
the Company by the same Person will not be considered an additional
Change in Control; or
(iii)
A change in the ownership of a “substantial portion of the
Company’s assets”, as defined herein. For this purpose,
a “substantial portion of the Company’s assets”
shall mean assets of the Company having a total gross fair market
value equal to or more than fifty percent (50%) of the total gross
fair market value of all of the assets of the Company immediately
prior to such change in ownership. For purposes of this subsection
(iii), a change in ownership of a substantial portion of the
Company’s assets occurs on the date that any Person acquires
(or has acquired during the twelve (12) month period ending on the
date of the most recent acquisition by such person or persons)
assets from the Company that constitute a “substantial
portion of the Company’s assets.” For purposes of this
subsection (c), the following will not constitute a change in the
ownership of a substantial portion of the Company’s assets:
(A) a transfer to an entity that is controlled by the
Company’s stockholders immediately after the transfer, or (B)
a transfer of assets by the Company to: (1) a stockholder of the
Company (immediately before the asset transfer) in exchange for or
with respect to the Company’s stock, (2) an entity, fifty
percent (50%) or more of the total value or voting power of which
is owned, directly or indirectly, by the Company, (3) a Person,
that owns, directly or indirectly, fifty percent (50%) or more of
the total value or voting power of all the outstanding stock of the
Company, or (4) an entity, at least fifty percent (50%) of the
total value or voting power of which is owned, directly or
indirectly, by a Person described in this subsection (c). For
purposes of this subsection (c), gross fair market value means the
value of the assets of the Company, or the value of the assets
being disposed of, determined without regard to any liabilities
associated with such assets.
For purposes of this Section, persons will be considered to be
acting as a group if they are owners of a corporation that enters
into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a
Change in Control unless the transaction qualifies as a change in
control event within the meaning of Section 409A of the Code.
Further and for the avoidance of doubt, a transaction will not
constitute a Change in Control if its primary purpose is to: (1)
change the state of the Company’s incorporation, or (2)
create a holding company that will be owned in substantially the
same proportions by the persons who held the Company’s
securities immediately before such transaction
(i)
“Code”
means the Internal Revenue Code of 1986, as amended.
(j)
“Committee”
means the committee appointed by the Board (pursuant to Section 3
to administer the Plan.
(k)
“Company”
means Neonode Inc., a Delaware corporation, or any successor
corporation thereto.
(l)
“Consultant”
means a person engaged to provide consulting or advisory services
(other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided
would not preclude the Company from offering or selling securities
to such person pursuant to the Plan in reliance on a Form S-8
Registration Statement under the Securities Act.
A-2
(m)
“Director”
means a member of the Board.
(n)
“Disability”
means a permanent and total disability within the meaning of
Section 22(e)(3). In the case of Awards other than Incentive Stock
Options, the Committee, in its discretion, may determine that a
different definition of Disability shall apply in accordance with
standards adopted by the Committee from time to time.
(o)
“Employee”
means any person treated as an employee (including an Officer or a
Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as
a Director nor payment of a director’s fee shall be
sufficient to constitute employment for purposes of the Plan. The
Company shall determine in its discretion whether an individual has
become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as
the case may be. For purposes of an individual’s rights, if
any, under the terms of the Plan as of the time of the
Company’s determination of whether or not the individual is
an Employee, all such determinations by the Company shall be final,
binding and conclusive as to such rights, if any, notwithstanding
that the Company or any court of law or governmental agency
subsequently makes a contrary determination as to such
individual’s status as an Employee.
(p)
“Exercise
Price” means
the price at which a Share may be purchased by a Participant
pursuant to the exercise of an Option or SAR.
(q)
“Fair Market
Value”
means, as of any date, the value of a share of Stock or other
property as determined by the Board, in its discretion, or by the
Company, in its discretion, if such determination is expressly
allocated to the Company herein, subject to the following:
(i)
If, on such date, the Stock is listed on a national or regional
securities exchange or market system, the Fair Market Value of a
share of Stock shall be the closing price of a share of Stock as
quoted on the national or regional securities exchange or market
system constituting the primary market for the Stock, as reported
in The Wall Street Journal or such other source as the
Company deems reliable. If the relevant date does not fall on a day
on which the Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall
be determined by the Board, in its discretion.
(ii)
If, on such date, the Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a
share of Stock shall be as determined by the Board in good faith
without regard to any restriction other than a restriction which,
by its terms, will never lapse, and in a manner consistent with the
requirements of Section 409A of the Code.
(r)
“Grant
Date” means,
with respect to an Award, the date on which the Committee makes the
determination granting such Award, or such later date as is
determined by the Committee at the time it approves the grant. The
Grant Date of an Award shall not be earlier than the date the Award
is approved by the Committee.
(s)
“Incentive Stock
Option”
means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within
the meaning of Section 422(b).
(t)
“Insider”
means an Officer, a Director or other person whose transactions in
Stock are subject to Section 16 of the Exchange Act.
(u)
“Insider Trading
Policy”
means the written policy of the Company pertaining to the purchase,
sale, transfer or other disposition of the Company’s equity
securities by Directors, Officers, Employees or other service
providers who may possess material, nonpublic information regarding
the Company or its securities.
(v)
“Nonemployee
Director” means a
Director who is not an employee of the Company.
(w)
“Nonstatutory Stock
Option”
means an Option not intended to be (as set forth in the Award
Agreement) or which does not qualify as an Incentive Stock
Option.
(x)
“Officer”
means any person designated by the Board as an executive officer of
the Company.
A-3
(y)
“Option”
means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(z)
“Parent
Corporation”
means any present or future “parent corporation” of the
Company, as defined in Section 424(e) of the Code.
(aa)
“Participant”
means any eligible person who has been granted one or more
Awards.
(bb)
“Participating
Company”
means the Company or any Parent Corporation or Subsidiary
Corporation.
(cc)
“Participating
Company Group”
means, at any point in time, all entities collectively which are
then Participating Companies.
(dd)
“Performance
Goals” means
the goal(s) (or combined goal(s)) determined by the Committee in
its discretion to be applicable to a Participant with respect to an
Award. As determined by the Committee, the Performance Goals
applicable to an Award shall provide for a targeted level or levels
of achievement using one or more of the following measures: (a)
cash flow, (b) earnings per share, (c) gross revenue, (d) market
share, (e) return on capital, (f) total stockholder return, (g)
share price performance, (h) return on assets or net assets, (i)
income or net income, (j) operating income or net operating income,
(k) operating profit or net operating profit, (l) operating margin
or profit margin, (m) return on operating revenue, (n) return on
invested capital, (o) product release schedules, (p) new product
innovation, (q) product cost reduction through advanced technology,
(r) brand recognition/acceptance, (s) product shipment targets, or
(t) customer satisfaction.
(ee)
“Performance
Period” means the time period during which the
Performance Goals or continued status as an Employee, Director, or
Consultant must be met as determined by the Committee at is sole
discretion.
(ff)
“Plan”
means the Neonode Inc. 2015 Stock Incentive Plan, as amended.
(gg)
“Restricted Stock
Award”
means an Award of restricted
stock granted pursuant to Section 8.
(hh)
“Restricted Stock
Unit Award”
means an Award of a right to receive Stock on a future date granted
pursuant to Section 9.
(ii)
“Rule
16b-3” means
Rule 16b-3 promulgated under the 1934 Act, and any future
regulation amending, supplementing or superseding such
regulation.
(jj)
“Section 16
Person” means an individual, who, with respect to the
shares of Stock, is subject to Section 16 of the 1934 Act and the
rules and regulations promulgated thereunder.
(kk)
“Service”
means a Participant’s employment or service with the
Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. Unless otherwise provided by
the Board, a Participant’s Service shall not be deemed to
have terminated merely because of a change in the capacity in which
the Participant renders such Service or a change in the
Participating Company for which the Participant renders such
Service, provided that there is no interruption or termination of
the Participant’s Service. Furthermore, a Participant’s
Service shall not be deemed to have terminated if the Participant
takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company. However, unless otherwise provided
by the Board, if any such leave taken by a Participant exceeds
ninety (90) days, then on the ninety-first (91st) day following the
commencement of such leave the Participant’s Service shall be
deemed to have terminated, unless the Participant’s right to
return to Service is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the
Company or required by law, an unpaid leave of absence shall not be
treated as Service for purposes of determining vesting under the
Participant’s Award Agreement. Except as otherwise provided
by the Board, in its discretion, the Participant’s Service
shall be deemed to have terminated either upon an actual
termination of Service or upon the business entity for which the
Participant performs Service ceasing to be a Participating Company.
Subject to the foregoing, the Company, in its discretion, shall
determine whether the Participant’s Service has terminated
and the effective date of and reason for such termination.
(ll)
“Stock”
means a share of common stock of the Company, as adjusted from time
to time in accordance with Section 4.3.
A-4
(mm)
“Stock Appreciation
Right or SAR”
means an Award of a right to receive Stock or the cash-value of
stock granted pursuant to Section 6.
(nn)
“Stock
Bonus”
means an Award granted pursuant to Section 7.
(oo)
“Subsidiary
Corporation”
means any present or future “subsidiary corporation” of
the Company, as defined in Section 424(f) of the Code.
(pp)
“Ten Percent
Stockholder”
means a person who, at the time an Award is granted to such person,
owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of a Participating
Company within the meaning of Section 422(b)(6) of the Code.
(qq)
“Vesting
Conditions”
mean those conditions established in accordance with the Plan prior
to the satisfaction of which shares subject to an Award remain
subject to forfeiture or a repurchase option in favor of the
Company exercisable for the Participant’s monetary purchase
price, if any, for such shares upon the Participant’s
termination of Service.
2.2
Construction. Captions
and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan.
Except when otherwise indicated by the context, the singular shall
include the plural and the plural shall include the singular. Use
of the term “or” is not intended to be exclusive,
unless the context clearly requires otherwise.
3.
Administration.
3.1
The
Committee. The Plan shall be administered by the
Committee. The Committee shall consist of not less than two (2)
Directors who shall be appointed from time to time by, and shall
serve at the pleasure of, the Board of Directors. The Committee
shall be comprised solely of Directors are (a) “outside
directors” under Section 162(m) of the Code and (b)
“non-employee directors” under Rule 16b-3.
3.2
Authority of the
Committee. It shall be the duty of the Committee to
administer the Plan in accordance with the Plan’s provisions.
The Committee shall have all powers and discretion necessary or
appropriate to administer the Plan and to control its operation,
including, but not limited to, the power to (a) determine which
Employees Consultants and Directors shall be granted Awards, (b)
prescribe the terms and conditions of the Awards, (c) interpret the
Plan and the Awards, (d) adopt such procedures and subplans as are
necessary or for the purpose of satisfying Applicable Laws, (e)
adopt rules for the administration, interpretation and application
of the Plan as are consistent therewith, and (f) interpret, amend
or revoke any such rules.
3.3
Delegation by the
Committee. The Committee, in its sole discretion and on
such terms and conditions as it may provide, may delegate all or
any part of its authority and powers under the Plan to one or more
Directors or officers of the Company, except that the Committee may
not delegate all or any part of its authority under the Plan with
respect to Awards granted to any individual who is subject to
Section 16 Persons. Notwithstanding the foregoing, with respect to
Awards that are intended to qualify as performance-based
compensation under Section 162(m) of the Code, the Committee may
not delegate its authority and powers with respect to such Awards
if such delegation would cause the Awards to fail to so qualify. To
the extent of any delegation by the Committee, references to the
Committee in this Plan and any Award Agreement shall be deemed also
to include reference to the applicable delegate(s).
3.4
Decisions
Binding. All interpretations, determinations and
decisions made by the Committee, the Board, and any delegate of the
Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the
maximum deference permitted by law.
4.
Shares Subject to
Plan.
4.1
Number of
Shares. Subject to adjustment as provided in Section
4.3, the aggregate number of shares of Stock that may be issued
pursuant to Awards shall not exceed Two Million One Hundred
Thousand (2,100,000) shares of Stock (the “Share
Reserve”).
4.2
Lapsed
Awards. If an Award expires without having been
exercised in full, or, with respect to Restricted Stock and
Restricted Stock Units is forfeited to the Company, the shares
which were subject thereto will become available for future grant
or sale under the Plan (unless the Plan has terminated). Shares
that have been
A-5
issued under the Plan under any Award will not be returned to the
Plan and will not become available for future distribution under
the Plan; provided, however, that if unvested shares of Restricted
Stock or Restricted Stock Units are repurchased by the Company or
are forfeited to the Company, such shares will become available for
future grant under the Plan. Shares used to pay the exercise or
purchase price of an Award and/or to satisfy the tax withholding
obligations related to an Award will not become available for
future grant or sale under the Plan.
4.3
Adjustments in Awards
and Authorized Shares. In the event that any dividend
(other than regular, ongoing dividends) or other distribution
(whether in the form of cash, shares, other securities, or other
property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares or other securities
of the Company, or other change in the corporate structure of the
Company affecting the shares such that an adjustment is determined
by the Committee (in its sole discretion) to be appropriate in
order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable,
adjust the number and class of stock. Notwithstanding the
preceding, the number of shares subject to any Award always shall
be a whole number.
5.
Eligibility.
5.1
Persons Eligible for
Awards. Awards
may be granted only to Employees, Consultants and Directors.
5.2
Participation in the
Plan. Awards are granted solely at the discretion of
the Board. Eligible persons may be granted more than one Award.
However, eligibility in accordance with this Section shall not
entitle any person to be granted an Award, or, having been granted
an Award, to be granted an additional Award.
6.
Options and Stock
Appreciation Rights.
Options and SARs shall be evidenced by Award Agreements specifying
the number of shares of Stock covered thereby, in such form as the
Board shall from time to time establish. Award Agreements may
incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and
conditions.
6.1
Option and SAR
Limitations. No Participant shall be granted Options or
SARs covering more than a total of One Hundred Fifty Thousand
(150,000) shares of Stock during any one Company fiscal year.
Notwithstanding the foregoing, during the Company fiscal year in
which a Participant first becomes an Employee, he or she may be
granted Options or SARs to purchase up to a total of an additional
One Hundred Fifty Thousand (150,000) shares of Stock.
6.2
Exercise
Price. The
exercise price for each Option or SAR shall be established in the
discretion of the Board; provided, however, that (a) the exercise
price per share for an Option or SAR shall be not less than the
Fair Market Value of a share of Stock on the effective date of
grant of the Option or SAR and (b) no Incentive Stock Option
granted to a Ten Percent Stockholder shall have an exercise price
per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of
the Incentive Stock Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) or SAR may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option or SAR is
granted pursuant to an assumption or substitution for another
option or SAR in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.3
Exercisability and Term
of Options and SARs. Options
and SARs shall be exercisable at such time or times, or upon such
event or events, and subject to such terms, conditions, Performance
Goals and restrictions as shall be determined by the Board and set
forth in the Award Agreement evidencing such Option or SAR;
provided, however, that (a) no Option or SAR shall be exercisable
after the expiration of ten (10) years after the effective date of
grant of such Option or SAR and (b) no Incentive Stock Option
granted to a Ten Percent Stockholder shall be exercisable after the
expiration of five (5) years after the effective date of grant of
such Incentive Stock Option. Subject to the foregoing, unless
otherwise specified by the Board in the grant of an Option or SAR,
any Option or SAR granted hereunder shall terminate ten (10) years
after the effective date of grant of the Option or SAR, unless
earlier terminated in accordance with its provisions.
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6.4
Exercise of
SAR. Upon the exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount
determined by multiplying: (a) the difference between the Fair
Market Value of the Stock on the date of exercise over the exercise
price by (b) the number of shares with respect to which the SAR is
exercised. At the discretion of the Committee, the payment upon
exercise of a SAR may be in cash, in shares of equivalent value, in
some combination thereof or in any other manner approved by the
Committee in its sole discretion.
6.5
Payment of Exercise
Price.
(a)
Forms of Consideration
Authorized. Except
as otherwise provided below, payment of the exercise price for the
number of shares of Stock being purchased pursuant to any Option or
SAR shall be made (i) in cash, by check or in cash equivalent, (ii)
by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Participant having a Fair Market Value
not less than the exercise price, (iii) by delivery of a properly
executed notice of exercise together with irrevocable instructions
to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System) (a “Cashless
Exercise”)
or SAR, (iv) by delivery of a properly executed notice electing a
Net-Exercise, (v) by such other consideration as may be approved by
the Board from time to time to the extent permitted by applicable
law, or (vi) by any combination thereof. The Board may at any time
or from time to time grant Options and SARS which do not permit all
of the foregoing forms of consideration to be used in payment of
the exercise price or which otherwise restrict one or more forms of
consideration.
(b)
Limitations on Forms of
Consideration - Tender of Stock. Notwithstanding the
foregoing, an Option or SAR may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of
the provisions of any law, regulation or agreement restricting the
redemption of the Company’s Stock. Unless otherwise provided
by the Board, an Option or SAR may not be exercised by tender to
the Company, or attestation to the ownership, of shares of Stock
unless such shares either have been owned by the Participant for
more than six (6) months or such other period, if any, required by
the Company (and were not used for another Option or SAR exercise
by attestation during such period) or were not acquired, directly
or indirectly, from the Company.
6.6
Certain Additional
Provisions for Incentive Stock Options.
(a)
Maximum Number of Shares
Issuable Pursuant to Incentive Stock Options. Subject to
Section 4 and adjustment as provided in Subsection 4.3, the maximum
aggregate number of shares of Stock that may be issued under the
Plan pursuant to the exercise of Incentive Stock Options shall not
exceed Two Million One Hundred Thousand (2,100,000) shares (the
“ISO Share
Limit”).
The maximum aggregate number of shares of Stock that may be issued
under the Plan pursuant to all Awards other than Incentive Stock
Options shall be the number of shares determined in accordance with
Section 4, subject to adjustment as provided in Subsection 4.3.
(b)
Exercisability. The
aggregate Fair Market Value (determined on the Grant Date(s)) of
the shares with respect to which Incentive Stock Options are
exercisable for the first time by any Employee during any calendar
year (under all plans of the Company and its Subsidiaries) shall
not exceed $100,000.
(c)
Termination of
Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant’s
Termination of Service for any reason other than Disability or
death, unless (a) the Participant dies during such three-month
period, and/or (b) the Award Agreement or the
Committee permits later exercise (in which case the Option instead
may be deemed to be a Nonqualified Stock Option). No Incentive
Stock Option may be exercised more than one (1) year after the
Participant’s Termination of Service on account of
Disability, unless (a) the Participant dies during such one-year
period, and/or (b) the Award Agreement or the Committee permit
later exercise (in which case the option instead may be deemed to
be a Nonqualified Stock Option).
(d)
Expiration. No
Incentive Stock Option may be exercised after the expiration of ten
(10) years from the Grant Date; provided, however, that if the
Option is granted to an Employee who, together with persons whose
stock ownership is attributed to the Employee pursuant to Section
424(d) of the Code, owns stock possessing more than 10% of the
total combined voting power of all classes of the stock of the
Company or any of its Subsidiaries, the Option may not be exercised
after the expiration of five (5) years from the Grant Date.
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6.7
Effect of Termination of
Service.
(a)
Option and SAR
Exercisability. Subject to earlier
termination of the Option or SAR as otherwise provided by this Plan
and unless a longer exercise period is provided by the Board, an
Option or SAR shall terminate immediately upon the
Participant’s termination of Service to the extent that it is
then unvested and shall be exercisable after the
Participant’s termination of Service to the extent it is then
vested only during the applicable time period determined in
accordance with this Section and thereafter shall terminate:
(i)
Disability. If the
Participant’s Service terminates because of the Disability of
the Participant, the Option or SAR, to the extent unexercised and
exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the
Participant (or the Participant’s guardian or legal
representative) at any time prior to the expiration of twelve (12)
months after the date on which the Participant’s Service
terminated, but in any event no later than the date of expiration
of the Option’s or SAR’s term as set forth in the Award
Agreement evidencing such Option or SAR.
(ii)
Death. If
the Participant’s Service terminates because of the death of
the Participant, the Option or SAR, to the extent unexercised and
exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the
Participant’s legal representative or other person who
acquired the right to exercise the Option or SAR by reason of the
Participant’s death at any time prior to the expiration of
twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option or
SAR Expiration Date. The Participant’s Service shall be
deemed to have terminated on account of death if the Participant
dies within three (3) months after the Participant’s
termination of Service.
(iii)
Termination for
Cause. Notwithstanding any
other provision of the Plan to the contrary, if the
Participant’s Service is terminated for Cause, the Option or
SAR shall terminate in its entirety and cease to be exercisable
immediately upon such termination of Service.
(iv)
Other Termination of
Service. If the
Participant’s Service terminates for any reason, except
Disability, death or Cause, the Option or SAR, to the extent
unexercised and exercisable for vested shares on the date on which
the Participant’s Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months
after the date on which the Participant’s Service terminated,
but in any event no later than the Option or SAR Expiration
Date.
(b)
Extension if Exercise
Prevented by Law. Notwithstanding the
foregoing other than termination of Service for Cause, if the
exercise of an Option or SAR within the applicable time periods set
forth in Subsection 6.7(a) is prevented by the provisions of
Section 12 below, the Option or SAR shall remain exercisable until
the later of (i) thirty (30) days after the date such exercise
first would no longer be prevented by such provisions or (ii) the
end of the applicable time period under Subsection 6.7(a), but in
any event no later than the Option or SAR Expiration Date.
6.8
Transferability of
Options or SARs. During the lifetime of the
Participant, an Option or SAR shall be exercisable only by the
Participant or the Participant’s guardian or legal
representative. An Option or SAR shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution. Notwithstanding the
foregoing, to the extent permitted by the Board, in its discretion,
and set forth in the Award Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the
General Instructions to Form S-8 Registration Statement under the
1933 Act.
6.9
No
Repricing. Other than in connection with a change in
the Company’s capitalization or other transaction as
described in Section 4.3 of the Plan, at any time when the Exercise
Price of an Option or SAR is above the market value of a share of
Stock, the Company shall not, without stockholder approval, reduce
the Exercise Price of such Option or SAR.
7.
Stock Bonus.
Stock Bonus Awards shall be evidenced by Award Agreements in such
form as the Board shall from time to time establish. Award
Agreements evidencing Stock Bonus Awards may incorporate all or any
of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions.
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7.1
Stock Bonus
Limitations. No Participant shall be granted a Stock
Bonus covering more than a total of One Hundred Fifty Thousand
(150,000) shares of Stock during any one Company fiscal year.
Notwithstanding the foregoing, during the Company fiscal year in
which a Participant first becomes an Employee, he or she may be
granted a Stock Bonus to purchase up to a total of an additional
One Hundred Fifty Thousand (150,000) shares of Stock.
7.2
Vesting and Restrictions
on Transfer. Shares of Stock issued pursuant to any
Stock Bonus Award may (but need not) be made subject to Vesting
Conditions based upon the satisfaction of such Service
requirements, conditions, restrictions or Performance Goals, as
shall be established by the Board and set forth in the Award
Agreement evidencing such Award. The Board, in its discretion, may
provide in any Award Agreement evidencing a Stock Bonus Award that,
if the satisfaction of Vesting Conditions with respect to any
shares subject to such Stock Bonus Award would otherwise occur on a
day on which the sale of such shares would violate the provisions
of the Insider Trading Policy, then satisfaction of the Vesting
Conditions automatically shall be determined on the next trading
day on which the sale of such shares would not violate the Insider
Trading Policy.
7.3
Form of Payment to
Participant. Payment may be made in the form of cash,
whole shares of Stock, or a combination thereof, based on the Fair
Market Value of the shares of Stock earned under a Stock Bonus
Award on the date of payment, as determined in the sole discretion
of the Committee.
7.4
Effect of Termination of
Service. Each Award Agreement will specify the
consequences of a Participant’s ceasing to be a Service
Provider prior to the settlement of a Stock Bonus Award.
8.
Restricted Stock
Awards.
Restricted Stock Awards shall be evidenced by Award Agreements in
such form as the Board shall from time to time establish. Award
Agreements evidencing Restricted Stock Awards may incorporate all
or any of the terms of the Plan by reference and shall comply with
and be subject to the following terms and conditions.
8.1
Restricted Stock
Limitations. No Participant shall be granted Restricted
Stock covering more than a total of One Hundred Fifty Thousand
(150,000) shares of Stock during any one Company fiscal year.
Notwithstanding the foregoing, during the Company fiscal year in
which a Participant first becomes an Employee, he or she may be
granted Restricted Stock to purchase up to a total of an additional
One Hundred Fifty Thousand (150,000) shares of Stock.
8.2
Types of Restricted
Stock Awards Authorized. Restricted Stock Awards may be
granted upon such conditions as the Board shall determine,
including, without limitation, upon the attainment of one or more
performance goals.
8.3
Purchase
Price. The purchase price for shares of Stock issuable
under each Restricted Stock Award shall be established by the Board
in its discretion. Except as may be required by applicable law or
established by the Board, no monetary payment (other than
applicable tax withholding) shall be required as a condition of
receiving shares of Stock pursuant to a Restricted Stock Award.
8.4
Payment of Purchase
Price. Except as otherwise provided below, payment of
the purchase price (if any) for the number of shares of Stock being
purchased pursuant to any Restricted Stock Award shall be made (a)
in cash, by check or in cash equivalent, (b) by such other
consideration as may be approved by the Board from time to time to
the extent permitted by applicable law, or (c) by any combination
thereof.
8.5
Vesting and Restrictions
on Transfer. Shares issued pursuant to any Restricted
Stock Award may (but need not) be made subject to Vesting
Conditions based upon the satisfaction of such Service
requirements, conditions, restrictions or Performance Goals, as
shall be established by the Board and set forth in the Award
Agreement evidencing such Award. During any period in which shares
acquired pursuant to a Restricted Stock Award remain subject to
Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than
pursuant to an Ownership Change Event or as provided in Subsection
8.7. The Board, in its discretion, may provide in any Award
Agreement evidencing a Restricted Stock Award that, if the
satisfaction of Vesting Conditions with respect to any shares
subject to such Restricted Stock Award would otherwise occur on a
day on which the sale of such shares would violate the provisions
of the Insider Trading Policy, then satisfaction of the Vesting
Conditions automatically shall be determined on the next trading
day on which the sale of such shares would not violate the Insider
Trading Policy. Upon request by the Company, each Participant
shall
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execute any agreement evidencing such transfer restrictions prior
to the receipt of shares of Stock hereunder and shall promptly
present to the Company any and all certificates representing shares
of Stock acquired hereunder for the placement on such certificates
of appropriate legends evidencing any such transfer
restrictions.
8.6
Voting Rights; Dividends
and Distributions. Except as provided in this
Subsection 8.6, Subsection 8.5 and any Award Agreement, during any
period in which shares acquired pursuant to a Restricted Stock
Award remain subject to Vesting Conditions, the Participant shall
have all of the rights of a stockholder of the Company holding
shares of Stock, including the right to vote such shares and to
receive all dividends and other distributions paid with respect to
such shares. However, in the event of a dividend or distribution
paid in shares of Stock or other property or any other adjustment
made upon a change in the capital structure of the Company as
described in Subsection 4.3, any and all new, substituted or
additional securities or other property (other than normal cash
dividends) to which the Participant is entitled by reason of the
Participant’s Restricted Stock Award shall be immediately
subject to the same Vesting Conditions as the shares subject to the
Restricted Stock Award with respect to which such dividends or
distributions were paid or adjustments were made.
8.7
Effect of Termination of
Service. Unless otherwise provided by the Board in the
Award Agreement evidencing a Restricted Stock Award, if a
Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death
or disability), then (a) the Company shall have the option to
repurchase for the purchase price paid by the Participant any
shares acquired by the Participant pursuant to a Restricted Stock
Award which remain subject to Vesting Conditions as of the date of
the Participant’s termination of Service and (b) if the
Participant did not pay any consideration for any shares acquired
by the Participant pursuant to a Restricted Stock Award which
remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service. The Company shall have
the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more
persons as may be selected by the Company.
8.8
Nontransferability of
Restricted Stock Award Rights. Rights to acquire shares
of Stock pursuant to a Restricted Stock Award shall not be subject
in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance or garnishment by
creditors of the Participant or the Participant’s
beneficiary, except transfer by will or the laws of descent and
distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his
or her lifetime only by such Participant or the Participant’s
guardian or legal representative.
9.
Restricted Stock Unit
Awards.
Restricted Stock Unit Awards shall be evidenced by Award Agreements
in such form as the Board shall from time to time establish. Award
Agreements evidencing Restricted Stock Unit Awards may incorporate
all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions.
9.1
Restricted Stock Unit
Limitations. No Participant shall be granted Restricted
Stock Units covering more than a total of One Hundred Fifty
Thousand (150,000) shares of Stock during any one Company fiscal
year. Notwithstanding the foregoing, during the Company fiscal year
in which a Participant first becomes an Employee, he or she may be
granted Restricted Stock Units to purchase up to a total of an
additional One Hundred Fifty Thousand (150,000) shares.
9.2
Types of Restricted
Stock Unit Awards Authorized. Restricted Stock Unit
Awards may be granted upon such conditions as the Board shall
determine, including, without limitation, upon the attainment of
one or more performance goals.
9.3
Number of Shares of
Stock. Each Award Agreement will specify the number of
shares of Stock subject to the Award and will provide for the
adjustment of such number in accordance with Subsection 4.3 of the
Plan.
9.4
Purchase
Price. The purchase price for shares of Stock issuable
under each Restricted Stock Unit Award shall be established by the
Board in its discretion. Except as may be required by applicable
law or established by the Board, no monetary payment (other than
applicable tax withholding) shall be required as a condition of
receiving a Restricted Stock Unit Award.
9.5
Payment of Purchase
Price. Except as otherwise provided below, payment of
the purchase price (if any) for the number of shares of Stock being
purchased pursuant to any Restricted Stock Unit Award shall be
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made (a) in cash, by check or in cash equivalent, (b) by such other
consideration as may be approved by the Board from time to time to
the extent permitted by applicable law, or (c) by any combination
thereof.
9.6
Vesting and Restrictions
on Transfer. Shares of Stock issued pursuant to any
Restricted Stock Award may (but need not) be made subject to
Vesting Conditions based upon the satisfaction of such Service
requirements, conditions, restrictions or Performance Goals, as
shall be established by the Board and set forth in the Award
Agreement evidencing such Award. The Board, in its discretion, may
provide in any Award Agreement evidencing a Restricted Stock Unit
Award that, if the satisfaction of Vesting Conditions with respect
to any shares subject to such Restricted Stock Unit Award would
otherwise occur on a day on which the sale of such shares would
violate the provisions of the Insider Trading Policy, then
satisfaction of the Vesting Conditions automatically shall be
determined on the next trading day on which the sale of such shares
would not violate the Insider Trading Policy.
9.7
Settlement of Restricted
Stock Units.
(a)
Procedure; Rights as a
Stockholder. Any Restricted Stock Unit Award granted
hereunder will be settled according to the terms of the Plan and at
such times and under such conditions as determined by the Board and
set forth in the Award Agreement. Until the Restricted Stock Unit
Awards are settled and the shares of Stock are delivered (as
evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to
vote, if applicable, or receive dividends or any other rights as a
stockholder will exist with respect to the Award. No adjustment
will be made for a dividend or other right for which the record
date is prior to the date the Securities are delivered, except as
provided in Subsection 4.2 of the Plan or the applicable Award
Agreement.
(b)
Nontransferability of
Restricted Stock Unit Award Rights. Rights to acquire
shares of Stock pursuant to a Restricted Stock Unit Award shall not
be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance or garnishment
by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or the laws of descent and
distribution. All rights with respect to a Restricted Stock Unit
Award granted to a Participant hereunder shall be exercisable
during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.
9.8
Cessation of
Services. Each Award Agreement will specify the
consequences of a Participant’s termination of Service prior
to the settlement of a Restricted Stock Unit Award.
9.9
Performance-Based Awards
under Section 162(m) of the Code
(a)
General. If
the Committee, in its discretion, decides to grant an Award
intended to qualify as “performance-based compensation”
under Section 162(m) of the Code, the provisions of this Section 10
will control over any contrary provision in the Plan. The
Committee, in its discretion, also may grant Awards that are not
intended to qualify as “performance-based compensation”
under Section 162(m) of the Code.
(b)
Performance
Goals. The granting and/or vesting of Awards and other
incentives under the Plan may, in the discretion of the Committee,
be made subject to the achievement of one or more Performance
Goals.
(c)
Procedures. To
the extent necessary to comply with the “performance-based
compensation” provisions of Section 162(m) of the Code, with
respect to any Award granted subject to Performance Goals and
intended to qualify as “performance-based compensation”
under such section, on or before the Determination Date (i.e.,
within the first 25% of the Performance Period, but in no event
more than ninety (90) days following the commencement of any
Performance Period or such other time as may be required or
permitted by Section 162(m)), the Committee will, in writing, (i)
designate one or more Participants to whom an Award will be made,
(ii) determine the Performance Period, (iii) establish the
Performance Goals and amounts that may be earned for the
Performance Period, and (iv) determine any other terms and
conditions applicable to the Award(s).
(d)
Additional
Limitations. Notwithstanding any other provision of the
Plan, any Award that is granted to a Participant and is intended to
constitute qualified “performance-based compensation”
under Section 162(m) will be subject to any additional limitations
set forth in the Code (including any amendment to Section 162(m))
or any regulations and ruling issued thereunder that are
requirements for qualification as “performance-based
compensation” under Section 162(m) of the Code, and the Plan
will be deemed amended to the extent necessary to conform to such
requirements.
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(e)
Determination of Amounts
Earned. Following the completion of each Performance
Period, the Committee will certify in writing whether the
applicable Performance Goals have been achieved for such
Performance Period. A Participant will be eligible to receive
payment pursuant to an Award intended to qualify as
“performance-based compensation” under Section 162(m)
of the Code for a Performance Period only if the Performance Goals
for such period are achieved. In determining the amounts earned by
a Participant pursuant to an Award intended to qualified as
“performance-based compensation” under Section 162(m)
of the Code, the Committee will have the right to (a) reduce or
eliminate (but not to increase) the amount payable at a given level
of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or
corporate performance for the Performance Period, (b) determine
what actual Award, if any, will be paid in the event of a
termination of employment as the result of a Participant’s
death or disability or upon a Change in Control or in the event of
a termination of employment following a Change in Control prior to
the end of the Performance Period, and (c) determine what actual
Award, if any, will be paid in the event of a termination of
employment other than as the result of a Participant’s death
or Disability prior to a Change in Control and prior to the end of
the Performance Period to the extent an actual Award would have
otherwise been achieved had the Participant remained employed
through the end of the Performance Period.
10.
Change in
Control.
10.1
Effect of Change in
Control on Awards. Subject
to the requirements and limitations of Section 409A of the Code, if
applicable, the Board may provide for any one or more of the
following:
(a)
Accelerated
Vesting. The Board may, in its discretion, provide in
any Award Agreement or, in the event of a Change in Control, may
take such actions as it deems appropriate to provide for the
acceleration of the exercisability and/or vesting in connection
with such Change in Control of each or any outstanding Award or
portion thereof and shares acquired pursuant thereto upon such
conditions, including termination of the Participant’s
Service prior to, upon, or following such Change in Control, to
such extent as the Board shall determine.
(b)
Assumption, Continuation
or Substitution of Awards. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case
may be (the “Acquiror”),
may, without the consent of any Participant, assume or continue the
Company’s rights and obligations under each or any Award or
portion thereof outstanding immediately prior to the Change in
Control or substitute for each or any such outstanding Award or
portion thereof a substantially equivalent award with respect to
the Acquiror’s stock. For purposes of this Section, if so
determined by the Board, in its discretion, an Award or any portion
thereof shall be deemed assumed if, following the Change in
Control, the Award confers the right to receive, subject to the
terms and conditions of the Plan and the applicable Award
Agreement, for each share of Stock subject to such portion of the
Award immediately prior to the Change in Control, the consideration
(whether stock, cash, other securities or property or a combination
thereof) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled; provided, however, that
if such consideration is not solely common stock of the Acquiror,
the Board may, with the consent of the Acquiror, provide for the
consideration to be received upon the exercise of the Award for
each share of Stock to consist solely of common stock of the
Acquiror equal in Fair Market Value to the per share consideration
received by holders of Stock pursuant to the Change in Control. If
any portion of such consideration may be received by holders of
Stock pursuant to the Change in Control on a contingent or delayed
basis, the Board may, in its discretion, determine such Fair Market
Value per share as of the time of the Change in Control on the
basis of the Board’s good faith estimate of the present value
of the probable future payment of such consideration. Any Award or
portion thereof which is neither assumed or continued by the
Acquiror in connection with the Change in Control nor exercised as
of the time of consummation of the Change in Control shall
terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control. Notwithstanding the
foregoing, shares acquired upon exercise of an Award prior to the
Change in Control and any consideration received pursuant to the
Change in Control with respect to such shares shall continue to be
subject to all applicable provisions of the Award Agreement
evidencing such Award except as otherwise provided in such Award
Agreement.
(c)
Cash-Out of Outstanding
Awards. The
Board may, in its discretion and without the consent of any
Participant, determine that, upon the occurrence of a Change in
Control, each or any Award or portion thereof outstanding
immediately prior to the Change in Control shall be canceled in
exchange for a payment with respect to each vested share (and each
unvested share, if so determined by the Board) of Stock subject to
such canceled Award in (i) cash, (ii) stock of the Company or of a
corporation or other business entity a party to the
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Change in Control, or (iii) other property which, in any such case,
shall be in an amount having a Fair Market Value equal to the Fair
Market Value of the consideration to be paid per share of Stock in
the Change in Control, reduced by the exercise or purchase price
per share, if any, under such Award. If any portion of such
consideration may be received by holders of Stock pursuant to the
Change in Control on a contingent or delayed basis, the Board may,
in its sole discretion, determine such Fair Market Value per share
as of the time of the Change in Control on the basis of the
Board’s good faith estimate of the present value of the
probable future payment of such consideration. In the event such
determination is made by the Board, the amount of such payment
(reduced by applicable withholding taxes, if any) shall be paid to
Participants in respect of the vested portions of their canceled
Awards as soon as practicable following the date of the Change in
Control and in respect of the unvested portions of their canceled
Awards in accordance with the vesting schedules applicable to such
Awards.
11.
Tax
Withholding.
11.1
Withholding
Requirements. Prior to the delivery of any shares or
cash pursuant to an Award (or exercise thereof), or at such earlier
time as the Tax Obligations are due, the Company shall have the
power and the right to deduct or withhold, or require a Participant
to remit to the Company, an amount sufficient to satisfy all Tax
Obligations.
11.2
Withholding
Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time,
may designate the method or methods by which a Participant may
satisfy such Tax Obligations. As determined by the Committee in its
discretion from time to time, these methods may include one or more
of the following: (a) paying cash, (b) electing to have the Company
withhold otherwise cash or shares having a Fair Market Value equal
to the amount required to be withheld, (c) delivering to the
Company already-owned shares having a Fair Market Value equal to
the minimum amount required to be withheld or remitted, provided
the delivery of such shares will not result in any adverse
accounting consequences as the Committee determines in its sole
discretion, (d) selling a sufficient number of shares otherwise
deliverable to the Participant through such means as the Committee
may determine in its sole discretion (whether through a broker or
otherwise) equal to the Tax Obligations required to be withheld,
(e) retaining from salary or other amounts payable to the
Participant cash having a sufficient value to satisfy the Tax
Obligations, or (f) any other means which the Committee, in its
sole discretion, determines to both comply with Applicable Laws,
and to be consistent with the purposes of the Plan. The amount of
Tax Obligations will be deemed to include any amount that the
Committee agrees may be withheld at the time the election is made,
not to exceed the amount determined by using the maximum federal,
state or local marginal income tax rates applicable to the
Participant or the Company, as applicable, with respect to the
Award on the date that the amount of tax or social insurance
liability to be withheld or remitted is to be determined. The Fair
Market Value of the shares to be withheld or delivered shall be
determined as of the date that the Tax Obligations are required to
be withheld.
12.
Compliance with
Securities Law.
12.1
Section 16
Persons. With respect to Section 16 Persons,
transactions under this Plan are intended to qualify for the
exemption provided by Rule 16b-3. To the extent any provision of
the Plan, Award Agreement or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable or appropriate by the Committee.
12.2
Investment
Representations. As a condition to the exercise of an
Award, the Company may require the person exercising such Award to
represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is
required.
12.3
Inability to Obtain
Authority. The Company will not be required to issue
any shares of Stock, cash or other property under the Plan unless
all the following conditions are satisfied: (a) the admission of
the shares or other property to listing on all stock exchanges on
which such class of stock or property then is listed; (b) the
completion of any registration or other qualification or rule
compliance of the shares under any U.S. state or federal law or
under the rulings or regulations of the Securities and Exchange
Commission, the stock exchange on which shares of the same class
are then listed, or any other governmental regulatory body, as
counsel to the Company, in its absolute discretion, deems necessary
or advisable; (c) the obtaining of any approval or other clearance
from any U.S. federal, state or other governmental agency, which
counsel to the Company, in its absolute discretion, determines to
be necessary or advisable; and (d) the lapse of such reasonable
period of time following the
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Grant Date, vesting and/or exercise as the Company may establish
from time to time for reasons of administrative convenience. If the
Committee determines, in its absolute discretion, that one or more
of the preceding conditions will not be satisfied, the Company
automatically will be relieved of any liability with respect to the
failure to issue the shares, cash or other property as to which
such requisite authority will not have been obtained.
13.
Amendment or Termination
of Plan.
The Board may amend, suspend or terminate the Plan at any time.
However, without the approval of the Company’s stockholders,
there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by
operation of the provisions of Subsection 4.3), (b) no change in
the class of persons eligible to receive Incentive Stock Options,
and (c) no other amendment of the Plan that would require approval
of the Company’s stockholders under any applicable law,
regulation or rule, including the rules of any stock exchange or
market system upon which the Stock may then be listed. No
amendment, suspension or termination of the Plan shall affect any
then outstanding Award unless expressly provided by the Board.
Except as provided by the next sentence, no amendment, suspension
or termination of the Plan may adversely affect any then
outstanding Award without the consent of the Participant.
Notwithstanding any other provision of the Plan or any Award
Agreement to the contrary, the Board may, in its sole and absolute
discretion and without the consent of any Participant, amend the
Plan or any Award Agreement, to take effect retroactively or
otherwise, as it deems necessary or advisable for the purpose of
conforming the Plan or such Award Agreement to any present or
future law, regulation or rule applicable to the Plan, including,
but not limited to, Section 409A of the Code.
14.
Miscellaneous
Provisions.
14.1
Indemnification. Each person who is or
shall have been a member of the Committee, or of the Board, shall
be indemnified and held harmless by the Company against and from
(a) any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he
or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan or any
Award Agreement, and (b) from any and all amounts paid by him or
her in settlement thereof, with the Company’s approval, or
paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the
Company’s Certificate of Incorporation or Bylaws, by
contract, as a matter of law, or otherwise, or under any power that
the Company may have to indemnify them or hold them harmless.
14.2
Successors. All
obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business or assets of the
Company.
14.3
Rights as Employee,
Consultant or Director. No person, even though eligible
pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a
Participant. Nothing in the Plan or any Award granted under the
Plan shall confer on any Participant a right to remain an Employee,
Consultant or Director or interfere with or limit in any way any
right of a Participating Company to terminate the
Participant’s Service at any time. To the extent that an
Employee of a Participating Company other than the Company receives
an Award under the Plan, that Award shall in no event be understood
or interpreted to mean that the Company is the Employee’s
employer or that the Employee has an employment relationship with
the Company.
14.4
Rights as a
Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until
the date of the issuance of such shares (as evidenced by the
appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be
made for dividends, distributions or other rights for which the
record date is prior to the date such shares are issued.
14.5
Delivery of Title to
Shares of Stock. Subject to any governing rules or
regulations, the Company shall issue or cause to be issued the
shares of Stock acquired pursuant to an Award and shall deliver
such shares to or for the benefit of the Participant by means of
one or more of the following: (a) by delivering to the
Participant
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evidence of book entry shares of Stock credited to the account of
the Participant, (b) by depositing such shares of Stock for the
benefit of the Participant with any broker with which the
Participant has an account relationship, or (c) by delivering such
shares of Stock to the Participant in certificate form.
14.6
Clawback Provision for
Participants. If the
Board determines that the Participant engaged in an act of
embezzlement, fraud, or breach of fiduciary duty during the
Participant’s Service that contributed to Company being
obligated to restate its financial statements, Participant may be
required to repay the proceeds from the sale or other disposition
of shares of Stock issued or issuable upon exercise of an Option or
SAR, or upon vesting of restricted stock or an RSU, if the sale or
disposition was effected during the 36-month period following the
first public issuance or filing with the SEC of the financial
statements required to be restated. The term “option
proceeds” means, with respect to any sale or other
disposition of shares issued or issuable upon exercise of an Option
or SAR, the amount determined appropriate by the Board to reflect
the effect of the restatement on the Company’s Stock price,
up to the amount equal to the number of shares of Stock sold or
disposed of, multiplied by the difference between the market value
per share of the Company’s Stock at the time of such sale or
disposition and the exercise price. The term “restricted
stock proceeds” means, with respect to any sale or other
disposition of shares issued or issuable upon vesting of restricted
stock or an RSU, the amount determined appropriate by the Board to
reflect the effect of the restatement on the Company’s Stock
price, up to the amount equal to the market value per share of the
Company’s Stock at the time of such sale or other
disposition, multiplied by the number of shares or units sold or
disposed of.
14.7
Fractional
Shares. The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.
14.8
Retirement and Welfare
Plans. Neither Awards made under this Plan nor shares
of Stock or cash paid pursuant to such Awards shall be included as
“compensation” for purposes of computing the benefits
payable to any Participant under any Participating Company’s
retirement plans (both qualified and non-qualified) or welfare
benefit plans unless such other plan expressly provides that such
compensation shall be taken into account in computing such
benefits.
14.9
Section 409A of the
Code. Notwithstanding other provisions of the Plan or
any Award Agreements hereunder, no Award shall be granted,
deferred, accelerated, extended, paid out or modified under this
Plan in a manner that would result in the imposition of an
additional tax under Section 409A of the Code upon a Participant.
In the event that it is reasonably determined by the Board or, if
delegated by the Board to the Committee, by the Committee that, as
a result of Section 409A of the Code, payments in respect of any
Award under the Plan may not be made at the time contemplated by
the terms of the Plan or the relevant Award Agreement, as the case
may be, without causing the Participant holding such Award to be
subject to taxation under Section 409A of the Code, including as a
result of the fact that the Participant is a “specified
employee” under Section 409A of the Code, the Company will
make such payment on the first day that would not result in the
Participant incurring any tax liability under Section 409A of the
Code. The Company shall use commercially reasonable efforts to
implement the provisions of this Subsection 15.8 in good faith;
provided that neither the Company, the Board nor any of the
Company’s employees, directors or representatives shall have
any liability to Participants with respect to this Subsection
14.9.
14.10 Severability. If
any one or more of the provisions (or any part thereof) of this
Plan shall be held invalid, illegal or unenforceable in any
respect, such provision shall be modified so as to make it valid,
legal and enforceable, and the validity, legality and
enforceability of the remaining provisions (or any part thereof) of
the Plan shall not in any way be affected or impaired thereby.
14.11 No
Constraint on Corporate Action. Nothing in this Plan
shall be construed to: (a) limit, impair, or otherwise affect the
Company’s or another Participating Company’s right or
power to make adjustments, reclassifications, reorganizations, or
changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any
part of its business or assets; or (b) limit the right or power of
the Company or another Participating Company to take any action
which such entity deems to be necessary or appropriate.
14.12 Choice of
Law. Except to the extent governed by applicable
federal law, the validity, interpretation, construction and
performance of the Plan and each Award Agreement shall be governed
by the laws of the State of Delaware, without regard to its
conflict of law rules.
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14.13 Stockholder
Approval. The Plan or any increase in the maximum
aggregate number of shares of Stock issuable thereunder as provided
in Subsection 4 (the “Authorized Shares”)
shall be approved by a majority of the outstanding securities of
the Company entitled to vote by the later of (a) a period beginning
twelve (12) months before and ending twelve (12) months after the
date of adoption thereof by the Board. Awards granted prior to
security holder approval of the Plan or in excess of the Authorized
Shares previously approved by the security holders shall become
exercisable no earlier than the date of security holder approval of
the Plan or such increase in the Authorized Shares, as the case may
be, and such Awards shall be rescinded if such security holder
approval is not received in the manner described in the preceding
sentence.
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